AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 1, 1995
AMONG
UNITED AUTO GROUP, INC.,
LANDERS AUTO SALES, INC.,
STEVE LANDERS,
JOHN LANDERS
AND
BOB LANDERS
TABLE OF CONTENTS
Page
----
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of the Shares............................... 2
1.2 Net Worth Adjustment.......................................... 4
1.3 Additional Payments........................................... 6
1.4 Contingent Payment............................................ 8
1.5 Two-Year Payment.............................................. 9
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
2.1 Organization and Good Standing................................ 10
2.2 Subsidiaries.................................................. 11
2.3 Capitalization................................................ 11
2.4 Authority; Approvals and Consents............................. 11
2.5 Financial Statements.......................................... 13
2.6 Absence of Undisclosed Liabilities............................ 14
2.7 Absence of Material Adverse Effect; Conduct
of Business................................................... 14
2.8 Taxes......................................................... 15
2.9 Legal Matters................................................. 16
2.10 Property...................................................... 17
2.11 Environmental Matters......................................... 18
2.12 Inventories................................................... 21
2.13 Accounts Receivable........................................... 21
2.14 Insurance..................................................... 21
2.15 Contracts; Etc................................................ 22
2.16 Labor Relations............................................... 22
2.17 Employee Benefit Plans........................................ 23
2.18 Other Benefit and Compensation Plans or
Arrangements.................................................. 26
2.19 Transactions with Insiders.................................... 27
2.20 Propriety of Past Payments.................................... 28
2.21 Interest in Competitors....................................... 28
2.22 Brokers....................................................... 29
2.23 Accounts...................................................... 29
2.24 Net Worth of the Companies.................................... 29
2.25 Disclosure.................................................... 29
(i)
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Page
----
3.1 Ownership of Shares; Title.................................... 29
3.2 Authority..................................................... 30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF UAG
4.1 Organization and Good Standing................................ 30
4.2 Subsidiaries.................................................. 31
4.3 Capitalization................................................ 32
4.4 Authority; Approvals and Consents............................. 32
4.5 Financial Statements.......................................... 33
4.6 Absence of Undisclosed Liabilities............................ 34
4.7 Absence of Material Adverse Effect; Conduct
of Business................................................... 34
4.8 Taxes......................................................... 35
4.9 Legal Matters................................................. 36
4.10 Property...................................................... 37
4.11 Environmental Matters......................................... 37
4.12 Inventories................................................... 39
4.13 Accounts Receivable........................................... 40
4.14 Insurance..................................................... 40
4.15 Contracts; Etc................................................ 40
4.16 Labor Relations............................................... 41
4.17 Employee Benefit Plans........................................ 42
4.18 Other Benefit and Compensation Plans or
Arrangements.................................................. 42
4.19 Transactions with Insiders.................................... 42
4.20 Propriety of Past Payments.................................... 43
4.21 Brokers....................................................... 43
4.22 Acquisition of the Shares for Investment...................... 43
4.23 Disclosure.................................................... 43
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 Access; Confidentiality....................................... 44
5.2 Furnishing Information; Announcements......................... 44
5.3 Antitrust Improvements Act Compliance......................... 45
5.4 Certain Changes and Conduct of Business....................... 45
(ii)
Page
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5.5 Contribution or Loan; No Intercompany Payables
or Receivables................................................ 48
5.6 Negotiations.................................................. 49
5.7 Consents; Cooperation......................................... 49
5.8 Additional Agreements......................................... 50
5.9 Interim Financial Statements.................................. 50
5.10 Notification of Certain Matters............................... 50
5.11 Additional Capital Contributions.............................. 51
5.12 Purchase of Chevrolet Dealership.............................. 51
5.13 Observer Rights............................................... 52
5.14 Release of Guarantees......................................... 52
5.15 Key Man Life Insurance........................................ 52
5.16 Assurance by the Stockholders................................. 52
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
6.1 Representations and Warranties; Agreements;
Covenants..................................................... 53
6.2 Authorization; Consents....................................... 53
6.3 Opinions of the Company's and the Stockholders'
Counsel....................................................... 53
6.4 Absence of Litigation......................................... 54
6.5 No Material Adverse Effect.................................... 54
