EXHIBIT 2.1
Pages where confidential treatment have been requested are marked "Confidential
Treatment Requested." The redacted material has been separately filed with the
Commission, and the appropriate section has been marked at the appropriate
place and in the margin with a star (*).
STOCK PURCHASE AGREEMENT
BY AND AMONG
GROUP 1 AUTOMOTIVE, INC.,
A DELAWARE CORPORATION
AND
XXXXXX AUTOMOTIVE GROUP, INC.
A CALIFORNIA CORPORATION
AND
XXXXXXXX XXXXXX XXXXXX AND XXXXXXX XXXXXX
TRUSTEES OF THE XXXXXX TRUST OF 1980 (RESTATED)
AND XXXXXXX X. XXXXXX
DATED AS OF APRIL ______, 2002
TABLE OF CONTENTS
Page
----
ARTICLE 1 TERMS OF THE TRANSACTION .................................... 1
1.1 Agreement to Sell and to Purchase the Shares ................ 1
1.2 Purchase Price .............................................. 1
1.3 Cash and Receivables ........................................ 4
1.4 Inventory ................................................... 4
1.5 Fixed Assets ................................................ 5
1.6 Excluded Assets ............................................. 6
1.7 Liabilities ................................................. 7
1.8 Closing ..................................................... 7
1.9 Closing Obligations ......................................... 8
1.10 Adjustments ................................................. 9
1.11 Payment .................................................... 10
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS .............. 10
2.1 Disclosure ................................................. 10
2.2 Organization and Good Standing ............................. 11
2.3 Authority .................................................. 11
2.4 Not Used ................................................... 11
2.5 Absence of Conflicts ....................................... 11
2.6 Capital Stock .............................................. 12
2.7 Financial Statements ....................................... 13
2.8 Books and Records .......................................... 13
2.9 Assets; Encumbrances ....................................... 13
2.10 Condition and Sufficiency of Assets ........................ 13
2.11 Accounts Receivables ....................................... 14
2.12 Inventory .................................................. 14
2.13 No Undisclosed Liabilities ................................. 14
2.14 Taxes ...................................................... 14
2.15 Employee Benefits .......................................... 15
2.16 Compliance with Laws ....................................... 16
2.17 Legal Proceedings .......................................... 16
2.18 Absence of Changes ......................................... 17
2.19 Contracts and Commitments .................................. 18
2.20 Insurance .................................................. 19
2.21 Environmental Matters ...................................... 19
2.22 Employees .................................................. 21
2.23 Intellectual Property ...................................... 22
2.24 Certain Payments ........................................... 23
2.25 Relationships with Related Persons ......................... 23
2.26 Brokers or Finders ......................................... 23
2.27 Leased Assets .............................................. 23
2.28 Phantom Stock Plan ......................................... 24
i
TABLE OF CONTENTS
(continued)
Page
----
2.29 Finance & Insurance Programs ............................... 25
2.30 Subsidiaries and Investments ............................... 25
2.31 Permits, Etc ............................................... 25
2.32 Powers of Attorney ......................................... 26
2.33 Bank Accounts, Credit Cards, Safe Deposit Boxes and
Cellular Telephones ........................................ 26
2.34 Warranties ................................................. 26
2.35 Directors and Officers ..................................... 26
2.36 Suppliers and Customers .................................... 26
2.37 Former Subsidiaries ........................................ 26
2.38 Not Used ................................................... 26
2.39 Litigation Regarding Seller ................................ 26
2.40 Approvals .................................................. 27
2.41 Manufacturer Communications ................................ 27
2.42 Xxx de Oro ................................................. 27
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER .................... 27
3.1 Organization and Good Standing ............................. 27
3.2 Authority .................................................. 27
3.3 No Conflict ................................................ 27
3.4 Certain Proceedings ........................................ 28
3.5 Brokers or Finders ......................................... 28
3.6 Misstatements and Omissions ................................ 28
ARTICLE 4 COVENANTS OF EACH ACQUIRED COMPANY AND OF THE
SELLERS PRIOR TO CLOSING ................................... 28
4.1 Access ..................................................... 28
4.2 Operation of the Businesses of each Acquired Company ....... 28
4.3 Prohibited Activities ...................................... 29
4.4 Required Approvals ......................................... 29
4.5 Notification ............................................... 29
4.6 Payment of Indebtedness by Related Persons ................. 30
4.7 No Negotiation ............................................. 30
4.8 Best Efforts ............................................... 30
4.9 Removal of Related Party Guarantees ........................ 30
4.10 Related Party Agreements ................................... 30
4.11 Real Property and Lease Agreements ......................... 30
4.12 Guaranty of Receivables .................................... 32
4.13 Woodland Hills Nissan Add-Point ............................ 33
4.14 Management Team ............................................ 33
ii
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE 5 COVENANTS OF BUYER PRIOR TO CLOSING DATE ................... 33
5.1 Approvals of Governmental Bodies ........................... 33
5.2 Lease ...................................................... 33
5.3 Release of Guarantees ...................................... 33
5.4 Best Efforts ............................................... 33
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION
TO CLOSE ................................................... 34
6.1 Accuracy of Representations ................................ 34
6.2 Sellers' Performance ....................................... 34
6.3 Consents ................................................... 34
6.4 Additional Conditions Precedent ............................ 34
6.5 Resignation of Directors and Officers ...................... 36
6.6 Manufacturer Approval ...................................... 36
ARTICLE 7 CONDITIONS PRECEDENT TO SELLERS' OBLIGATION
TO CLOSE ................................................... 36
7.1 Accuracy of Representations ................................ 36
7.2 Buyer's Performance ........................................ 36
7.3 Consents ................................................... 37
7.4 Additional Documents ....................................... 37
7.5 No Injunction .............................................. 37
7.6 Physical Inventory ......................................... 37
ARTICLE 8 POST-CLOSING AND OTHER COVENANTS ........................... 37
8.1 General .................................................... 37
8.2 Litigation Support ......................................... 37
8.3 Transition ................................................. 38
8.4 Post-Closing Notifications ................................. 38
8.5 Transfer Taxes ............................................. 38
8.6 Payment of Expenses ........................................ 38
8.7 Tax Periods Ending on or Before the Closing Date ........... 38
8.8 Release .................................................... 38
8.9 Non-Competition Obligations ................................ 39
8.10 Non-Hiring Provisions ...................................... 40
8.11 IRC Section 338 Election ................................... 41
8.12 Vehicle Service Contract Trust Funds ....................... 41
8.13 Phantom Stock Plan ......................................... 41
ARTICLE 9 TERMINATION ................................................ 41
9.1 Termination Events ......................................... 41
9.2 Effect of Termination ...................................... 41
iii
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE 10 INDEMNIFICATION; REMEDIES .................................. 42
10.1 Survival ................................................... 42
10.2 Indemnification by Sellers ................................. 42
10.3 Indemnification by Buyer ................................... 43
10.4 Claims for Indemnification ................................. 43
10.5 Procedures for Indemnification -- Third Party Claims ....... 43
10.6 Procedures for Indemnification -- Other Claims ............. 44
10.7 Limitations of Indemnification ............................. 44
10.8 Setoff ..................................................... 44
10.9 Applicability .............................................. 45
ARTICLE 11 GENERAL PROVISIONS ......................................... 45
11.1 Expenses ................................................... 45
11.2 Public Announcements ....................................... 45
11.3 Confidentiality ............................................ 45
11.4 Notices .................................................... 46
11.5 Insider Liability .......................................... 46
11.6 Waiver ..................................................... 47
11.7 Entire Agreement and Modification .......................... 47
11.8 Schedules .................................................. 47
11.9 Assignments, Successors, and No Third-Party Rights ......... 47
11.10 Severability ............................................... 48
11.11 Section Headings, Construction ............................. 48
11.12 Time Of Essence ............................................ 48
11.13 Governing Law .............................................. 48
11.14 Counterparts ............................................... 48
11.15 Attorneys' Fees ............................................ 48
11.16 Concurrent Conditions ...................................... 48
11.17 Jurisdiction; Arbitration .................................. 49
ARTICLE 12 DEFINITIONS ................................................ 50
"Acquired Companies" ....................................... 50
"Affiliate" ................................................ 50
"Affiliate Payables" ....................................... 50
"Applicable Contract" ...................................... 50
"Balance Sheet" ............................................ 50
"Best Efforts" ............................................. 50
"Breach" ................................................... 50
"Business Day" ............................................. 50
"Closing Date" ............................................. 50
"Company" .................................................. 50
"Consent" .................................................. 50
"Contemplated Transactions" ................................ 51
"Contract" ................................................. 51
iv
TABLE OF CONTENTS
(continued)
Page
----
"Corporations" ............................................. 51
"Xxxxxx City Honda Dealership Location" .................... 51
"Xxxxxx City Toyota Dealership Location" ................... 51
"Dealership Locations" ..................................... 51
"Disclosure Letter" ........................................ 51
"Employee Plan" ............................................ 51
"Encumbrance" .............................................. 51
"Environment" .............................................. 51
"Environmental, Health, and Safety Liabilities" ............ 52
"Environmental Law" ........................................ 52
"ERISA" .................................................... 52
"Facilities" ............................................... 52
"GAAP" ..................................................... 52
"Governmental Authorization" ............................... 53
"Governmental Body" ........................................ 53
"Group 1" .................................................. 53
"Guaranty" ................................................. 53
"Hazardous Activity" ....................................... 53
"Hazardous Materials" ...................................... 53
"Honda" .................................................... 00
"XXX Xxx" .................................................. 53
"IRC" ...................................................... 53
"IRS" ...................................................... 53
"Knowledge" ................................................ 54
"Legal Requirement" ........................................ 54
"Management Team" .......................................... 54
"Manufacturer" ............................................. 54
"Material Agreement" ....................................... 54
"Material Environmental Liability" ......................... 54
"Mitsubishi" ............................................... 54
"Modified GAAP" ............................................ 54
"Nissan" ................................................... 54
"Occupational Safety and Health Law" ....................... 54
"Order" .................................................... 54
"Ordinary Course of Business" .............................. 54
"Organizational Documents" ................................. 55
"Person" ................................................... 55
"Proceeding" ............................................... 55
"Purchase Price" ........................................... 55
"Real Properties" .......................................... 55
"Related Guarantees" ....................................... 55
"Related Party Agreement" .................................. 55
"Related Person" ........................................... 55
"Release" .................................................. 56
v
TABLE OF CONTENTS
(continued)
Page
----
"Representative" ............................................ 56
"Schedule" .................................................. 56
"Securities Act" ............................................ 56
"Sellers' Releases" ......................................... 56
"Shares" .................................................... 56
"Subsidiary" ................................................ 56
"Tax Return" ................................................ 56
"Threat of Release" ......................................... 56
"Threatened" ................................................ 57
"Toyota" .................................................... 57
"Van Nuys Honda Dealership Location" ........................ 57
"Van Nuys Infiniti Dealership Location" ..................... 57
"Van Nuys Mitsubishi Dealership Location" ................... 57
"Van Nuys Nissan Dealership Location" ....................... 57
"Woodland Hills Nissan Dealership Location" ................. 57
ANNEX I STOCK OWNERSHIP ............................................. 61
EXHIBIT "6.4(a)" OPINION OF SELLERS' COUNSEL ....... Exhibit 6.4(a) - Pages 1-4
vi
STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT ("Agreement") dated effective this
_______ day of April, 2002, is among GROUP 1 AUTOMOTIVE, INC., a Delaware
corporation, and its assigns ("Buyer") and XXXXXX AUTOMOTIVE GROUP, INC., a
California corporation ("Company") and the persons whose names are set forth on
ANNEX I hereto (collectively and individually "Sellers") which Sellers are,
directly and indirectly, the holders in the aggregate of one hundred percent
(100%) of the issued and outstanding shares of capital stock of the Company
("Shares"). Terms capitalized but not otherwise defined herein have the meanings
ascribed to them in Article 12.
WITNESSETH
WHEREAS, the Company owns one hundred percent (100%) of the issued and
outstanding capital stock of Xxxxxx Family Company, Inc. d/b/a Xxxxxx Honda of
Van Nuys, a
California corporation, Xxxxxx Infiniti Inc., a
California
corporation, Xxxxxx Imports, Inc. d/b/a Xxxxxx Mitsubishi, Inc., a
California
corporation, Xxxxxx Nissan, Inc., a
California corporation, Millbro, Inc. d/b/a
Xxxxxx Honda of Xxxxxx City, a
California corporation, FMM, Inc. d/b/a Xxxxxx
Toyota, a
California corporation, and Xxxxxx Motors Van Nuys, Inc., a
California
corporation (collectively "Corporations" or "Subsidiary" or "Subsidiaries");
WHEREAS, based upon the representations and warranties herein made
Sellers and on the terms and subject to the conditions contained herein, Buyer
wishes to acquire one hundred percent (100%) of the issued and outstanding
capital stock of Company;
WHEREAS, based upon the representations and warranties herein made by
Buyer and on the terms and subject to the conditions contained herein, Sellers
wish to sell to Buyer the Shares; and
WHEREAS, the parties agree that this is a cash transaction and the
parties will not make an election under IRC Section 338(h)(10).
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
ARTICLE 1
TERMS OF THE TRANSACTION
1.1 AGREEMENT TO SELL AND TO PURCHASE THE SHARES. At the Closing, and
on the terms and subject to the conditions set forth in this Agreement, Sellers
shall sell to Buyer, and Buyer shall purchase from Sellers, the Shares of
Company, as set forth on ANNEX I. At the Closing, the Sellers shall deliver to
the Buyer a certificate or certificates representing the Shares, duly endorsed
in blank or with a fully executed stock power attached, all in proper form for
transfer with all transfer taxes, if any, paid by the Sellers. The Shares shall
be delivered to the Buyer free and clear of all Encumbrances.
1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares will be an aggregate amount consisting of the value of the Goodwill for
the Acquired Companies as
1
CONFIDENTIAL TREATMENT REQUESTED
defined in SECTION 1.2(b) below, plus or minus the Tangible Net Worth of the
Acquired Companies, as defined in SECTION 1.2(a) below.
(a) The Tangible Net Worth ("Tangible Net Worth") shall be
calculated as of the Effective Closing Date (as hereinafter defined), as
follows: (i) by adding the items listed in SECTION 1.3 through 1.6, and (ii)
subtracting the total amount of the liabilities described in SECTION 1.7. No
value shall be attributed to any assets, intangible or otherwise, other than
as specifically provided in SECTIONS 1.3 THROUGH 1.6. For computation of the
Tangible Net Worth, the inventories shall be valued in accordance with the
provisions of SECTION 1.4, below.
* (b) Goodwill is to be calculated by multiplying [REDACTED]
times Adjusted Pre-Tax Earnings, as hereinafter defined. Adjusted Pre-Tax
Earnings are the actual Modified GAAP pre-tax earnings of the Acquired
Companies for the twelve (12) months ended December 31, 2001 ("PTE"),
adjusted as follows:
(1) Increased or decreased by the actual 2001 adjustments
to the LIFO inventory reserve included in the pre-tax
earnings.
(2) Increased or decreased based on the difference between
the actual rent expense included in the PTE and the
go-forward rent established in the Leases, as
hereinafter defined, and provided for in SECTION 4.11
(excluding any rent attributable to the planned
improvements at the Xxxxxxxxx Boulevard Honda Service
Center and the Woodland Hills Nissan Add-Point).
(3) Increased by any compensation included in the PTE,
inclusive of state and federal payroll and other taxes
and the reasonable value of all benefits paid and
expenses, paid to the individuals identified on
SCHEDULE 1.2(b)(3) ("Excluded Employees"). The PTE
shall be increased by any compensation or fees paid to
Company or any Affiliate controlled by Sellers, whether
fixed or determined on a percentage basis (e.g. MAG
management fee).
(4) Increased by actual income generated by the
Subsidiaries, such as income from Manufacturer
incentives, warranties, finance or insurance, which was
paid or payable to the Company or any Affiliates of the
Subsidiaries, to the extent such income is not included
in the PTE.
(5) Increased by any personal expenses, demonstrator
vehicles, travel and entertainment incurred by
Principals as described in the Sellers information
memorandum, entitled Project Delta Informational
Memorandum, dated July 30, 2001.
(6) Increased by (i) the first year pro-forma pre-tax
income for the new Xxxxxx City Honda facilities, which
is agreed to be One Million Five Hundred Ninety-Five
Thousand Dollars ($1,595,000); and (ii) the first year
pro forma pre-tax income ("Pro Forma") of the Woodland
Hills Nissan Add-Point, which is agreed to be Eight
Hundred Seventy-Five Thousand Dollars ($875,000),
reduced by the amount, if any, that the estimated rent
factor in the Pro Forma exceeds the Nissan per new unit
average rent factor for the Los Angeles market.
2
(7) Increased by (i) the expenditures in 2001 for
environmental remediation at the Van Nuys Infiniti
Dealership location, (ii) the amount of Two Hundred
Fifty Thousand Dollars ($250,000) in recognition of the
underutilization of the Toyota and Honda properties in
Xxxxxx City, and (iii) Two Hundred Sixteen Thousand
Dollars ($216,000) in recognition of the
underutilization of the Xxxxxxxxx Boulevard Honda
Service Center property. Increased or decreased by any
other reasonable non-recurring income, or expenses or
personal expenses of Principal customarily adjusted by
Buyer in transaction of this type, as agreed between
Buyer and Sellers. The PTE will not be adjusted for any
overstatement of pretax income arising from the Van
Nuys Nissan and Mitsubishi sales issues described as
Xxx de Oro, occurring in the first quarter of 2001,
except to the extent the overstatement to PTE exceeds
One Hundred Thousand Dollars ($100,000). However, any
deduction or reduction in determining the PTE resulting
from Xxx de Oro sales issues consisting of expenses of
settlement or losses from repossessions shall increase
the PTE to the extent that such expenses or losses have
been deducted in deriving the Adjusted PreTax Earnings,
net of profits (i.e., gross profits less sales
commissions), from the sale of such repossessed
vehicles.
(8) Sellers will prepare and deliver to Buyer a computation
of the good will and the Adjusted Pre-Tax Earnings
within twenty-one (21) days after the date of execution
of this Agreement. In the event that the adjustments
provided for in paragraph (2) of this SECTION 1.2(b)
have not been determined within such time period,
Sellers shall deliver a preliminary computation of
Adjusted Pre-Tax Earnings utilizing the actual lease
expense for the year 2001. The Buyer will have fifteen
(15) days to review the Sellers' computation of the
Adjusted Pre-Tax Earnings. Buyer and Sellers shall
negotiate in good faith to reconcile the difference, if
any, between Sellers' computation of the Adjusted
Pre-Tax Earnings and Buyer's computation of the
Adjusted Pre-Tax Earnings. If within sixty (60) days
following delivery of the computation of the Adjusted
Pre-Tax Earnings (or the preliminary Adjusted Pre-Tax
Earnings) Buyer and Sellers have not agreed to the
computation of the Adjusted Pre-Tax Earnings (or the
preliminary Adjusted Pre-Tax Earnings), then the issues
in dispute shall be determined by arbitration conducted
in accordance with the Streamlined Arbitration Rules
and Procedures of Jams/Endispute.
