EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 30th day of
September, 1999 by and among SONIC AUTOMOTIVE, INC., a Delaware corporation (the
"BUYER"), RIVERSIDE CHEVROLET, INC., an Oklahoma corporation (the "SELLER"), and
the stockholders of the Seller set forth on the signature page hereto
(individually, a "STOCKHOLDER" and, collectively, the "STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, the Seller is engaged in the ownership and operation of a
Chevrolet automobile dealership business located at 000 X. 00xx Xxxxxx, Xxxxx,
Xxxxxxxx 00000 (the "BUSINESS"); and
WHEREAS, the Seller desires to sell and the Buyer desires to buy, or to
cause one or more subsidiaries or affiliates of the Buyer to buy, substantially
all of the assets pertaining to the Business, upon the terms and subject to the
conditions of this Agreement; and
WHEREAS, at the closing of the transactions contemplated by this
Agreement, the Landlords (as defined in Section 1.4 below) and the Buyer, as the
Tenant, shall enter into the Dealership Lease (as defined in Section 1.4 below);
and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Seller is notifying the Manufacturer (as defined in Article I below) of the
transactions contemplated by this Agreement;
WHEREAS, contemporaneously with the execution of this Agreement, the Buyer
has entered into an Asset Purchase Agreement dated as of the date hereof (the
"XXX XXXXXX PURCHASE AGREEMENT") with Xxx Xxxxxx Dodge, Inc. ("XXX XXXXXX
DODGE") and certain stockholders of Xxx Xxxxxx Dodge, with respect to the
acquisition by the Buyer of the Dodge automobile dealership business owned by
Xxx Xxxxxx Dodge, and the Buyer has entered into a Stock Purchase Agreement
dated as of the date hereof (the "RIVERSIDE NISSAN PURCHASE AGREEMENT") with
Riverside Nissan, Inc. ("RIVERSIDE NISSAN") and the stockholders of Riverside
Nissan, with respect to the acquisition by the Buyer of the Nissan automobile
dealership business owned by Riverside Nissan;
WHEREAS, the consummation of the transactions contemplated by this
Agreement is subject to the consummation of the transactions contemplated by the
Xxx Xxxxxx Purchase Agreement and the Riverside Nissan Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 "ASSETS" shall mean: the New Vehicles (as defined in Section 3.1); the
Demonstrators (as defined in Section 3.2); the Used Vehicles (as defined in
Section 3.5); the Parts (as defined in Section 4.3); the Miscellaneous
Inventories (as defined in Section 5.1); the Work in Progress (as defined in
Section 5.3); the Fixtures and Equipment (as defined in Section 5.4); the
Miscellaneous Assets (as defined in Section 5.5); the goodwill of the Business;
and any other assets and properties of the Seller to be transferred to the Buyer
hereunder.
1.2 "CLOSING DATE" shall mean the date, not later than the Closing Date
Deadline (as hereinafter defined), of the closing of the purchase and sale of
the Assets (the "CLOSING"), which shall be a date designated by the Buyer not
later than fifteen (15) days after receipt by the Buyer of the approvals, and
the satisfaction of the other conditions, set forth in Sections 8.8, 8.13, 8.17,
and 8.19, or such other date as is mutually agreed upon by the parties hereto.
The Closing shall be held at the offices of Parker, Poe, Xxxxx & Xxxxxxxxx
L.L.P., 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx at 9:00 a.m. on the
Closing Date. The Closing shall be deemed to be effective as of the opening of
business on the Closing Date.
1.3 "CLOSING DATE DEADLINE" shall mean December 31, 1999; provided,
however, if, as of December 31, 1999, the approvals or other conditions set
forth in Sections 8.13, 8.17 or 8.19 of this Agreement shall not have been
obtained, the Buyer may elect to extend the Closing Date Deadline for up to an
additional thirty (30) days.
1.4 "DEALERSHIP LEASE" shall mean that certain Lease Agreement
substantially in the form of Exhibit 1.4 hereto, to be dated as of the Closing
Date between the Buyer and the other persons and entities set forth on the
signature page thereto (collectively, the "LANDLORDS") pursuant to which the
Buyer will lease the real property, buildings and other improvements located at
the real property described on Schedule 7.9(b).
1.5 "INVENTORY DATE" shall mean the close of business on the date of
completion of the Inventory (as defined in Section 4.1), which date shall not be
more than three (3) days prior to the Closing Date, or such other date prior to
the Closing as is mutually agreed by the Seller and the Buyer.
1.6 "LIABILITIES" shall mean: (a) all obligations of the Seller arising in
the ordinary course of business after the Closing Date, and not as a result of
any breach or default, under (i) all contracts and leases of the Seller that are
set forth on Annex A of Part I of Schedule 2.4 attached hereto, and (ii) all
other contracts and leases of the Seller that are entered into in connection
with the Business in the ordinary course of business at any time after the date
hereof and on or prior to the Closing Date, but only if, in the case of both
clauses (i) and (ii) above, the Buyer has agreed to assume such contracts and
leases pursuant to the Assumption Agreement (as
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defined in Section 2.4 below); (b) the Inducement Fee as provided in Section 2.6
below; and (c) any floor plan indebtedness of the Seller assumed by the Buyer
pursuant to Section 2.4(b) hereof.
1.7 "MANUFACTURER" shall mean General Motors Corporation. For purposes of
the Buyer's application to the Manufacturer, as contemplated by Section 10.11
below, the address of the Manufacturer and the relevant contact person at the
Manufacturer are: Xxxx Xxxxxx (Zone Manager) (913/469-3009) and Xxxx Xxxxxxx
(Dealer Placement Manager) (913/469-3012) at 0000 Xxxxxxx Xxxxxxxxx, Xxxxx 0000,
Xxxxxxxx Xxxx, Xxxxxx 00000.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS; OTHER AGREEMENTS
2.1 SALE AND PURCHASE. Upon the terms and subject to the conditions
hereinafter set forth, at the Closing, the Seller will sell, transfer and convey
the Assets to the Buyer and the Buyer will purchase the Assets from the Seller
for the consideration set forth in this Agreement. The sale, transfer and
conveyance of the Assets shall be made by the execution and delivery at the
Closing of a xxxx of sale from the Seller in a form reasonably satisfactory to
the Buyer's counsel (the "XXXX OF SALE") and such other instruments of
assignment, transfer and conveyance as the Buyer shall reasonably request.
Except to the extent specifically included within the Assets, the Seller will
not sell, and the Buyer will not purchase, any other tangible or intangible
assets of the Seller including, but not limited to, the assets of the Seller
listed on Schedule 2.1 attached hereto.
2.2 AGGREGATE PURCHASE PRICE. (a) The purchase price (the "INITIAL
PURCHASE PRICE") to be paid for the Assets shall consist of the sum of (i)
Seventeen Million Five Hundred Thousand Dollars ($17,500,000), as the purchase
price for the Business and the intangible assets included in the Assets (the
"BUSINESS AND INTANGIBLE ASSETS PURCHASE PRICE"); (ii) the New Vehicle Purchase
Price (as defined in Section 3.1); (iii) the Demonstrator Purchase Price (as
defined in Section 3.2); (iv) the Used Vehicle Purchase Price (as defined in
Section 3.5); (v) the Parts Purchase Price (as defined in Section 4.4); (vi) the
Miscellaneous Inventories Purchase Price (as defined in Section 5.1); (vii) the
Work in Progress Purchase Price (as defined in Section 5.3); and (viii) the
Fixtures and Equipment Purchase Price (as defined in Section 5.4). The parties
acknowledge that the New Vehicle Purchase Price, the Parts Purchase Price, the
Miscellaneous Inventories Purchase Price and the Work in Progress Purchase Price
will be based upon information contained in Schedule 3.1 and the Inventory (as
defined in Section 4.1), both of which are to be completed and delivered prior
to the Closing Date. The parties also acknowledge that adjustments to those
categories of Assets will have to be made after the Closing to reflect ordinary
course increases or decreases in those assets between the time of delivery of
such Schedule 3.1 and the Inventory and the Closing Date, and that the related
components of the Initial Purchase Price will have to be adjusted to reflect any
such adjustments to those Assets. All of the foregoing adjustments (with
appropriate payments by the parties) will be made as promptly as possible after
the Closing, the parties hereby agreeing to cooperate with each other in making
such adjustments. Each party will use the Aggregate Purchase
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Price (as defined below) and Liabilities allocation described in Schedule 2.2
hereto in all reporting to, and all tax returns filed with, the Internal Revenue
Service and other state and local taxing authorities. The Seller and the Buyer
will execute and deliver to each other at Closing a declaration under Section
1060 of the Internal Revenue Code of 1986, as amended (the "CODE"), in the form
set forth in the regulations promulgated thereunder, which declaration shall
reflect the allocation on Schedule 2.2.
(b) In addition to the Initial Purchase Price as hereinabove
provided, the Buyer shall pay to the Seller an amount equal to Five Hundred
Thousand Dollars ($500,000) (the "CONTINGENT PURCHASE PRICE" and sometimes
referred to herein, together with the Initial Purchase Price, as the "AGGREGATE
PURCHASE PRICE") in the event that the Business acquired pursuant to this
Agreement (the "DEALERSHIP BUSINESS") generates Pre-Tax Profits (as defined in
Section 2.8 below) of at least Four Million Five Hundred Thousand Dollars
($4,500,000) during the one (1) year period commencing on the later to occur of
(i) January 1, 2000 and (ii) the first day of the calendar month immediately
following the month during which the Closing shall occur.
2.3 PAYMENT OF PURCHASE PRICE. At the Closing, the Buyer shall pay the
Initial Purchase Price and, if due and payable, the Contingent Purchase Price as
follows:
(a) PAYMENT OF CASH. The Buyer shall deliver to the Seller cash, by
wire transfer to an account or accounts designated by the Seller at least one
Business Day prior to the Closing, in an amount equal to the sum of: (i) one
hundred percent (100%) of the New Vehicle Purchase Price; plus (ii) eighty
percent (80%) of each of (A) the Demonstrator Purchase Price, (B) the Used
Vehicle Purchase Price, (C) the Parts Purchase Price, (D) the Miscellaneous
Inventories Purchase Price, (E) the Work in Progress Purchase Price, (F) the
Fixtures and Equipment Purchase Price and (G) the Business and Intangibles
Assets Purchase Price. As used herein, the term "BUSINESS DAY" shall mean a day
other than a Saturday, Sunday or a day on which banks are required to be closed
in the State of North Carolina.
(b) ISSUANCE OF PREFERRED STOCK.
(i) In payment of the balance of the Initial Purchase Price
(such balance being hereinafter called the "STOCK COMPONENT"), the Buyer shall
issue and deliver to the Seller that number of whole shares of the Buyer's Class
A Convertible Preferred Stock, Series II, obtained by dividing the Stock
Component by $1,000 (the "PREFERRED STOCK"). No fractional shares of Preferred
Stock shall be issued; any such fraction of a share of Preferred Stock shall be
paid in cash at the rate of $1,000 per whole share of Preferred Stock. The
Preferred Stock shall be convertible into shares of the Buyer's Class A Common
Stock, par value $.01 per share (the "COMMON STOCK"), and shall have such rights
and preferences, all as set forth in the Certificate of Designation, Preferences
and Rights with respect to the Preferred Stock, a copy of which is attached as
Exhibit 2.3(b) hereto (the "CERTIFICATE OF DESIGNATION"). Inasmuch as the Seller
intends to distribute the Preferred Stock to certain of its stockholders at
Closing, the Buyer shall issue and deliver the Preferred Stock to such
stockholders in accordance with any written instructions delivered by the Seller
to the Buyer at least five (5) Business Days prior to the Closing Date.
Notwithstanding the foregoing or any such written
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instructions, no stockholder of the Seller shall be issued any Preferred Stock
by the Buyer unless (A) such stockholder is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT"), (B) such stock holder shall have
completed, executed and delivered to the Buyer an investor qualification
questionaire in form and substance reasonably acceptable to the Buyer, (C) such
stockholder shall have delivered to the Buyer such balance sheets and income tax
returns reasonably requested by the Buyer to confirm such stockholder's status
as an "accredited investor" and (D) if such stockholder is not a party to this
Agreement, such stockholder shall have executed and delivered to the Buyer a
certificate, in form and substance reasonably acceptable to the Buyer, whereby
such stockholder shall make the representations and warranties contained in
Section 7.16.
(ii) Upon the issuance and delivery of the Preferred Stock to
the Seller at the Closing, the Buyer's sole obligations with respect to the
Preferred Stock and the Common Stock issuable upon conversion thereof (the
"CONVERSION STOCK") shall be as follows:
(A) The Buyer shall use its best reasonable efforts to
make available "current public information" about itself within the meaning of
subsection (c)(1) of Rule 144 ("RULE 144") promulgated by the Securities and
Exchange Commission (the "SEC") under the Securities Act, to the extent
necessary to facilitate resales of the Conversion Stock pursuant to Rule 144 or
any successor rule; and
(B) The Buyer shall remove stop transfer instructions on
and restrictive legends from certificates representing the Conversion Stock to
the extent that either (I) the offer and sale of the Preferred Stock or the
Conversion Stock may hereafter be registered under the Securities Act and under
any applicable state securities or blue sky laws, (II) the Buyer has received an
opinion of counsel, in form and substance reasonably satisfactory to the Buyer,
that registration of such offer and sale is not required, or (III) the Sellers
are eligible to sell the Conversion Stock pursuant to Rule 144 or any successor
rule.
(iii) Except as set forth in the last sentence of this
subsection (iii), during the Lock-Up Period (as defined below), the Seller and
the Stockholders covenant and agree that none of them shall, without the prior
written consent of the Buyer, directly or indirectly, (A) offer, pledge, sell,
sell short, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant for the sale
of, or otherwise dispose of or transfer any shares of the Conversion Stock, the
Preferred Stock or any securities convertible into or exchangeable or
exercisable for the Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act, with respect to any of the foregoing, or (B) enter into any swap
or any other agreement or hedging arrangement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence of
ownership of the Conversion Stock or the Preferred Stock, whether any such swap
or transaction is to be settled by delivery of Conversion Stock or other
securities, in cash or otherwise. The "LOCKUP PERIOD" shall be for a period
beginning on the Closing Date and ending on the date that is one (1) year after
the date on which all of such shares of Preferred Stock have been converted into
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Conversion Stock. Notwithstanding the foregoing, the provisions of this Section
2.3(b)(iii) shall not prevent the Seller and the Stockholders from selling any
shares of Conversion Stock pursuant to Rule 144 or any successor rule or from
converting any shares of Preferred Stock.