6.6 Working Capital Requirements.................................. 54
6.7 Completion of Due Diligence................................... 55
6.8 Employment Agreements......................................... 55
6.9 Leases........................................................ 55
6.10 Shareholders Agreement........................................ 55
6.11 Registration Rights Agreement................................. 55
6.12 Board Approval................................................ 55
6.13 Certificates.................................................. 55
6.14 Legal Matters................................................. 55
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
7.1 Representations and Warranties; Agreements.................... 56
7.2 Authorization of the Agreement, Consents...................... 56
7.3 Opinions of UAG's Counsel..................................... 56
7.4 Absence of Litigation......................................... 57
7.5 Employment Agreement.......................................... 57
7.6 Leases........................................................ 57
(iii)
Page
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7.7 Shareholders Agreement........................................ 57
7.8 Registration Rights Agreement................................. 57
7.9 Certificates.................................................. 57
7.10 Legal Matters................................................. 57
ARTICLE 8
TERMINATION
8.1 Termination................................................... 58
8.2 Effect of Termination......................................... 59
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Stockholders........................... 59
9.2 Indemnification by UAG........................................ 59
9.3 Procedures.................................................... 60
9.5 Offset........................................................ 62
9.6 Remedies...................................................... 63
9.7 Definitions................................................... 63
9.8 Indemnifying Stockholders..................................... 63
ARTICLE 10
MISCELLANEOUS
10.1 Survival of Provisions........................................ 64
10.2 Fees and Expenses............................................. 64
10.3 Headings...................................................... 65
10.4 Notices....................................................... 65
10.5 Assignment.................................................... 67
10.6 Entire Agreement.............................................. 67
10.7 Waiver and Amendments......................................... 67
10.8 Counterparts.................................................. 68
10.9 GOVERNING LAW................................................. 68
10.10 Accounting Terms............................................. 68
10.11 Certain Definitions.......................................... 68
10.12 Schedules.................................................... 69
10.13 Severability................................................. 69
10.14 Remedies..................................................... 69
10.15 The Company.................................................. 69
(iv)
SCHEDULES
---------
Schedule 1.2(a) Accounting Principles
Schedule 2.1 Company Foreign Qualifications and
Assumed Names
Schedule 2.3 Company Capitalization
Schedule 2.4 Company Agreement Conflicts
Schedule 2.5 Company Financial Statements
Schedule 2.6 Company Liabilities
Schedule 2.7(a) Company Material Adverse Effects
Schedule 2.7(b) Company Conduct of Business
Schedule 2.8 Company Taxes
Schedule 2.9(a) Company Litigation
Schedule 2.9(b) Company Compliance with Legal
Requirements and Permits
Schedule 2.10 Company Real Property
Schedule 2.11(a) Company Environmental Compliance
Schedule 2.11(c) Company Environmental Matters
Schedule 2.11(d) Company Environmental Substances
Schedule 2.11(e) Company Environmental Litigation
Schedule 2.14 Company Insurance Policies
Schedule 2.15 Company Agreements
Schedule 2.16(b) Company Employment and Labor Agreements
Schedule 2.16(c) Company Labor Matters
Schedule 2.17(a) Company ERISA Plans
Schedule 2.17(b) Company Multiemployer Plans
Schedule 2.17(e) Company Pension Benefit Plans
Schedule 2.17(g) Company Multiemployer Plan Withdrawal
Liability Amounts
Schedule 2.17(h) Company Welfare Benefit Plan Liability
Amounts
Schedule 2.18(a) Company Compensation Commitments
Schedule 2.19 Company Transactions with Insiders
Schedule 2.20 Company Past Payments
Schedule 2.23 Company Bank Accounts
Schedule 4.1 UAG Foreign Qualifications and
Assumed Names
Schedule 4.2 UAG Subsidiaries
Schedule 4.3 UAG Capitalization
Schedule 4.4 UAG Agreement Conflicts
Schedule 4.5 UAG Financial Statements
Schedule 4.6 UAG Liabilities
Schedule 4.7(a) UAG Material Adverse Effects
Schedule 4.7(b) UAG Conduct of Business
Schedule 4.8 UAG Taxes
Schedule 4.9(a) UAG Litigation
Schedule 4.9(b) UAG Compliance with Legal
Requirements and Permits
Schedule 4.11(a) UAG Environmental Compliance
Schedule 4.11(c) UAG Environmental Matters
(v)
Schedule 4.11(d) UAG Environmental Substances
Schedule 4.11(e) UAG Environmental Litigation
Schedule 4.15 UAG Agreements
Schedule 4.16(b) UAG Labor Matters
Schedule 4.17 UAG ERISA Plans
Schedule 4.18(a) UAG Compensation Commitments
Schedule 4.19 UAG Transactions with Insiders
Schedule 4.20 UAG Past Payments
Schedule 5.14 Stockholder Personal Guarantees
Schedule 6.6 Minimum Working Capital Amount
Exhibit A -- Form of UAG Note I
Exhibit A-1 -- Form of UAG Note II
Exhibit A-2 -- Form of Working Capital Note
Exhibit B -- Form of UAG Guaranty
Exhibit C -- Form of Steve Landers Employment Agreement
Exhibit D -- Form of John Landers Employment Agreement
Exhibit E -- Form of Lease
Exhibit F -- Form of Shareholders Agreement
Exhibit G -- Form of Registration Rights Agreement
(vi)
INDEX OF DEFINED TERMS
Page
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Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
accumulated funding deficiency . . . . . . . . . . . . . . . . . . . . . . . 25