If a preliminary Adjusted Pre-Tax Earnings computation
is prepared and delivered, then upon determination of
the items set forth in paragraph 2 of this SECTION
1.2(b), Sellers shall promptly prepare a computation of
the final Adjusted Pre-Tax Earnings and deliver such
computation to Buyer. Buyer may object only to the
amounts and computation based upon the substitution of
the items
3
determined pursuant to paragraph 2 of this SECTION
1.2(b). With respect to those items, the process set
forth above shall be repeated.
1.3 CASH AND RECEIVABLES. Cash and cash equivalents held by the
Acquired Companies shall be valued at the reconciled amount on the Closing Date.
Value shall be placed on any contracts for future services, prepaid items or
deferred charges, only to the extent of the value or benefit of which will be
usable by the Acquired Companies. The receivables of each Acquired Company,
including but not limited to contracts in transit, factory, rebate, warranty,
employee, trade and accounts receivable, incentives (under SECTION 1.4(a))
accrued but unpaid (collectively, the "Accounts Receivable") as of the Closing
Date shall be valued at the amount recorded on each Acquired Company's books.
Sellers covenant that there will not be any receivables from any Sellers or
Affiliates of Sellers. Sellers shall purchase all uncollected Accounts
Receivables as provided in SECTION 4.12.
1.4 INVENTORY. Prior to and as close to the Closing Date as possible,
Buyer or Buyer's representatives shall conduct a physical inventory of all new
vehicles, used vehicles, parts and accessories, work in process and sublet
repairs of the Acquired Companies. The Sellers shall have the right to have an
agent present during each physical inventory. The new vehicles, used vehicles,
parts and accessories, work in process and sublet repairs shall be valued as
provided herein for purposes of calculating the Tangible Net Worth at the
Closing Date:
(a) Sellers and Buyer shall calculate the value of the new,
unused and undamaged current model year vehicles with less than five hundred
(500) miles, as follows: factory invoice, less: holdback, advertising
incentives, floor plan assistance or interest credits, model year change-over
allowances, full fuel tank reimbursement (to the extent the vehicle has not been
fueled), or other allowances or incentives paid or payable to the Acquired
Companies, but each such item not paid as of the Closing Date shall be recorded
and valued as a receivable in accordance with SECTION 1.3. Vehicles in inventory
which previously have been delivered to a customer together with the
Manufacturer's Certificate of Origin ("MCO") (e.g. "unwinds" or "back-outs"),
vehicles pre-reported, or vehicles without proper documentation (e.g. "R.D.R.
card," "sale card,") such that Acquired Companies may not subsequently sell,
transfer and register such vehicles as new vehicles, shall be valued pursuant to
the terms of SECTION 1.4(c) below; provided, however, that up to thirty (30)
unwinds shall be valued as provided in this SECTION 1.4(a). Sellers shall
disclose all damage as well as any repairs made to any vehicle. The valuation of
any vehicle with damage, shall be reduced by the cost of repair and an amount to
reflect the reduction in value due to the damage and repair, provided however
any vehicle previously damaged, even if repaired, if the cost of repairing such
damage exceeds or has exceeded Five Hundred Dollars ($500), shall be valued
pursuant to the terms of SECTION 1.4(c), below. Installed accessories shall be
valued at actual dealer cost. Any new, unused vehicles not meeting the
provisions of this SECTION 1.4(a), shall be valued pursuant to the terms of
SECTION 1.4(b) or SECTION 1.4(c), below, as applicable.
(b) All current model year Demonstrator Vehicles as
hereinafter defined shall be valued as provided in SECTION 1.4(a) above, less
fifteen cents (15(cent)) per mile on the odometer. Demonstrator Vehicle is
defined as a new vehicle meeting the criteria in SECTION 1.4(a) above, except
said vehicle has more than Five Hundred (500) miles but less than Seven Thousand
Five Hundred (7,500) miles. Vehicles with more than Seven Thousand Five Hundred
(7,500) miles shall be considered used and sold pursuant to the terms of SECTION
1.4(c) below. Any Demonstrator Vehicle not meeting the provisions of this
SECTION 1.4(b), and to the extent applicable the provisions of SECTION 1.4(a),
shall be valued pursuant to the terms of SECTION 1.4(c), below.
4
(c) Sellers and Buyer shall agree to the value of the new
vehicles not qualifying in SECTIONS 1.4(a) AND (b), used vehicle inventory, and
company vehicles (collectively "Used Vehicle") in determining the Tangible Net
Worth. The Sellers and Buyer shall value the Used Vehicle inventory at the
current wholesale market value of the vehicles at least ten (10) days prior to
the Closing Date. In the event Sellers and Buyer fail to agree on the value of
the Used Vehicle inventory, then Sellers shall purchase said Used Vehicle at the
net book value of the vehicle. If Sellers purchases any vehicles pursuant to
this SECTION 1.4(c), the Buyer will assist Sellers with the
California DMV
paperwork and will store said vehicles at no cost to Sellers for up to sixty
(60) days.
(d) The value of the parts and accessories inventory shall be
the actual verifiable inventory of new, unused, undamaged and non-obsolete
Manufacturer's parts and accessories that are: (i) listed for sale in the then
current Dealer Parts and Accessories Price Schedules for each Manufacturer
(excluding parts and accessories listed as "discontinued" or "replaced" parts
and accessories, etc.); (ii) were purchased directly from the Manufacturer or
its wholesale distributor; and (iii) are returnable under the terms of the
Manufacturer's Sales and Service Agreements; valued at the dealer prices in the
Manufacturer's Price Schedules in effect on the Closing Date, less all
applicable allowances and discounts (i.e. replacement cost). Parts and
accessories with no sales in the prior twelve (12) months shall be valued as
described above, less all applicable return discounts. The parties shall jointly
retain an independent automotive inventory service to inventory the parts and
accessories, which are the subject of SECTIONS 1.4(d) AND 1.4(e) and each party
will be responsible for one-half (1/2) of the cost of the inventory service.
(e) The value of the after-market parts and accessories shall
be the actual verifiable inventory of new, unused, undamaged, non-obsolete, and
saleable after-market parts and accessories that: (i) are in the original,
resealable merchandising package; and (ii) are listed for sale in the then
current after-market distributor's price schedules; shall be valued at the
lesser of each Acquired Company's actual cost or the after-market distributors
prices in effect on the Closing Date, less all applicable allowances and
discounts. Parts and accessories with no sales in the prior twelve (12) months
shall be valued as described above, less all applicable return discounts.
Conversion or custom van parts and accessories will be valued at zero.
(f) The labor, parts and sublet repairs as reflected on
outstanding repair orders as of the Closing Date shall be valued at actual
dealer cost.
(g) The TRAC vehicles and Infiniti loaner vehicles shall be
valued at their net book value on the Closing Date. The Acquired Companies shall
depreciate the TRAC vehicles and Infiniti loaner vehicles through the Closing
Date.
1.5 FIXED ASSETS.
(a) The value of all fixed assets, including all machinery and
shop equipment, special tools, parts and accessories equipment, furniture and
fixtures, signs, office equipment, and computer equipment, but excluding
leasehold improvements owned by each Acquired Company ("Fixed Assets") shall be
valued at the Acquired Company's accounting net book value. The
5
Purchase Price will not include any value for any item of Fixed Assets which is
leased, unless the lease is a capitalized asset (and the corresponding liability
is also recorded).
(b) No value shall be assigned to any leasehold improvements,
other than the leasehold improvements upon property leased from third-parties
(not Affiliates of Sellers). Leasehold improvements located upon property leased
from third-parties (not Affiliates of Sellers) shall be valued at their
respective fair market value. Sellers will prepare and deliver to Buyer their
determination as to the fair market value of each leasehold improvement within
thirty (30) days of the execution of this Agreement. Buyer will have thirty (30)
days to object to Sellers' determination of such fair market value. Buyer and
Sellers shall negotiate in good faith to reconcile the difference, if any,
between the Sellers' computation and Buyer's determination of the fair market
value of such leasehold improvements. If, within fifteen (15) days following
delivery of Sellers' determination of such fair market value, Buyer and Sellers
have not agreed to such evaluation, then the issues in dispute will be submitted
to a mutually agreeable appraiser for final determination. If the parties cannot
agree upon an appraiser within fifteen (15) days, they shall each appoint an
independent MAI appraiser who shall jointly appoint a third MAI appraiser, each
of whom shall perform an appraisal. The two appraisals closest to each other
shall be averaged and the third appraisal shall be ignored. Any leasehold
improvements located in part upon property leased from third-parties (not
Affiliates of Sellers) and in part upon the property leased from Affiliates of
Sellers shall be included in the determination of tangible net worth to the
proportionate extent that such leasehold improvements are located upon property
leased from third-parties (not Affiliates of Sellers).
(c) Notwithstanding anything herein contained to the contrary,
the Honda Van Nuys showroom, which is located upon property leased from a
third-party (not an Affiliate of Sellers) shall be valued at Six Hundred Fifty
Thousand Dollars ($650,000) plus, without duplication, any portion of the Eight
Hundred Thousand Dollars ($800,000) described in SECTION 1.5(d) attributable to
such showroom. Such showroom shall be purchased by Sellers at Closing for Six
Hundred Fifty Thousand Dollars ($650,000) and shall be leased to the appropriate
Acquired Company as more particularly set forth in SECTION 4.11.
(d) Notwithstanding anything herein contained to the contrary,
construction or remodeling in order to satisfy the Manufacturer's facility
requirements for the Van Nuys Infiniti and Honda showroom facilities, regardless
of the ownership of the property upon which such facilities are located, shall
be undertaken by the Acquired Companies and shall be valued at the Acquired
Companies net book value, which shall not be less than any amounts paid for such
remodeling or construction including architects and permit fees or reflected as
a liability in connection with such remodeling or construction; provided,
however, that to the extent such leasehold improvements (as distinguished from
furniture and trade fixtures) for the Van Nuys Infiniti and Honda showroom
facilities would otherwise exceed Eight Hundred Thousand Dollars ($800,000),
such excess shall be valued at Zero Dollars ($0). In the event any funds are
expended in respect of Toyota's Image USA program, such expenditures shall also
be capitalized to the extent the expenditures upon the Van Nuys Infiniti and
Honda showroom facilities are less than Eight Hundred Thousand Dollars
($800,000).
1.6 EXCLUDED ASSETS. Company owns certain assets, which Buyer does not
wish to acquire ("Excluded Assets"), listed on SCHEDULE 1.6(a) ("Excluded
Assets"). The Excluded Assets, described on SCHEDULE 1.6(a) shall be sold to the
Sellers at their fair market value, on or
6
prior to the Closing Date. Buyer shall approve the form of all deeds and bills
of sale for transfer of the Excluded Assets. The Excluded Assets shall be valued
at the net amount from their sale, after all sales and closing costs.
1.7 LIABILITIES. Liabilities of the Acquired Companies shall include
all trade payables, taxes, accrued liabilities, notes payables, accrued income
taxes, other taxes, contingent liabilities (to the extent, if any, includable
upon a balance sheet prepared in accordance with GAAP), debts and liabilities of
any nature.
(a) The Buyer and Sellers shall compute the accrued liability
for future finance, insurance and service contract chargebacks in accordance
with procedures set forth in SECTION 1.2(b)(8).
(b) Any corporate level tax liability for the gain on the sale
of the Excluded Assets, and the Van Nuys Honda showroom, shall be included as a
liability in the calculation of the Tangible Net Worth.
(c) A corporate level tax liability shall be taken into
account in the calculation of the Tangible Net Worth, for the corporate income
and franchise taxes payable by an S Corporation based upon its income (including
built in gains) for the period after January 1, 2002, through the Effective
Closing Date. The parties agree to accrue a tax liability based upon the actual
taxes payable (but not then paid) under IRC Section 1363(d) by reason of the
recapture of LIFO benefits upon the conversion of the Acquired Companies from a
C Corporation to an S Corporation, effective January 1, 2002.
(d) A corporate level liability shall be accrued for the
estimated cost of any Manufacturer's facility requirements for leasehold
improvements in excess of Eight Hundred Thousand Dollars ($800,000) in the
aggregate for (i) the Infiniti and Honda showrooms, (ii) Toyota's current Image
USA program at Xxxxxx Toyota, and (iii) any other Manufacturers' facility
requirements if (a) request has been made for such leasehold improvements prior
to the Effective Closing Date, and (b) the work so requested must commence
within two (2) years of the Effective Closing Date.
(e) A liability for all of the Company's obligations under its
phantom stock plan, whether or not accruable immediately prior to the Effective
Closing Date under GAAP, shall be accrued by the Company on the Business Day
prior to the Effective Closing Date, based upon the Purchase Price utilizing the
Estimated Tangible Net Worth and adjusted retroactively upon computation of the
Adjustment Amount.
1.8 CLOSING. The effective date of the purchase and sale ("Effective
Closing Date") provided for in this Agreement will be the first Monday following
receipt of the approval and consents specified in SECTIONS 6.3, 6.4(c), 6.4(l),
AND 6.6 or such other time as the parties mutually agree. The closing
("Closing") shall take place at the offices of the Company, or such other place
as Buyer and Sellers agree, at 10:00 a.m. (local time) on the first Wednesday
following the Effective Closing Date. Subject to the provisions of SECTION
9.1(f), failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
SECTION 1.8 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
7
1.9 CLOSING OBLIGATIONS. At the Closing:
(a) Sellers will deliver to Buyer:
(1) Certificates evidencing the Shares and other supporting
documents of transfer requested by Buyer, executed by
Sellers;
(2) Certificate executed by each Seller representing and
warranting to Buyer that each of Seller's
representations and warranties in this Agreement was
accurate in all material respects as of the date of
this Agreement and is accurate in all material respects
as of the Closing Date as if made on the Closing Date
(giving full effect to any supplements to the Schedules
that were delivered by Sellers to Buyer prior to the
Closing Date);
(3) Certificate executed by Sellers representing and
warranting to Buyer that each of the representations
and warranties of the Acquired Companies, in this
Agreement was accurate in all material respects as of
the date of this Agreement and is accurate in all
material respects as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements
to the Schedules that were delivered by Sellers to
Buyer prior to the Closing Date);
(4) Certificate of good standing for each Acquired Company
in the state of incorporation certified as of a date
not more than ten (10) days before the Closing Date;
(5) Lien searches for federal and state tax liens, judgment
liens, and other liens on standard form of Request for
Information (Uniform Commercial Code Form UCC-11) for
entries in the name of every Acquired Company
(including any assumed names) completed and certified
by the County Clerk of Los Angeles County, and the
Secretary of State, in the State of California, dated
no earlier than ten (10) days prior to Closing Date and
showing the absence of any Encumbrances; provided,
however, that it is understood that the County Clerk
may not certify a search for all types of liens.
(6) Evidence in form reasonably satisfactory to Buyer of
the receipt of each of the governmental and third-party
consents, approvals and waivers described in SECTIONS
2.5 AND 2.19;
(7) Evidence in form reasonably satisfactory to Buyer of
the payment or discharge, as applicable, of the loans
and payables described in SECTION 4.6;
(8) The written resignations described in SECTION 6.5;
8
(9) All minute books, including the Organizational
Documents, stock transfer ledgers and corporate seal of
each Acquired Company;
(10) Such additional certificates, instruments, documents,
information and materials required to be delivered by
Sellers and their affiliates under this Agreement and
otherwise as Buyer may reasonably request;
(11) Executed Leases for all dealership locations on
property owned by Sellers' Affiliates or their
successors; and
(12) Consents of landlords, if required by reason of the
sale of the shares, for leases upon property owned by
third-parties who are not Affiliates of Sellers.
(b) Buyer will deliver to Sellers:
(1) Payment of the Initial Payment, as hereinafter defined;
(2) Certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each of
Buyer's representations and warranties in this
Agreement was accurate in all respects as of the date
of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date;
(3) Certificate of good standing in the state of Buyer's
incorporation certified as of a date not more than ten
(10) days before the Closing Date;
(4) Such additional certificates, instruments, documents,
information and material required to be delivered by
Buyer or its Affiliates under this Agreement and
otherwise as Sellers may reasonable request;
(5) Releases of Sellers' guaranties, as required in
SECTIONS 5.3 AND 5.4; and
(6) Guaranty of Buyer of any new Leases executed by the
Acquired Companies at Closing.
(c) Each party will pay its respective obligations to Presidio
Merchant Partners, LLC.
1.10 ADJUSTMENTS. The Adjustment Amount (which may be a positive or
negative number) will be equal to the difference between the final computation
of the Purchase Price and the Initial Payment. Sellers will prepare and will
cause Good Xxxxxx Xxxxx & Xxxxx LLP, the Company's certified public accountants,
to prepare a computation of the Tangible Net Worth and Purchase Price as of the
Closing Date within sixty (60) days after the Closing Date The Buyer will
9
have thirty (30) days to review the Sellers' computation the Tangible Net Worth
and Purchase Price. Buyer and Sellers shall negotiate in good faith to reconcile
the difference, if any, between the Buyer's and Sellers' computation of the
Tangible Net Worth and Purchase Price. If Buyer and Sellers cannot agree to the
computation of the Tangible Net Worth and Purchase Price within thirty (30)
days, (other than valuation issues addressed in SECTION 1.4 below), then the
issues in dispute will be submitted to an independent public accounting firm
("Accountants") selected by Buyer and Sellers within thirty (30) days from the
date they fail to agree (as provided in previous sentence) 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 that party, and will be afforded the opportunity to present to
the Accountants any material relating to the determination and to discuss the
determination with the Accountants; (ii) the 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) Buyer and Sellers will each
bear fifty percent (50%) of the fees of the Accountants for such determination.
1.11 PAYMENT. All payments of the Purchase Price and Adjustments by
Buyer to Sellers shall be payable to each Seller, in accordance with their
percentage ownership of the Shares as set forth on ANNEX I, by wire transfer of
immediately available funds to the account of each of the Sellers, which shall
be designated by the Sellers in writing at least five (5) full Business Day
prior to the Payment Date. The Purchase Price shall be paid on the following
dates (if applicable in each case) (in each case the "Payment Date"):
(a) The Estimated Tangible Net Worth, plus (i) Goodwill, times
(ii) ninety-five percent (95%) ("Initial Payment") shall be paid on the Closing
Date. Buyer and Sellers shall calculate and mutually agree to the Estimated
Tangible Net Worth based upon the information available as of the Effective
Closing Date, and in accordance with the provisions herein for calculating the
Tangible Net Worth, on or before the Closing Date.