(c) PAYMENT OF CONTINGENT PURCHASE PRICE. As soon as reasonably
practicable after December 31, 2000, the Buyer shall calculate the Pre-Tax
Profits and determine whether the Contingent Purchase Price is due and payable.
The Buyer shall deliver to the Seller a statement in writing setting forth in
reasonable detail the determination of the Pre-Tax Profits. Provided that the
condition set forth in Section 2.2(b) hereof shall have been met, the Buyer
shall deliver to the Seller, in immediately available funds, by wire transfer to
an account or accounts designated by the Seller, an amount equal to the
Contingent Purchase Price. The Contingent Purchase Price shall be due and
payable no later than the tenth (10th) business day after the date upon which
the Pre-Tax Profits shall be determined by the Buyer.
2.4 ASSIGNMENT AND ASSUMPTION.
(a) At the Closing, the Seller will assign to the Buyer the
Liabilities, and the Buyer will assume and agree to perform and discharge the
Liabilities, pursuant to an assignment and assumption agreement with the Seller
in a form reasonably acceptable to the Seller's counsel (the "ASSUMPTION
AGREEMENT"). At the option of the Buyer, the Buyer may assume the Seller's
liabilities with regard to accrued vacation and sick leave, as of the Closing,
for all employees of the Business. If the Buyer assumes such liabilities, the
Buyer will receive, at closing, a credit against the Purchase Price in the
aggregate amount of such liabilities. Notwithstanding anything herein to the
contrary, except as expressly provided in this Section 2.4 and in the Assumption
Agreement, the Buyer does not and will not assume or become liable, or otherwise
be responsible, for any obligations or liabilities of the Seller, of any kind
whatsoever, fixed or contingent, known or unknown, and whether or not any of
such liabilities or obligations are the subject matter of any of the
representations and warranties of the Seller in this Agreement (collectively,
the "RETAINED LIABILITIES"), as a result of the transactions contemplated in
this Agreement. The Seller shall retain and agrees to satisfy and discharge, and
otherwise be responsible for, all of the Retained Liabilities, including without
limitation the Retained Liabilities set forth on Part II of Schedule 2.4.
(b) Notwithstanding the provisions of Section 2.4(a) above, at the
Closing, the Buyer may, if reasonably necessary, elect to assume the Seller's
floor plan indebtedness outstanding as of the Closing and/or other indebtedness
outstanding as of the Closing, in which case the Initial Purchase Price payable
in cash at the Closing will be reduced by the unpaid principal of, and accrued
interest on, such indebtedness outstanding as of the Closing, as set forth in
estoppel and/or payoff letters from the respective lenders, or as otherwise
mutually agreed by the Buyer and the Seller. In the event of such assumption,
such indebtedness shall become part of the "Liabilities" for all purposes of
this Agreement (including, without limitation, the indemnification obligations
of the Buyer under Section 10.6 below); provided, however that the Seller and
the Stockholders shall indemnify the Buyer for any breaches or defaults of the
Seller with respect to such floor plan arrangements and agreements.
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2.5 DEALERSHIP LEASE. At the Closing, the Buyer and the Landlords will
execute and deliver the Dealership Lease.
2.6 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 Seller hereby agrees to pay to the Buyer not later than January 29,
2000, the sum of $500,000 (the "Inducement Fee"). The Inducement Fee will be
included in the Liabilities 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 Assets) who acquires,
directly or indirectly, the Assets, or any portion thereof, as a result of the
execution and delivery by the Seller of this Agreement. The Inducement Fee will
be canceled if this Agreement is terminated for any reason other than the
exercise of a right of first refusal, preemptive right or other similar right,
by the Manufacturer or any person claiming by, through or under it. Subject to
the foregoing, the obligation to pay the Inducement Fee shall survive the
termination of this Agreement.
2.7 EMPLOYMENT AGREEMENT. At the Closing, Xxx Xxxxxx shall enter into an
employment agreement with the Buyer substantially in the form of Exhibit 2.7
attached hereto (the "EMPLOYMENT AGREEMENT").
2.8 PRE-TAX PROFITS. For purposes of this Agreement, "PRE-TAX PROFITS"
shall be the pre-tax profits as determined from the Manufacturer's annual
financial statement for the Dealership Business, subject to the following
special rules:
(a) no deduction shall be taken for federal and state income taxes
owed by the Dealership Business;
(b) Pre-Tax Profits shall be determined before any management fee
expense allocation from the Buyer;
(c) overhead expenses which are allocated to the Dealership Business
but do not directly relate to the operation of the Dealership Business shall not
be deducted in determining Pre- Tax Profits;
(d) no deduction shall be taken for goodwill amortization of the
Dealership Business;
(e) no deduction shall be taken for any interest expense of the
Dealership Business other than floor plan financing interest attributable to the
Dealership Business and other interest expense directly attributable to the
operation of the Dealership Business; and
(f) Pre-Tax Profits shall be determined before calculation of Xxx
Xxxxxx'x monthly special bonus pursuant to his employment agreement with the
Buyer, but after calculation of bonuses for all other employees of the
Dealership Business.
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ARTICLE III
NEW VEHICLES; DEMONSTRATORS AND USED VEHICLES
3.1 NEW VEHICLES. At the Closing, the Buyer shall purchase all of the
Seller's untitled new motor vehicles (meaning (i) current model year vehicles as
of the Closing Date and (ii) if the Closing occurs on or before January 31,
1999, 1999 model year vehicles but excluding from clauses (i) and (ii)
conversion vans or similar-type vehicles that have been in inventory longer than
180 days, rental cars and company vehicles) in the Seller's stock and unsold by
the Seller as of the Closing Date and which are listed on Schedule 3.1 hereto,
which schedule the Seller shall deliver to the Buyer not more than three (3)
days prior to the Closing (the "NEW VEHICLES"). The purchase price to be paid by
the Buyer for each New Vehicle shall be the price at which the New Vehicle was
invoiced to the Seller by the Manufacturer, as adjusted pursuant to this Article
III (the sum of all such amounts to be paid for New Vehicles as determined by
this Article III is herein referred to as the "NEW VEHICLE PURCHASE PRICE");
provided, however, the purchase price of any pre-reported sold vehicles for
which the sale cannot be reversed shall be as mutually agreed by the Buyer and
the Seller. In the event the Buyer and the Seller cannot agree upon a price with
respect to any such pre- reported sold vehicle, the Buyer shall not be obligated
to purchase, and the Seller shall not be obligated to sell, such vehicle.
Schedule 3.1 shall set forth the model, invoice cost, and all other information
necessary to calculate the New Vehicle Purchase Price with respect to each New
Vehicle listed in such Schedule 3.1. At the Closing, the Seller shall assign to
the Buyer, without any additional consideration therefor, by appropriate
documents reasonably satisfactory to the Buyer, all unfilled retail orders and
deposits made thereon. Any profits or proceeds derived from such unfilled retail
orders shall belong to the Buyer.
3.2 DEMONSTRATORS. At the Closing, the Buyer shall purchase all of the
Seller's untitled new motor vehicles (meaning (i) current model year vehicles as
of the Closing Date and (ii) if the Closing occurs on or before January 31,
1999, 1999 model year vehicles but excluding from clauses (i) and (ii)
conversion vans or similar-type vehicles that have been in inventory longer than
180 days, rental cars and company vehicles) in the Seller's stock and unsold by
the Seller as of the Closing Date which are used in the ordinary course of
business for the purpose of demonstration, and that are listed on Schedule 3.2,
which schedule the Seller shall deliver to the Buyer no more than three (3) days
prior to the Closing (the "DEMONSTRATORS"). For purposes of this Agreement, (a)
each motor vehicle with more than 6,000 miles on its odometer and (b) each
vehicle which is used for the purpose of demonstration and which is not a
current model year vehicle as of the Closing Date shall be deemed to be "used"
rather than a "Demonstrator" or "New Vehicle". The purchase price to be paid by
the Buyer for each Demonstrator shall be the price at which the Demonstrator was
invoiced to the Seller by the Manufacturer, as adjusted pursuant to this Article
III, and, if such Demonstrator has an odometer reading in excess of 500 miles,
as reduced by an amount equal to ten cents ($.10) multiplied by the total
mileage on the odometer (the sum of all such amounts to be paid for
Demonstrators hereunder is herein referred to as the "DEMONSTRATOR PURCHASE
PRICE"). Schedule 3.2 shall set forth each Demonstrator's model, invoice cost,
odometer reading and all other
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information necessary to calculate the Demonstrator Purchase Price with respect
to such Demonstrator.
3.3 ADJUSTMENT OF NEW VEHICLE AND DEMONSTRATOR PURCHASE PRICE. The
purchase price paid for each New Vehicle and each Demonstrator purchased under
this Article III shall be: (a) increased by the dealer cost of any equipment and
accessories which have been installed in such vehicle; and (b) decreased by the
sum of (i) the dealer cost of any equipment and accessories which have been
removed from such vehicle, (ii) if such vehicle shall have been in inventory for
less than thirty (30) days as of the Closing Date, any factory floor plan
assistance and advertising credits relative to such vehicle, and (iii) all paid
or unpaid rebates, discounts, holdback for dealer account and other factory
incentives (including without limitation rebates applied for and paid but not
earned and incentive monies claimed on pre-reported units). Notwithstanding
clause (ii) above, in the event that the amount of advertising funds which are
held by the Manufacturer and are transferable to the Buyer exceed the amount of
the advertising credits taken by the Buyer in clause (ii) above, then the
purchase price paid for each New Vehicle and Demonstrator purchased under this
Article III shall be increased by the sum of (A) one hundred percent (100%) of
such excess advertising funds which are withheld by the Manufacturer relative to
such vehicle and (B) fifty percent (50%) of such excess advertising funds which
are matched by the Manufacturer relative to such vehicle .
3.4 DAMAGED OR REPAIRED NEW VEHICLES AND DEMONSTRATORS. If any New
Vehicles or Demonstrators shall have suffered any damage prior to the Closing
Date which is not reflected on Schedule 3.1 or Schedule 3.2, the Seller shall
notify the Buyer in writing on or prior to the Closing Date. In such case, the
Seller and the Buyer will attempt to agree on the cost to cover such repairs or
some other equitable reduction in value to reflect such condition, which amount
shall be deducted from the price to be paid for such New Vehicle or
Demonstrator. In the event the Buyer and the Seller cannot agree on the cost of
repairs or the amount of reduction, the Buyer shall have no obligation to
purchase any such damaged New Vehicle or Demonstrator and the Seller shall have
no obligation to sell such damaged New Vehicle or Demonstrator. With respect to
any New Vehicle or Demonstrator which shall have been damaged and repaired prior
to the Closing Date, the Seller and the Buyer will attempt to agree on an
adjustment to the price to reflect the decrease, if any, in the wholesale value
of such New Vehicle or Demonstrator resulting from such damage and repair, which
amount shall be deducted from the price to be paid for such New Vehicle or
Demonstrator. In the event the Buyer and the Seller cannot agree on such
adjustment, the Buyer shall have no obligation to purchase such New Vehicle or
Demonstrator and the Seller shall have no obligation to sell such New Vehicle or
Demonstrator.
3.5 USED VEHICLES. The Buyer shall have no obligation to purchase any
vehicle from the Seller other than its obligation hereunder to purchase the New
Vehicles and the Demonstrators. The Seller and the Buyer shall perform an
inventory of the Seller's motor vehicles that are not New Vehicles or
Demonstrators (including conversion vans or similar-type vehicles that have been
in inventory longer than 180 days, rental cars and company vehicles) as of the
Inventory Date and, in connection with such inventory, the Seller and the Buyer
shall attempt to assign a mutually agreed price to each such vehicle owned by
the Seller as of the Closing Date. Any such vehicles as to which the Seller and
the Buyer are unable to agree upon a price shall not be purchased by the Buyer
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in connection herewith. Any such vehicles as to which the Seller and the Buyer
shall agree upon a price are collectively referred to herein as the "USED
VEHICLES," and shall be purchased by the Buyer, and sold by the Seller, at the
Closing. The aggregate sum of all prices assigned to such Used Vehicles to be
purchased by the Buyer pursuant to the terms of this Section 3.5 shall be
referred to herein as the "USED VEHICLE PURCHASE PRICE."
ARTICLE IV
PARTS/ACCESSORIES
4.1 THE INVENTORY. The Buyer and the Seller shall engage a mutually
acceptable third party engaged in the business of appraising, valuing and
preparing inventories for automobile dealerships (hereinafter referred to as the
"INVENTORY SERVICE") to prepare an inventory list (the "INVENTORY") of the parts
and accessories, as well as of the Miscellaneous Inventories (as defined in
Section 5.1), owned by and either used or held for use by the Seller in the
Business. The Inventory (insofar as it relates to parts and accessories) shall
be posted to the Manufacturer's approved system of inventory control. The cost
of the Inventory shall be borne 50% by the Buyer and 50% by the Seller. The
Buyer shall have the right to deduct the Seller's portion of such expense from
the consideration to be paid to the Seller under the terms of this Agreement and
to remit such sums directly to the Inventory Service. The Inventory shall be
completed by the Inventory Date. The Inventory shall identify each part and
accessory and its purchase price.
4.2 RETURNABLE AND NON-RETURNABLE REPLACEMENT PARTS AND ACCESSORIES. The
Inventory shall classify replacement parts and accessories as "returnable" or
"nonreturnable." For purposes of this Agreement, the terms "returnable parts"
and "returnable accessories" shall describe and include only those new
replacement parts and new accessories (excluding prior model year vehicle parts
and accessories) for vehicles which are listed (coded) in the latest current
Master Parts Price List Suggested List Prices and Dealer Prices, or other
applicable similar price lists, of the Manufacturer, with supplements or the
equivalent in effect as of the Closing Date (the "MASTER PRICE LIST"), as
returnable to the Manufacturer at not less than the purchase price reflected in
the Master Price List or in the most recent applicable price list. All parts and
accessories listed (coded) in the Master Price List as non-returnable to the
Manufacturer shall be classified as "nonreturnable." The purchase price for each
"returnable part" and "returnable accessory" will be the price therefor listed
in the Master Price List. The purchase price of each "nonreturnable" part and
accessory shall be equal to a value mutually agreed upon by Buyer and the
Seller. Any such "nonreturnable" part or accessory as to which the Buyer and the
Seller are unable to agree upon a price shall not be purchased by the Buyer in
connection herewith. The purchase price of all special order, non-stock,
"Jobber" or "NPN" parts shall be equal to the Seller's original cost of such
parts. The purchase price of all nuts, bolts and any other parts not addressed
in this Section 4.2 shall equal the fair market value thereof as determined by
the Inventory Service. The Buyer shall not be required to purchase any damaged
parts or accessories, parts and accessories with component parts missing,
superseded or obsolete parts or accessories, or used parts or accessories.