cquired Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Acquired Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Acquired Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Acquired Entity's Pro Rata Earnings. . . . . . . . . . . . . . . . . . . . . .8
Actual Working Capital Amount. . . . . . . . . . . . . . . . . . . . . . . . 54
Additional Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Additional Payment Deficiency. . . . . . . . . . . . . . . . . . . . . . . . .7
Additional Payment Surplus . . . . . . . . . . . . . . . . . . . . . . . . . .7
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Annual Pre-Tax Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Associate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Base Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
best efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Closing Date Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . .4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Company Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Company Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Company Factory Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 13
Compensation Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 27
complete withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Contingent Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Contingent Payment Deficiency. . . . . . . . . . . . . . . . . . . . . . . . .9
Contingent Payment Surplus . . . . . . . . . . . . . . . . . . . . . . . .9, 10
Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Earnings Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Employment and Labor Agreements. . . . . . . . . . . . . . . . . . . . . . . 23
Environmental Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ERFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Estimated Additional Payment . . . . . . . . . . . . . . . . . . . . . . . . .7
(vii)
Estimated Closing Date Balance Sheet . . . . . . . . . . . . . . . . . . . . 54
Estimated Contingent Payment . . . . . . . . . . . . . . . . . . . . . . . . .9
Event of Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Everett Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . .3
Final Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
H-S-R Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 37
Hazardous substance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
HMTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Initial Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Insider. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ISRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
John Landers Employment Agreement. . . . . . . . . . . . . . . . . . . . . . .3
Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Landers Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Landers Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . 60
Landers Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Landers Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . 59
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Mass layoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Minimum Working Capital Amount . . . . . . . . . . . . . . . . . . . . . . . 54
Multi-employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Net Worth Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
NLRB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Observance Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Observer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
partial withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PCB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Pension Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Plant closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
RATFA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(viii)
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . .4
Relative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Remedial Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Reviewed Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Reviewer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Special wastes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Spivey Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Steven Landers Employment Agreement. . . . . . . . . . . . . . . . . . . . . .3
Stockholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Supplemental Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Total Pre-Tax Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Two-Year Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Two-Year Payment Deficiency. . . . . . . . . . . . . . . . . . . . . . . . . 10
Two-Year Payment Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 10
UAG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
UAG Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
UAG Compensation Commitments . . . . . . . . . . . . . . . . . . . . . . . . 42
UAG Employment and Labor Agreements. . . . . . . . . . . . . . . . . . . . . 41
UAG Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . 37
UAG ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
UAG Event of Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
UAG Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 33
UAG Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
UAG Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
UAG Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
UAG Insider. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
UAG Note I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
UAG Note II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
UAG Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
UAG Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
UAG Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
UAG Working Capital Note . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Ultimate parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Welfare Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Year 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Year 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Year 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(ix)
This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of July