(b) On the fifth (5th) business day following the final
determination of the Adjustment Amount, if the Purchase Price is greater than
the Initial Payment made pursuant to SECTION 1.11(a), Buyer will pay the
difference to Sellers, and if the Purchase Price is less than the Initial
Payment, Sellers will pay the difference to Buyer. Payments to Sellers must be
made in the manner and will be allocated in the proportions as set forth in this
SECTION 1.11. Payments to Buyer must be made by wire transfer to such bank
account as Buyer will specify.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Sellers and the Acquired Companies, severally and not jointly,
represent and warrant to Buyer as follows:
2.1 DISCLOSURE. No representation or warranty by Sellers in this
Agreement or in any of the exhibits attached hereto, or other statement in
writing or certificate furnished or to be furnished to Buyer by or on behalf of
Sellers or an Acquired Company in connection with the transactions contemplated
by this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein not misleading.
10
2.2 ORGANIZATION AND GOOD STANDING. SCHEDULE 2.2 ("Organization")
contains a complete and accurate list of each Acquired Company, its name, its
jurisdiction of organization, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and the number of shares held by each). Each Acquired Company is duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
organization, with full power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform all its obligations under Applicable Contracts. No
Acquired Company is qualified to do business as a foreign corporation in any
other state or jurisdiction and no such qualification is required. Sellers have
delivered to Buyer copies of the Organizational Documents of each Acquired
Company, as currently in effect.
2.3 AUTHORITY. Each of the Sellers has full legal right, power,
capacity and authority to execute, deliver and perform its obligations pursuant
to this Agreement and to execute, deliver and perform its obligations under each
instrument, document or agreement required hereby to be executed and delivered
by such Sellers at, or prior to, the Closing. This Agreement has been, and each
instrument, document or agreement required hereby to be executed and delivered
by such Sellers at, or prior to, the Closing will then be, duly executed and
delivered by such Seller, and this Agreement constitutes and, to the extent it
purports to obligate such Seller, each such instrument, document or agreement
will constitute (assuming due authorization, execution and delivery by each
other party thereto), the legal, valid and binding obligation of such Sellers
enforceable against it in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally, and (ii) the effect of rules of law governing the availability of
equitable remedies. Except for any consents disclosed in SCHEDULE 2.5, each
Acquired Company has the right, power, and authority to execute and deliver and
to perform its obligations under any agreements and documents to be provided
under this Agreement.
2.4 NOT USED.
2.5 ABSENCE OF CONFLICTS.
(a) Except to the extent set forth in SCHEDULE 2.5
("Conflicts"), neither the execution and delivery by such Sellers of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by such Sellers of its obligations under this Agreement or any such instrument
will (A) violate or breach the terms of or cause a default under (i) any
applicable Law, (ii) any applicable Order or any applicable rule or regulation
of any Court or Governmental Authority, (iii) any contract or agreement to which
such Sellers are a party or by which it, or any of its properties, is bound, or
(B) result in the creation or imposition of any Lien on any of the properties or
assets of such Sellers, or (C) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit, certificate or order of any Court or
Governmental Authority, or (D) with the passage of time or the giving of notice
or the taking of any action of any third party have any of the effects set forth
in clause (A), (B) or (C) of this SECTION 2.5.
(b) Except as set forth in SCHEDULE 2.5, neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will,
11
directly or indirectly (with or without notice or lapse of time): (i)
contravene, conflict with, or result in a violation of (A) any provision of the
Organizational Documents of each of the Acquired Companies, or (B) any
resolution adopted by the board of directors or stockholders of any Acquired
Company; (ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which an Acquired Company or either
Sellers, or any of the assets owned or used by the Acquired Companies, may be
subject; (iii) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by the Acquired Companies or that otherwise relates to the business
of, or any of the assets owned or used by an Acquired Company; (iv) cause Buyer
or the Acquired Companies to become subject to, or to become liable for the
payment of, any Tax; (v) cause any of the assets owned by the Acquired Companies
to be reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or (vii) result in the imposition
or creation of any Encumbrance upon or with respect to any of the assets owned
or used by the Acquired Companies. Except as set forth in SCHEDULE 2.5, no
Sellers or any of the Acquired Companies are or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
2.6 CAPITAL STOCK. Such Sellers are the beneficial and record owner of
the number of Shares of Company Common Stock as set forth in ANNEX I, free and
clear of any lien, claim, pledge, encumbrance or other adverse claim. Except for
such Shares set forth in ANNEX I hereto, such Sellers do not own, beneficially
or of record, any capital stock or other security, including without limitation
any option, warrant or right entitling the holder thereof to purchase or
otherwise acquire any shares of capital stock of any Acquired Company. The
Sellers are "United States persons" as that term is defined in IRC Section
7701(a)(30) and the regulations promulgated thereunder. Except as set forth in
SCHEDULE 2.6 ("Capital Stock"): (a) each Acquired Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire or reacquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof; (b) no transaction has been effected
in contemplation of the Contemplated Transactions, and no action in
contemplation of Contemplated Transactions has been taken, respecting the equity
ownership of an Acquired Company; (c) all of the outstanding equity securities
of each Acquired Company have been duly authorized and validly issued and are
fully paid and nonassessable; and (d) no legend or other reference to any
purported Encumbrance appears upon any certificate representing equity
securities of any Acquired Company. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of any
Acquired Company. None of the outstanding equity securities or other securities
of any Acquired Company was issued in violation of the Securities Act or any
other Legal Requirement. No Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Company) or any direct or indirect equity or ownership interest in any other
business. The Company owns one hundred percent (100%) of the issued and
outstanding common shares of each Corporation.
12
2.7 FINANCIAL STATEMENTS. Attached to SCHEDULE 2.7 ("Financial
Statements") are the following financial statements: (a) balance sheets of the
Acquired Companies as at December 31, in each of the years 2000 and 2001 (the
2001 balance sheet is called the "Balance Sheet"), and the related statements of
income, changes in stockholders' equity, and cash flow for each of the fiscal
years then ended. Except as set forth in SCHEDULE 2.7, such financial statements
and notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Acquired Companies as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with Modified GAAP; Except as set forth in
SCHEDULE 2.7, the financial statements referred to in this SECTION 2.7 reflect
the consistent application of such accounting principles throughout the periods
involved. No financial statements of any Person other than the Acquired
Companies are required by Modified GAAP to be included in the financial
statements of the Acquired Companies.
2.8 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Acquired Companies, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices and the requirements of SECTION
13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless of
whether or not the Acquired Company is subject to that Section), including the
maintenance of an adequate system of internal controls. The minute or record
books of each Acquired Company contains accurate and complete records of all
corporate action taken by, the stockholders, the Boards of Directors, committees
of the Boards of Directors. At the Closing, all of those books and records will
be in the possession of the Company.
2.9 ASSETS; ENCUMBRANCES. The Acquired Companies have good and
marketable title to all assets, rights, interests and other properties, real,
personal and mixed, tangible and intangible, owned by it (collectively, the
"Assets") and all Assets are reflected in the Balance Sheet. SCHEDULE 2.9
("Assets; Encumbrances") contains a complete and accurate list of all real
property, leaseholds, or other interests therein owned by the Companies. The
Assets include all properties and assets (real, personal and mixed, tangible and
intangible) owned by the Companies. Except as provided in SCHEDULE 2.9, all
Assets are free and clear of all Encumbrances other than Permitted Encumbrances
(as hereinafter defined), except liens for current taxes not yet due.
2.10 CONDITION AND SUFFICIENCY OF ASSETS. Except as provided in
SCHEDULE 2.10 ("Condition and Sufficiency of Assets"), the buildings, plants,
structures, and equipment of the Acquired Companies are structurally sound, are
in good operating condition and repair, and are adequate for the uses to which
they are being put, and none of such buildings, plants, structures, or equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost. Except as provided in
SCHEDULE 2.10, and except for requirements which have been imposed by the
respective Manufacturer to upgrade the Van Nuys Infiniti and Honda showroom
facilities pursuant to their facility requirements, the building, plants,
structures, and equipment of the Acquired Companies are sufficient for the
continued conduct of the Acquired Companies businesses after the Closing Date in
substantially the same manner as conducted prior to the Closing. Notwithstanding
the foregoing, no representation is made as to any requirement which may be
imposed hereafter by Manufacturer to upgrade any facility pursuant to such
Manufacturer's facilities requirements.
13
2.11 ACCOUNTS RECEIVABLES. Except as provided in SCHEDULE 2.11
("Accounts Receivables"), all receivables of the Acquired Companies, including
but not limited to factory, rebate, warranty, employee, trade and accounts
receivable that are reflected on the Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business
and are collectible at the aggregate recorded amounts thereof, subject to the
reserves for doubtful accounts maintained by the Acquired Companies in the
ordinary course of business, and are not subject to any known counterclaims or
set offs. An adequate reserve for doubtful accounts for the Acquired Companies
have been established and such reserve is consistent with both the operation of
the Acquired Companies in the ordinary course of business and past practice.
SCHEDULE 2.11 contains a complete and accurate summary of all Accounts
Receivable as of the end of the month prior to the delivery date of the
Schedules, which list sets forth the aging of such Accounts Receivable.
2.12 INVENTORY. Except as provided in SCHEDULE 2.12 ("Inventory"), all
inventory of the Acquired Companies, whether or not reflected in the Balance
Sheet, consists of a quality and quantity usable and salable in the Ordinary
Course of Business, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Balance Sheet or on the accounting records of the Acquired
Companies as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or net realizable value on a
first in, first out basis. The quantities of each item of inventory are not
excessive, but are reasonable in the present circumstances of the Acquired
Companies.
2.13 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 2.13
("Liabilities"), and except for Environmental matters which are the subject of
SECTION 2.21, the Acquired Companies have no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the date thereof and except for liabilities which are not
required under GAAP to be reflected on the Balance Sheet.
2.14 TAXES. Except as provided in SCHEDULE 2.14 ("Taxes"):
(a) All federal, state and local tax returns and tax reports
required as of the date hereof to be filed by the Acquired Companies for taxable
periods ending prior to the date hereof have been duly and timely filed prior to
the due date thereof (as such due date may have been lawfully extended) by the
Acquired Companies with the appropriate governmental agencies, and all such
returns and reports are true, correct and complete in all material respects
(material meaning it does not affect the tax liability).
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("Taxes"), payable by, or due from, the Acquired
Companies for all periods prior to the date hereof have been fully paid or
adequately reserved for by the Acquired Companies or, with respect to Taxes
required to be accrued, the Acquired Companies have properly accrued or will
properly accrue such Taxes in the ordinary course of business consistent with
past practice of the Acquired Companies.
14
(c) A list of the tax years for which the federal income tax
returns of the Acquired Companies have been examined by the IRS and accepted is
contained on SCHEDULE 2.14. No Acquired Companies has received any notice of any
assessed or proposed claim or deficiency against it in respect of, or of any
present dispute between it and any governmental agency concerning, any Taxes. No
examination or audit of any tax return or report of the Acquired Companies by
any applicable taxing authority is currently in progress and there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return or report of the Acquired Companies. Copies of all
federal, state and local tax returns and reports required to be filed by the
Acquired Companies for the tax years 1997 through 2001, together with all
schedules and attachments thereto, have been delivered by the Sellers to the
Buyer.
(d) For years ended through December 31, 2001, all of the
Acquired Companies were members of an "affiliated group" of corporations as
defined in IRC Section 1504(a) which filed consolidated returns for federal
income tax purposes, with the Company owning one hundred percent (100%) of the
other Acquired Companies. For the year beginning January 1, 2002, the Company
has elected to be an S Corporation and all of the other Acquired Companies are
qualified S Corporation subsidiaries and are therefore disregarded for federal
income tax purposes. No consent under IRC Section 341 has been made affecting
the Acquired Companies. The Acquired Companies are not a party to any agreement
or arrangement that would result in the payment of any "excess parachute
payments" under IRC Section 280G. No Acquired Company is required to make any
adjustment under IRC Section 481(a). No power of attorney relating to Taxes is
currently in effect for any Acquired Companies.
(e) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Acquired Companies are adequate (determined in
accordance with Modified GAAP) and are at least equal to that Acquired Companies
liability for Taxes. There exists no proposed tax assessment against any
Acquired Companies except as disclosed in the Balance Sheet. No consent to the
application of IRC Section 341(f)(2) has been filed with respect to any property
or assets held, acquired, or to be acquired by any Acquired Companies. All Taxes
that any Acquired Companies is or was required by Legal Requirements to withhold
or collect have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other Person.
(f) There is no tax sharing agreement that will require any
payment by any Acquired Companies after the date of this Agreement.
2.15 EMPLOYEE BENEFITS. All defined terms used in this SECTION 2.15,
shall have the meanings set forth in ERISA or the IRC. Sellers and the Acquired
Company have listed in SCHEDULE 2.15 ("Employee Benefits") and has delivered to
the Buyer true and complete copies of all Employee Plans and related documents,
established, maintained or contributed to by the Acquired Companies (which shall
include for this purpose and for the purpose of all of the representations in
this SECTION 2.15, the each Acquired Company and all employers, whether or not
incorporated, that are treated together with the Acquired Companies as a single
employer with the meaning of IRC Section 414). Where applicable, each Employee
Plan (i) has been administered in material compliance with the terms of such
Employee Plan and the requirements of ERISA and the IRC; and (ii) is in material
compliance with the reporting and disclosure requirements of ERISA and the IRC.
The Acquired Companies do not maintain or contribute to, and have never
maintained or contributed to, an Employee Plan subject to Title IV of ERISA or a
"multiemployer
15
plan." There are no facts relating to any Employee Plan that (i) have resulted
in a "prohibited transaction" of a material nature or have resulted or is
reasonably likely to result in the imposition of a material excise tax, penalty
or liability pursuant to IRC Section 4975, (ii) have resulted in a material
breach of fiduciary duty or violation of Part 4 of Title I of ERISA, or (iii)
have resulted or could result in any material liability (whether or not asserted
as of the date hereof) of the Acquired Companies or any ERISA affiliate pursuant
to IRC Section 412 arising under or related to any event, act or omission
occurring on or prior to the date hereof. Each Employee Plan that is intended to
qualify under IRC Section 401(a) or to be exempt under IRC Section 501(c)(g) is
so qualified or exempt as of the date hereof in each case as such Employee Plan
has received favorable determination letters from the IRS with respect thereto.
To the Knowledge of the Sellers, the amendments to and operation of any Employee
Plan subsequent to the issuance of such determination letters do not adversely
affect the qualified status of any such Employee Plan. No Employee Plan has an
"accumulated funding deficiency" as of the date hereof, whether or not waived,
and no waiver has been applied for. Each Acquired Company has made no promises
or incurred any liability under any Employee Plan or otherwise to provide health
or other welfare benefits to former employees of each Acquired Company, except
as specifically required by law. There are no pending or, to the Knowledge of
the Sellers, threatened claims (other than routine claims for benefit) or
lawsuits with respect to the Acquired Companies Employee Plans.
2.16 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.16
("Compliance with Laws"), the Acquired Companies have conducted their operations
and business in material compliance with, and all of the Assets (including all
of the Real Property) comply in all material respects with, (i) all applicable
laws, rules, regulations and codes (including, without limitation, any laws,
rules, regulations and codes relating to anticompetitive practices, contracts,
discrimination, employee benefits, employment, health, safety, fire, building
and zoning, but excluding Environmental Laws which are the subject of SECTION
2.21 hereof) and (ii) all applicable orders, rules, writs, judgments,
injunctions, decrees and ordinances. The Acquired Companies have not received
any notification of any asserted present or past uncured failure by them to
comply with such laws, rules or regulations, or such orders, writs, judgments,
injunctions, decrees or ordinances. Set forth in SCHEDULE 2.16 are all orders,
writs, judgments, injunctions, decrees and other awards of any court or
governmental agency applicable to the Acquired Companies or their business or
operations. The Sellers have delivered to the Buyer copies of all reports filed
since January 1, 1998, if any, of the Acquired Companies required to be
submitted under the Federal Occupational Safety and Health Act of 1970, as
amended, and under all other applicable health and safety laws and regulations.
The deficiencies, if any, noted on such reports have been corrected by the
Acquired Companies and any deficiencies noted by inspection through the Closing
Date will have been corrected by the Acquired Companies by the Closing Date.
2.17 LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 2.17 ("Legal
Proceedings"), and except for Environmental matters which are the subject of
SECTION 2.21, there are no actions, suits, claims, or legal, administrative or
arbitration proceedings pending, or, to the Sellers' Knowledge, no
investigations are pending and no such matters or investigations are threatened
or probable of assertion, against the Acquired Companies or relating to their
assets, business or operations or the transactions contemplated by this
Agreement, and the Sellers do not know of any basis for the institution of any
such suit or proceeding. No order, writ, judgment, injunction, decree or similar
command of any court or any governmental or administrative agency or other body
which is presently in effect has been entered against or served upon the
Acquired Companies relating to the Acquired Companies or their assets, business
or operations. SCHEDULE 2.17,
16
contains a complete list of all of the actions, suits, claims, investigations,
legal or administrative proceedings (whether with any governmental, consumer
advocacy organization, or quasi governmental organization) filed, served upon or
disclosed to Sellers or the Acquired Companies in the last three (3) years
relating to any Acquired Company sales or adverting practices.
2.18 ABSENCE OF CHANGES. Except as set forth in SCHEDULE 2.18 ("Absence
of Changes"), since January 1, 2002, the business of the Acquired Companies have
been operated in the ordinary course, consistent with past practices and, except
as set forth on SCHEDULE 2.18, there has not been incurred, nor has there
occurred: (a) Any damage, destruction or loss (whether or not covered by
insurance), adversely affecting the business or assets of the Acquired Companies
in excess of Fifty Thousand Dollars ($50,000); (b) Any strikes, work stoppages
or other labor disputes involving the employees of the Acquired Companies; (c)
Any sale, transfer, pledge or other disposition of any of the Assets of the
Acquired Companies having an aggregate book value of Fifty Thousand Dollars
($50,000) or more (except sales of vehicles and parts inventory in the ordinary
course of business); (d) Any declaration or payment of any dividend or other
distribution in respect of its capital stock or any redemption, repurchase or
other acquisition of its capital stock, (e) any amendment, termination, waiver
or cancellation of any Material Agreement or any termination, amendment, waiver
or cancellation of any material right or claim of the Acquired Companies under
any Material Agreement (except in each case in the ordinary course of business
and consistent with past practice); (f) Any (1) general uniform increase in the
compensation of the employees of the Acquired Companies (including, without
limitation, any increase pursuant to any bonus, pension, profit-sharing,
deferred compensation or other plan or commitment), (2) increase in any such
compensation payable to any individual officer, director, consultant or agent
thereof, or (3) loan or commitment therefor made by the Acquired Companies to
any officer, director, stockholder, employee, consultant or agent of the
Acquired Companies; (g) Any change in the accounting methods, procedures or
practices followed by the Acquired Companies or any change in depreciation or
amortization policies or rates theretofore adopted by the Acquired Companies;
(h) Any material change in policies, operations or practices of the Acquired
Companies with respect to business operations followed by the Acquired
Companies, including, without limitation, with respect to selling methods,
returns, discounts or other terms of sale, or with respect to the policies,
operations or practices of the Acquired Companies concerning the employees of
the Acquired Companies; (i) Any capital appropriation or expenditure or
commitment therefor on behalf of the Acquired Companies in excess of Twenty-Five
Thousand Dollars ($25,000) individually or One Hundred Thousand Dollars
($100,000) in the aggregate (exclusive of individual items, each not in excess
of Five Thousand Dollars ($5,000) and exclusive of expenditures or commitments
for the construction of Manufacturers' facility requirements for the Van Nuys
Infiniti and Honda showrooms or for the construction set forth on SCHEDULE
2.18); (j) Any write-down or write-up of the value of any inventory or equipment
of the Acquired Companies or any increase in inventory levels in excess of
historical levels for comparable periods; (k) Any account receivable in excess
of Twenty-Five Thousand Dollars ($25,000) or note receivable in excess of
Twenty-Five Thousand Dollars ($25,000) owing to the Acquired Companies which (1)
has been written off as uncollectible, in whole or in part, (2) has had asserted
against them any claim, refusal or right of setoff, or (3) the account or note
debtor has refused to, or threatened not to, pay for any reason, or such account
or note debtor has become insolvent or bankrupt; (l) Any other change in the
condition (financial or otherwise), business operations, assets, earnings,
business or prospects of the Acquired Companies which, in the judgment of the
Sellers, has, or could reasonably be expected to have, a material adverse effect
on the assets,
17
business or operations of the Acquired Companies; or (m) Any agreement, whether
in writing or otherwise, for the Acquired Companies to take any of the actions
enumerated in this SECTION 2.18.