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4.3 PARTS. At the Closing, the Buyer shall purchase all parts and
accessories owned by the Seller on the Closing Date and listed on the Inventory
(the "PARTS") provided, however, that the Buyer shall not be obligated to
purchase any damaged parts or accessories, parts and accessories with component
parts missing, superseded or obsolete parts or accessories, or used parts or
accessories. The Seller agrees that if parts and accessories that the Buyer is
not obligated to purchase hereunder are not removed from the Leased Premises
within thirty (30) days after the Closing Date, they shall become the property
of the Buyer without the payment of any consideration in addition to the
consideration otherwise provided herein. The Buyer agrees to provide access to
the Seller for the purpose of removing such property during such thirty (30) day
period.
4.4 PARTS PURCHASE PRICE. The purchase price for the Parts will equal the
value of such items shown on the Inventory, subject to the provisions of Section
4.2 above (the "PARTS PURCHASE PRICE").
4.5 PARTS RETURN PRIVILEGES. The Seller shall assign to the Buyer at
Closing any net parts return privileges under the Manufacturer's Parts Return
Plans that may have accrued to the Seller prior to the Closing (and any other
special parts return authorizations which may have been granted to the Seller by
Manufacturer). At the request of the Buyer, the Seller shall use its reasonable
best efforts to assist the Buyer in effecting any one-time parts return offered
by the Manufacturer, and will promptly pay over to the Buyer any monies received
from the Manufacturer related thereto.
ARTICLE V
MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES
AND EQUIPMENT
5.1 MISCELLANEOUS INVENTORIES. At the Closing, the Buyer shall purchase
(a) all useable gas, oil and grease, all undercoat material and body materials
in unopened cans and such other miscellaneous useable and saleable articles in
unbroken lots (including office supplies) which (i) are on the Seller's
dealership premises, (ii) are owned by the Seller on the Closing Date, (iii) do
not represent more than a sixty (60) day supply of any particular item(s), and
(iv) are identified in the Inventory taken by the Inventory Service on the
Inventory Date and (b) all t-shirts, caps and other clothing items which bear
the Seller's logo and are not defective or damaged in any manner (the
"MISCELLANEOUS INVENTORIES"). The purchase price for the Miscellaneous
Inventories shall be the sum of the replacement cost of the items set forth in
clause (a) above, as determined by the Inventory Service and set forth on the
Inventory, plus the actual cost incurred by the Seller for the items set forth
in clause (b) above (the sum of all prices of the Miscellaneous Inventories
pursuant to the terms of this Section 5.1 shall be referred to herein as the
"MISCELLANEOUS INVENTORIES PURCHASE PRICE").
5.2 MISCELLANEOUS ITEMS NOT INCLUDED IN THE INVENTORY. The Buyer shall
have no obligation to purchase any miscellaneous items that are not included in
the Miscellaneous Inventories. The Seller agrees that any miscellaneous items
that are not included in the
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Miscellaneous Inventories and are not removed from the Leased Premises within
thirty (30) days after the Closing Date shall become the property of the Buyer
without the payment of any consideration in addition to the consideration
otherwise provided herein. The Buyer agrees to provide access to the Seller for
the purpose of removing such property during such thirty (30) day period.
5.3 WORK IN PROGRESS. At the Closing, the Buyer shall buy at the Seller's
actual cost for parts and labor such shop labor and sublet repairs as the Seller
shall have caused to be performed on any repair orders which are in process at
the opening of business on the Closing Date for which there are adequate credit
arrangements (the "WORK IN PROGRESS") (the aggregate sum of all costs of the
Seller for the Work in Progress pursuant to the terms of this Section 5.3 shall
be referred to herein as the "WORK IN PROGRESS PURCHASE PRICE"). The Buyer shall
complete such repair work and shall be entitled to the entire proceeds to be
collected for such services.
5.4 FIXTURES AND EQUIPMENT. At the Closing, the Buyer shall purchase all
fixtures, machinery, equipment (including special tools and shop equipment, but
excluding leasehold improvements), furniture and all signs and office equipment
(including, without limitation, computer equipment used in normal dealership
operations) owned by the Seller and used or held for use by the Seller in
connection with the Business, including the items listed on Schedule 5.4 hereto,
which the Seller shall deliver to the Buyer not later than five (5) days prior
to the Closing (collectively referred to herein as the "FIXTURES AND
EQUIPMENT"). The purchase price for all Fixtures and Equipment which have been
purchased by the Seller on or after January 1, 1999 shall be the actual cost
thereof as depreciated by the modified accelerated costs recovery system
depreciation method as reflected in Schedule 5.4. The purchase price for all
Fixtures and Equipment which were purchased by the Seller prior to January 1,
1999 shall be equal to the depreciated book value thereof as of December 31,
1998 less an amount equal to seventy-five percent (75%) of the book depreciation
thereof from January 1, 1999 through the Closing Date as reflected in Schedule
5.4. The aggregate purchase price for all Fixtures and Equipment shall be
referred to herein as the "FIXTURES AND EQUIPMENT PURCHASE PRICE"; provided,
however, the Fixtures and Equipment Purchase Price shall not include the value
of any items of Fixtures and Equipment which are leased pursuant to contracts or
leases included in the Assumed Liabilities.
5.5 MISCELLANEOUS ASSETS. At the Closing, and without payment of any
additional consideration, the Buyer shall purchase all of the Seller's (i)
unused shop repair orders, parts sales tickets, accounting forms, binders,
office and shop supplies (not in unbroken lots) and such shop reference manuals,
parts reference catalogs, non-accounting file copies for all sales of the Seller
for the three (3) years preceding the Closing Date, (ii) copies of new and used
car sales records and specifically wholesale parts sales records, new and used
parts sales records, and service sales records for the three (3) years preceding
the Closing Date, (iii) product sales training material and reference books on
hand as of the Closing Date, (iv) customer and registration lists pertaining to
the sale of motor vehicles, service files, repair orders, owner follow-up lists
and similar records relating to the operation of the Business, (v) telephone
numbers and listings used by the Seller in connection with the Business, (vi)
names and addresses of the Seller's service customers and prospective
purchasers, (vii) all lawfully transferrable licenses and permits of the
Business, (viii) all rights and claims under
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or arising out of the contracts and leases included in the Liabilities, and (ix)
the Seller's rights to the tradename "Riverside" and any other tradename used by
the Seller, all of which are listed on Schedule 5.5 hereto, and any similar
variations thereof (all the foregoing items collectively referred to herein as
the "MISCELLANEOUS ASSETS").
5.6 CERTAIN RECORDS OF THE SELLER; ACCESS BY THE SELLER. The Seller may
retain all corporate records, financial records and correspondence which are not
necessary for the continued operation of the Business by the Buyer. All records
not retained by the Seller shall be referred to as the "TRANSFERRED RECORDS."
Buyer agrees to maintain the Transferred Records for a period not less than six
(6) years after the Closing Date. The Seller and the Seller's representatives
may have access to review and copy such information during the Buyer's regular
business hours, upon reasonable notice, if such information is necessary to wind
up the Seller's business affairs.
5.7 WARRANTY OBLIGATIONS OF THE SELLER. To the extent that the Seller may
have issued warranties on the vehicles sold by the Seller on or prior to the
Closing Date and to the extent such warranties are not included in the Work in
Progress, the Buyer shall have no responsibility to perform any services
required under such warranties, unless authorized in writing by the Seller
accompanied by arrangements in writing satisfactory to the Buyer to assure the
Buyer of payment for all work performed by the Buyer, and, if so authorized by
the Seller, the Seller shall reimburse the Buyer for all of the Buyer's costs
for parts and labor in connection therewith at established internal rates for
parts and labor. At the Closing Date, the Seller shall supply the Buyer with a
list to which such warranties and guaranties, if any, are applicable, which list
shall include the names of the purchasers, the make and year model of the
vehicles purchased and the date of purchase. The Seller shall also supply to the
Buyer at or prior to the Closing Date an address for and a designation of the
person who will be responsible for authorizing the Buyer to perform any services
under such warranties, if any, issued by the Seller on vehicles sold by it on or
prior to the Closing Date. The Seller shall reimburse the Buyer promptly upon
demand for all sums due or payable by the Seller to the Buyer hereunder.
5.8 ACCOUNTS RECEIVABLE. The Seller shall retain all accounts receivable
arising out of the operation of the Business prior to the Closing Date and the
Buyer shall retain all accounts receivable arising out of sales and/or services
of the Business on or after the Closing Date. After the Closing Date, the Buyer
shall cooperate with the Seller and shall use reasonable and ordinary efforts,
including providing the Seller access to the Buyer's books, records and
employees (at the Seller's expense) to assist the Seller in its efforts to
collect its accounts receivable for a period of six (6) months after the
Closing. The Buyer shall accept payment of the Seller's accounts receivable at
no charge to the Seller for a period of six (6) months after the Closing, and
shall forward to the Seller, promptly upon receipt, all the money so received on
said accounts. Notwithstanding anything to the contrary stated herein, the Buyer
shall have no responsibility to collect any of the Seller's accounts receivable.
ARTICLE VI
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REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller and the Stockholders as
follows:
6.1 ORGANIZATION; POWER AND AUTHORITY; AUTHORIZATION. The Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business makes such
qualification necessary and has full corporate power and authority to own or use
the properties it purports to own and use and to carry on its business as now
being conducted. The Board of Directors of the Buyer has, or prior to the
Closing will have, duly approved this Agreement, all other agreements,
certificates and documents executed or to be executed by the Buyer in connection
herewith, and the transactions contemplated hereby and thereby. The Buyer has
full corporate power and authority to execute and deliver this Agreement and all
other agreements, certificates and documents executed or to be executed by the
Buyer in connection herewith, to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and thereunder. This
Agreement, and all other agreements, certificates and documents executed or to
be executed by the Buyer in connection herewith, constitute or, when executed
and delivered, will constitute legal, valid and binding agreements of the Buyer
enforceable against the Buyer in accordance with their respective terms.
6.2 NON-VIOLATION; CONSENTS. Except as set forth on Schedule 6.2 attached
hereto, the execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
hereof do not and will not: (a) conflict with or violate any of the provisions
of the Buyer's Restated Certificate of Incorporation or Bylaws, each as amended,
or any resolution of the Board of Directors or the stockholders 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; (c) violate or
conflict with or result in a breach of, or constitute a default under, any
material instrument, agreement or indenture or any mortgage, deed of trust or
similar contract to which the Buyer is a party or by which the Buyer is bound or
affected; or (d) require the consent, authorization or approval of, or notice
to, or filing or registration with, any governmental body or authority, or any
other third party.
6.3 LITIGATION. There are no actions, suits or proceedings pending, or, to
the knowledge of the Buyer, threatened against or affecting the Buyer which
might adversely affect the power or authority of the Buyer to carry out the
transactions to be performed by it hereunder.
6.4 AUTHORIZATION OF PREFERRED STOCK. The issuance of the Preferred Stock,
as well as the shares of Conversion Stock, has been duly authorized by all
necessary corporate action of the Buyer. Upon the issuance of the Preferred
Stock pursuant to this Agreement, and upon the issuance of shares of Conversion
Stock, such Preferred Stock and/or Conversion Stock, as the case may be, shall
be validly issued, fully paid and non-assessable.
6.5 CAPITALIZATION. The authorized capital stock of the Buyer consists of:
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(a) 3,000,000 shares of Preferred Stock, par value $0.10 per share,
of which 300,000 shares are designated Class A Convertible Preferred Stock and
are, in turn, divided into 100,000 shares of Series I (the "SERIES I PREFERRED
STOCK"), 100,000 shares of Series II (the "SERIES II PREFERRED STOCK") and
100,000 shares of Series III (the "SERIES III PREFERRED STOCK"); as of August
23, 1999, approximately 12,947 shares of Series I Preferred Stock are issued and
outstanding and/or are committed to be issued by the Buyer, approximately 6,775
shares of Series II Preferred Stock are issued and outstanding and/or are
committed to be issued by the Buyer, and approximately 11,683 shares of Series
III Preferred Stock are issued and outstanding and/or are committed to be issued
by the Buyer;
(b) 100,000,000 shares of Class A Common Stock, par value $0.01 per
share, of which 23,447,763 shares are issued and outstanding as of August 23,
1999; and
(c) 30,000,000 shares of Class B Common Stock, par value $0.01 per
share, of which 12,300,000 shares are issued and outstanding as of August 23,
1999.
All outstanding capital stock of the Buyer is duly authorized, validly issued,
fully paid and non-assessable and has been issued in conformity with all
applicable federal and state securities laws.
6.6 DISCLOSURE MATERIALS. The Buyer has delivered to the Sellers' Agent
copies of (i) the Buyer's Prospectus dated April 29, 1999 (the "PROSPECTUS"),
(ii) the Buyer's Annual Report on Form 10-K for the Fiscal Year ended December
31, 1998, (iii) the Buyer's Quarterly Report on Form 10-Q for the three-month
period ended on each of March 31, 1999 and June 30, 1999, (iv) any Current
Reports on Form 8-K, filed after January 1, 1999, each in the form (excluding
exhibits) filed with the SEC, and (v) the Buyer's proxy statement dated May 19,
1999 (collectively, such Forms 10-K, 10-Q and 8-K and the proxy statement being
hereinafter referred to as its "REPORTS"). Neither the Prospectus nor any of the
Reports contained, at the time of filing thereof with the SEC, any untrue
statement of any material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading.
6.7 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made by
the Buyer in this Agreement, and no statement contained in any agreement,
instrument, certificate or schedule furnished or to be furnished by the Buyer
pursuant hereto, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
such representation or warranty or such statement not misleading.