1, 1995, among United Auto Group, Inc., a Delaware corporation ("UAG"), Landers
Auto Sales, Inc., an Arkansas corporation (the "Company"), and Steve Landers,
John Landers and Bob Landers (each a "Stockholder" and, collectively, the
"Stockholders"), amending and restating the Stock Purchase Agreement, dated as
of January 30, 1995, among UAG, the Company and the Stockholders.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company operates franchise automobile dealerships and
related businesses;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of common stock, no par value, of the Company (the "Common Stock"); and
WHEREAS, UAG desires to purchase 3.33 shares of Common Stock from Bob
Landers and 2.335 shares of Common Stock from each of Steve Landers and John
Landers (such shares being collectively referred to herein as the "Shares"), and
the Stockholders desire to sell the Shares to UAG (in each case upon the terms
and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG, Steve Landers
and John Landers will own eighty percent (80%), ten percent (10%) and ten
percent (10%), respectively, of all of the issued and outstanding shares of
Common Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholders shall sell to UAG, and
UAG shall purchase from the Stockholders, the Shares for an aggregate purchase
price (the "Purchase Price") equal to (i) $18,053,000 less the amount of the
Earnings Adjustment (as determined in accordance with SECTION 1.1(b) below), if
any (the "Base Price") (the Base Price shall be allocated among the Stockholders
as they so determine in their sole discretion), which Base Price is subject to
adjustment after Closing as provided in SECTION 1.2 below (as adjusted, the
"Initial Payment"), (ii) the Additional Payments (if any) made pursuant to
SECTION 1.3 below, (iii) the Contingent Payment (if any) made pursuant to
SECTION 1.4 below, (iv) the Two-Year Payment (if any) made pursuant to SECTION
1.5 below, (v) a promissory note issued by UAG in the principal amount of
$3,287,896 bearing interest at the rate of 8% per annum and maturing on the
fifth anniversary of the Closing, such promissory note being substantially in
the form of EXHIBIT A hereto (the "UAG Note I"), (vi) a promissory note issued
by UAG in the principal amount of $726,619 bearing interest at the rate of 8%
per annum and maturing on the third anniversary of the Closing, such promissory
note being substantially in the form of EXHIBIT A-1 hereto (the "UAG Note II"),
and (vii) if UAG so elects in accordance with SECTION 6.6 hereof, a promissory
note issued by the Company in the principal amount determined in accordance with
SECTION 6.6 hereof bearing interest at the prime rate set by Citibank, N.A. on
the date of such promissory note and maturing on the first anniversary of such
date, such promissory note being substantially in the form of EXHIBIT A-2 hereto
(the "Working Capital Note"). At the Closing referred to in SECTION 1.1(c)
hereof:
(i) The Stockholders shall sell, assign, transfer and
deliver to UAG the Shares representing 80% of the outstanding Common
Stock and deliver the certificates representing such Shares
accompanied by stock powers duly executed in blank; and
(ii) UAG shall accept and purchase the Shares from the
Stockholders and in payment therefor shall deliver to the Stockholders
(A) immediately available funds in an aggregate amount equal to the
Base Price by wire transfer to an account designated in writing by the
Stockholders and (B) the UAG Note I and the UAG Note II.
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(b) EARNINGS ADJUSTMENT. In the event that the Annual Pre-Tax
Earnings (as defined in SECTION 1.3 hereof) for calendar year 1994 are less than
$7,500,000 (before taking into account any year-end tax adjustments), then the
"Earnings Adjustment" shall be an amount equal to (A) $7,500,000 less the amount
of the Annual Pre-Tax Earnings for calendar year 1994 multiplied by (B) three
(3).
(c) CLOSING. Subject to the conditions set forth in this
Agreement, the purchase and sale of the Shares pursuant to this Agreement (the
"Closing") shall take place at the offices of Willkie Farr & Gallagher, 153 East
53rd Street, New York, New York 10022, or such other location as the parties
shall agree upon, at 10:00 a.m. as soon as practicable following the date on
which all conditions to the obligations of the parties hereunder (other than
those requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived. The date
on which the Closing is to occur is herein referred to as the "Closing Date."
The Closing shall be deemed to be effective as of August 1, 1995.
(d) DELIVERIES AT THE CLOSING. Subject to the conditions set
forth in this Agreement, at the Closing:
(i) The Stockholders shall deliver to UAG (A) certificates
representing the Shares bearing the restrictive legend customarily
placed on securities that have not been registered under applicable
federal and state securities laws and accompanied by stock powers as
required by SECTION 1.1(a)(i) hereof, and any other documents that are
necessary to transfer to UAG good title to all the Shares, and (B) all
opinions, certificates and other instruments and documents required to
be delivered by the Stockholders at or prior to the Closing or
otherwise required in connection herewith;
(ii) UAG shall pay and deliver to the Stockholders (A)
funds as required by SECTION 1.1(a)(ii) hereof, (B) a guaranty
substantially in the form of EXHIBIT B hereto (the "UAG Guaranty"),
(C) the UAG Note I, (D) the UAG Note II, and (E) all opinions,
certificates and other instruments and documents required to be
delivered by UAG at or prior to the Closing or otherwise required in
connection herewith;
(iii) The Company shall enter into an Employment Agreement
with each of Steve Landers and John Landers (the "Steve Landers
Employment Agreement" and the "John Landers Employment Agreement,"
respectively) substantially in the form of EXHIBIT C and EXHIBIT D
hereto, respectively, and Dwight Everett (the "Everett Employment
Agreement")
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containing such terms and conditions as shall be agreed upon by the
Company and Dwight Everett.