2.19 CONTRACTS AND COMMITMENTS.
(a) Except as set forth in SCHEDULE 2.19 ("Contracts and
Commitments"), the Sellers and each Acquired Company have provided Buyer with a
complete, accurate list of, or made available to Buyer copies of each of the
following (each a "Company Commitment") to which an Acquired Company is a party
or by which any of its properties is bound and which presently remains executory
in whole or in any part: (i) each partnership; or joint venture agreement; (ii)
each guaranty or suretyship, indemnification or contribution agreement or
performance bond (other than any Guaranty limited as to recourse to no more than
Five Thousand Dollars ($5,000) and any Guaranty of any automobile or other
vehicle retail installment sales contract entered into and sold to a financial
institution in the ordinary course of business); (iii) each instrument,
agreement or other obligation evidencing or relating to indebtedness of an
Acquired Company involving more than Twenty-Five Thousand Dollars ($25,000) in
any single case, or to money lent or to be lent to another Person involving more
than One Hundred Thousand Dollars ($100,000) in the aggregate, other than any of
its dealership customers in connection with the purchase, or the refinancing of
the purchase, of any vehicle; (iv) each contract to purchase or sell real
property; (v) each agreement with brokers of motor vehicles or sales or
commission agents, public relations or advertising agencies, accountants or
attorneys (other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any twelve (12) month
period in excess of Ten Thousand Dollars ($10,000) and which is not terminable
without penalty and no more than thirty (30) days' prior notice; (vi) each
Related Party Agreement involving total payments within any twelve (12) month
period in excess of Ten Thousand Dollars ($10,000) and which is not terminable
without penalty on no more than thirty (30) days' prior notice; (vii) each
contract containing any noncompetition agreement, covenant or undertaking;
(viii) each Dealer Agreement to which an Acquired Company is a party and each
other agreement providing for the purchase from a supplier of all or
substantially all the requirements of an Acquired Company of a particular
product or service; or (ix) each other agreement or commitment not made in the
ordinary course of business which is material to the Acquired Companies.
(b) True, correct and complete copies of all written Company
Commitments have heretofore been delivered or made available to Buyer. Except as
accurately set forth in SCHEDULE 2.19: (i) there are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that, with
the giving of notice or lapse of time or both, would constitute defaults or
events of default under any Company Commitment material to the Acquired
Companies by an Acquired Company or, to the Knowledge of the Sellers or the
Acquired Companies, any other party thereto; and (ii) no penalties have been
incurred, nor are amendments pending, with respect to the Acquired Companies
Commitments material to the Acquired Companies. All Company Commitments are in
full force and effect and are valid and enforceable obligations of the Acquired
Company, and to the Knowledge of the Acquired Companies, the other parties
thereto in accordance with their respective terms and no defenses, off-sets or
counterclaims have been asserted or, to the Knowledge of the Acquired Companies,
may be made by any party thereto (other than by an Acquired Company), nor has an
Acquired Company waived any rights thereunder, except as described in SCHEDULE
2.19.
18
(c) Except as disclosed in SCHEDULE 2.19 or contemplated
hereby or by any other Transaction Document to which an Acquired Company or
Stockholder is a party, no Acquired Company or Sellers have received notice of
any plan or intention of any other party to any Company Commitment that is
Material to the Acquired Companies to exercise any right to cancel or terminate
that Company Commitment, and neither the Acquired Companies nor Sellers knows of
any condition or state of facts which would justify the exercise of such a
right.
2.20 INSURANCE. SCHEDULE 2.20 ("Insurance") sets forth a list of all
policies of insurance currently in effect relating to the business or operations
of the Acquired Companies, true and complete copies of which have been furnished
to Buyer. Such insurance policies are in full force and effect. The Acquired
Companies are presently insured, and since the inception of operations by the
Acquired Companies have been insured, against such risks as companies engaged in
the same or substantially similar business would customarily be insured. The
Acquired Companies have given in a timely manner to their insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in SCHEDULE 2.20, no
insurer has denied coverage of any such claims or actions or reserved their
rights in respect of or rejected any of such claims. The Acquired Companies have
not received any notice or other communication from any such insurer canceling
or materially amending any of such insurance policies, and no such cancellation
is pending or, to the Knowledge of Sellers or the Acquired Companies,
threatened. The execution of this Agreement and the consummation of the
transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies. Set forth in SCHEDULE
2.20 is a summary of information pertaining to insured claims against the
Acquired Companies during the past two (2) years. Except as set forth in
SCHEDULE 2.20, all of such claims are fully satisfied or are being defended by
the insurance carrier and involve no exposure to the Acquired Companies. Also
set forth in SCHEDULE 2.20 is: (i) the most recent report from the counsel for
the Acquired Companies, listing the pending and threatened litigation and claims
against any Acquired Company; (ii) a summary of the settlements or losses paid
by any Acquired Company since January 1, 2000, on any uninsured claim in excess
of Twenty-Five Thousand Dollars ($25,000); and (iii) to the extent not reported
above, a listing of all current customer claims, in excess of Five Thousand
Dollars ($5,000).
2.21 ENVIRONMENTAL MATTERS. Except as it relates to the matters set
forth in SCHEDULE 2.21 ("Environmental Matters") and matters that are not
reasonably expected to result in a Material Environmental Liability to Buyer or
any Acquired Company:
(a) To the Knowledge of Seller, each Acquired Company is, and
at all times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law such that any Acquired
Company could reasonably be expected to incur any Material Environmental
Liability. To the Knowledge of Sellers, neither Sellers or any Acquired Company
has any basis to reasonably expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any Governmental Body
or private citizen acting in the public interest, or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any Material Environmental Liability
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which
19
Sellers or an Acquired Company has had an interest, or with respect to any
property or Facility at which Hazardous Materials were generated, manufactured,
refined, stored, disposed, imported, used, or processed by Sellers, an Acquired
Company, or any other Person for whose conduct they are or may be held
responsible.
(b) To the Knowledge of Sellers, and the Acquired Companies
there are no pending or Threatened claims, Encumbrances, or other restrictions
of any nature, resulting from any Material Environmental Liability or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which Sellers or an Acquired Company has or had an interest.
(c) Sellers have no Knowledge that Sellers, nor any Acquired
Company has received, any written citation, directive, inquiry, notice, Order,
summons, warning, or other written communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Sellers or an
Acquired Company had an interest, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by Sellers, an Acquired Company, or any other
Person for whose conduct they are or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) To Knowledge of Seller, neither Sellers nor any Acquired
Company, or any other Person for whose conduct they are or may be held
responsible, has any Material Environmental Liability with respect to the
Facilities or with respect to any other properties and assets (whether real,
personal, or mixed) in which Sellers or any Acquired Company (or any
predecessor), has or had an interest.
(e) To Knowledge of Sellers, other than Hazardous Materials
normally utilized in automobile dealerships, all of which are properly stored,
used and disposed of by the Acquired Companies, there are no Hazardous Materials
present on or in the Environment at the Facilities, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon.
(f) To the Knowledge of Sellers and the Acquired Companies,
there has been no Release, or Threat of Release, of any Hazardous Materials at
or from the Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which Sellers or an Acquired Company has or had an
interest, whether by Sellers, an Acquired Company, or any other Person.
(g) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or an Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Sellers or an Acquired Company.
20
(h) Neither the Acquired Companies nor the Sellers has
transported or disposed of, or arranged for the transportation or disposal of,
any Hazardous Materials to any location (i) which, to the Knowledge of Sellers,
is listed on the National Priorities List, the CERCLIS list under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar federal, state or local list, or (ii) about which either
the Acquired Companies or the Sellers has received or has reason to expect to
receive a potentially responsible party notice or other notice under any
Environmental Law.
(i) Sellers have received no written notice or claim alleging
that any employee of the Acquired Companies in the course of his or her
employment with the Acquired Companies has been exposed to any Hazardous
Materials or other substance, generated, produced or used by the Acquired
Companies which could give rise to any claim (whether or not such claim has been
asserted) against the Acquired Companies.
(j) The Acquired Companies have not agreed to assume, defend,
undertake, guarantee, or provide indemnification for, any liability, including,
without limitation, any obligation for corrective or remedial action, of any
other person under any Environmental Law for environmental matters or
conditions.
2.22 EMPLOYEES.
(a) Except as provided in SCHEDULE 2.22 ("Employees"), (i) the
Acquired Companies are not delinquent in the payment to or on behalf of their
past or present employees of any wages, salaries, commissions, bonuses, benefit
plan contributions or other compensation for all periods prior to the date
hereof, or of any amount which is due and payable to any state or state fund
pursuant to any workers' compensation statute, rule or regulation or any amount
which is due and payable to any workers' compensation claimant; (ii) there are
no collective bargaining agreements currently in effect between the Acquired
Companies and labor unions or organizations representing any employees of the
Acquired Companies; (iii) no collective bargaining agreement is currently being
negotiated by the Acquired Companies; (iv) to the Knowledge of the Sellers,
there are no union organizational drives in progress and there has been no
formal or informal request to the Acquired Companies for collective bargaining
or for an employee election from any union or from the National Labor Relations
Board; and (v) no dispute exists between the Acquired Companies and any of their
sales representatives or, to the Knowledge of the Sellers, between any such
sales representatives with respect to territory, commissions, products or any
other terms of their representation.
(b) SCHEDULE 2.22 contains a complete and accurate list of the
following information for each employee or director of the Acquired Companies,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable and any change in compensation
since January 1, 2001; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under an Acquired Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan. The information
contained on SCHEDULE 2.22 shall satisfy Sellers' disclosure obligations with
respect to any representation or warranty calling for such information.
21
(c) Except as provided in SCHEDULE 2.22, to the Sellers'
Knowledge no employee or director of an Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Acquired Companies, or (ii) the ability of an
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with Sellers or the Acquired Companies by any such employee or
director. To Sellers' Knowledge, no director, officer, or other key employee of
an Acquired Company intends to terminate his employment with such Acquired
Company.
(d) SCHEDULE 2.22 also contains a complete and accurate list
of the following information for each retired employee or director of the
Acquired Companies, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage, and other
benefits. Except as set forth in SCHEDULE 2.22, Sellers and Acquired Companies
have not entered into any severance or similar arrangement in respect of any
present or former personnel that shall result in any obligation (absolute or
contingent) of any of the Acquired Companies to make any payment to any present
or former personnel following termination of employment, including the
termination of employment effected by the Contemplated Transactions. Except as
set forth in SCHEDULE 2.22, The Contemplated Transactions will not trigger any
severance or similar arrangement payable by any Acquired Companies after the
Closing.
2.23 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 2.23
("Intellectual Property"), the Acquired Companies own, or are licensed or
otherwise have the right to use all Intellectual Property that is necessary for
the conduct of the business and operations of the Acquired Companies as
currently conducted. To the Knowledge of the Acquired Companies and the Sellers,
(i) the use of the Intellectual Property by the Acquired Companies and their
Subsidiaries does not infringe on the rights of any Person, and (ii) no Person
is infringing on any right of the Acquired Companies with respect to any
Intellectual Property. No claims are pending or, to the Knowledge of the
Acquired Companies and the Sellers, threatened that the Acquired Companies are
infringing or otherwise adversely affecting the rights of any Person with regard
to any Intellectual Property. To the Knowledge of the Acquired Companies and the
Sellers, no Person is infringing the rights of the Acquired Companies or any of
their Subsidiaries with respect to any Intellectual Property. All of the
Intellectual Property that is owned by the Acquired Companies or any of their
Subsidiaries is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by the Acquired Companies or any of their Subsidiaries is licensed
pursuant to valid and existing license agreements. The consummation of the
transactions contemplated by this Agreement will not result in the loss of any
Intellectual Property. Except as set forth in SCHEDULE 2.23, the Acquired
Companies do not pay a royalty to anyone under, any license or similar
agreement. The Acquired Companies have the right to use the names "Xxxxxx Honda
of Van Nuys," "Xxxxxx Infiniti," "Xxxxxx Mitsubishi," "Xxxxxx Nissan," "Xxxxxx
Toyota," and "Xxxxxx Honda of Xxxxxx City" in the Los Angeles Metropolitan
Statistical Areas (as defined by the Office of Management and Budget) and, to
the Knowledge of the Sellers, no person uses, or has the right to use, in such
Area, such name or any derivation thereof in connection with the manufacture,
sale, marketing or distribution of products or services commonly associated with
an automobile dealership.
22
2.24 CERTAIN PAYMENTS. Since January 1, 1997, no Acquired Company,
director or officer of an Acquired Company, or to the Knowledge of Sellers, any
agent, employee or other Person associated with or acting for or on behalf of an
Acquired Company, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, 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, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of an Acquired
Company or any Affiliate of an Acquired Company, or (iv) in violation of any
Legal Requirement, (b) established or maintained any fund that has not been
recorded in the books and records of the Acquired Companies.
2.25 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth on
SCHEDULE 2.25, no Seller or any Related Person of Sellers or of an Acquired
Company has, any interest in any Assets. No Seller or any Related Person of
Sellers or of Company owns (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with an
Acquired Company, or (ii) engaged in competition with any Acquired Company with
respect to any line of the products or services of such Acquired Company (a
"Competing Business") in any market presently served by such Acquired Company.
Except as set forth in SCHEDULE 2.25 ("Relationships with Related Persons"),
there are no transactions between the Acquired Companies and the Sellers
(including the Sellers' Affiliates), or any of the directors, officers or
management employees of the Acquired Companies, or the family members or
Affiliates of any of the above (other than for services as employees, officers
and directors), including, without limitation, any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from, the Sellers, or any such officer, director or salaried employee,
family member, or Affiliate or any corporation, partnership, trust or other
entity in which such family member, Affiliate, officer, director or employee has
a substantial interest or is a shareholder, officer, director, trustee or
partner.
2.26 BROKERS OR FINDERS. Sellers will indemnify and hold Buyer harmless
from any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement or the Contemplated Transactions, alleged to be due by any
Acquired Company or by Buyer by reason of any agreement made by Sellers or the
Acquired Companies. Sellers represent that they have a brokerage agreement with
Presidio Merchant Partners, LLC.
2.27 LEASED ASSETS.
(a) The Acquired Companies do not lease any real property or
any interest therein except as set forth in SCHEDULE 2.27(A) ("Leased
Properties"), which sets forth the location and size of, principal improvements
and buildings on the Leased Properties, including the Acquired Companies'
leasehold improvements located upon each Leased Property. True, correct and
complete copies of all leases covering Leased Properties have been delivered to
Buyer. Except as set forth in SCHEDULE 2.27(A), (i) the Acquired Companies have
good and valid title to their leasehold interest of their Leased Property, free
and clear of any lien other than conditions, covenants and restrictions which do
not materially adversely affect the present use of the Leased Properties
("Permitted Encumbrances"); (ii) there are no pending or, to the Knowledge of
the Acquired Companies or the Sellers, threatened condemnation proceedings,
suits or administrative
23
actions relating to the Leased Properties or other matters affecting adversely
the current use or occupancy thereof; (iii) the buildings and improvements are
located within the boundary lines of the parcels of land constituting each
Leased Property, are not in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications),
building code requirements, permits, licenses or other forms of approval by any
Governmental Authority, and do not encroach on any easement which may burden the
land; (iv) all facilities have received all approvals of Governmental
Authorities (including licenses and permits) required in connection with the
ownership or operation thereof and have been operated and are in compliance with
applicable laws, ordinances, rules and regulations, including the Americans with
Disabilities Act; (v) there are no contracts granted to or by the Acquired
Companies, or, to the Knowledge of Sellers or the Acquired Companies, by the
Owners of the parcels of the Leased Property, granting to any party or parties
the right of use or occupancy of any portion of the parcels of Leased Property;
(vi) there are no outstanding options or rights of first refusal granted to or
by Sellers or the Acquired Companies to purchase the parcels of Leased Property,
or any portion thereof or interest therein; (vii) there are no parties (other
than the Acquired Companies) in possession of the parcels of Leased Property,
(viii) all facilities located on the parcels of Leased Property are supplied
with utilities and other services necessary for the operation of such
facilities; (ix) each parcel of Leased Property abuts on and has direct
vehicular access to a public road, or has access to a public road; (x) all
improvements and buildings on the Leased Property are in good repair and
adequate for the use of such Leased Property in the manner in which presently
used; and (xi) there are no material service contracts, management agreements or
similar agreements granted by Sellers or the Acquired Companies which affect the
parcels of Leased Property; (xii) with respect to each lease of a Leased
Property, no event or condition currently exists which would give rise to a
material repair or restoration obligation if such lease were to terminate;
(xiii) the Sellers haves no Knowledge of any event or condition which currently
exists which would create a legal or other impediment to the use of the Leased
Property as currently used, or would increase the additional charges or other
sums payable by the tenant under any of the leases of a Leased Property
(including, without limitation, any pending tax reassessment or other special
assessment affecting the Leased Property).
(b) SCHEDULE 2.27(B) sets forth a list of all material
machinery, equipment, motor vehicles and furniture and fixtures leased by the
Acquired Companies ("Leased Equipment"). Sellers have provided Buyer with true,
correct and complete copies and descriptions of all agreements for Leased
Equipment, whether written or oral, under which the Acquired Companies are
lessee of or hold or operate any items of machinery, equipment, motor vehicles,
furniture and fixtures or other property (other than real property) owned by any
third-party. Except as provided in SCHEDULE 2.27(B), the Leased Equipment is in
good operating condition, maintenance and repair in accordance with industry
standards taking into account the age thereof.