15
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDERS
The Seller and each of the Stockholders, jointly and severally, represent
and warrant to the Buyer, as follows:
7.1 ORGANIZATION; POWER AND AUTHORITY; AUTHORIZATION. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Oklahoma, is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business makes such
qualification necessary and has full corporate power and authority to own or use
the properties it purports to own and use and to carry on its business as now
being conducted. The Stockholders own all of the issued and outstanding stock of
the Seller. Schedule 7.1 sets forth each person or entity which has an ownership
interest in the Seller and the extent and nature of such ownership interest held
by such owner. There are no outstanding options or warrants with respect to the
capital stock of the Seller, nor are there any outstanding securities which are
convertible or exchangeable into capital stock of the Seller. There are no
voting trusts, shareholder agreements or other agreements, instrument or rights
of any kind or nature whatsoever outstanding with respect to shares of capital
stock of the Seller. The Seller has full corporate power and authority to
execute and deliver this Agreement and all other agreements, certificates and
documents executed or to be executed by the Seller in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The Stockholders have full capacity, power
and authority to execute and deliver this Agreement and all other agreements,
certificates and documents executed or to be executed by the Stockholders in
connection herewith, to consummate the transactions contemplated hereby and
thereby and to perform their obligations hereunder and thereunder. This
Agreement, and all other agreements, certificates and documents executed or to
be executed by the Seller in connection herewith, have been duly authorized by
all necessary corporate action and constitute or, when executed and delivered,
will constitute legal, valid and binding agreements of the Seller enforceable
against the Seller in accordance with their respective terms. This Agreement,
and all other agreements, certificates and documents executed or to be executed
by the Stockholders in connection herewith, constitute or, when executed and
delivered, will constitute legal, valid and binding agreements of the
Stockholders enforceable against the Stockholders in accordance with their
respective terms. The Seller has never operated the Business under any
tradenames other than the tradenames listed or referred to in Section 5.5.
7.2 NO VIOLATION; CONSENTS. Except as set forth in Schedule 7.2 attached
hereto, the execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
hereof do not and will not: (a) conflict with or violate any of the provisions
of the Seller's Articles of Incorporation or Bylaws, each as amended, or any
resolution of the Board of Directors or stockholders of the Seller; (b) violate
any law, ordinance, rule or regulation or any judgment, order, writ, injunction
or decree or similar command of any court, administrative or governmental agency
or other body applicable to the Seller, any of the Assets, the Business or any
of the Liabilities; (c) violate or conflict with or result in a breach of, or
constitute a default under, or an event giving rise to a right of termination
of, any Contract (as
16
defined in Section 7.10), any material instrument, agreement or indenture or any
mortgage, deed of trust or similar contract to which the Seller or any of the
Stockholders is a party or by which the Seller, any of the Stockholders or any
of the Assets are bound or affected; (d) result in the creation or imposition of
any Encumbrance upon any of the Assets; or (e) require the consent,
authorization or approval of, or notice to, or filing or registration with, any
governmental body or authority, or any other third party.
7.3 LITIGATION. There are no actions, suits or proceedings pending or, to
the knowledge of the Seller and the Stockholders, threatened against the Seller
or any of the Stockholders which might adversely affect the power or authority
of any of them to carry out the transactions to be performed by any of them
hereunder. There are no actions, suits or proceedings pending, or, to the
knowledge of the Seller and the Stockholders, threatened against or affecting
the Seller, other than those disclosed on Schedule 7.3 attached hereto, and none
of the actions, suits or proceedings described on Schedule 7.3, if determined
adversely to the Seller, will have, or could reasonably be expected to have, a
material adverse effect upon the Assets or the Liabilities of the Seller or the
business, prospects, properties, earnings, results of operations or condition
(financial or otherwise) of the Business. All actions, suits or proceedings
pending, or, to the knowledge of the Seller and the Stockholders, threatened
against or affecting the Seller are covered in full by insurance, without any
reservation of rights, subject only to the payment of applicable deductibles.
7.4 TITLE TO ASSETS; ENCUMBRANCES. Except as disclosed on Schedule 7.4
attached hereto, the Seller has good title to the Assets, free and clear of all
liens (including tax liens), security interests, encumbrances, actions, claims,
payments or demands of any kind and character (collectively, "ENCUMBRANCES"),
except Encumbrances disclosed on Schedule 7.4 hereto and Encumbrances for ad
valorem personal property taxes not yet due and payable. All of the Assets to be
transferred hereunder conform, as to condition and character, to the
descriptions of such Assets contained herein and will be transferred at the
Closing free and clear of all Encumbrances, except Encumbrances for ad valorem
personal property taxes not yet due and payable. There is no existing claim, or,
to the knowledge of the Seller and the Stockholders, any basis for any claim,
against the Seller that the Business or any of its operations, activities or
products infringe the patents, trademarks, trade names, copyrights or other
property rights of others or that the Seller is wrongfully or otherwise using
the property rights of others. There is no existing claim, or, to the knowledge
of the Seller and the Stockholders, any basis for any claim, by the Seller
against any third party that the operations, activities or products of such
third party infringe the patents, trademarks, trade names, copyrights or other
property rights of the Seller or that such other third party is wrongfully or
otherwise using the property rights of the Seller.
7.5 PERMITS AND APPROVALS. Except as disclosed on Schedule 7.5 attached
hereto, there are no permits or approvals used or obtained for use by the Seller
which are required under applicable law in connection with the ownership or
operation of the Business.
7.6 FINANCIAL STATEMENTS.
17
(a) The Seller has delivered to the Buyer the Seller's annual
financial statements for each of the last two fiscal years of the Seller, as
well as the monthly year-to-date financial statements of the Seller, all as
described in Schedule 7.6(a)(i) attached hereto (the "FINANCIAL STATEMENTS").
The Financial Statements have been prepared in accordance with the
Manufacturer's published accounting manual and generally accepted industry
accounting standards, each consistently applied. Each balance sheet included in
the Financial Statements fairly presents the financial condition of the Seller
as of the date thereof, and each related statement of income included in the
Financial Statements fairly presents the results of the operations of the Seller
for the period indicated, all in accordance with the Manufacturer's published
accounting manual and generally accepted industry accounting standards, each
consistently applied. Except as set forth on Schedule 7.6(a)(ii), to the
knowledge of the Seller and the Stockholders, the Financial Statements contain
adequate reserves for all reasonably anticipated claims relating to matters with
respect to which the Seller is self insured. The Financial Statements are in
accord with the books and records of the Seller, which books and records are
true, correct and complete in all material respects.
(b) The Seller has no outstanding material claims, liabilities,
obligations or indebtedness of any nature, fixed or (to the knowledge of the
Seller or the Stockholders) contingent, of a kind or type required by the
Manufacturer's published accounting manual or generally accepted industry
accounting standards to be reflected in the Financial Statements other than
those which are (i) set forth in the Financial Statements; (ii) specified in the
Schedules to this Agreement; or (iii) incurred in the ordinary course of
business since the date of the Financial Statements and are of the kind and type
reflected in the Financial Statements.
7.7 BROKERS AND FINDERS. Neither the Seller nor any of the Stockholders
has engaged any broker or any other person or entity who would be entitled to
any brokerage commission or finder's fee in respect of the execution of this
Agreement and/or the consummation of the transactions contemplated hereby, other
than Xxx Xxxxx & Associates, Inc., which fee or commission the entire cost will
be borne by the Seller.
7.8 COMPLIANCE WITH LAWS.
(a) Except as set forth on Schedule 7.8(a) attached hereto, the
Assets and the Leased Premises comply in all material respects with, and the
Business has been conducted in all material respects in compliance with, all
laws, rules and regulations (including all worker safety and all Environmental
Laws (as hereinafter defined)), applicable zoning and other laws, ordinances,
regulations and building codes, and neither the Seller nor any of the
Stockholders has received any notice of any violation thereof which has not been
remedied.
(b) Except as set forth on Schedule 7.8(b) attached hereto, (i) the
Seller has not at any time generated, used, treated or stored Hazardous
Materials (as hereinafter defined) on, or transported Hazardous Materials to or
from, the Leased Premises or any property adjoining or adjacent to the Leased
Premises and, to the knowledge of the Seller and the Stockholders, no party has
taken such actions on or with respect to the Leased Premises, provided, however,
certain petroleum products are stored and handled by the Seller in the ordinary
course of business in
18
compliance in all material respects with all Environmental Laws, (ii) the Seller
has not at any time released or disposed of Hazardous Materials on the Leased
Premises or any property adjoining or adjacent to the Leased Premises, and, to
the knowledge of the Seller and the Stockholders, no party has taken any such
actions on the Leased Premises, (iii) the Seller has at all times been in
compliance in all material respects with all Environmental Laws and the
requirements of any permits issued under such Environmental Laws with respect to
the Leased Premises, the Assets and the operation of the Business, (iv) there
are no past, pending or, to the knowledge of the Seller and the Stockholders,
threatened environmental claims against the Seller, the Leased Premises, any of
the Assets or the Business, (v) to the knowledge of the Seller and the
Stockholders, there are no facts or circumstances, conditions or occurrences
regarding the Seller, the Leased Premises, any of the Assets or the Business
that could reasonably be anticipated to form the basis of an environmental claim
against the Seller, any of the Assets or the Business or to cause the Leased
Premises, Assets or Business to be subject to any restrictions on its ownership,
occupancy, use or transferability under any Environmental Law, (vi) there are
not now and, to the knowledge of the Seller and the Stockholders, never have
been any underground storage tanks located on the Leased Premises, (vii) the
Seller has not, nor to the knowledge of the Seller and the Stockholders has any
other person, ever transported or arranged for the transportation of any
Hazardous Materials to any site other than the Leased Premises, and (viii)
except as set forth on Schedule 7.8(b), neither the Seller nor any Stockholder
has operated the Business at any location other than the Leased Premises. The
Seller has not received any notice, claim or demand from governmental entity or
other person regarding the presence of Hazardous Materials at, on, under or
around the Leased Premises or alleging that the Leased Premises is in violation
of any Environmental Laws. As used herein, the term "ENVIRONMENTAL LAWS" shall
mean 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 governmental authority relating to pollution or Hazardous
Materials or protection of human health or the environment, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), as amended. As used herein, the term "HAZARDOUS MATERIALS" means
any waste, pollutant, chemical, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste, asbestos, radioactive materials,
polychlorinated biphenyls, 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, regulated under or as defined
by any Environmental Law.
(c) Neither the Seller nor any of the Stockholders, nor any
director, officer, agent or employee of the Seller or, to the knowledge of the
Seller and the Stockholders, any other person or entity associated with or
acting for or on behalf of the Seller, has, directly or indirectly, made any
unlawful contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any person or entity, regardless of form, whether in money,
property or services: (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, or (iii) to obtain
special concessions or for special concessions already obtained from the Seller.
7.9 FIXTURES AND EQUIPMENT; LEASED PREMISES. (a) The Fixtures and
Equipment constitute in the aggregate all of the fixtures, machinery, equipment,
furniture, signs and office
19
equipment used or intended for use by the Seller in the Business. All
Demonstrators have been operated in the ordinary course of business, are
operated with dealer tags and have not had certificates of title issued with
respect to them.
(b) The Seller does not have any rights, title or interest in or to
any real property other than its leasehold interests in the Leased Premises, and
the only real property used by the Seller in connection with the Business is the
Leased Premises. Schedule 7.9(b) hereto contains a complete list and description
(including buildings and other structures thereon and the name of the owner
thereof) of all real property of which the Seller is a tenant (herein
collectively referred to as the "LEASED PREMISES,"). True, correct and complete
copies of all leases of all Leased Premises (the "LEASES") have been delivered
to the Buyer. The Fixtures and Equipment and the Leased Premises (including,
without limitation, the roof, the walls and all plumbing, wiring, electrical,
heating, air conditioning, fire protection and other systems, as well as all
paved areas, included therein or located thereat) are in good working order,
condition and repair and are not in need of maintenance or repairs except for
maintenance and repairs which are routine, ordinary and not material in nature
or cost. The Seller and the Stockholders do not have any knowledge of any event
or condition which currently exists which would create a legal or other
impediment to the use of the Leased Premises as currently used, or would
increase the additional charges or other sums payable by the tenant under any of
the Leases (including, without limitation, any pending tax reassessment or other
special assessment affecting the Leased Premises).
(c) There has been no work performed, services rendered or materials
furnished in connection with repairs, improvements, construction, alteration,
demolition or similar activities with respect to the Leased Premises for at
least ninety (90) days before the date hereof; there are no outstanding claims
or persons entitled to any claim or right to a claim for a mechanics' or
materialman's lien against the Leased Premises; and there is no person or entity
other than the Seller in or entitled to possession of the Leased Premises.
(d) The Seller has all easements and rights, including, but not
limited to, easements for power lines, water lines, sewers, roadways and other
means of ingress and egress, necessary to conduct the Business, all such
easements and rights are perpetual, unconditional appurtenant rights to the
Leased Premises, and none of such easements or rights are subject to any
forfeiture or divestiture rights.
(e) Neither the whole nor any portion of any of the Leased Premises
has been condemned, expropriated, ordered to be sold or otherwise taken by any
public authority, with or without payment or compensation therefor, and the
Seller and the Stockholders do not know of any such condemnation, expropriation,
sale or taking, or have any grounds to anticipate that any such condemnation,
expropriation, sale or taking is threatened or contemplated. The Seller and the
Stockholders have no knowledge of any pending assessments which would affect the
Leased Premises.
(f) None of the Leased Premises is in violation of any public or
private restriction or any federal, state or local laws, rules, ordinances,
codes or regulations, including without
20
limitation, any building, zoning, health, safety or fire laws, rules,
ordinances, codes or regulations, and no notice from any governmental body has
been served upon the Seller or upon any of the Leased Premises claiming any
violation of any such law, ordinance, code or regulation or requiring or calling
to the attention of the Seller the need for any work, repair, construction,
alterations or installation on or in connection with said properties which has
not been complied with. All improvements which comprise a part of the Leased
Premises are located within the record lines of the Leased Premises and none of
the improvements located on the Leased Premises encroach upon any adjoining
property or any easements or rights of way and no improvements located on any
adjoining property encroach upon any of the Leased Premises or any easements or
rights of way servicing the Leased Premises.