(iv) The Stockholders, UAG and the Company shall enter into
leases for the real property used in the business of the Company
substantially in the form of EXHIBIT E hereto (collectively, the
"Leases");
(v) UAG, the Company, Steve Landers and John Landers shall
enter into a Shareholders' Agreement substantially in the form of
EXHIBIT F hereto (the "Shareholders Agreement"); and
(vi) Steve Landers and John Landers shall have become a
party to the Registration Rights Agreement among UAG and certain other
parties named therein (the "Registration Rights Agreement"),
substantially in the form of EXHIBIT G hereto.
1.2 NET WORTH ADJUSTMENT.
(a) On or as soon as practicable after the Closing Date, the
Stockholders shall deliver to UAG a consolidated balance sheet of the Company
dated as of the last day of the month immediately preceding the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared in good faith
on the same basis and in accordance with the accounting principles, methods and
practices used in preparing the Company Financial Statements (as defined in
SECTION 2.5 hereof), subject to the modifications, adjustments and exceptions to
such accounting principles, methods and practices as shall be agreed upon by UAG
and the Stockholders within thirty (30) days (or such other number of days as
the parties shall agree upon) of the date hereof and set forth on SCHEDULE
1.2(a) hereto, and shall also include mutually agreed upon procedures to adjust
for any earnings and/or distributions of the Company between the date of the
Closing Date Balance Sheet and the Closing Date (such accounting principles,
methods and practices as so modified and adjusted, and such procedures, are
referred to herein as the "Accounting Principles"). In connection with the
preparation of the Closing Date Balance Sheet, the Stockholders and the Company
shall permit the Reviewer (as defined below) and other representatives of UAG to
conduct a physical inventory at each location where inventory is held by the
Company. From the results of such inventory and prior to the Closing Date, UAG
and the Stockholders (or the respective representatives thereof) will prepare a
schedule, which shall be signed by each of UAG and the Stockholders, setting
forth the nature and quality of such inventory and such other items as shall be
agreed upon by UAG and the Stockholders.
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(b) Within thirty (30) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other accounting firm (the
"Reviewer") selected by UAG shall audit or otherwise review the Closing Date
Balance Sheet in such manner as UAG and the Reviewer deem appropriate, and (ii)
UAG shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Stockholders. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with the
Accounting Principles and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in SECTION 1.2(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(ii)
hereof. UAG and the Reviewer shall have the opportunity to consult with the
Stockholders, the Company and each of the accountants and other representatives
of the Stockholders and the Company and examine the work papers, schedules and
other documents prepared by the Stockholders, the Company and each of such
accountants and other representatives during the preparation of the Closing Date
Balance Sheet. The Stockholders and the Stockholders' independent public
accountants shall have the opportunity to consult with the Reviewer and examine
the work papers, schedules and other documents prepared by UAG and the Reviewer
during the preparation of the Reviewed Balance Sheet.
(c) The Stockholders shall have a period of forty
five (45) days after delivery of the Reviewed Balance Sheet to present in
writing to UAG all objections the Stockholders may have to any of the matters
set forth or reflected therein, which objections shall be set forth in
reasonable detail. If no objections are raised within such 45-day period, the
Reviewed Balance Sheet shall be deemed accepted and approved by the Stockholders
and a supplemental closing (the "Supplemental Closing") shall take place within
five (5) Business Days following the expiration of such 45-day period, or on
such other date as may be mutually agreed upon in writing by UAG and the
Stockholders.