2.28 PHANTOM STOCK PLAN. Sellers represent, warrant and covenant that
the Company phantom stock plan ("Phantom Stock Plan") will be terminated at or
prior to the Effective Closing Date. All benefits and payments owed to any
participant of the Phantom Stock Plan will be paid on the Business Day prior to
the Effective Closing Date except for any deferred amount which will be accrued
as of the Business Day prior to the Effective Closing Date and will be paid by
the Acquired Companies promptly thereafter. The Sellers, jointly and severally,
guarantee to Buyer that Buyer will have no liability under the Phantom Stock
Plan except to the extent that the
24
Acquired Companies will be liable for the amount accrued as of the Business Day
prior to the Effective Closing Date, and except that Buyer agrees to loan the
Acquired Companies' funds on such Business Day prior to the Effective Closing
Date, if necessary, to provide sufficient liquidity to pay said liabilities
prior to or after Closing. Such liabilities shall be paid ninety-five percent
(95%) on the Business Day prior to the Effective Closing Date and five percent
(5%) at such time as the final payment of the Purchase Price is made to Sellers,
subject to adjustment as set forth in SECTION 1.7(e). A copy of all documents
associated with the Phantom Stock Plan are attached to SCHEDULE 2.15.
2.29 FINANCE & INSURANCE PROGRAMS. SCHEDULE 2.29(A) ("Finance &
Insurance Programs") contains a complete and accurate list and brief description
of all programs of any type related to credit life insurance, accident and
health insurance, vehicle maintenance, vehicle service or vehicle warranty
programs extended (even if there are insurance policies, stop loss agreements or
other resources available to satisfy obligations of those programs) or sold by
any Acquired Company since January 1, 1997, and any type of agreement for the
sale, assignment or discount of retail installment sales contracts or notes by
any Acquired Company since January 1, 1997. Sellers and the Acquired Company
have (i) delivered to Buyer true, correct and complete copies of all contracts,
policies, agreements and commitments with respect to any of such programs; (ii)
correct and complete histories of chargebacks with respect to any of such
program; (iii) paid all premiums and taxes due and payable with respect to any
of the foregoing. Sellers and the Company represent and warrant that: (i) all
applicable insurers or administrators with respect to the foregoing have paid
all valid claims, except claims being contested in good faith and no Acquired
Company has any direct, indirect or contingent liabilities or obligations with
respect thereto; and (ii) no event has occurred which would increase the level
of chargebacks on finance income, vehicle service contracts, or credit, accident
and health insurance commissions over historical levels. SCHEDULE 2.29(B)
("Affiliated Insurance Companies") contains a complete and accurate list of all
Affiliates of Sellers or any Acquired Company which has undertaken any actuarial
risk (e.g. vehicle service companies or insurance companies) related to any type
of credit life insurance, accident and health insurance, vehicle service
contracts, or other products sold by any Acquired Company since January 1, 1995
("Affiliated Insurance Companies"). Sellers represent and warrant that all
Affiliated Insurance Companies have adequate funds to cover all future
liabilities, including but not limited to cancellation premium refunds and
anticipated future claims, calculated using sound actuarial assumptions and
conservative risk and experience assumptions.
2.30 SUBSIDIARIES AND INVESTMENTS. The Acquired Companies do not own or
maintain, directly or indirectly, any capital stock of or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity and does not have any
commitment to contribute to the capital of, make loans to, or share in the
losses of, any such entity.
2.31 PERMITS, ETC. Set forth on SCHEDULE 2.31 ("Permits") is a list of
all material governmental licenses, permits, approvals, certificates of
inspection and other authorizations, filings and registrations that are
necessary for the Acquired Companies to own and operate their business as
presently conducted (collectively, the "Permits"). All such Permits have been
duly and lawfully obtained by the Acquired Companies and are in full force and
effect. There is no proceeding pending, or, to the Sellers' Knowledge,
threatened or probable of assertion, to revoke
25
or limit any such Permit. Except as set forth on SCHEDULE 2.31 none of the
Contemplated Transactions will terminate, violate or limit the effectiveness of
any such Permit.
2.32 POWERS OF ATTORNEY. Except as set forth in SCHEDULE 2.32 ("Powers
of Attorney"), there are no persons, firms, associations, corporations or
business organizations or entities holding general or special powers of attorney
from the Acquired Companies.
2.33 BANK ACCOUNTS, CREDIT CARDS, SAFE DEPOSIT BOXES AND CELLULAR
TELEPHONES. SCHEDULE 2.33 ("Bank Accounts, Credit Cards, Safe Deposit Boxes and
Cellular Telephones") lists all bank accounts, credit cards and safe deposit
boxes in the name of, or controlled by, the Acquired Companies, and all cellular
telephones provided and/or paid for by the Acquired Companies, and details about
the persons having access to or authority over such accounts, credit cards, safe
deposit boxes and cellular telephones.
2.34 WARRANTIES. Set forth on SCHEDULE 2.34 ("Warranties") are
descriptions or copies of the forms of all express warranties and disclaimers of
warranty made by the Acquired Companies (separate and distinct from any
applicable Manufacturers', suppliers' or other third-parties' warranties or
disclaimers of warranties) during the past five (5) years to customers or users
of the vehicles, parts, products or services of the Acquired Companies. There
have been no breach of warranty or breach of representation claims against the
Acquired Companies during the past five (5) years which have resulted in any
cost, expenditure or exposure to the Acquired Companies of more than Fifty
Thousand Dollars ($50,000) individually or Fifty Thousand Dollars ($50,000) in
the aggregate, in any one (1) of the past five (5) years.
2.35 DIRECTORS AND OFFICERS. Set forth on SCHEDULE 2.35 ("Directors and
Officers") is a true and correct list of the names and titles of each director
and officer of each of the Acquired Companies.
2.36 SUPPLIERS AND CUSTOMERS. Except as set forth in SCHEDULE 2.36, the
Acquired Companies are not required to provide bonding or any other security
arrangements in connection with any transactions with any of their respective
customers and suppliers. To the Knowledge of the Sellers, no such supplier,
customer or creditor intends or has threatened, or reasonably could be expected,
to terminate or modify any of their relationships with the Acquired Companies;
provided, however, that certain consents, as set forth in SECTION 2.5, are
required in connection with the consummation of the Contemplated Transactions.
2.37 FORMER SUBSIDIARIES. Except as set forth on SCHEDULE 2.37, no
Acquired Company has any direct, indirect or contingent liability associated
with any former subsidiaries or Affiliates of any Acquired Companies. Set forth
on SCHEDULE 2.37 ("Former Subsidiaries and Affiliates") is a complete list of
all former subsidiaries and affiliates of any Acquired Company. Sellers shall
deliver to Buyer copies of all documents related to the sale of all former
subsidiaries and affiliates and any further documents which might create a
direct, indirect or contingent liability to any Acquired Company.
2.38 NOT USED.
2.39 LITIGATION REGARDING SELLER. Except to the extent set forth in
SCHEDULE 2.39 ("Litigation"), there are no actions, suits, claims, or legal,
administrative or arbitration proceedings
26
pending or, to the Sellers' Knowledge, there are no investigations pending and
there are no such matters and no investigations threatened or probable of
assertion, against any of the Sellers relating to the Shares, this Agreement or
the transactions contemplated hereby before any court, governmental or
administrative agency or other body. The Sellers do not know of any basis for
the institution of any such suit or proceeding. No judgment, order, writ,
injunction, decree or other similar command of any court or governmental or
administrative agency or other body has been entered against or served upon the
Sellers relating to the Shares, this Agreement or the transactions contemplated
hereby.
2.40 APPROVALS. Except for applicable requirements, if any, of the HSR
Act, no filing or registration with, and no consent, approval, authorization,
permit, certificate or order of any Court or Governmental Authority is required
by any applicable Law or by any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority to permit such Sellers to
execute, deliver or perform this Agreement or any instrument required hereby to
be executed and delivered by them at the Closing.
2.41 MANUFACTURER COMMUNICATIONS. Except as set forth on SCHEDULE 2.41
("Manufacturer Communications"), and except for notices which are no longer
applicable, the Manufacturer has not: (a) notified the Sellers 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 Sellers of a present or future need for
facility improvements or upgrades in connection with the Acquired Companies'
business; or (c) notified the Sellers of the awarding or possible awarding of
their franchise to an entity or entities other than the Acquired Company in the
Metropolitan Statistical Area in which the Acquired Company operates.
2.42 XXX DE ORO. Sellers represent and warrant that there shall be no
future liability to any Acquired Company from the sales issues described as Xxx
de Oro, in SECTION 1.2(b)(7).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a Delaware corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
3.2 AUTHORITY. This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the documents (including guaranty of
the Leases) negotiated to be delivered by Buyer at Closing, ("Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
3.3 NO CONFLICT. Neither the execution and delivery of this Agreement
by Buyer nor the consummation or performance of any of the Contemplated
Transactions by Buyer will give
27
any Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to: (i) any provision of Buyer's
Organizational Documents; (ii) any resolution adopted by the board of directors
or the stockholders of Buyer; (iii) any Legal Requirement or Order to which
Buyer may be subject; or (iv) any Contract to which Buyer is a party or by which
Buyer may be bound. Buyer is not and will not be required to obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
3.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
3.5 BROKERS OR FINDERS. Buyer will indemnify and hold Sellers harmless
from any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement or the Contemplated Transactions, alleged to be due by any Buyer.
Buyer hereby discloses that it has an agency agreement with Presidio Merchant
Partners, LLC, which provides for a sales commission in connection with the
Contemplated Transactions.
3.6 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the
Buyer contained in this Agreement, and no statement contained in any certificate
or Schedule furnished or to be furnished by the Buyer to the Sellers in
connection with this Agreement, 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 and warranty or such statement not misleading.
ARTICLE 4
COVENANTS OF EACH ACQUIRED COMPANY AND OF THE SELLERS PRIOR TO CLOSING
4.1 ACCESS. Between the date of this Agreement and the Closing Date,
Sellers will, and will cause each Acquired Company and its Representatives to,
(a) afford Buyer and its Representatives full and free access to the Acquired
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer with such additional
financial, operating, and other data and information as Buyer may reasonably
request; provided however, that such access shall be conducted at a mutually
convenient time to be determined by Buyer and Sellers, during normal business
hours and in a manner that does not unreasonably interfere with Sellers' normal
operations and employee relations; and provided, further, that access to
personnel may be limited by Sellers to key employees and shall require advance
notice to Sellers.
4.2 OPERATION OF THE BUSINESSES OF EACH ACQUIRED COMPANY. Between the
date of this Agreement and the Closing Date, Sellers will, and will cause each
Acquired Company to: (i) conduct the business of each Acquired Company only in
the Ordinary Course of Business and in a manner consistent with prior business
practice; (ii) use their Best Efforts to preserve intact the current business
organization of each Acquired Company, keep available the services of the
current officers, employees, and agents of each Acquired Company, and maintain
the relations and
28
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with each Acquired Company; (iii)
confer with Buyer concerning operational matters of a material nature (e.g.
ordering vehicles, major advertising plans, etc.); and (iv) otherwise report
periodically to Buyer concerning the status of the business, operations, and
finances of each Acquired Company. Each Acquired Company and Sellers will not
omit to take any action that is inconsistent with any representation or warranty
of the Sellers, or that would cause any such representation or warranty to be
untrue or incorrect in any material respect if such representation or warranty
were made immediately following the taking of or failure to take such action. In
connection therewith, the parties agree that the Acquired Companies may dealer
trade vehicles for similar models, but they shall not liquidate or otherwise
dispose of any of their new vehicles other than in the ordinary course of
business to retail buyers. Sellers agree to cause the Acquired Companies to
maintain their advertising expenditures and activities commensurate with prior
business practices. The Acquired Companies shall not advertise a "Going Out of
Business," "Retirement Sale" or any similar type of sale.
4.3 PROHIBITED ACTIVITIES. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, Sellers
will not, and will cause each Acquired Company not to, without the prior consent
of Buyer, take any affirmative action, or fail to take any reasonable action
within their control, as a result of which any of the changes or events listed
in SECTION 2.18 is likely to occur. Sellers and each Acquired Company and their
Affiliates, will not: (i) make any changes to their organizational documents
(charter documents); (ii) directly or indirectly redeem, retire, purchase, or
otherwise acquire or obtain the surrender of any stock, option, warrant or
derivative of any Acquired Company or Affiliate; (iii) issue any stock, option,
warrant, bond, or derivative of any Acquired Company or Affiliate; (iv) make any
investment in the stock, indebtedness, or any derivative security of any Person
other than in Acquired Company; (v) enter into any transaction which is outside
the ordinary course of business and past business practices, or prohibited
hereby; provided, however, that commencement of construction projects set forth
on SCHEDULE 4.3 shall be permitted; and provided, further that the prohibitions
upon Sellers shall apply only to matters related to the Acquired Companies.
4.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause each Acquired Company to, make all
filings required by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions (including all filings under the HSR Act, which
shall be coordinated with the filing by Buyer under the HSR Act).
4.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each of the Sellers will promptly notify Buyer in writing if such Seller
or any Acquired Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of Sellers' representations and warranties as of the
date of this Agreement, or if such Sellers or any Acquired Company becomes aware
of the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the Schedules
if the Schedules were dated the date of the occurrence or discovery of any such
fact or condition, Sellers will promptly deliver to Buyer a supplement to the
Schedule specifying such change. During the same period, each Seller will
promptly notify Buyer of the
29
occurrence of any Breach of any covenant of Sellers in this Article 4 or of the
occurrence of any event that may make the satisfaction of the conditions in
Article 6 impossible or unlikely.
4.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Sellers will cause all
indebtedness owed to any Acquired Company by either Sellers or any Related
Person of either of the Sellers, or any of their Affiliates, to be paid in full
prior to or at Closing.
4.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Article 9, Sellers will not, and will cause each Acquired
Company and each of their Representatives not to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets (other
than in the Ordinary Course of Business or as necessary pursuant to a sale of
any of the Real Properties to a third party) of each Acquired Company, or any of
the capital stock of any Acquired Company, or any merger, consolidation,
business combination, or similar transaction involving any Acquired Company.
Sellers shall promptly advice Buyer of any such inquiry or proposal so received.
4.8 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers will use their Best Efforts to cause the conditions in Articles 6
and 7 to be satisfied.
4.9 REMOVAL OF RELATED PARTY GUARANTEES. Each Acquired Company and the
Sellers agree to take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable to terminate, waive
or release all Related Guarantees. All Related Guarantees are disclosed on
SCHEDULE 4.9 ("Related Party Guarantees").
4.10 RELATED PARTY AGREEMENTS. Each Acquired Company agrees, and the
Sellers agree to cause each Acquired Company, not to enter into any Related
Party Agreements or engage in any transactions with the Sellers or their
Affiliates; except for those Related Party Agreements or transactions with
Affiliates that are required by this Agreement, disclosed on SCHEDULES 4.10
("Related Party Agreements") as agreements or transactions that shall not be
subject to this SECTION 4.10. Prior to the Closing: (i) each Acquired Company
shall pay in full or otherwise discharge all amounts payable by each Acquired
Company to, or loans made to each Acquired Company by, the Sellers or other
Affiliates of each Acquired Company, or the members of their respective
families; and (ii) the Sellers or other Affiliates of each Acquired Company, or
the members of their respective families, shall pay in full to each Acquired
Company any amounts payable by such Persons to each Acquired Company and any
loans made by each Acquired Company to such Persons not otherwise required to be
forgiven by the terms of this Agreement.
4.11 REAL PROPERTY AND LEASE AGREEMENTS.
(a) Affiliates of the Sellers currently own certain of the
Real Properties and will own the Woodland Hills Nissan Dealership Location on
the Closing Date (the "Affiliate Real Properties"). Sellers may cause the
Affiliates of Sellers to sell some or all of the Affiliate Real Properties to
Buyer or a third-party acceptable to Sellers which is not an Affiliate of
Sellers ("Purchaser"). Buyer will enter into lease agreements or will cause the
Acquired Companies to enter into lease agreements, guaranteed by Buyer, with the
Purchaser for each of the Affiliate Real Properties in form or substance
acceptable to Buyer and to Purchaser (individually or collectively
30
the "Lease"), effective on the Closing Date. In addition, Sellers shall purchase
from the Acquired Companies the Van Nuys Honda showroom. Such showroom shall
also be leased to Buyer or an Acquired Company for the term of the underlying
ground lease, at a rental of Five Thousand Three Hundred Dollars ($5,300) per
month, with the same escalations as the other Leases, on a triple-net basis.
Copies of all leases for the Real Properties not owned by Affiliates of Sellers
will be furnished to Buyer and will remain in place as third-party leases of the
Acquired Companies. As soon as practical after execution of this Agreement,
Buyer and Sellers and/or Purchaser shall negotiate in good faith the terms of
each Lease. The term of each Lease with a Purchaser shall be fifteen (15) years
with three (3) five (5) year renewal options. The balance of the terms of each
Lease, except for the rent, will consist of such other reasonable terms and
conditions as are customary for a REIT owner. In connection with negotiating
such Leases, it is contemplated that the rent for each of the Affiliate Real
Properties shall be based upon an appropriate capitalization rate taking into
consideration the capitalization rates currently negotiated by REITS as applied
to the appraised value for each of such Affiliate Real Properties. In that
connection, it is contemplated that the aggregate fair market value of the
Affiliate Real Properties, exclusive of the Woodland Hills Nissan Add-Point and
exclusive of the Van Nuys Honda showroom will approximate Forty-Five Million Two
Hundred Eighty Thousand Dollars ($45,280,000) assuming all such Affiliate Real
Properties are sold. In the event the actual fair market value price of such
Affiliate Real Properties vary from such amount, the rents will be adjusted to
reflect such actual values utilizing the negotiated capitalization rate. In the
event the Sellers enter into, or desire to enter into, an agreement to sell some
or all the Affiliate Real Properties to a Purchaser, Buyer and Sellers shall
cooperate with each other in attempting to negotiate the Leases with such
Purchaser. With respect to the Leases for the Woodland Hills Nissan Add-Point,
or the Xxxxxxxxx Boulevard Honda Service Center, respectively, it is understood
that each such Lease will provide for the construction by the Lessor of the
improvements upon the land required for operation of the dealership or Xxxxxxxxx
Boulevard Honda Service Center, respectively.
(b) With respect to any of the Leased Properties retained by
Sellers' Affiliates, the Leases from Sellers' Affiliates to the Acquired
Companies shall contain the following terms and conditions:
(i) the Initial Term of the Lease shall be fifteen
(15) years from the Commencement Date, with three (3) five (5) year renewal
options. The Commencement Date of each Lease shall be the Effective Closing Date
for any property other than the Woodland Hills Nissan Add-Point and the
Xxxxxxxxx Boulevard Honda Service Center. In each of the latter two cases, the
Commencement Date shall be the date upon which the respective premises are ready
for occupancy.