7.10 CONTRACTS. The Seller has in all material respects performed all of
its obligations required to be performed by it to the date hereof, and is not in
default or alleged to be in default in any material respect, under any contract
or lease to be assigned to the Buyer hereunder (collectively, the "CONTRACTS"),
and there exists no event, condition or occurrence which, after notice or lapse
of time or both, would constitute such a default. To the knowledge of the Seller
and the Stockholders, no other party to any Contract is in default in any
respect of any of its obligations thereunder. Each of the Contracts is valid and
in full force and effect and enforceable against the Seller in accordance with
its terms, and, to the knowledge of the Seller and the Stockholders, enforceable
against the other parties thereto in accordance with its terms. Except as set
forth in Schedule 7.2 hereto, each Contract is assignable to the Buyer without
the consent of the other party(ies) thereto.
7.11 ADEQUACY OF ASSETS. Except for the Seller's cash and accounts
receivable and rights under its dealership agreements with the Manufacturer, the
Assets of the Seller, together with the Leased Premises and the Contracts
(including all equipment leased pursuant to the equipment leases included in the
Contracts) of the Seller, comprise all of the assets, properties, contracts,
leases and rights necessary for the Buyer to operate the Business substantially
in the manner operated by the Seller prior to the Closing. The failure by the
Seller to satisfy and discharge in full any of the Retained Liabilities will not
have, and could not reasonably be expected to have, a material adverse effect
upon any of the Assets or Liabilities or the prospects, properties, earnings,
results of operations or condition (financial or otherwise) of the Business.
7.12 TAXES. The Seller has filed all federal, state and local governmental
tax returns required to be filed by it in accordance with the provisions of law
pertaining thereto and has paid all taxes and assessments (including, without
limitation of the foregoing, income, excise, unemployment, social security,
occupation, franchise, property and import taxes, duties or charges and all
penalties and interest in respect thereof) required by such tax returns or
otherwise to have been paid to date.
7.13 EMPLOYEES; EMPLOYEE BENEFIT PLANS.
(a) Schedule 7.13(a) attached hereto discloses, as of the date
hereof, all of the Seller's employees, as well as each employee's compensation
(including, separately, base pay and any incentive or commission pay), title,
length of employment, employment contract, if any, and
21
accrued vacation time. The Seller is not currently, nor has it ever been, a
party to any collective bargaining agreement or other labor contract, and there
has not been, nor is there pending or, to the knowledge of the Seller and the
Stockholders, threatened, any union organizational drive or application for
certification of a collective bargaining agent with respect to the Seller's
employees.
(b) The Seller has listed on Schedule 7.13(b) and has delivered to
the Buyer true and complete copies of all Employee Benefit Plans (as defined
below) and related documents, established, maintained or contributed to by the
Seller. For the purpose of all of the representations in this Section 7.13(b),
the term "Seller" shall include the Seller and all employers, whether or not
incorporated, that are treated together with the Seller as a single employer
within the meaning of Section 414 of the Code. The term "EMPLOYEE BENEFIT PLAN"
shall include all plans described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and also shall include,
without limitation, any deferred compensation, stock, employee or retiree
pension benefit, welfare benefit or other similar fringe or employee benefit
plan, program, policy, contract or arrangement, written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, covering employees or
former employees of the Seller and maintained or contributed to by the Seller.
Where applicable, each Employee Benefit Plan (i) has been administered in
material compliance with the terms of such Employee Benefit Plan and the
requirements of ERISA and the Code, and (ii) is in material compliance with the
reporting and disclosure requirements of ERISA and the Code. The Seller neither
maintains nor contributes to, and has never maintained or contributed to, an
Employee Benefit Plan subject to Title IV of ERISA or a "multiemployer plan."
There are no facts relating to any Employee Benefit Plan that (i) have resulted
in a "prohibited transaction" of a material nature or have resulted or are
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 in or are reasonably likely to result in any material
liability (whether or not asserted as of the date hereof) of the Seller or any
ERISA affiliate pursuant to Section 412 of the Code arising under or related to
any event, act or omission occurring on or prior to the date hereof. Each
Employee Benefit Plan that is intended to qualify under Section 401(a) or to be
exempt under Section 501(c) of the Code is so qualified or exempt as of the date
hereof in each case, and such Employee Benefit Plan has received favorable
determination letters from the Internal Revenue Service with respect thereto. To
the knowledge of the Seller and the Stockholders, the amendments to and
operation of any Employee Benefit Plan subsequent to the issuance of such
determination letters do not adversely affect the qualified status of any such
Employee Benefit Plan. No Employee Benefit Plan has an "accumulated funding
deficiency" as of the date hereof, whether or not waived, and no waiver has been
applied for. The Seller has not made any promises or incurred any liability
under any Employee Benefit Plan or otherwise to provide health or other welfare
benefits to current or future retirees or other former employees of the Seller,
except as specifically required by law. There are no pending or, to the
knowledge of the Seller and the Stockholders, threatened, claims (other than
routine claims for benefit) or lawsuits with respect to the Employee Benefit
Plans. Except as disclosed on Schedule 7.13(b), none of the Seller's employees
or former employees has elected COBRA continuation coverage or has incurred a
COBRA qualifying event since January 1, 1997.
7.14 [INTENTIONALLY DELETED]
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7.15 MANUFACTURER COMMUNICATIONS. Except as set forth on Schedule 7.15,
the Manufacturer has not (a) notified the Seller or any of the Stockholders of
any deficiency in dealership operations, including, but not limited to, the
following areas: (i) brand imaging, (ii) facility conditions, (iii) sales
efficiency, (iv) customer satisfaction, (v) warranty work and reimbursement, or
(vi) sales incentives; (b) otherwise advised the Seller or any of the
Stockholders of a present or future need for facility improvements or upgrades
in connection with the Business; or (c) notified the Seller or any of the
Stockholders of the awarding or possible awarding of its franchise to any person
or entity in the Metropolitan Statistical Areas in which the Business operates.
7.16 SPECIAL REPRESENTATIONS REGARDING THE PREFERRED STOCK AND THE
CONVERSION STOCK:
(a) The Seller and the Stockholders are individually referred to in
this Section as an "INVESTOR". Each Investor understands that the Preferred
Stock and the Conversion Stock (collectively, the "SECURITIES") will not be
registered under the Securities Act or applicable state securities laws on the
basis that the sale provided for in this Agreement and the issuance of the
Securities hereunder is exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and that the Buyer's reliance on such
exemption is predicated on the representations and warranties of such Investor.
(b) The Securities are being acquired for the account of the
Investor for the purposes of investment and not with a view to the distribution
thereof, as those terms are used in the Securities Act and the rules and
regulations promulgated thereunder.
(c) Each Investor is an "accredited investor" within the meaning of
Rule 501(a) of Regulation D promulgated under the Securities Act; and each
Investor has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of acquiring the
Securities; each Investor has delivered to the Buyer an Investor Qualification
Questionnaire and any balance sheets and income tax returns reasonably requested
by the Buyer to confirm such Investor's status as an "accredited investor."
(d) Each Investor has received copies of: (i) the Prospectus dated
April 29, 1999; (ii) the Form 10-K filing of Buyer for the year ended December
31, 1998 (without exhibits); (iii) the Form 10-Q filing of Buyer for the first
and second quarters of 1999 (without exhibits); (iv) all Form 8-K filings of the
Buyer filed after January 1, 1999 (without exhibits); and has been furnished
such other information, and has had an opportunity to ask such questions and
have them answered by the Buyer, as such Investor has deemed necessary in order
to make an informed investment decision with respect to the acquisition of the
Securities.
(e) Each Investor understands, and has the financial capability of
assuming, the economic risk of an investment in the Securities for an indefinite
period of time.
23
(f) Each Investor has been advised that such Investor will not be
able to sell, pledge or otherwise dispose of the Securities, or any interest
therein, without first complying with the relevant provisions of the Securities
Act and any applicable state securities laws, and that the provisions of Rule
144, permitting routine sales of securities of certain issuers subject to the
terms and conditions thereof, may not currently be available to such Investor
with respect to the Securities.
(g) Each Investor has, to the extent such Investor has deemed
necessary, consulted with such Investor's own investment advisors, legal counsel
and tax advisors regarding an investment in the Securities.
(h) Each Investor acknowledges that the Buyer is under no obligation
to (i) register the Securities or (ii) except as specifically set forth in this
Agreement, to furnish any information or to take any other action to assist the
Investor in complying with the terms and conditions of any exemption which might
be available under the Securities Act or any state securities laws with respect
to sales of the Securities by the Investor in the future; provided, however,
that the Buyer will, at the Stockholders request and expense, provide such legal
opinions and secretary certificates as are reasonably necessary for the
Stockholders to sell or dispose of the Securities under Rule 144.
7.17 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made by
the Seller or the Stockholders in this Agreement, and no statement contained in
any agreement, instrument, certificate or schedule furnished or to be furnished
by the Seller or the Stockholders pursuant hereto, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make such representation or warranty or such
statement not misleading.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
The obligations of the Buyer to perform this Agreement at Closing are
subject to the following conditions precedent which shall be fully satisfied at
or before the Closing, unless waived in writing by the Buyer.
8.1 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Seller and the Stockholders herein contained shall be true and
correct in all material respects on and as of the Closing Date as if made on and
as of the Closing Date, and the Buyer shall have received a certificate from the
Stockholders and a duly authorized officer of the Seller, dated the Closing
Date, to such effect.
8.2 COMPLIANCE WITH AGREEMENTS. Each of the agreements or obligations
required by this Agreement to be performed or complied with by the Seller or the
Stockholders at or before the Closing shall have been duly performed or complied
with in all material respects, and the Buyer
24
shall have received a certificate from the Stockholders and a duly authorized
officer of the Seller, dated the Closing Date, to such effect.
8.3 NO LITIGATION. No action, suit or proceeding shall have been
instituted by a governmental agency or any other third party to prohibit or
restrain the sale contemplated by this Agreement or otherwise challenge the
power and authority of the parties to enter into this Agreement or to carry out
their obligations hereunder or the legality or validity of the sale contemplated
by this Agreement.
8.4 INVENTORY. The Inventory shall have been completed to the reasonable
satisfaction of the Buyer.
8.5 CORPORATE ORGANIZATION; ENCUMBRANCES. The Seller shall have furnished
to the Buyer: (a) a certificate of good standing of the Seller issued by the
Secretary of State of the State of Oklahoma dated no earlier than fifteen (15)
business days prior to the Closing Date; (b) a copy of the Articles of
Incorporation of the Seller certified by the Secretary of State of the State of
Oklahoma dated no earlier than fifteen (15) business days prior to the Closing
Date; (c) a certificate of the Seller, dated the Closing Date, in form and
substance reasonably satisfactory to the Buyer, certifying as to (i) no
amendments to the Articles of Incorporation of the Seller since the date of the
certificate delivered in accordance with Section 8.5(b); (ii) the Bylaws of the
Seller attached to such certificate being true and correct; and (iii) the
incumbency and signatures of the officers of the Seller executing this Agreement
and any other agreements, instruments or documents to be executed by the Seller
in connection herewith; and (d) recent UCC-11 search reports for the Seller
(including reports for each of the trade names required to be listed under
Section 5.5) or other evidence reasonably satisfactory to the Buyer and its
counsel that the Assets are free and clear of all Encumbrances.
8.6 BOARD RESOLUTIONS. The Seller shall have furnished to the Buyer a copy
of the resolutions duly adopted by the directors and the stockholders of the
Seller authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, certified by an authorized
officer of the Seller as of the Closing Date.
8.7 NO DAMAGE. There shall have been no material adverse change or
development in any of the Assets or the Liabilities of the Seller or in the
prospects, properties, earnings, results of operations or condition (financial
or otherwise) of the Business, and no event shall have occurred or circumstance
exist that may, or could reasonably be expected to, result in such a material
adverse change.
8.8 MOTOR VEHICLE LICENSES. The Buyer shall have been licensed as a Motor
Vehicle Dealer under applicable Oklahoma motor vehicle dealer registration laws
and shall have obtained all other authorizations, consents, licenses and permits
from applicable governmental agencies having or asserting jurisdiction, which
the Buyer deems necessary or appropriate to conduct business as an automobile
dealer at the Leased Premises or such other location as the Buyer may determine.
25
8.9 CONSENTS AND APPROVALS. The Seller shall have obtained and delivered
to the Buyer all other authorizations, consents and approvals from third persons
and entities as are (a) required to assign the Contracts or (b) otherwise
required of the Seller to consummate the transactions contemplated hereby.
8.10 CERTIFICATES OF ORIGIN; ETC. The Seller shall have transferred to the
Buyer certificates of title or origin for all New Vehicles, Demonstrators and,
if applicable, Used Vehicles and all of its registration lists, owner follow-up
lists and service files on hand as of the Closing Date with respect to the
Business.
8.11 TERMINATION OF THE SELLER'S AGREEMENTS WITH MANUFACTURER. The Seller
shall have terminated in writing the Seller's dealer agreement and any other
applicable sales and service agreements with the Manufacturer.
8.12 XXXX OF SALE; ETC. The Seller shall have executed and delivered to
the Buyer a Xxxx of Sale, other documents of transfer of title contemplated
hereby and any and all other documents necessary or desirable in connection with
the transfer of the Assets, which documents shall warrant title to the Buyer
consistent with this Agreement and shall in all respects be in such form as may
be reasonably required by the Buyer and its counsel.
8.13 MANUFACTURER APPROVAL. The Manufacturer shall have approved (a) the
Buyer or the Buyer's affiliate as an authorized dealer at the present dealership
locations in the Seller's existing facilities as currently configured for
dealership operations, and (b) O. Xxxxxx Xxxxx or O. Xxxxxx Xxxxx'x designee as
the authorized dealer operator; and the Manufacturer shall have executed a
dealer agreement, and any other applicable sales and service agreements, on
terms reasonably satisfactory to the Buyer.
8.14 CONSENTS; RELEASES OF ENCUMBRANCES. All consents, approvals, notices,
filings and/or registrations set forth on Schedule 7.2 hereto shall have been
obtained or made and the Seller shall have delivered to the Buyer evidence
thereof reasonably satisfactory to the Buyer. The Seller shall have obtained
releases or discharges of, or shall otherwise have made provision satisfactory
to the Buyer for the release or discharge of, all Encumbrances set forth on
Schedule 7.4 hereto, except for Encumbrances which secure only the Liabilities.
8.15 DEALERSHIP LEASE. The Landlords shall have executed and delivered the
Dealership Lease to the Buyer. Any outstanding Leases shall have been
terminated.