(d) If the Stockholders shall raise any objection within the 45-
day period, UAG and the Stockholders shall attempt to resolve the matter or
matters in dispute and, if resolved, the Supplemental Closing shall take place
within five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the
Stockholders within sixty (60) days after the delivery of the Reviewed Balance
Sheet, then the specific matters in dispute shall be submitted to a firm of
independent public accountants mutually acceptable to UAG and the Stockholders,
which firm shall make a final and binding determination as to such matter or
matters. Such accounting firm shall send its written
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determination to UAG and the Stockholders and the Supplemental Closing, if any,
shall take place five (5) Business Days following the receipt of such
determination by UAG and the Stockholders. The fees and expenses of the
accounting firm referred to in this SECTION 1.2(e) shall be paid one
half by UAG and one half by the Stockholders.
(f) UAG and the Stockholders agree to cooperate with each other
and each other's authorized representatives and with any accounting firm
selected by UAG and the Stockholders pursuant to SECTION 1.2(e) hereof in order
that any and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet
as finally determined through the operation of SECTIONS 1.2(a) THROUGH (e)
hereof (such amount being referred to herein as the "Final Net Worth") shall be
less than $7,500,000 (the amount of any such deficiency being referred to herein
as the "Net Worth Deficiency"), the Stockholders shall pay to UAG at the
Supplemental Closing, by wire transfer of immediately available funds to an
account designated in writing by UAG within two (2) Business Days of the date of
the Supplemental Closing, an amount equal to the Net Worth Deficiency, together
with interest on such amount from the Closing Date to the date of the
Supplemental Closing at the prime rate or its equivalent (as announced from time
to time by Citibank, N.A.).
(ii) "Net Worth" computed in connection with the Estimated
Closing Date Balance Sheet, the Closing Date Balance Sheet and the Reviewed
Balance Sheet shall mean the amount by which the total assets (not including
intangible assets) exceed the total liabilities reflected, in each case, on the
balance sheet of Company comprising the Closing Date Balance Sheet or the
Reviewed Balance Sheet, as the case may be. "Net Worth" shall in no event
include the consolidated net earnings of the Company for the period commencing
immediately after the date of the Closing Date Balance Sheet and ending on the
Closing Date.
1.3 ADDITIONAL PAYMENTS.
(a) If the Company, on a combined basis, achieves Annual Pre-Tax
Earnings (as defined below) of at least $8,800,000 in any of the three (3)
successive twelve (12) month periods beginning on the first day of the calendar
month immediately following the Closing Date (such twelve month periods being
referred to herein as "Year 1," "Year 2," and "Year 3," respectively), then, in
consideration for the sale of the Shares by the Stockholders to UAG, the Company
will make an additional payment to the Stockholders in the aggregate amounts set
forth below (each such payment being referred to herein as an "Additional
Payment"), which Additional Payments shall be
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allocated among the Stockholders as they so determine in their sole discretion:
Additional Payment
(% of Annual
Annual Pre-Tax Earnings Pre-Tax Earnings)
----------------------- -----------------
$ 8,800,000 - $10,799,999 6%
$10,800,000 - $11,799,999 7%
$11,800,000 - $12,799,999 8%
$12,800,000 and over 9%
(b) In the event that the Company is required to make an
Additional Payment in either Year 1, Year 2 or Year 3, then the Company shall
pay to the Stockholders an aggregate amount equal to eighty percent (80%) of
UAG's estimate of such Additional Payment (the "Estimated Additional Payment")
within thirty (30) days after the completion of such Year. Within sixty (60)
days after the completion of the review by the Company's certified public
accountants of the financial statements prepared in accordance with SECTION
1.3(c) hereof covering the entire Year for which an Additional Payment must be
paid, (i) if the amount of the Additional Payment shall exceed the amount of the
Estimated Additional Payment (the amount of any such excess being referred to
herein as the "Additional Payment Deficiency"), the Company shall pay to the
Stockholders, by wire transfer of immediately available funds to an account
designated in writing by the Stockholders, an aggregate amount equal to the
Additional Payment Deficiency, and (ii) if the amount of the Additional Payment
shall be less than the amount of the Estimated Additional Payment (the amount of
any such deficiency being referred to herein as the "Additional Payment
Surplus"), the Stockholders shall pay to the Company, by wire transfer of
immediately available funds to an account designated in writing by UAG, an
aggregate amount equal to the Additional Payment Surplus.