(ii) the annual Base Rent during the Initial Term
shall be an amount equal to the fair market value of existing properties times
9.75%. The annual Base Rent during the Initial Term of the properties to be
constructed shall be 450 basis points over the ten (10) year treasury xxxx rate
at the Commencement Date of the respective property times the actual cost of the
land and construction of the improvements thereon. The actual cost of the land
shall be (i) all hard and soft costs paid by Sellers' Affiliate for the purchase
of the land in the case of Woodland Hills Nissan Add-Point and the fair market
value ("Market Value") of the Property, as it is then being used, pursuant to an
appraisal conducted on an as-used basis utilizing actual arm's-length comparable
transactions of the land at the Effective Closing Date in the case of the
Xxxxxxxxx Boulevard Honda Service Center, and in the case of the Xxxxxxxxx
Boulevard Honda Service
31
Center, subtracting demolition costs, plus (ii) interest costs on such amount
from the Effective Closing Date through the Commencement Date of the Initial
Term, in the case of the Woodland Hills Nissan Add-Point, plus (iii) the
prorated portion of any property taxes assessed against the land which are
applicable to the period from the date of this Agreement until the Commencement
Date, in the case of the Woodland Hills Nissan Add-Point, less (iv) the amount
of any incentives paid or payable to Sellers' Affiliate applicable to the
purchase of the land or the construction of the improvements, but exclusive of
any incentive based upon the performance of the Acquired Companies, which shall
be retained by the Acquired Companies. Actual costs of the improvements shall be
the actual amounts paid to contractors, subcontractors, architects, surveyors,
or others for construction, demolition, permitting, construction period interest
(excluding interest on land costs) and other soft costs.
(iii) The Base Rent under each Lease shall increase
in an amount equal to one-half (1/2) of the percentage change in the cost of
living index as reported by the Consumer Price Index ("CPI"), published by the
Bureau of Labor Statistics of the United States Department of Labor, from the
date of the previous adjustment (or the Commencement Date as to the first
adjustment) on the fifth and tenth anniversaries of the Commencement Date. The
Base Rent payable for the first option period shall be the Market Value of the
property, multiplied by an amount equal to 450 basis points over the then ten
(10) year treasury xxxx rate. Such Base Rent shall be increased on the
commencement of each of the two additional five (5) year renewal options in an
amount equal to one-half (1/2) of the percentage change in the CPI from the date
of the previous adjustment (or for the second renewal option, from the date of
the commencement of the first renewal option). In no event shall the Base Rent
decrease at any time.
(iv) The balance of the terms of the Lease shall be
such that it constitutes a triple net lease and will consist of such other
reasonable terms and conditions as Buyer and Sellers mutually agree.
(v) With respect to the Xxxxxxxxx Boulevard Service
Center, prior to the Commencement Date, Buyer shall pay to Sellers or Sellers'
Affiliate, on a monthly basis, the actual interest costs of Sellers or Sellers'
Affiliate from the Effective Closing Date through the Commencement Date and,
when due, the pro rated portion of property taxes upon such property from the
Effective Closing Date through the Commencement Date.
4.12 GUARANTY OF RECEIVABLES. Subject to the limitations set forth in
this SECTION 4.12, Sellers, jointly and severally, guarantee to Buyer that,
except to the extent of the reserve for doubtful accounts shown on the balance
sheets of the Acquired Companies as of the Effective Closing Date, all Accounts
Receivable reflected on said balance sheet will be valid and legally binding
obligations of the persons owing said amounts to the Acquired Companies and that
the full amount of the Accounts Receivables, other than Accounts Receivables
from Manufacturers, will be paid to the Acquired Companies on or before one
hundred twenty (120) days following the Closing Date and the Accounts
Receivables from Manufacturers will be paid to the Acquired Companies on or
before twelve (12) months from the Closing Date. If any part of the Accounts
Receivable has not been paid on or before one hundred twenty (120) days
following the Closing Date, or twelve (12) months for Accounts Receivables from
Manufacturers, respectively, then to the extent that such unpaid part of the
Accounts Receivable exceeds the reserve for doubtful accounts with respect to
such category of Accounts Receivable shown on the balance sheet of the Acquired
Companies as of the Effective Closing Date, Buyer may reassign to Sellers all or
any
32
part of the unpaid part of the respective Accounts Receivable, which shall be
free and clear of any security interest, lien or other encumbrance arising on or
after the Closing Date, and which shall be selected by Sellers, in which event
Sellers shall pay to Buyer in cash or by certified check an amount equal to such
reassigned portion of the Accounts Receivable; provided, however, that Buyer
shall have caused the Acquired Companies to use their reasonable efforts
consistent with past practices to collect such Accounts Receivable.
4.13 WOODLAND HILLS NISSAN ADD-POINT. Sellers covenant that Sellers
shall use their Best Efforts to assist Buyer to receive all rights and interests
of Sellers for the new Nissan franchise add-point in the Woodland Hills area
("Woodland Hills Nissan Add-Point").
4.14 MANAGEMENT TEAM. Buyer intends to retain the Management Team,
identified on EXHIBIT 4.14 ("Management Team"), following Closing. Prior to
Closing, Sellers, Buyer and each individual of the Management Team, shall agree
on the Management Team's post Closing compensation package ("Post-Closing
Compensation Package"). The Post-Closing Compensation Package will be designed
to properly compensate and motivate the Management Team, but the Post-Closing
Compensation Package shall not exceed, but is expected to approximate, the total
annual compensation paid to the Management Team in 2001 (except to the extent
any excess is based upon increased profitability over 2001). Sellers will use
their Best Efforts to assist Buyer in retaining the Management Team.
ARTICLE 5
COVENANTS OF BUYER PRIOR TO CLOSING DATE
5.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after
the date of this Agreement, Buyer will, and will cause each of its Related
Persons to, make all filings required by Legal Requirements to be made by them
to consummate the Contemplated Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing Date, Buyer will, and
will cause each Related Person to: (i) cooperate with Sellers with respect to
all filings that Sellers are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Sellers
in obtaining all consents identified in SCHEDULE 2.5; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
5.2 LEASE. Buyer agrees to cause the respective Acquired Company to
enter into the Leases, and to execute and deliver the related guaranty of such
leases.
5.3 RELEASE OF GUARANTEES. Buyer will obtain the release of Sellers
from any and all personal guarantees of liabilities of the Acquired Companies
incurred in the operation of the business of the Acquired Companies, including
financing obligations and obligation under letters of credit, except for
guarantees of leases, which is governed by SECTION 5.4.
5.4 BEST EFFORTS. Except as set forth in the proviso to SECTION 9.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Articles 6 and 7 to be satisfied. In
addition, Buyer will use its Best Efforts (including the guaranty of Leases by
Buyer, if necessary) to obtain the release of Sellers from their guaranty(s) of
any
33
Leases for Real Properties not owned by Affiliates of Sellers. Buyer will
guaranty new Leases entered into by the Acquired Companies.
ARTICLE 6
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS.
(a) All of Sellers' representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
(b) Each of Sellers' representations and warranties in
SECTIONS 2.3 AND 2.6 must have been accurate in all respects as of the date of
this Agreement, and must be accurate in all respects as of the Closing Date as
if made on the Closing Date.
6.2 SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that Sellers are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing Date (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to SECTION
1.9 must have been delivered, and each of the other covenants and obligations in
SECTIONS 4.6 AND 4.9 must have been performed and complied with in all respects.
6.3 CONSENTS. Each of the Consents identified in SCHEDULES 2.5 AND
2.19, must have been obtained and must be in full force and effect.
6.4 ADDITIONAL CONDITIONS PRECEDENT. Each of the following documents or
events must have occurred or been delivered to Buyer:
(a) an opinion of Sellers' counsel, dated the Closing Date,
substantially in the form of EXHIBIT "6.4(a)";
(b) such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the accuracy of any of Sellers' representations
and warranties, (ii) evidencing the performance by all Sellers of, or the
compliance by all Sellers with, any covenant or obligation required to be
performed or complied with by such Sellers, (iii) evidencing the satisfaction of
any condition referred to in this Article 6, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions;
34
(c) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and Manufacturer, that
reasonably may be deemed necessary so that the consummation of the Acquisition
and the transactions contemplated thereby will be in compliance with applicable
laws;
(d) Buyer shall have received evidence, satisfactory to Buyer,
that all Related Party Agreements shall have been terminated and all Related
Guarantees shall have been terminated, waived or released pursuant to SECTION
4.9 AND 4.10;
(e) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets or operations
of the Acquired Companies, taken as a whole, shall have occurred, and each
Acquired Company shall not have suffered any damage, destruction or loss of
assets (whether or not covered by insurance) materially adversely affecting the
properties or business of the Acquired Company, and Buyer shall have received a
certificate signed by the chief executive officer of each Acquired Company dated
the Closing Date to such effect;
(f) Receipt by Buyer of Phase I Environmental Surveys, at the
Buyer's expense, prepared by URS Corporation, showing no environmental problems
or recommended actions, which will be performed at the discretion of Buyer.
Prior to issuing any Phase I Environmental assessment, URS Corporation shall
consult with California Environmental, Sellers' environmental consultant. The
costs of any Phase II Environmental procedures required by the Phase I surveys
and the cost of any remediation recommended by the Phase I assessment or
supplemental Phase II procedures will be at Sellers' sole cost. Any remediation
which extends beyond the Closing Date shall be performed and paid by Sellers.
Buyer shall allow Sellers access to perform such remediation and shall otherwise
cooperate with Sellers to allow for such remediation. Sellers shall remain
responsible for the remediation currently in process at the Van Nuys Infiniti
dealership, but Sellers will be entitled to any rebate or refund or other
governmental payment received by the Acquired Companies in respect of such
remediation whether performed prior to or after the date of this Agreement;
(g) Receipt by Buyer, at Sellers' expense, of a Leasehold
Policy of Title Insurance, issued by a title company, approved by Buyer for each
Lease;
(h) Receipt by Buyer, at Sellers' expense, of an ALTA survey
for each leased premises showing the location of any improvements, prepared by a
licensed surveyor approved by Buyer;
(i) Receipt by Buyer at Buyer's cost of a structural survey
for each leased premises, prepared by an inspector selected by Buyer, showing no
material structural problems or required maintenance (either individually or in
the aggregate), except for the roof issues on the service department at Xxxxxx
City Toyota;
(j) Receipt by Buyer of each executed Lease;
(k) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have expired or
been terminated. Buyer and
35
Sellers shall each be responsible for their respective fees associated with the
preparation of their HSR filing;
(l) The Physical Inventory must have been taken in accordance
with SECTION 1.4(d);
(m) Buyer will have completed its due diligence investigations
of each Acquired Company and each leased premises on or before sixty (60) days
from the execution date of this Agreement ("Due Diligence Deadline") and the
results of such investigation has not revealed any material adverse conditions.
Buyer shall be deemed satisfied with the due diligence investigation, unless
Buyer notifies Sellers on or before the Due Diligence Deadline, that it wishes
to terminate this Agreement;
(n) Sellers shall have complied with the provisions of SECTION
2.28 concerning the Phantom Stock Plan and shall have delivered to Buyer
termination agreements or releases from the participants evidencing and
implementing such compliance;
(o) Approval of Board of Directors of Buyer; and
(p) Buyer reaching an agreement for the continued employment
of the chief financial officer and chief operating officer of the Company.
6.5 RESIGNATION OF DIRECTORS AND OFFICERS. Sellers shall have delivered
to Buyer the written resignations of the directors and officers of each Acquired
Company.
6.6 MANUFACTURER APPROVAL. Each Manufacturer shall have given
unconditional approval of the transfer of the Shares to the Buyer (excepting
facilities requirements) and shall have given any required approval of the
Contemplated Transaction or its designee as the authorized dealer operator of
the each Acquired Company's dealership franchise and Manufacturer shall have
executed any required dealer agreements and/or amendments or supplements thereto
in connection with the foregoing. Without limiting the generality of the
foregoing, approval of the grant of the Woodland Hills Nissan Add-Point to a
subsidiary of Company, and of the transfer thereof to Buyer by way of Buyer's
purchase of the Shares, shall have been obtained.
ARTICLE 7
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing Date
36
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects. Buyer must have delivered the each of the documents required
to be delivered by Buyer pursuant to 1.9(b).
7.3 CONSENTS. Each of the Consents identified in SECTION 1.9(b) must
have been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Sellers:
(a) Receipt by Sellers or their Affiliate of the Leases;
(b) The applicable waiting period under the HSR Act (if
applicable) with respect to the transactions contemplated by this Agreement
shall have expired or been terminated.
(c) Receipt by Sellers of the consent by all Manufacturers to
the Contemplated Transactions, including the consent to the establishment and
transfer of the Woodland Hills Nissan Add-Point.
(d) such other documents as Sellers may reasonably request for
the purpose of (i) evidencing the accuracy of any representation or warranty of
Buyer, (ii) evidencing the performance by Buyer of, or the compliance by Buyer
with, any covenant or obligation required to be performed or complied with by
Buyer, (iii) evidencing the satisfaction of any condition referred to in this
SECTION 7.4, or (iv) otherwise facilitating the consummation of any of the
Contemplated Transactions.
7.5 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
7.6 PHYSICAL INVENTORY. The Physical Inventory must have been taken in
accordance with SECTION 1.
ARTICLE 8
POST-CLOSING AND OTHER COVENANTS
8.1 GENERAL. In case, at any time after the Closing, any further action
is necessary or desirable to carry out the purchase and sale of the Shares and
the other purposes and intent of this Agreement, each of the parties will take
such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request.
8.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving each Acquired Company, or its business or Assets,
Sellers or the Shares, each of the other Parties will cooperate with the
contesting or defending Party and his or its counsel in the contest or defense,
make
37
available its Personnel, and provide such testimony and access to its books and
records as shall be reasonably necessary for the contest or defense, all at the
sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor as
provided elsewhere in this Agreement).
8.3 TRANSITION. The Sellers will not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of each Acquired Company from maintaining
the same business relationships with each Acquired Company after the Closing
Date as it maintained with each Acquired Company prior to the Closing. Sellers
will refer all customer inquiries relating to the business of each Acquired
Company from and after the Closing Date to that Acquired Company.
8.4 POST-CLOSING NOTIFICATIONS. Buyer and the Sellers will, and each
will cause their respective Affiliates to, comply with any post-Closing
notification or other requirements, to the extent then applicable to such Party,
of any antitrust, trade competition, investment or control, export or other Law
of any Governmental Entity having jurisdiction over Buyer, each Acquired Company
or the Sellers.
8.5 TRANSFER TAXES. All sales and Taxes imposed by any taxing
authority, domestic or foreign, with respect to the sale of the Shares or
otherwise on account of this Agreement or Contemplated Transactions shall be
borne by Buyer.
8.6 PAYMENT OF EXPENSES. Each Party shall pay its own expenses incident
to preparing for, entering into and carrying out this Agreement and the
Contemplated Transactions, whether or not the Closing occurs.
8.7 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The Sellers shall
prepare and file or cause to be prepared and filed, all income tax returns,
including amended returns, for each Acquired Company for all periods ending on
or prior to the Closing Date, which are required to be filed after the Closing
Date. The Sellers shall provide to Buyer a copy of the tax returns proposed to
be filed pursuant to the preceding sentence, a reasonable time in advance of
such filing date, and shall make such revisions to such tax returns as are
reasonably and appropriately requested by Buyer. The Sellers shall not file such
tax returns without the consent of Buyer which consent will not be unreasonably
withheld. Failure of Buyer to respond within thirty (30) days will be deemed to
be consent. Buyer acknowledges that the Company is an S Corporation for the
period commencing January 1, 2002, and its final S Corporation return will be
filed using the closing of the books method, and Buyer will cooperate with
Sellers as required to file such return on such basis. Buyer will not permit any
Acquired Companies to file an amendment to any income tax returns for any year
ended prior to the Closing Date, without Sellers' prior written consent, which
shall not be unreasonably withheld.
8.8 RELEASE.
(a) As of the Closing Date, each of the Sellers does hereby
for himself or his heirs, executors, administrators and legal representatives
release, acquit and forever discharge each Acquired Company and each of its
Subsidiaries of and from any and all claims, demands, liabilities,
responsibilities, disputes, causes of action and obligations of every nature
whatsoever, liquidated or unliquidated, known or unknown, matured or unmatured,
fixed or contingent, which
38
each of such Sellers now has, owns or holds or has at any time previously had,
owned or held against each Acquired Company or its Subsidiaries including
without limitation all liabilities created as a result of the negligence, gross
negligence and willful acts of each Acquired Company and their employees and
agents, existing as of the Closing Date or relating to any matter that occurred
on or prior to the Closing; provided, however, that any claims, liabilities,
debts or causes of action that may arise in connection with the failure of any
of the parties hereto to perform any of their obligations hereunder or under any
other agreement relating to the transactions contemplated hereby or from any
breaches by any of them of any representations or warranties herein or in
connection with any of such other agreements shall not be released or discharged
pursuant to this Agreement; and provided further any liabilities under Plans or
Benefit Programs or Agreements listed on the Schedules hereto shall not be
released. Provided further, that any rights of Sellers against any Acquired
Company for indemnification shall not be released, to the extent such claim does
not give rise to a breach of the provisions of this Agreement.
(b) Each of the Sellers represents and warrants that he has
not previously assigned or transferred, or purported to assign or transfer, to
any person or entity whatsoever all or any part of the claims, demands,
liabilities, responsibilities, disputes, causes of action or obligations
released herein. Each of the Sellers covenants and agrees that he will not
assign or transfer to any person or entity whatsoever all or any part of the
claims, demands, liabilities, responsibilities, disputes, causes of action or
obligations to be released herein. Each of the Sellers represents and warrants
that he has read and understands all of the provisions of this SECTION 8.8 and
that he has been represented by legal counsel of his own choosing in connection
with the negotiation, execution and delivery of this Agreement.
8.9 NON-COMPETITION OBLIGATIONS.
(a) As part of the consideration for this Agreement, Xxxxxxxx
X. Xxxxxx, and Xxxxxxx X. Xxxxxx, (individually or collectively "Principal") and
Buyer agree to the non-competition provisions of this SECTION 8.9. Principal
agrees that for a period three (3) years from the Closing Date, Principal agrees
not to directly or indirectly for themselves or for others, within Los Angeles
County and all adjoining counties: (i) engage in the ownership or operation of
an automobile dealership; or (ii) render advice, services to, financing for, or
otherwise assist, any other person, association, or entity who is engaged,
directly or indirectly, in any automobile dealership. The provisions of this
SECTION 8.9 shall not prohibit Xxxxxxxx Xxxxxx from providing financing and
advice to his son, Xxxx Xxxxxx, or Xxxxxxx Xxxxxx from providing financing and
advice to his son, Xxxxx Xxxxxx, to acquire an automobile dealership within the
area described above.