8.16 CHANGE OF NAME. The Seller shall have delivered to the Buyer all
documents, including, without limitation, resolutions of the directors and the
Stockholders of the Seller, necessary to effect a change of name of the Seller
after the Closing to names other than the corporate name and trade names
referred to in Section 5.5 hereof or any variation thereof.
8.17 HSR. All applicable waiting periods under the HSR Act (as defined in
Section 10.14 below) shall have expired without any indication by the Antitrust
Division (as defined in Section
26
10.14 below) or the FTC (as defined in Section 10.14 below) that either of them
intends to challenge the transactions contemplated hereby or, if any such
challenge or investigation is made or commenced, such challenge or investigation
shall have been concluded in a way which lawfully permits the transactions
contemplated hereby in all material respects.
8.18 EMPLOYMENT AGREEMENT. Xxx Xxxxxx shall have executed and delivered to
the Buyer the Employment Agreement.
8.19 AUDITED FINANCIAL STATEMENTS OF THE BUYER. The Buyer shall have
completed preparation of such audited financial statements of the Seller as may
be required by applicable regulations of the SEC or by the Buyer's lenders.
8.20 OPINION OF COUNSEL. The Buyer shall have received an opinion,
reasonably acceptable in form and substance to Buyer's counsel, of Xxxxxxx X.
Xxxxxxx, Xxxxxxx Law Firm, counsel to the Seller and the Stockholders.
8.21 OTHER BASIC AGREEMENTS. All conditions to the obligations of the
Buyer under the Xxx Xxxxxx Purchase Agreement and the Riverside Nissan Purchase
Agreement shall have been satisfied or fulfilled unless waived in writing by the
Buyer, and the closings under the Xxx Xxxxxx Purchase Agreement and the
Riverside Nissan Purchase Agreement shall have occurred or shall be occurring
contemporaneously with the Closing of the transactions contemplated by this
Agreement.
8.22 COMPUTER SERVER ACCESSIBILITY. Xxxxxxxx Chevrolet, Inc. shall have
entered into a lease agreement with the Buyer in accordance with Section 10.20.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER AND THE STOCKHOLDERS
The obligations of the Seller and the Stockholders to perform this
Agreement at Closing are subject to the following conditions precedent which
shall be fully satisfied at or before the Closing, unless waived in writing by
the Seller:
9.1 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Buyer herein contained shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of the
Closing Date, and the Seller shall have received a certificate from a duly
authorized officer of the Buyer, dated the Closing Date, to such effect.
9.2 COMPLIANCE WITH AGREEMENTS. Each of the agreements or obligations
required by this Agreement to be performed or complied with by the Buyer at or
before the Closing shall have been duly performed or complied with in all
material respects, and the Seller shall have received a certificate from a duly
authorized officer of the Buyer, dated the Closing Date, to such effect.
27
9.3 NO LITIGATION. No action, suit or proceeding shall have been
instituted by a governmental agency or any third party to prohibit or restrain
the sale contemplated by this Agreement or otherwise challenge the power and
authority of the parties to enter into this Agreement or to carry out their
obligations hereunder or the legality or validity of the sale contemplated by
this Agreement.
9.4 INVENTORY. The Inventory shall have been completed to the reasonable
satisfaction of the Seller.
9.5 CORPORATE ORGANIZATION; BOARD RESOLUTIONS. The Buyer shall have
furnished to the Seller: (a) a certificate of good standing of the Buyer issued
by the Secretary of State of the State of Delaware dated no earlier than fifteen
(15) business days prior to the Closing Date; and (b) a certificate of the
Secretary or an Assistant Secretary of the Buyer, dated the Closing Date, in
form and substance reasonably satisfactory to the Seller, certifying as to (i)
the Restated Certificate of Incorporation of the Buyer attached to such
certificate being true and correct; (ii) the Bylaws of the Buyer attached to
such certificate being true and correct; (iii) the incumbency and signatures of
the officers of the Buyer executing this Agreement and any other agreements,
instruments or documents to be executed by the Buyer in connection herewith; and
(iv) the resolutions of the Board of Directors of the Buyer authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
9.6 PAYMENT OF INITIAL PURCHASE PRICE; ASSUMPTION AGREEMENT. The Buyer
shall have tendered to the Seller the Initial Purchase Price and shall have
executed and delivered the Assumption Agreement.
9.7 DEALERSHIP LEASE. The Buyer shall have executed and delivered the
Dealership Lease to the Landlords.
9.8 HSR. All applicable waiting periods under the HSR Act shall have
expired without any indication of the Antitrust Division or the FTC that either
of them intends to challenge the transactions contemplated hereby, or, if any
such challenge or investigation is made or commenced, such challenge or
investigation shall have been concluded in a way which lawfully permits the
transactions contemplated hereby in all material respects.
9.9 EMPLOYMENT AGREEMENT. The Buyer shall have executed and delivered the
Employment Agreement to Xxx Xxxxxx.
9.10 OPINION OF COUNSEL. The Seller and the Stockholders shall have
received an opinion of Parker, Poe, Xxxxx & Xxxxxxxxx, L.L.P., counsel to the
Buyer, reasonably acceptable in form and substance to Seller's counsel.
9.11 OTHER BASIC AGREEMENTS. All conditions to the obligations of the
Seller (as defined in the Xxx Xxxxxx Purchase Agreement) under the Xxx Xxxxxx
Purchase Agreement and all the conditions to the obligations of the Sellers (as
defined in the Riverside Nissan Purchase Agreement)
28
under the Riverside Nissan Purchase Agreement shall have been satisfied or
fulfilled unless waived in writing by such party, and the closings under the Xxx
Xxxxxx Purchase Agreement and the Riverside Nissan Purchase Agreement shall have
occurred or shall be occurring contemporaneously with the Closing of the
transactions contemplated by this Agreement.
ARTICLE X
COVENANTS AND AGREEMENTS
10.1 [INTENTIONALLY DELETED]
10.2 FURTHER ASSURANCES. The Seller and the Stockholders agree that they
will, at any time and from time to time, after the Closing, upon request of the
Buyer, do, execute, acknowledge and deliver all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances, in a
form reasonably satisfactory to the Buyer's counsel, as may be reasonably
required to convey and transfer to and vest in the Buyer, and protect its
rights, title and interest in and enjoyment of, all the Assets.
10.3 SATISFACTION OF CLOSING CONDITIONS. The parties hereto shall use
their reasonable best efforts to obtain, and to cooperate with each other in
obtaining, all authorizations, approvals, licenses, permits and other consents
contemplated by Articles VIII and IX.
10.4 NO MATERIAL ADVERSE CHANGES. During the period from the date of this
Agreement through the Closing Date, the Seller will operate the Business only in
the ordinary course of business and in accordance with past practices. The
Seller shall promptly notify the Buyer of any material adverse change or
development in any of the Assets or the Liabilities or in the prospects,
properties, earnings, results of operations or condition (financial or
otherwise) of the Business, and of the occurrence of any event or circumstance
that will, or could reasonably be expected to, result in such a material adverse
change.
10.5 ACCESS; ENVIRONMENTAL AUDIT. Until Closing, the Seller shall afford
to the Buyer, its officers, employees, attorneys, accountants and such other
representatives of the Buyer as the Buyer shall designate to the Seller, free
and full access at all reasonable times, and upon reasonable prior notice, to
the Assets and the properties, books and records of the Seller, and to interview
personnel, suppliers and customers of the Seller, in order that the Buyer may
have full opportunity to make such further investigation as it shall reasonably
desire of the Assets, the Liabilities and the Business. The Seller and the
Stockholders shall furnish to the Buyer the due diligence materials set forth in
Schedule 10.5 hereto as soon as practicable, and shall provide to the Buyer and
its representatives, including, without limitation, the aforementioned
individuals, such additional information as the Buyer may reasonably request.
The contact person(s) of the Seller for purposes of arranging such access and
requesting such additional information is Xxx Xxxxxx. The Seller shall allow
Dames & Xxxxx (the "ENVIRONMENTAL AUDITOR") to have prompt access to the Leased
Premises in order to conduct an environmental investigation satisfactory to the
Buyer in scope and
29
reasonably acceptable to the Seller (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 Leased
Premises (the "ENVIRONMENTAL AUDIT"). The Seller shall provide to the
Environmental Auditor: (a) reasonable access to all of its existing records
concerning the matters which are the subject of the Environmental Audit; and (b)
reasonable access to the employees of the Seller and the last known addresses of
former employees of the Seller who are most familiar with the matters which are
the subject of the Environmental Audit (the Seller agreeing to use reasonable
efforts to have such former employees respond to any reasonable requests or
inquiries by the Environmental Auditor). The Environmental Auditor shall
coordinate all visits to the Leased Premises and conversations with employees of
the Seller with the Stockholders or their designee and shall use reasonable
efforts to minimize any disruption of the Seller's business in performing such
investigations. The Seller shall otherwise cooperate with the Environmental
Auditor in connection with the Environmental Audit. The Buyer shall pay 50% of
the costs, fees and expenses in connection with the Environmental Audit and the
Seller shall pay 50% of the costs, fees and expenses in connection with the
Environmental Audit. The Buyer shall bear the costs, fees and expenses in
connection with any financial audit.
10.6 INDEMNIFICATION BY THE SELLER AND THE STOCKHOLDERS.
(a) All representations and warranties of the Seller and the
Stockholders contained herein, or in any agreement, certificate or document
executed by either the Seller or the Stockholders in connection herewith, shall
survive the Closing for a period of three (3) years with the exception of (i)
the representations and warranties of the Seller and the Stockholders contained
in Section 7.12, which shall survive the Closing until the expiration of the
applicable tax statutes of limitation plus a period of sixty (60) days; (ii) the
representations and warranties of the Seller and the Stockholders contained in
Sections 7.6(b) and 7.8, which shall survive the Closing for a period of seven
(7) years; and (iii) the representations and warranties of the Seller and the
Stockholders contained in Section 7.4, which shall survive the Closing for a
period of five (5) years. The foregoing limitations of survival shall not in any
way reduce the Seller's obligations with respect to the Retained Liabilities. As
to each representation and warranty of the parties to this Agreement, the date
to which such representation and warranty shall survive is hereinafter referred
to as the "SURVIVAL DATE." All information contained in any Schedule furnished
hereunder by the Seller shall be deemed a representation and warranty by the
Seller and the Stockholders made in this Agreement as to the accuracy of such
information.
(b) The Seller and the Stockholders, jointly and severally, agree to
indemnify and hold harmless the Buyer and its stockholders, officers, directors,
employees and agents, and their respective successors and assignees
(collectively, the "BUYER INDEMNITEES"), from and against any and all losses,
damages, liabilities, obligations, assessments, suits, actions, proceedings,
claims or demands, including costs, expenses and fees (including reasonable
attorneys' fees and expert witness fees incurred in connection therewith)
("LOSSES"), suffered by any of them or asserted against any of them or any of
the Assets, arising out of or based upon (i) the breach or failure of any
representation or warranty of the Seller or any Stockholder contained herein, or
in any agreement, certificate or document executed by the Seller or any
Stockholder in connection herewith, to be true
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and correct (regardless of any investigation made by or on behalf of the Buyer
and regardless of any knowledge or information the Buyer may have), (ii) the
breach of any covenant or agreement of the Seller or any Stockholder contained
in this Agreement, (iii) the Retained Liabilities or any liability or obligation
of any Stockholder, (iv) any arrangements or agreements made or alleged to have
been made by the Seller or any Stockholder with any broker, finder or other
agent in connection with the transactions contemplated hereby, (v) any waiver by
the Buyer of the provisions of any applicable bulk sales laws, (vi) any breach
or default by the Seller under any of its floor plan arrangements and
agreements, (vii) any matter, item, circumstance or condition listed, contained
or otherwise referred to on Schedule 7.8(a) or Schedule 7.8(b), (viii) any loss
of life, injury to persons or property, or damage to natural resources caused by
the actual, alleged, or threatened release, storage, transportation, treatment
or generation, of Hazardous Materials generated, stored, used, disposed of,
treated, handled or shipped by the Seller before the Closing Date, (ix) any
cleanup of Hazardous Materials released, disposed of or discharged: (A) on, in,
beneath or around to the Real Property prior to the date of the Closing; or (B)
at any other location if such substances were generated, used, stored, treated,
transported or released by the Seller prior to the Closing Date; (x) any and all
costs of installing pollution control equipment or other equipment to bring any
of the Leased Premises into compliance with any Environmental Law if such
equipment is installed because any of the Leased Premises were not in compliance
with any Environmental Laws as of the date of the Closing; or (xi) the use by
the Stockholders of the "Riverside" tradename at the Riverside Autoplex Dodge,
Jeep, Chrysler, Mazda and Honda automobile dealership operated by certain of the
Stockholders in McAlester, Oklahoma. Neither the Seller nor the Stockholders
shall be required to indemnify under Section 10.6(b)(i) unless the amount of all
Losses (including claims for Losses) thereunder exceeds a cumulative aggregate
total of $175,000, at which time rights to indemnification for Losses may be
asserted for any amounts in excess of such cumulative aggregate total of
$175,000. The aggregate amount of indemnification obligations of the Seller and
the Stockholders under this Section 10.6(b) shall not exceed the Purchase Price.
(c) No claim for indemnification with respect to a breach of a
representation and warranty shall be made by a Buyer Indemnitee after the
applicable Survival Date unless prior to such Survival Date the Buyer Indemnitee
shall have given an indemnifying party 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. The provisions of this Section 10.6 shall be
effective upon consummation of the Closing, and prior to the Closing, shall have
no force and effect.
10.7 INDEMNIFICATION BY THE BUYER.
(a) All representations and warranties of the Buyer contained
herein, or in any agreement, certificate or document executed by the Buyer in
connection herewith, shall survive the Closing for a period of three years. All
information contained in any Schedule furnished hereunder by the Buyer shall be
deemed a representation and warranty by the Buyer made in this Agreement as to
the accuracy of such information.