(c) For purposes of this ARTICLE I, "Annual Pre-Tax Earnings"
for each of Year 1, Year 2 and Year 3 shall mean the consolidated net earnings
(or losses), before taxes, of the Company, computed in accordance with the
Accounting Principles and reflected on financial statements prepared in
accordance with the Accounting Principles and reviewed by the certified public
accountants of the Company; PROVIDED, HOWEVER, that for purposes of SECTION 1.3
and SECTION 1.4, but not for purposes of SECTION 1.5, Annual Pre-Tax Earnings
shall be calculated giving effect in each Year to the consolidated net earnings
(or losses) (the "Acquired Earnings") derived from the entity or entities (each,
an "Acquired Entity" and, collectively, the "Acquired Entities") acquired
pursuant to SECTION 5.11 hereof, provided that (i) if
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the consideration paid by UAG (or an Affiliate thereof) in the acquisition
pursuant to which UAG contributes $5,000,000 exceeds $5,000,000, then the
Acquired Earnings included in Annual Pre-Tax Earnings shall be equal to an
amount obtained by multiplying the consolidated net earnings (or losses) of the
Acquired Entity obtained in such acquisition by a fraction, the numerator of
which is equal to $5,000,000 and the denominator of which is equal to the
consideration paid in such acquisition, or (ii) if there is more than one
acquisition pursuant to SECTION 5.11 hereof within nine (9) months of the
Closing Date pursuant to which UAG has contributed an aggregate of $5,000,000,
and the total consideration paid by UAG (or an Affiliate thereof) in such
acquisitions exceeds $5,000,000, then the Acquired Earnings included in the
Annual Pre-Tax Earnings with respect to all of the Acquired Entities shall be an
amount equal to the product of (A) the sum of each Acquired Entity's Pro Rata
Earnings (as defined below) and (B) a fraction, the numerator of which is equal
to $5,000,000 and the denominator of which is equal to the total consideration
paid for all of the Acquired Entities. For purposes of this Agreement, the term
"Acquired Entity's Pro Rata Earnings" shall mean, with respect to an Acquired
Entity, an amount equal to the product of (i) the consolidated net earnings (or
losses) of such Acquired Entity and (ii) a fraction, the numerator of which is
equal to the consideration paid for such Acquired Entity and the denominator of
which is equal to the total consideration paid for all Acquired Entities.
Notwithstanding the foregoing, (i) if there is more than one acquisition
pursuant to SECTION 5.11 hereof pursuant to which the total consideration paid
by UAG (or an Affiliate thereof) exceeds $5,000,000 and (ii) the acquisition in
which UAG's aggregate capital contribution equalled $5,000,000 occurred more
than nine (9) months after the Closing Date, then UAG and the Stockholders will
mutually agree on an appropriate allocation of the Acquired Earnings for
purposes of calculating Annual Pre-Tax Earnings in any Year.
1.4 CONTINGENT PAYMENT.
(a) If the total of the Annual Pre-Tax Earnings for Year 1, Year
2 and Year 3 (the "Total Pre-Tax Earnings") exceeds $29,400,000, then, in
consideration for the sale of the Shares by the Stockholders to UAG, UAG will
make an additional payment to the Stockholders in the amount set forth below
(such payment being referred to herein as the "Contingent Payment"), which
Contingent Payment shall be allocated among the Stockholders as they so
determine in their sole discretion:
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Total Pre-Tax Earnings (TE) Contingent Payment
- -------------------------------- ------------------------------
$29,400,000 - $32,399,999 $1,000,000 + [$2,000,000 x [(TE -
$29,400,000) DIVIDED BY $3,000,000]]
$32,400,000 - $38,399,999 $3,000,000 + [.20 x (TE -
$32,400,000)]
$38,400,000 and over $4,200,000 + [.33 x (TE -
$38,400,000)]
For purposes of illustration: If the Total Pre-Tax Earnings are
$30,900,000, then the Contingent Payment would equal $2,000,000 (i.e.,
$1,000,000 + 50% of $2,000,000); if the Total Pre-Tax Earnings are $32,400,000,
then the Contingent Payment would equal $3,000,000; if the Total Pre-Tax
Earnings are $38,400,000, then the Contingent Payment would equal $4,200,000
(i.e., $3,000,000 + 20% of $6,000,000); and if the Total Pre-Tax Earnings are
$41,400,000, then the Contingent Payment would equal $5,200,000 (i.e.,
$4,200,000 + 33% of $3,000,000).
(b) In the event that UAG is required to make a Contingent
Payment, then UAG shall pay to the Stockholders an amount equal to eighty
percent (80%) of UAG's estimate of the Contingent Payment (the "Estimated
Contingent Payment") within sixty (60) days after the completion of Year 3.