(b) Principal understands that the foregoing restrictions may
limit his ability to engage in certain businesses during the period provided for
above, but acknowledge that Principal will receive sufficiently high
remuneration and other benefits under this Agreement to justify such
restriction. Principal acknowledges that money damages would not be sufficient
remedy for any breach of this SECTION 8.9 by Principal, and Buyer shall be
entitled to enforce the provisions of this SECTION 8.9 by terminating any
payments then owing to Principal under this Agreement, and/or to specific
performance and injunctive relief as remedies for such breach or any threatened
breach, without any requirement for the securing or posting of any bond in
connection with such remedies. Such remedies shall not be deemed the exclusive
remedies for a breach of this SECTION 8.9, but
39
shall be in addition to all remedies available at law or in equity to Buyer
including, without limitation, the recovery of damages from Principal and
Principals' agents involved in such breach.
(c) It is expressly understood and agreed that Buyer and
Principal consider the restrictions contained in this SECTION 8.9 to be
reasonable and necessary to protect the confidential and proprietary information
and trade secrets of Buyer and the Acquired Companies. Nevertheless, if any of
the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
(d) The parties hereto expressly acknowledge that Buyer rights
under this SECTION 8.9 are assignable and that such rights shall be fully
enforceable by any of Buyer's subsidiaries, assignees, or successors in
interest, but such assignment shall not expand the scope of Principal's
responsibilities hereunder.
8.10 NON-HIRING PROVISIONS.
(a) As part of the consideration for this Agreement, the
Principals and Buyer agree to the non-hiring provisions of this SECTION 8.10.
Principals agrees that during for a period of three (3) years after the Closing
Date, Principal will not, directly or indirectly for themselves or for others,
proselytize, offer employment, retain, hire or assist in the proselytizing,
recruitment or hiring of any employee of any Acquired Company.
(b) Principal understands that the foregoing restrictions may
limit his ability to engage in certain businesses, but acknowledge that
Principal will receive sufficiently high remuneration and other benefits under
this Agreement, to justify such restriction. Principal acknowledges that money
damages would not be sufficient remedy for any breach of this SECTION 8.10 by
Principal, and Buyer shall be entitled to enforce the provisions of this SECTION
8.10 by terminating any payments then owing to Principal under this Agreement,
and/or to specific performance and injunctive relief as remedies for such breach
or any threatened breach, without any requirement for the securing or posting of
any bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this SECTION 8.10, but shall be in addition
to all remedies available at law or in equity to Buyer, including, without
limitation, the recovery of damages from Principal and Principals' agents
involved in such breach.
(c) It is expressly understood and agreed that Buyer and
Principal consider the restrictions contained in this SECTION 8.10 to be
reasonable and necessary to protect the confidential and proprietary information
and trade secrets of Buyer and the Acquired Companies. Nevertheless, if any of
the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
(d) The parties hereto expressly acknowledge that Buyer's
rights under this SECTION 8.10 are assignable and that such rights shall be
fully enforceable by any of Buyer's assignees or successors in interest, but
such assignment shall not expand the scope of Principal's responsibilities
hereunder.
40
8.11 IRC SECTION 338 ELECTION. Buyer shall not make an election under
IRC Section 338(h)(10) with respect to the Contemplated Transactions.
8.12 VEHICLE SERVICE CONTRACT TRUST FUNDS. Sellers agree to maintain at
all times funds reasonably acceptable to Buyer, in Affiliated Insurance
Companies, to cover the cost of future claims on vehicle service contracts
insured by any Affiliated Insurance Companies. Sellers shall at all times
maintain cash and marketable investments in Affiliated Insurance Companies,
greater than or equal to the amount of the unearned premium, calculated using
sound actuarial assumptions and conservative risk and experience assumptions, on
the outstanding vehicle service contracts. Sellers shall enter into an agreement
with Buyer at Closing which contains the terms and conditions as provided in
this SECTION 8.12.
8.13 PHANTOM STOCK PLAN. Buyer shall permit the Acquired Companies to,
and shall lend to the Acquired Companies the funds necessary to enable the
Acquired Companies to, pay the amount accrued with respect to the Phantom Stock
Plan as set forth in SECTION 2.28.
ARTICLE 9
TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) (i) by Buyer if any of the conditions in SECTION 6 have
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Sellers, if any of the conditions in
SECTION 7 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Sellers
to comply with their obligations under this Agreement) and Sellers have not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers;
(d) by Buyer, on or before the Due Diligence Deadline, by
notice to Sellers, that the results of the due diligence inspection are not
satisfactory to Buyer, as permitted by SECTION 6.4(m);
(e) by Sellers if the Board of Directors of Buyer has not
approved this Agreement on or before June 15, 2002; or
(f) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before
September 1, 2002, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination under
SECTION 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a
41
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to SECTION 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in SECTIONS 11.1 AND
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party shall receive
Five Million Five Hundred Thousand Dollars ($5,500,000) ("Termination Fee") from
the other party as full and complete liquidated damages in full relief and
discharge of any and all obligations of the terminated party hereunder. The
parties have discussed and negotiated, in good faith, upon the question of
damages to be suffered by Buyer or Sellers in the event this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, and have endeavored to
reasonably estimate such damages, and Buyer and Sellers hereby agree that: (a)
such damages are and will be impracticable or extremely difficult to fix; (b)
liquidated damages shall be in an amount equal to the Termination Fee; (c) in
the event of such termination, the terminating party shall be entitled to the
Termination Fee as liquidated damages; and, (d) such liquidated damages shall be
the terminating party's sole remedy in the event of such termination.
ARTICLE 10
INDEMNIFICATION; REMEDIES
10.1 SURVIVAL. All statements contained in any Schedule or certificate
delivered hereunder or in connection herewith by or on behalf of any of the
parties pursuant to this Agreement shall be deemed representations and
warranties by the respective parties hereunder unless otherwise expressly
provided herein. The representations and warranties of the Sellers or the Buyer
contained in this Agreement, including those contained in any Schedule or
certificate delivered hereunder or in connection herewith, shall survive the
Closing for a period of three (3) years with the exception of: (i) the
representations and warranties of the Sellers contained in SECTION 2.14, which
shall survive the Closing until the expiration of the applicable tax statutes of
limitation plus a period of sixty (60) days; and (ii) the representations and
warranties of the Sellers contained in SECTIONS 2.2, 2.3, AND 2.6, which shall
survive the Closing indefinitely. As to each representation and warranty of the
parties hereto, the date to which such representation and warranty shall survive
is hereinafter referred to as the "Survival Date."
10.2 INDEMNIFICATION BY SELLERS. Sellers, jointly and severally, agree
to indemnify and hold harmless the Buyer, each Acquired Company and their
Affiliates, successors and assigns ("Indemnified Persons") harmless from and
against, for and in respect of, any and all damages, losses, obligations,
liabilities, demands, judgments, injuries, penalties, claims, actions or causes
of action, encumbrances, costs, and expenses (including, without limitation,
reasonable attorneys' fees and expert witness fees), suffered, sustained,
incurred or required to be paid by any Buyer Indemnitee ("Damages") arising out
of, based upon, in connection with, or as a result of: (a) the untruth,
inaccuracy or breach of any representation and warranty of the Sellers
(including any loss of life, injury to persons or property, remediation costs or
damages, arising from Environmental, Health, and Safety Liabilities) contained
in or made pursuant to this Agreement, including the Disclosure Letter and in
any Schedule or certificate delivered hereunder or in connection herewith; (b)
the breach or nonfulfillment of any covenant or agreement of the Sellers
contained in this
42
Agreement or in any other agreement, document or instrument delivered hereunder
or pursuant hereto; (c) any tax liability associated with the sale of the
Excluded Assets, and Van Nuys Honda showroom as provided in SECTION 1.6; (d) any
Damages related to the lease for the property at the former Santa Xxxxxx
dealership location. In determining Damages in respect of any liability for
Taxes, offsetting tax benefits, such as a deduction in a subsequent year, shall
be taken into consideration.
10.3 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify and
hold harmless the Sellers and their successors and assigns from or against, for
and in respect of, any and all Damages suffered, sustained, incurred or required
to be paid by any Sellers arising out of, based upon or in connection with or as
a result of: (a) the untruth, inaccuracy or breach of any representation and
warranty of the Buyer contained in or made pursuant to this Agreement, including
in any Schedule or certificate delivered hereunder or in connection herewith; or
(b) the breach or nonfulfillment of any covenant or agreement of the Buyer
contained in this Agreement; or (c) any obligations arising from the ownership
or operation of the Acquired Companies after the Closing Date.
10.4 CLAIMS FOR INDEMNIFICATION. No claim for indemnification with
respect to a breach of a representation, warranty or covenant shall be made
under this Agreement after the applicable Survival Date unless prior to such
Survival Date the Buyer Indemnitee or the Sellers Indemnitee, as the case may
be, shall have given the Sellers or the Buyer, as the case may be, written
notice of such claim for indemnification based upon actual loss sustained, or
potential loss anticipated, as a result of the existence of any claim, demand,
suit, or cause of action against such Indemnified Person.
10.5 PROCEDURES FOR INDEMNIFICATION -- THIRD PARTY CLAIMS. The
procedures to be followed by the Buyer and the Sellers 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 Indemnified Person 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, the Indemnified
Person 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.
(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, environmental remediation or related to any liability
for taxes, (ii) the Indemnifying Party confirms, in writing, its obligation
hereunder to indemnify and hold harmless the Indemnified Party with respect to
such damages in their entirety subject to the limits in SECTION 10.7, and (iii)
the Indemnifying Party, in the reasonable judgment of the Indemnified Party,
shall be able 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
43
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; and, provided further, that in the event of settlement of
claims for environmental remediation, the Indemnifying Party may perform such
other acts, including the placement of monitors or other remediation equipment
upon the Leased Properties, as may be necessary to resolve such claim.
(c) With respect to any action, proceeding or claim as to
which (i) the Indemnifying Party does not have the right to assume the defense
or (ii) the Indemnifying Party shall not have exercised its right to assume the
defense, the Indemnified Party shall assume and control the defense of and
contest such action, proceeding or claim with counsel chosen by it and approved
by the Indemnifying Party, which approval shall not be unreasonably withheld.
The Indemnifying Party shall be entitled to participate in the defense of such
action, 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. The Indemnified Party may
not settle such action, proceeding or claim without the prior written consent of
the Indemnifying Party, which shall not be unreasonably withheld.
(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.
10.6 PROCEDURES FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the Indemnifying Party by the Indemnified Party.
10.7 LIMITATIONS OF INDEMNIFICATION. Notwithstanding anything to the
contrary contained in this Article 10, the Indemnifying Party's liability for
Damages shall be limited as follows: (a) the Indemnified Party shall have no
claim for Damages unless and until all Damages incurred by the Indemnified Party
exceed an aggregate of Two Hundred Fifty Thousand Dollars ($250,000) in which
event the Indemnifying Party shall be liable for only such Damages in excess of
Two Hundred Fifty Thousand Dollars ($250,000); and (b) the total amount of
Damages for which the Indemnifying Party shall be liable to the Indemnified
Party shall not exceed the Purchase Price. However, this SECTION 10.7. will not
apply to any Breach of any of Sellers' representations and warranties: (i)
contained in SECTIONS 2.2, 2.3, 2.6, 2.28 and 2.42; (ii) of which Sellers made a
fraudulent representation or warranty or any intentional Breach by Sellers of
any covenant or obligation; (iii) any Damages arising from provisions of
10.2(d); and (iv) Sellers will be jointly and severally liable for all Damages
with respect to such Breaches.
10.8 SETOFF. The Indemnifying Party agrees to grant the Indemnified
Party, the right to offset any amounts due the Indemnified Party, its successors
or assigns under this Agreement.
44
10.9 APPLICABILITY. THE PROVISIONS OF THIS ARTICLE 10 SHALL APPLY
NOTWITHSTANDING THE, JOINT OR CONCURRENT NEGLIGENCE OR JOINT OR CONCURRENT
STRICT LIABILITY OR OTHER FAULT OF THE INDEMNIFIED PARTY. IF BOTH THE
INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY ARE NEGLIGENT OR OTHERWISE AT FAULT
OR STRICTLY LIABLE WITHOUT FAULT, THE CONTRACTUAL OBLIGATIONS OF INDEMNIFICATION
UNDER THIS ARTICLE 10 SHALL CONTINUE, BUT THE INDEMNIFYING PARTY SHALL INDEMNIFY
THE INDEMNIFIED PARTY ONLY FOR THE PERCENTAGE OF RESPONSIBILITY FOR THE DAMAGE
OR INJURIES INCLUDING ATTORNEYS FEES ATTRIBUTABLE TO THE INDEMNIFYING PARTY.
ARTICLE 11
GENERAL PROVISIONS
11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer and Sellers jointly
determine. Unless consented to by Buyer in advance or required by Legal
Requirements, prior to the Closing Date Sellers shall, and shall cause each
Acquired Company to, keep this Agreement strictly confidential and may not make
any disclosure of this Agreement to any Person except for disclosure to
officers, directors, employees, attorneys, accountants and other
representatives, as necessary in connection with the transactions contemplated
hereby or as necessary to the operation of Sellers' business. Sellers and Buyer
will consult with each other concerning the means by which each Acquired
Company's employees (except as permitted by the preceding sentence), customers,
and suppliers and others having dealings with each Acquired Company will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY. Sellers and Buyer agree, and agree to cause their
officers, directors, employees, representatives agents and consultants, to hold
in confidence and not to disclose to others for any reason whatsoever, any and
all non-public information received by them or their representatives in
connection with this transaction, including but not limited to all terms,
conditions and covenants related to this transaction and this Agreement, and
Buyer's pricing models, methodology, customs or practices related to the
acquisition of automobile dealerships, except (i) as required by law; and (ii)
for disclosure to officers, directors, employees, attorneys, accountants and
other representatives, as necessary in connection with the transactions
contemplated hereby or as necessary to the operation of Sellers' or Buyer's
business. In the event the transactions contemplated by this Agreement are not
consummated, Sellers and Buyer will return all non-public documents and other
material obtained from the other or their respective representatives in
connection with the transactions contemplated hereby or certify to the other
that all such information has been destroyed. The provisions of this Section
shall survive the Closing or termination of this Agreement.
45
11.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand, (b) sent by telecopier (with confirmation of
receipt), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
Sellers: Xxxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx
c/o Xxxx Xxxxxx
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to: Xxxxxx Automotive Group, Inc.
0000 Xxx Xxxx Xxxxxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxx Xxxxxx
with a copy to: Xxxxxxxxx Xxxxxxx Fields
Claman Machtinger & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
Buyer: Group 1 Automotive, Inc.
000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone (000) 000-0000
Telecopier (000) 000-0000
Attention: Xxxx X. Xxxxxx
with a copy to: Xxxxxxx X. Xxxxxxx, Esq.
0000 X. Xxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Telephone (000) 000-0000
Telecopier (000) 000-0000
11.5 INSIDER LIABILITY. The Sellers acknowledges that trading in
Buyer's securities by persons possessing material non-public information may
result in private lawsuits for damages or
46
to civil or criminal proceedings by the Securities and Exchange Commission.
Sellers also acknowledges that liability may be imposed on insiders who
privately disclose otherwise nonpublic material information where such
disclosure coincide with trading Buyer's securities by such insiders or by the
recipients of such information.
11.6 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.8 SCHEDULES.
(a) Sellers shall prepare and furnish the Disclosure Letter,
containing the Schedules, to Buyer within on or before the date thirty (30) days
from the date of this Agreement. Sellers may supplement the Disclosure Letter,
at any time prior to the Closing Date.
(b) The disclosures in the Schedules to the Agreement, and
those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(c) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Schedules (other than an
exception expressly set forth as such in the Schedule with respect to the
specific representation or warranty to which the Schedule pertains), the
statements in the body of this Agreement will control.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any Affiliate of Buyer, but Buyer shall not be relieved of any of
its obligations hereunder. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right,
47
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
11.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms. The parties have jointly participated in the
negotiation and drafting this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumptions or burdens of proof
shall arise favoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Nothing in the disclosed schedules shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the disclosure
schedules identifies the exception with reasonable particularity and described
the relevant facts in reasonable detail. The parties intend that each
representative, warranty, and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty, or
covenant contained herein any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty, or covenant.
11.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.13 GOVERNING LAW. This Agreement will be governed by the laws of the
State of California without regard to conflicts of laws principles.
11.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.15 ATTORNEYS' FEES. In the event any party instigates litigation to
enforce or protect its rights under this Agreement, the party substantially
prevailing in any such litigation shall be entitled, in addition to all other
relief, to reasonable attorneys' fees, out-of-pocket costs and disbursements
relating to such litigation.
11.16 CONCURRENT CONDITIONS. The performance or tender of performance
at Closing of all matters applicable to a Party under this Agreement shall be
deemed concurrent conditions and no Party shall be required at Closing to
perform, or tender performance of, the obligations of such
48
Party hereunder unless, coincident therewith, each other Party from whom
performance is required under this Agreement performs or tenders performance of
its obligations hereunder.
11.17 JURISDICTION; ARBITRATION.
(a) Subject to the other provisions of this SECTION 11.17, any
judicial proceeding brought with respect to this Agreement must be brought in
any court of competent jurisdiction in the State of California, and, by
execution and delivery of this Agreement, each party hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, and (ii) irrevocably waives
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such court or that such court is an inconvenient
forum.
(b) Any dispute, claim or controversy arising out of or
relating to this Agreement (except for accounting matters provided for in
Article 1 hereto), or the interpretation or breach hereof (including, without
limitation, any of the foregoing based upon a claim to any termination fee
hereunder), shall be resolved by binding arbitration under the commercial
arbitration rules of the American Arbitration Association (the "AAA RULES") to
the extent such AAA Rules are not inconsistent with this Agreement. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm the award
and order its enforcement, as the case may be. The demand for arbitration shall
be made by any party hereto within a reasonable time after the claim, dispute or
other matter in question has arisen, and in any event shall not be made after
the date when institution of legal proceedings, based on such claim, dispute or
other matter in question, would be barred by the applicable statute of
limitations. The arbitration panel shall consist of three (3) arbitrators, one
of whom shall be appointed by each party hereto within thirty (30) days after
any request for arbitration hereunder. The two arbitrators thus appointed shall
choose the third arbitrator within thirty (30) days after their appointment;
PROVIDED, HOWEVER, that if the two (2) arbitrators fail to appoint the third
(3rd) 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 Los Angeles, California. 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).
Initials: Buyers: Sellers:
----------- ------------
(c) Nothing contained in this SECTION 11.17 shall prevent any
party hereto from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
49
ARTICLE 12
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article 12:
"ACQUIRED COMPANIES" -- shall mean the Company and its Subsidiaries,
collectively.
"AFFILIATE" -- shall mean, as applied to another Person, (i) any Person directly
or indirectly owning, controlling or holding with power to vote ten percent
(10%) or more of the voting securities of or Equity Interests in such other
Person; (ii) any Person ten percent (10%) or more of whose outstanding voting
securities or Equity Interests are directly or indirectly owned, controlled or
held with power to vote by such other Person; (iii) any Person directly or
indirectly controlling, controlled by or under common control with such other
Person; (iv) any officer, director, or partner of such other Person, or any
family member of any of the foregoing and (v) any Entity for which any Person
described in clause (iv) acts as a director, officer or partner.