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(b) The Buyer agrees to indemnify and hold harmless the Seller and
its stockholders, officers, employees, agents, successors and assigns (the
"SELLER INDEMNITEES"), from and against any and all Losses incurred in
connection with, suffered by any of them, or asserted against any of them,
arising out of or based upon (i) the breach or failure of any representation or
warranty of the Buyer contained herein, or in any agreement, certificate or
document executed by the Buyer in connection herewith, to be true and correct
(regardless of any investigation made by or on behalf of the Seller and
regardless of any information the Seller may have), (ii) the breach of any
covenant or agreement of the Buyer contained in this Agreement, (iii) the
Buyer's failure to discharge the Liabilities, or (iv) any arrangements or
agreements made or alleged to have been made by the Buyer with any broker,
finder or other agent in connection with the transactions contemplated hereby.
The Buyer shall not be required to indemnify under Section 10.7(b)(i) unless the
amount of all Losses (including claims for Losses) thereunder exceeds a
cumulative aggregate total of $175,000, at which time rights to indemnification
for Losses may be asserted for any amounts in excess of such cumulative
aggregate total of $175,000. The aggregate amount of indemnification obligations
of the Buyer under this Section 10.7(b) shall not exceed the Purchase Price.
(c) No claim for indemnification with respect to a breach of a
representation and warranty shall be made by any Seller Indemnitee under this
Agreement after the applicable Survival Date unless prior to such Survival Date
the Seller Indemnitee shall have given the Buyer 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 Seller Indemnitee. The provisions of this Section 10.7
shall be effective upon consummation of the Closing, and prior to the Closing,
shall have no force and effect.
10.8 CERTAIN TAXES. Personal property, use and intangible taxes and
assessments and utility charges with respect to the Assets shall be prorated on
a per diem basis and apportioned on a calendar year basis between the Seller, on
the one hand, and the Buyer, on the other hand, as of the date of the Closing.
The Seller shall be liable for that portion of such taxes and assessments
relating to, or arising in respect of, periods prior to the Closing Date and,
with respect to any period commencing prior to the Closing Date and ending on or
after the Closing Date (a "STRADDLE PERIOD"), the portion of the Straddle Period
prior to the Closing Date. The Buyer shall be liable for that portion of such
taxes and assessments relating to, or arising in respect of, any period after
the Closing Date and, with respect to any Straddle Period, the portion of the
Straddle Period on or after the Closing Date. Any taxes attributable to the sale
or transfer of the Assets to the Buyer hereunder shall be paid by the Seller.
10.9 NO PUBLICITY. Except as may be required by law or the rules of the
New York Stock Exchange or as necessary in connection with the transactions
contemplated hereby, no party hereto shall (a) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior approval of the other parties hereto or (b) otherwise
disclose the existence and nature of the transactions contemplated hereby to any
person or entity other than such party's accountants, attorneys, agents and
representatives, all of whom shall be subject to this nondisclosure obligation
as agents of such party. The parties shall cooperate with
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each other in the preparation and dissemination of any public announcements of
the transactions contemplated by this Agreement.
10.10 NO NEGOTIATIONS OR DISCUSSIONS. Neither the Seller nor any of the
Stockholders shall, directly or indirectly, at any time on or prior to the
Closing Date, 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 or
possible sale to any such person or entity of the Assets of the Seller or
capital stock of the Seller or any merger or consolidation or similar
transaction involving the Seller.
10.11 REGARDING THE MANUFACTURER. Immediately upon the execution of this
Agreement, the Seller will notify the Manufacturer regarding the transactions
contemplated by this Agreement, utilizing a form of notification acceptable to
the Buyer. The Buyer shall promptly apply to the Manufacturer for, or cause an
affiliate of the Buyer to apply to the Manufacturer for, the issuance of a
franchise to operate an automobile dealership upon the Leased Premises or at
such other location the Buyer shall determine in its sole discretion. Effective
as of the Closing, the Seller shall terminate its Dealer Sales and Service
Agreements with the Manufacturer. The Seller shall fully cooperate with the
Buyer, and take all reasonable steps to assist the Buyer, in the Buyer's efforts
to obtain its own similar Dealer Sales and Service Agreements with the
Manufacturer. The contact person(s) of the Seller for purposes of requests by
the Buyer for such assistance are Xxxx Xxxxxx (Zone Manager) (913/469-3009) and
Xxxx Xxxxxxx (Dealer Placement Manager) (913/469-3012) at 0000 Xxxxxxx
Xxxxxxxxx, Xxxxx 0000, Xxxxxxxx Xxxx, Xxxxxx 00000. The parties acknowledge that
the Buyer's Dealer Agreements are subject to the approval of the Manufacturer
and that the Buyer would be unable to obtain its own, similar Dealer Sales and
Service Agreements absent the Seller's termination of its agreements.
Notwithstanding the foregoing, at the request of the Buyer, the Seller shall
allow the Buyer, if reasonably necessary, for a period not to exceed thirty (30)
days after the Closing, to utilize the Seller's dealer code with the
Manufacturer until the Manufacturer has issued a new dealer code to the Buyer.
The Buyer hereby agrees to indemnify the Seller from any and all liabilities
arising out of the use by the Buyer of the Seller's dealer code including,
without limitation, liabilities and obligations to the Manufacturer and to any
floor plan lender or other creditor providing financing for products purchased
under the Seller's dealer code by the Buyer (or by the Seller on behalf of the
Buyer) after the Closing.
10.12 THE SELLER'S EMPLOYEES. The Buyer shall have the right, but not the
obligation, to employ any or all of the Seller's employees. If permitted by law
and applicable regulations, the Seller shall, in consideration for the sale of
substantially all of the Seller's assets in bulk, assign and transfer to the
Buyer, without additional charge therefor, the amount of reserve in the Seller's
State Unemployment Compensation Fund with respect to the Business and the
corresponding experience rate. The Seller shall terminate its 401(k) plan prior
to the Closing Date and in connection therewith shall amend the 401(k) plan to
fully vest all accounts of all participants in the 401(k) plan and to provide
for the distribution of all such accounts. The Seller shall deliver to the Buyer
at Closing a duly executed plan amendment and resolutions of the Board of
Directors and, if necessary, the Seller's stockholders reflecting the
termination of the 401(k) Plan and related amendments to the 401(k) plan. The
Seller also shall terminate all other Employee Plans as of the Closing Date and
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shall provide the Buyer with formal documentation evidencing such terminations
and the Seller shall indemnify and reimburse the Buyer for all Losses (as
defined in Section 10.6(b)) incurred by the Buyer in connection with the
termination and winding up of the Employee Plans. The Seller shall retain all
liability and responsibility for its Employee Plans and shall promptly take any
and all actions necessitated by or related to the amendment and/or termination
of any Employee Plan, including but not limited to liquidation of plan assets
and processing distributions to participants; filing of determination letter
applications, final Forms 5500, and/or other notices with governmental
authorities; and cancellation of insurance policies. Notwithstanding the
foregoing, the Buyer shall have the option, in its sole discretion and exercised
by the delivery to the Seller of a written request, to require the Seller to
transfer any or all of the Seller's plans or related insurance policies to the
Buyer (or other related entity which will continue the Seller's business).
10.13 TERMINATION.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing:
(i) by the written mutual consent of the parties heret
prior to the Closing Date Deadline;
(ii) by the Buyer prior to the Closing Date Deadline (as the
same may have been extended pursuant to Section 1.3 hereof) in the event of any
material breach by the Seller or any of the Stockholders of any of their
respective representations, warranties, covenants or agreements contained
herein;
(iii) by the Seller prior to the Closing Date Deadline (as the
same may have been extended pursuant to Section 1.3 hereof) in the event of any
material breach by the Buyer of any of the Buyer's representations, warranties,
covenants or agreements contained herein;
(iv) at any time after the Closing Date Deadline (as the same
may have been extended pursuant to Section 1.3 hereof), by written notice by the
Buyer or the Seller to the other parties hereto if the Closing shall not have
occurred on or before the Closing Date Deadline (as the same may have been
extended in accordance with Section 1.3);
(v) by the Buyer, by written notice to the Seller, if the
Buyer in its sole discretion is not satisfied with its due diligence
investigation of the Seller, at any time during the period (the "DUE DILIGENCE
PERIOD") commencing on the date hereof and ending on the close of business on
the thirtieth (30th) day after the later to occur of: (A) the date upon which
the Seller and the Buyer agree upon the form and substance of Schedule 5.5 and
the Schedules delivered by the Seller pursuant to Article VII hereof and (B) the
date of delivery by the Seller to the Buyer of the due diligence materials
listed on Schedule 10.5 attached hereto;
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(vi) by the Seller, by written notice to the Buyer, if the
Seller in its sole discretion is not satisfied with its due diligence
investigation of the Buyer, at any time during the Due Diligence Period.
(vii) by the Buyer, by written notice to the Seller, in the
event that the Manufacturer, or any other person claiming by, through or under
the Manufacturer, shall exercise any right of first refusal, preemptive right or
other similar right, with respect to any of the Assets;
(viii)by the Buyer, by written notice to the Seller if, after
any initial HSR Act filing, the FTC makes a "second request" for information
pursuant to 16 C.F.R. ss.803.20, or if the FTC or the Antitrust Division
challenges the transactions contemplated hereby; or
(ix) by the Buyer, by written notice to the Seller, in the
event that approval by the Manufacturer of the transactions contemplated hereby
is not received by the Closing Date Deadline (as the same may have been extended
pursuant to Section 1.3 hereof);
provided, however, no party may terminate this Agreement pursuant to clauses
(ii), (iii), or (iv) above if such party is in material breach of any of its
representations, warranties, covenants or agreements contained herein.
(b) In the event of termination of this Agreement pursuant to
Section 10.13(a), this Agreement shall be of no further force or effect;
provided, however, that any termination pursuant to Section 10.13(a) shall not
relieve: (i) the Buyer of any liability under Section 10.13(c) below; (ii) the
Seller and the Stockholders of any liability under Section 10.13(d) below; (iii)
subject to Section 10.13(e) below, any party hereto of any liability for breach
of any representation, warranty, covenant or agreement hereunder occurring prior
to such termination; or (iv) any party hereto of its or his obligations
hereunder to pay the fees and expenses of third parties; provided, further, that
all filings, applications and other submissions made pursuant to this Agreement
or prior to the execution of this Agreement in contemplation hereof shall, to
the extent practicable, be withdrawn from the agency or other entity to which
made.
(c) If this Agreement is terminated by the Seller pursuant to
Section 10.13(a)(iv) hereof and the failure to complete the Closing on or before
the Closing Date Deadline (as the same may have been extended pursuant to
Section 1.3) shall have been due to the Buyer's material breach of its
representations, warranties, covenants or agreements under this Agreement, then
the Buyer shall, upon demand of the Seller, promptly pay to the Seller in
immediately available funds, as liquidated damages for the loss of the
transaction, an aggregate termination fee of $1,750,000 ("the BUYER TERMINATION
FEE").
(d) If this Agreement is terminated by the Buyer pursuant to Section
10.13(a)(iv) hereof and the failure to complete the Closing on or before the
Closing Date Deadline (as the same may have been extended pursuant to Section
1.3) shall have been due to a material breach by any of the Stockholders or the
Seller of a representation, warranty, covenant or agreement of such party under
this Agreement, then the Seller shall, upon demand of the Buyer, promptly pay to
the Buyer
35
in immediately available funds, as liquidated damages for the loss of the
transaction, a termination fee of $1,750,000 (the "SELLER TERMINATION FEE").
(e) In the case of termination of this Agreement pursuant to Section
10.13(a)(iv) hereof, the rights of the terminating party to be paid the Seller
Termination Fee or the Buyer Termination Fee, as the case may be, shall be such
party's sole and exclusive remedy for damages; in the event of such termination
by either party, such party shall have no right to equitable relief for any
breach or alleged breach of this Agreement, other than for specific performance
for the payment of the Seller Termination Fee or the Buyer Termination Fee, as
the case may be. Nothing contained in this Agreement shall prevent any party
from electing not to exercise any right it may have to terminate this Agreement
and, instead, seeking any equitable relief (including specific performance) to
which it would otherwise be entitled in the event of breach of any other party
hereto.
(f) The Seller and the Stockholders acknowledge and agree that the
Buyer's due diligence investigation of the Seller and the Business, including,
without limitation, its review of the Schedules attached hereto and the
information and documentation received from the Seller, shall not constitute a
waiver of, or otherwise modify, the Buyer's right to terminate this Agreement
under Section 10.13(a)(v) hereof.
10.14 HSR. Subject to the determination by the Buyer that compliance by
the Seller and the Buyer with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), is not required, the Seller and the Buyer
shall each prepare and file with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "ANTITRUST DIVISION"),
and respond as promptly as practicable to all inquiries received from the FTC or
the Antitrust Division for additional information or documentation. The Buyer
shall pay any HSR Act filing fees.
10.15 THE BUYER'S FINANCIAL STATEMENTS. The Seller shall allow, cooperate
with and assist the Buyer's accountants, and shall instruct the Seller's
accountants to cooperate, in the preparation of audited financial statements of
the Seller as necessary for any required filings by the Buyer with the SEC or as
required by the Buyer's lenders; provided, however, that the expense of such
audit shall be borne by the Buyer.
10.16 CURING BREACHES OF REPRESENTATIONS AND WARRANTIES. Upon written
notice by the Buyer of the discovery by the Buyer prior to the Closing of a
breach of any representation and warranty of the Seller contained in this
Agreement, the Seller will, if requested by the Buyer, at its expense, undertake
to cure such breach prior to the Closing. In the event that such breach cannot,
despite reasonable efforts, be fully cured prior to the Closing, the Seller
shall diligently prosecute such efforts to effect such cure before and after the
Closing until so cured. If the Buyer shall have requested the Seller to cure any
such breach pursuant to this Section 10.16, the Buyer shall not be entitled to
claim such breach as a failure of the Buyer's condition to close under Section
8.1 of the Agreement provided that (a) the Seller shall have cured such breach
prior to the Closing or (b) in the event that such breach cannot, despite
reasonable efforts, be fully cured prior to the Closing, the Seller shall be
diligently prosecuting such efforts to effect such cure before the Closing.
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10.17 RIGHT OF FIRST OFFER.