"AFFILIATE PAYABLES" -- shall mean all amounts owing to the an Acquired Company
from any Sellers or any Affiliate thereof, or from any of the Acquired Company's
officers or employees.
"APPLICABLE CONTRACT" -- shall mean any Contract (a) under which an Acquired
Company has or may acquire any rights, (b) under which any Acquired Company has
or may become subject to any obligation or liability, or (c) by which any
Acquired Company or any of the assets owned or used by it is or may become
bound.
"BALANCE SHEET" -- as defined in SECTION 2.7.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible.
"BREACH" -- a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"BUSINESS DAY" - is a day other than a Saturday, a Sunday or a day on which
banks are closed in the State of California.
"CLOSING DATE" - the date and time as of which the Closing actually takes place.
"COMPANY" - means Xxxxxx Automotive Group, Inc., a California corporation.
"CONSENT" - any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
50
"CONTEMPLATED TRANSACTIONS" - all of the transactions contemplated by this
Agreement, including: (i) the sale of the Shares by Sellers to Buyer; (ii) the
sale of assets from Company to Sellers or to Sellers' Affiliate; (iii) the
execution, delivery, and performance of the Lease Agreement; (iv) the
performance by Buyer and Sellers of their respective covenants and obligations
under this Agreement; and (v) Buyer's acquisition and ownership of the Shares
and exercise of control over the Company.
"CONTRACT" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"CORPORATIONS" - means Xxxxxx Family Company, Inc. d/b/a Xxxxxx Honda of Van
Nuys, a California corporation. Xxxxxx Infiniti Inc., a California corporation,
Xxxxxx Imports, Inc. d/b/a Xxxxxx Mitsubishi, Inc., a California corporation,
Xxxxxx Nissan, Inc., a California corporation, Millbro, Inc. d/b/a Xxxxxx Honda
of Xxxxxx City, a California corporation, Xxxx Xxxxxx Toyota, Inc. d/b/a Xxxxxx
Toyota, a California corporation, and Xxxxxx Motors Van Nuys, Inc., a California
corporation.
"XXXXXX CITY HONDA DEALERSHIP LOCATION" - means the automobile dealership
located at 0000 X. Xxxxxxxxxx Xxxxxxxxx.
"XXXXXX CITY TOYOTA DEALERSHIP LOCATION" - means the automobile dealership
located at 0000 X. Xxxxxxxxxx Xxxxxxxxx.
"DEALERSHIP LOCATIONS" - means the Van Nuys Honda Dealership Location, Van Nuys
Infiniti Dealership Location, Van Nuys Mitsubishi Dealership Location, Van Nuys
Nissan Dealership Location, Xxxxxx City Honda Dealership Location, Xxxxxx City
Toyota Dealership Location and the Woodland Hills Nissan Dealership Location.
"DISCLOSURE LETTER" - the disclosure letter delivered by Sellers to Buyer as
provided herein; all references to Schedules in this Agreement, refer to
schedules or parts of the Disclosure Letter.
"EMPLOYEE PLAN" - shall include all plans described in SECTION 3(3) of the 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 Company and maintained or
contributed to by the Company.
"ENCUMBRANCE" -- any charge, claim, community property interest, condition,
equitable interest, option, pledge, security interest, right of first refusal,
or restriction of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership, or
restrictions or claims of any kind, nature or description.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
51
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to: (i) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products); (ii) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and
Health Law; (iii) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or (iv) any other compliance, corrective,
investigative, or remedial measures required under Environmental Law or
Occupational Safety and Health Law. The terms "removal," "remedial," and
"response action," include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement, as amended, that requires or
relates to: (i) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment; (ii) preventing or reducing to acceptable
levels the release of pollutants or hazardous substances or materials into the
Environment; (iii) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated; (iv)
assuring that products are designed, formulated, packaged, and used so that they
do not present unreasonable risks to human health or the Environment when used
or disposed of; (v) protecting resources, species, or ecological amenities; (vi)
reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
(vii) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or (viii) making
responsible parties pay private parties, or groups of them, for damages done to
their health or the Environment, or permitting self-appointed representatives of
the public interest to recover for injuries done to public assets, including but
not limited to: Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA").
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"FACILITIES" -- any real property, leaseholds, or other interests currently or
formerly owned or operated by Company and any buildings, plants, structures, or
equipment (including company vehicles) currently or formerly owned or operated
by Company, including the Xxxxxxxxx Boulevard Honda Service Center property.
"GAAP" -- generally accepted United States accounting principles, applied on a
consistent basis, from period to period.
52
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit, waiver,
or other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"GOVERNMENTAL BODY" -- any: (i) nation, state, county, city, town, village,
district, or other jurisdiction of any nature; (ii) federal, state, local,
municipal, foreign, or other government; (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal); (iv)
multi-national organization or body; or (v) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"GROUP 1" -- means Group 1 Automotive, Inc., a Delaware corporation.
"GUARANTY" -- means, for any specified Person, without duplication, any
liability, contingent or otherwise, of that Person guaranteeing or otherwise
becoming liable for any obligation of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, and including any liability of
the specified Person, direct or indirect, (a) to purchase or pay (or to advance
or supply funds for the purchase of) any security for the payment of that
obligation, (b) to purchase property, securities or services for the purpose of
assuring the owner of that obligation of its payment or (c) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay that obligation;
provided, that the term "Guaranty" does not include endorsements for collection
or deposit in the ordinary course of the endorser's business.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HONDA" -- means American Honda Motor Co., Inc.
"HSR ACT" -- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"IRC" -- the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS" -- the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
53
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a particular
fact or other matter if: (i) such individual is actually aware of such fact or
other matter; or (ii) a prudent individual should have discovered or become
aware of such fact or matter in the ordinary course of conduct of the normal
duties and obligations of such person bearing in mind that person's position
with the Company. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer of such Person
(or in any similar capacity) has, or at any time had, Knowledge of such fact or
other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty, as amended.
"MANAGEMENT TEAM" -- means collectively the four (4) current general managers of
the Corporations and the chief operating officer and chief financial officer of
Company.
"MANUFACTURER" -- shall mean individually or collectively Toyota Motor Sales
U.S.A., Inc., Nissan Motor America, Inc., Mitsubishi Motor Sales of America,
Inc., Infiniti Division of Nissan Motor America, Inc. and American Honda Motor
Co.
"MATERIAL AGREEMENT" -- means all leases and all other contracts, agreements,
documents, instruments, guarantees, plans, understandings or arrangements,
written or oral, which are material to the Company or its business or assets.
"MATERIAL ENVIRONMENTAL LIABILITY" -- any occurrence of an Environmental,
Health, and Safety Liability the expected liability of which exceeds Twenty-Five
Thousand Dollars ($25,000).
"MITSUBISHI" -- means Mitsubishi Motor Sales of America, Inc.
"MODIFIED GAAP" - generally accepted United States accounting principles, as
modified by Manufacturer's Dealer Accounting Manual accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in 2.7 were prepared, from period to
period (unless otherwise specifically disclosed).
"NISSAN" -- means Nissan Motor America, Inc.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (consisting
of those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order, ruling, subpoena,
or verdict entered, issued, made, or rendered by any court, administrative
agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if: (i) such action is
consistent with the past practices
54
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; (ii) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of Persons
exercising similar authority); or (iii) such action is similar in nature and
magnitude to actions customarily taken, without any authorization by the board
of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) any charter or similar document adopted or
filed in connection with the creation, formation, or organization of a Person;
and (c) any amendment to any of the foregoing.
"PERSON" -- any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" -- means the amount specified in SECTION 1.2.
"REAL PROPERTIES" -- means all real property, whether owned or leased, including
buildings and improvements listed on SCHEDULE 1.6(b).
"RELATED GUARANTEES" - are the Company guarantees of indebtedness or other
obligations of any of the Company's officers, directors, shareholders or
employees or their Affiliates except for the other Acquired Companies.
"RELATED PARTY AGREEMENT" -- are any contracts or other formal or informal
understandings between Company and any of their officers, directors, employees,
agents or stockholders or their Affiliates.
"RELATED PERSON" -- with respect to a particular individual: (i) each other
member of such individual's Family; (ii) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family; (iii) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and (iv) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual: (i) any
Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person; (ii) any Person that holds a Material Interest in such
specified Person; (iii) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity); (iv)
any Person in which such specified Person holds a Material Interest; (v) any
Person with respect to which such specified Person serves as a general
55
partner or a trustee (or in a similar capacity); and (vi) any Related Person of
any individual described in clause (ii) or (iii).
For purposes of this definition, (i) the "Family" of an individual
includes (1) the individual, (2) the individual's spouse, (3) any other natural
person who is related to the individual or the individual's spouse within the
second degree, and (4) any other natural person who resides with such
individual, and (ii) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least fifty
percent (50%) of the outstanding voting power of a Person or equity securities
or other equity interests representing at least fifty percent (50%) of the
outstanding equity securities or equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"SCHEDULE" -- the schedules or parts of the Disclosure Letter, delivered by
Sellers to Buyer, as provided herein.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS' RELEASES" -- as defined in SECTION 6.4.
"SHARES" -- as defined in the introduction of this Agreement.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" or
"Subsidiaries"means a corporation, limited liability company, limited
partnership, partnership, or other entity owned in whole or part by the Company.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
56
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made (in
writing) or any notice has been given (in writing), or if any other event has
occurred or any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the future.
"TOYOTA" -- means Toyota Motor Sales USA, Inc.
"VAN NUYS HONDA DEALERSHIP LOCATION" -- means the automobile dealership, tech
center and Sepulveda tech center located at 0000 Xxx Xxxx Xxxxxxxxx, 0000 Xxx
Xxxx Xxxxxxxxx, and 0000 Xxxxxxxxx Xxxxxxxxx, respectively.
"VAN NUYS INFINITI DEALERSHIP LOCATION" -- means the automobile dealership
located at 0000 Xxx Xxxx Xxxxxxxxx.
"VAN NUYS MITSUBISHI DEALERSHIP LOCATION" -- means the automobile dealership
located at 0000 Xxx Xxxx Xxxxxxxxx.
"VAN NUYS NISSAN DEALERSHIP LOCATION" -- means the automobile dealership located
at 0000 Xxx Xxxx Xxxxxxxxx.
"WOODLAND HILLS NISSAN DEALERSHIP LOCATION" -- means the real property located
at 00000 Xxxxxxx Xxxxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx which will be the future
dealership location for the Woodland Hills Nissan Add Point.
[The remainder of page intentionally left blank.]
57
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
"SELLERS"
XXXXXXXX XXXXXX XXXXXX and XXXXXXX
XXXXXX, Trustees of the Xxxxxx Trust of 1980
(Restated)
----------------------------------------------
Xxxxxxxx Xxxxxx Xxxxxx, Trustee
----------------------------------------------
Xxxxxxx Xxxxxx, Trustee
----------------------------------------------
Xxxx Xxxxxx, an individual
"COMPANY"
XXXXXX AUTOMOTIVE GROUP, INC.,
a California corporation
By:
------------------------------------------
Xxxxxxxx X. Xxxxxx, Chairman of the Board
"CORPORATIONS"
XXXXXX FAMILY COMPANY, INC.
D/B/A/ HONDA OF VAN NUYS,
a California corporation
By:
------------------------------------------
Xxxxxxxx X. Xxxxxx, President
[signatures continued on next page]
58
[signatures continued from previous page]
XXXXXX INFINITI INC.,
a California corporation
By:
----------------------------------------
Xxxxxxxx X. Xxxxxx, President
XXXXXX IMPORTS, INC. D/B/A/
XXXXXX MITSUBISHI,
a California corporation
By:
----------------------------------------
Xxxxxxxx X. Xxxxxx, President
XXXXXX NISSAN, INC.,
a California corporation
By:
----------------------------------------
Xxxxxxxx X. Xxxxxx, President
MILLBRO, INC. D/B/A/ XXXXXX
HONDA OF XXXXXX CITY,
a California corporation
By:
----------------------------------------
Xxxxxxx X. Xxxxxx, President
FMM, INC. D/B/A
XXXXXX TOYOTA,
a California corporation
By:
----------------------------------------
Xxxxxxx X. Xxxxxx, President
[signatures continued on next page]
59
[signatures continued from previous page]
XXXXXX MOTORS VAN NUYS, INC.,
a California corporation
By:
----------------------------------------
Xxxxxxxx X. Xxxxxx, President
"BUYER"
GROUP 1 AUTOMOTIVE, INC.,
a Delaware corporation
By:
----------------------------------------
Xxxx X. Xxxxxx, Executive Vice President
60
STOCK PURCHASE AGREEMENT
ANNEX I
STOCK OWNERSHIP
% OF
NO. OF OUTSTANDING
SELLERS SHARES COMMON STOCK
------- ------ ------------
Xxxxxxxx Xxxxxx Xxxxxx
and Xxxxxxx Xxxxxx
Trustees of the Xxxxxx Trust
of 1980 (Restated) 50%
Xxxxxxx X. Xxxxxx 50%
STOCK PURCHASE AGREEMENT
EXHIBIT "6.4(a)"
OPINION OF SELLERS' COUNSEL
Exhibit 6.4(a) - Page 1
Firm Letterhead
[Date]
[Name and Address of Buyer]
Gentlemen:
We have acted as counsel to ____________ and _____________
(collectively, "Sellers"), _______________, a _______________ corporation (the
"Company") and the Subsidiaries of the Company in connection with the
Stock
Purchase Agreement dated ____________, 200_ (the "Agreement") between the
Sellers and ________________, a _______________ corporation ("Buyer"). This is
the opinion contemplated by Section 7.4 of the Agreement. All capitalized terms
used in this opinion without definition have the respective meanings given to
them in the Agreement. The law covered by the opinions expressed herein is
limited to the Federal Law of the United States and the Law of the State of
California.
Whenever a statement herein is qualified by the phrase "to our
knowledge," it is intended to indicate that, during the course of our
representation of the Borrower, no information that would give us current
knowledge of the inaccuracy of such statement has come to the attention of those
attorneys in this firm who have rendered legal services in connection with our
representation described in the introductory paragraph of this opinion letter.
However, we have not undertaken any independent investigation to determine the
accuracy of such statement, and any limited inquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such an
investigation.
For the purposes hereof, we have assumed, with your permission and
without independent verification of any kind: (a) that the signatures of Persons
(other than the Sellers) (collectively, the "Other Parties) signing all
documents in connection with which this opinion is rendered are genuine and
authorized; (b) the legal capacity of all natural persons other than Sellers;
(c) that all documents submitted to us as originals or duplicate originals are
authentic; (d) that all documents submitted to us as copies, whether certified
or not, conform to authentic original documents; (e) there has not been any
mutual mistake of fact or misunderstanding, fraud, duress, or undue influence;
(f) there are no agreements or understandings among the parties, written or
oral, and there is no usage of trade or course of prior dealing among the
parties that would, in either case, define, supplement, or qualify the terms of
the
Stock Purchase Agreement; (g) the contracts, agreements, or instruments to
which the Acquired Companies are a party or by which the properties are bound
other than the
Stock Purchase Agreement will be enforced as written; (h) all
parties to the
Stock Purchase Agreement will act in accordance with, and will
refrain from taking any action that is forbidden by, the
Stock Purchase
Agreement; (i) Buyer and any agent acting for it in connection with the
transactions contemplated by the Stock Purchase Agreement has acted in good
faith and without notice of any defense against the enforcement of any rights
created by the Stock Purchase Agreement; (j) the constitutionality or validity
of a relevant statute, rule, or
Exhibit 6.4(a) - Page 2
regulation is not in issue; and (k) all parties to the Stock Purchase Agreement
will act in accordance with its terms and conditions. As to questions of fact
relevant to this opinion, (x) we have assumed the accuracy of the
representations and warranties of the Sellers in the Stock Purchase Agreement
and have relied upon certificates and oral or written statements and other
information of public officials, officers and representatives of the Sellers and
others, but we have made no independent investigation of factual matters, and
(y) we assume compliance on the part of all parties to the Stock Purchase
Agreement with their covenants and agreements contained therein.
In rendering the opinions expressed below, we have assumed, with your
permission and without any independent investigation or verification of any
kind, that: (a) Buyer has been duly organized and is validly existing and in
good standing under the laws of the State of Delaware and of each other
jurisdiction in which the conduct of its business or the ownership of its
property makes such qualification necessary and (b) the Stock Purchase Agreement
has been duly executed and delivered by Buyer. We have further assumed, with
your permission and without any independent investigation or verification of any
kind, that the Stock Purchase Agreement constitutes the valid and legally
binding obligation of Buyer.
Based on the foregoing, our opinion is as follows:
1. The Agreement is enforceable against the Sellers, except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement of creditors'
rights generally, and (ii) the effect of rules of law governing the availability
of equitable remedies.
2. The authorized capital stock of each Company consists of ____ shares
of common stock, no par value, [of which __________ shares] [all of which] are
outstanding. Sellers own all of the outstanding Stock of record. Based on a
certificate of Sellers, Sellers own all of the outstanding stock beneficially,
free and clear of all adverse claims. As a result of the delivery of
certificates to Buyer and the payment to Sellers being made at the Closing,
Buyer is acquiring ownership of all of the outstanding Stock, and, based upon
the certificate of Sellers, free and clear of all adverse claims.
3. Each Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, with full corporate
power and authority to own its properties and to engage in its business as
presently conducted or contemplated. All of the outstanding shares of capital
stock of Company have been duly authorized and validly issued and are
nonassessable and were not issued in violation of the preemptive rights of any
Person.
4. Neither the execution and delivery of the Agreement nor the
consummation of any or all of the Contemplated Transactions (a) violates any
provision of the articles of incorporation or bylaws (or other governing
instrument) of Company, or (b) violates any statute, law, regulation, or rule,
or any judgment, decree or order of any court or other Governmental Body
applicable to Company.
We hereby confirm to you that, except as set forth in Schedule 2.15, to
our knowledge, there is no Proceeding by or before any court or Governmental
Body pending or overtly threatened against or involving Company or that
questions or challenges the validity of the Agreement or any
Exhibit 6.4(a) - Page 3
action taken or to be taken by Company pursuant to the Agreement or in
connection with the Contemplated Transactions and, to our knowledge the Company
is not subject to any judgment, order or decree having prospective effect.
We understand that you are delivering a copy of this opinion to
[identify lenders to Buyer] in connection with the financing of the transactions
contemplated by the Agreement and agree that [those lenders] may rely on this
opinion as if it were addressed to them. Except for delivery to such lenders,
this opinion is rendered solely for your benefit in connection with the subject
transaction, and is not to be relied upon by any other person, or otherwise
furnished to third parties, used, circulated, quoted or relied upon, without our
prior consent. This opinion is as of the date hereof, and we undertake no, and
hereby disclaim any, obligation to advise you of any change in any matters set
forth herein.
Very truly yours,
------------------------
Exhibit 6.4(a) - Page 4