(a) If, at any time prior to the fifth (5th) anniversary of the
Closing Date, the Buyer shall propose to sell the Business acquired from the
Seller pursuant to this Agreement, the Buyer shall first give notice in writing
to Xxx Xxxxxx, as agent for the Seller and the Stockholders (the "SELLER'S
AGENT"), of its intention to do so, which notice (the "FIRST OFFER") shall
constitute an offer to the Seller and the Stockholders to purchase the Business
from the Buyer at the price and upon payment terms set forth in such notice. The
Seller and the Stockholders, acting through the Seller's Agent, shall have a
period of thirty (30) days after the giving of such notice by the Buyer to
accept in writing (the "FIRST OFFER ACCEPTANCE") the Buyer's offer set forth in
the First Offer. If the Seller and the Stockholders, acting through the Seller's
Agent, shall have delivered the First Offer Acceptance to the Buyer prior to the
expiration of such thirty (30) day period, the parties shall negotiate in good
faith in an effort to finalize, execute and deliver a definitive purchase
agreement containing customary terms with respect to such proposed sale. If the
parties are unable to execute and deliver such definitive purchase agreement
within a period of thirty (30) days after receipt by the Buyer of the First
Offer Acceptance (the last day of such thirty (30) day period at 5:00 p.m.,
Eastern Time, being the "FIRST OFFER AGREEMENT DEADLINE"), the Buyer shall be
free to sell the Business to any other person or entity during the one (1) year
period commencing with the expiration of the First Offer Agreement Deadline at a
price that is not less than 90% of the price proposed by the Buyer in the First
Offer, and on payment terms which, overall, are no less favorable than such
payment terms proposed by the Buyer in the First Offer.
(b) The parties hereto acknowledge and agree that any rights granted
to the Seller and the Stockholders pursuant to Section 10.17(a) are subject to
the Manufacturer's (or any person claiming by, through or under the
Manufacturer) right of first refusal, preemptive right or other similar right,
with respect to the Business, and that any exercise of such right by a
Manufacturer shall not be subject to Section 10.17(a). Accordingly, the parties
hereto acknowledge that any potential closing of a purchase transaction pursuant
to Section 10.17(a) will be contingent upon a determination by the Manufacturer
that it does not wish to exercise its right of first refusal, preemptive right
or other similar right with respect to the Business.
10.18 CERTAIN INDEMNIFICATION PROCEDURES. The procedures to be followed by
the Buyer and the Seller with respect to indemnification hereunder regarding
claims by third persons which could give rise to an indemnification obligation
hereunder 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 a written
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, proceeding or claim,
including copies of any documents and written correspondence from such third
person to such Indemnified Party.
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(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 and agrees, in writing,
that it is obligated hereunder to indemnify and hold harmless the Indemnified
Party with respect to such damages in their entirety pursuant to Sections 10.6
or 10.7 hereof, as the case may be, and (iii) the Indemnifying Party shall have
made provision which, in the reasonable judgment of the Indemnified Party, is
adequate to satisfy any adverse judgment as a result of its indemnification
obligation with respect to such action, proceeding or claim, then the
Indemnifying Party shall be entitled to assume and control such defense with
counsel chosen by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld or delayed. The Indemnified
Party shall be entitled to participate therein after such assumption, the costs
of such participation following such assumption to be at its own expense. Upon
assuming such defense, the Indemnifying Party shall have full rights to enter
into any monetary compromise or settlement which is dispositive of the matters
involved; PROVIDED, that such settlement is paid in full by the Indemnifying
Party and will not have any direct or indirect continuing material adverse
effect upon the Indemnified Party. Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay, settle or compromise any such
action, proceeding or claim, provided that in such event the Indemnified Party
shall waive any right to indemnity therefor hereunder unless the Indemnified
Party shall have sought the consent of the Indemnifying Party to such payment,
settlement or compromise and such consent was unreasonably withheld or delayed,
in which event no claim for indemnity therefor hereunder shall be waived.
(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, (ii) the
Indemnifying Party shall not have exercised its right to assume the defense or
(iii) the Indemnifying Party shall have lost its right to continue 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, proceeding or claim, 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 10.6 or 10.7 hereof, as the case may be. The Indemnified Party shall
have full rights to dispose of such action, proceeding or claim and enter into
any monetary compromise or settlement; PROVIDED, HOWEVER, in the event that the
Indemnified Party shall settle or compromise any action, proceeding or claim for
which indemnification is due under Sections 10.6 or 10.7 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 action, proceeding or claim, including, without
limitation, by making available to the other all pertinent information and
witnesses within its control.
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10.19 USE OF RIVERSIDE NAME. The Buyer agrees not to institute any legal
action to prevent the limited use by the Stockholders of the "Riverside"
tradename at the Riverside Autoplex Dodge, Jeep, Chrysler, Mazda and Honda
automobile dealership operated by certain of the Stockholders in McAlester,
Oklahoma; provided, that, the use of the Riverside tradename shall not be used
in any manner other than in connection with such automobile dealership at its
present location and such automobile dealership shall not operate as a Nissan or
Chrysler motor vehicle franchise. It is stipulated that any improper use by the
Stockholders of the Riverside tradename would cause irreparable damage to the
Buyer. The Buyer, in addition to any other rights or remedies which the Buyer
may have, shall be entitled to an injunction restraining the Stockholders from
violating or continuing any violation of this section. Such right to obtain
injunctive relief may be exercised, at the option of the Buyer, concurrently
with, prior to, after or in lieu of the exercise of any other rights or remedies
which the Buyer may have as a result of any such breach or threatened breach.
10.20 COMPUTER MATTERS. The Buyer acknowledges that the Seller does not
own the computer hardware server currently used in the Business and that,
pursuant to a lease, Xxxxxxxx Chevrolet, Inc. provides access to its computer
hardware server to the Seller. The Seller acknowledges that the Buyer is not
purchasing the computer hardware server from the Seller and that the Buyer will
not be able to have its own server in place at the Closing. The Seller and the
Stockholders agree to take such steps as are necessary to permit the Buyer, upon
reasonable terms and conditions, to access and utilize the computer hardware
server owned by Xxxxxxxx Chevrolet, Inc. and to cause Xxxxxxxx Chevrolet, Inc.
to enter into an agreement with the Buyer to such effect. The Buyer will use
commercially reasonable efforts to obtain its own server as soon as reasonably
practicable.
ARTICLE XI
MISCELLANEOUS
11.1 ASSIGNMENT. Except as provided in this Section, this Agreement shall
not be assignable by any party hereto without the prior written consent of the
other parties. The Buyer may assign this Agreement, without the consent of the
other parties hereto, to a corporation, partnership, limited liability company
or other entity controlled by the Buyer, including a corporation, partnership,
limited liability company or other entity to be formed at any time prior to the
Closing Date, and to any person or entity who shall acquire all or substantially
all of the assets of the Buyer or of such corporation, partnership, limited
liability company or other entity controlled by the Buyer (including any such
acquisition by merger or consolidation); provided said assignment shall be in
writing and the assignee shall assume all obligations of the Buyer hereunder,
whereupon the assignee shall be substituted in lieu of the Buyer named herein
for all purposes, and provided further, that the Buyer originally named herein
shall continue to be liable with respect to its obligations hereunder. The Buyer
may assign this Agreement, without the consent of the other parties hereto, as
collateral security, and the other parties hereto agree to execute and deliver
any acknowledgment of such assignment by the Buyer as may be required by any
lender to the Buyer.
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11.2 GOVERNING LAW. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
Oklahoma.
11.3 ACCOUNTING MATTERS. All accounting matters required or contemplated
by this Agreement shall be in accordance with generally accepted accounting
principles.
11.4 FEES AND EXPENSES. Except as otherwise specifically provided in this
Agreement, each of the parties hereto shall be responsible for the payment of
such party's fees, costs and expenses incurred in connection with the
negotiation and consummation of the transactions contemplated hereby.
11.5 AMENDMENTS; MERGER CLAUSE. This Agreement, including the schedules
and other documents referred to herein which form a part hereof, contains the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement may not be amended except by a
writing executed by all of the parties hereto. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
11.6 WAIVER. To the extent permitted by applicable law, no claim or right
arising out of this Agreement or the documents referred to in this Agreement can
be discharged by a party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by all the parties hereto. Any
waiver by a party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach of such
provision or any other provision of this Agreement. Neither the failure nor any
delay by any party hereto in exercising any right or power under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right or power, and no single or partial exercise of any such right or power
will preclude any other or further exercise of such right or power or the
exercise of any other right or power.
11.7 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by facsimile or by a nationally recognized overnight courier,
postage prepaid, and shall be deemed to have been duly given when so delivered
personally or by confirmed facsimile or one (1) business day after the date of
deposit with such nationally recognized overnight courier. All such notices,
claims, certificates, requests, demands and other communications shall be
addressed to the respective parties at the addresses set forth below or to such
other address as the person to whom notice is to be given may have furnished to
the others in writing in accordance herewith.
40
If to the Buyer, to:
Sonic Automotive, Inc.
0000 X. Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Chief Financial Officer
With a copy to:
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxxx III
If to the Seller or the Stockholders, to:
Xxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxxxx
Xxxxxxx Xxxx, XX 00000
Fax No.: (000) 000-0000
With a copy to:
Xxxxxxx Xxxxxxx
Xxxxxxx Law Firm
0000 X. Xxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Fax No.: (000) 000-0000
11.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts. Each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
11.9 KNOWLEDGE. Whenever any representation or warranty of the Seller or
any of the Stockholders contained herein or in any other document executed and
delivered in connection herewith is based upon the knowledge of the Seller or
any of the Stockholders, (a) such knowledge shall be deemed to include (i) the
best actual knowledge, information and belief of the Seller and each Stockholder
and (ii) any information which any of the Stockholders would reasonably be
expected to be aware of in the prudent discharge of his duties in the ordinary
course of business (including consultation with legal counsel) on behalf of the
Seller, and (b) the knowledge of the Seller or any of the Stockholders shall be
deemed to be the knowledge of the Seller and all the Stockholders.
41
11.10 ARBITRATION.
(a) [Intentionally Deleted]
(b) Except as otherwise provided herein, any dispute, claim or
controversy arising out of or relating to this Agreement or the interpretation
or breach hereof shall be resolved by binding arbitration under the commercial
arbitration rules of the American Arbitration Association (the "AAA RULES") to
the extent such AAA Rules are not inconsistent with this Agreement. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm the award
and order its enforcement, as the case may be. The demand for arbitration shall
be made by any party hereto within a reasonable time after the claim, dispute or
other matter in question has arisen, and in any event shall not be made after
the date when institution of legal proceedings, based on such claim, dispute or
other matter in question, would be barred by the applicable statute of
limitations. The arbitration panel shall consist of three (3) arbitrators, one
of whom shall be appointed by the Buyer and one of whom shall be appointed by
the Seller within thirty (30) days after any request for arbitration hereunder.
The two arbitrators thus appointed shall choose the third arbitrator within
thirty (30) days after their appointment; provided, however, that if the two
arbitrators are unable to agree on the appointment of the third arbitrator
within thirty (30) days after their appointment, either arbitrator may petition
the American Arbitration Association to make the appointment. The place of
arbitration shall be Charlotte, North Carolina. The arbitrators shall be
instructed to render their decision within sixty (60) days after their selection
and to allocate all costs and expenses of such arbitration (including legal and
accounting fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits (including the
successful assertion of any defenses).
(c) Notwithstanding the provisions of Section 11.10(b), any dispute
relating to accounting matters shall be resolved as provided in this Section
11.10(c). The parties first shall use reasonable efforts to resolve any such
accounting dispute. In the event the dispute has not been resolved within a
reasonable amount of time, either the Buyer, on the one hand, or the Seller, on
the other hand, may provide written notice to the other party that the matter
will be submitted to a "Big Five" accounting firm mutually acceptable to the
Buyer and the Seller (the "ACCOUNTANTS") for resolution. If issues in dispute
are submitted to the Accountants for resolution: (i) each party will furnish to
the Accountants such work papers 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)
such determination by the Accountants, as set forth in a notice delivered to
both parties by the Accountants, will be binding and conclusive on the parties;
and (iii) the Buyer and the Seller shall each bear 50% of the fees and expenses
of the Accountants for such determination.
(d) Nothing contained in this Section 11.10 shall prevent any party
hereto from seeking any equitable relief to which it would otherwise be entitled
from a court of competent jurisdiction.
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11.11 PERMITTED SUCCESSORS; ASSIGNS; NO THIRD PARTY BENEFICIARIES. Subject
to Section 11.1, this Agreement shall be binding upon, inure to the benefit of
and be enforceable by the respective successors, heirs and assigns of the
parties hereto. Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon or give to any employee of the Seller, or any
other person, firm, corporation or legal entity, other than the parties hereto
and their successors and permitted assigns, any rights, remedies or other
benefits under or by reason of this Agreement.
11.12 HEADINGS. The article headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.13 SEVERABILITY; CONSTRUCTION.
(a) 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.
(b) This Agreement shall be construed equitably, in accordance with
its terms, without regard to the degree which the Seller or the Buyer, or their
respective legal counsel, have participated in the drafting of this Agreement.
11.14 COOPERATION IN SEC FILINGS. At the request of the Buyer and at the
Buyer's expense, the Seller and the Stockholders shall cooperate in the
preparation by the Buyer of any filings to be made by the Buyer with the SEC
including, without limitation, any filing with respect to a registered offering
of its securities by the Buyer and the closing of the offering registered
thereby.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
BUYER: SONIC AUTOMOTIVE, INC.
By: /s/ O. Xxxxxx Xxxxx
-------------------------------------
Its: Chairman and CEO
SELLER: RIVERSIDE CHEVROLET, INC.
By: /s/ Xxxxx Xxxxxxxx
-------------------------------------
Its: Vice President
STOCKHOLDERS: /s/ Xxx Xxxxxx
-------------------------------------(SEAL)
Xxx Xxxxxx
/s/ Xxxxx Xxxxxxxx
-------------------------------------(SEAL)
Xxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxxxx
-------------------------------------(SEAL)
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxx
-------------------------------------(SEAL)
Xxxxx Xxxxxx
/s/ Xxxxx Xxxx
-------------------------------------(SEAL)
Xxxxx Xxxx
/s/ Xxxxxx Xxxxxxxx
-------------------------------------(SEAL)
Xxxxxx Xxxxxxxx
Xxxx Xxxxxxxx 1997 Dynasty Trust
(dated December 26, 1997)
By: /s/ Xxxxx Xxxxxxxx
-------------------------------------
Xxxxx Xxxxxxxx, Co-Trustee
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------
Xxxxxx Xxxxxxxx, Co-Trustee
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Xxxxx Xxxxxx, Co-Trustee
By: /s/ Xxxxx Xxxx
-------------------------------------
Xxxxx Xxxx, Co-Trustee