Within thirty (30) days after the completion of the review by the Companies'
certified public accountants of the financial statements prepared in accordance
with SECTION 1.3(c) hereof covering Year 3, (i) if the amount of the Contingent
Payment shall exceed the amount of the Estimated Contingent Payment (the amount
of any such excess being referred to herein as the "Contingent Payment
Deficiency"), UAG shall pay to the Stockholders, by wire transfer of immediately
available funds to an account designated in writing by the Stockholders, an
amount equal to the Contingent Payment Deficiency, and (ii) if the amount of the
Contingent Payment shall be less than the amount of the Estimated Contingent
Payment (the amount of any such deficiency being referred to herein as the
"Contingent Payment Surplus"), the Stockholders shall pay to UAG, by wire
transfer of immediately available funds to an account designated in writing by
UAG, an amount equal to the Contingent Payment Surplus.
1.5 TWO-YEAR PAYMENT.
(a) If the total of the Annual Pre-Tax Earnings for Year 1 and
Year 2 (the "Total Two-Year Pre-Tax Earnings") exceeds $21,600,000, then, in
consideration for the sale of the Shares by the Stockholders to UAG, UAG will
make an additional payment to
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the Stockholders equal to $1,000,000 plus an amount, not to exceed $1,000,000,
equal to fifty percent (50%) multiplied by the Total Two-Year Pre-Tax Earnings
less $21,600,000 (such payment being referred to herein as the "Two-Year
Payment"), which Two-Year Payment shall be allocated among the Stockholders as
they so determine in their sole discretion. For purposes of illustration: If
the Total Pre-Tax Earnings are $21,600,000, then the Two-Year Payment would
equal $1,000,000; if the Total Pre-Tax Earnings are $22,600,000, then the Two-
Year Payment would equal $1,500,000; if the Total Pre-Tax Earnings are
$23,600,000, then the Two-Year Payment would equal $2,000,000; and if the Total
Two-Year Pre-Tax Earnings are $24,500,000, then the Two-Year Payment would equal
$2,000,000.
(b) In the event that UAG is required to make a Two-Year
Payment, then UAG shall pay to the Stockholders an amount equal to eighty
percent (80%) of UAG's estimate of the Two-Year Payment (the "Estimated Two-Year
Payment") within sixty (60) days after the completion of Year 2. Within thirty
(30) days after the completion of the review by the Companies' certified public
accountants of the financial statements prepared in accordance with SECTION
1.3(c) hereof covering Year 2, (i) if the amount of the Two-Year Payment shall
exceed the amount of the Estimated Two-Year Payment (the amount of any such
excess being referred to herein as the "Two-Year Payment Deficiency"), UAG shall
pay to the Stockholders, by wire transfer of immediately available funds to an
account designated in writing by the Stockholders, an amount equal to the Two-
Year Payment Deficiency, and (ii) if the amount of the Two-Year Payment shall be
less than the amount of the Estimated Two-Year Payment (the amount of any such
deficiency being referred to herein as the "Two-Year Payment Surplus"), the
Stockholders shall pay to UAG, by wire transfer of immediately available funds
to an account designated in writing by UAG, an amount equal to the Two-Year
Payment Surplus.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders hereby jointly and severally
represent and warrant to UAG as follows:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Arkansas and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each state and juris-
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diction where qualification as a foreign corporation is required, except for
such failures to be qualified and in good standing, if any, which when taken
together with all other such failures of the Company would not, or could not
reasonably be expected to, in the aggregate have a Material Adverse Effect (as
defined in SECTION 10.11 hereof). SCHEDULE 2.1 hereto lists (i) the states and
other jurisdictions where the Company is so qualified and (ii) the assumed names
under which the Company conducts business. The Company has previously delivered
to UAG complete and correct copies of its charter and by-laws (including
comparable governing instruments with different names), as amended and presently
in effect.
2.2 SUBSIDIARIES. The Company does not have any interest or
investment in any person (as defined in SECTION 10.11 hereof).
2.3 CAPITALIZATION. The authorized stock of the Company and the
number of shares of capital stock which are issued and outstanding are set forth
on SCHEDULE 2.3 hereto. The shares listed on SCHEDULE 2.3 hereto constitute all
the issued and outstanding shares of capital stock of the Company and have been
validly authorized and issued, are fully paid and nonassessable, have not been
issued in violation of any preemptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
There is no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent, that
directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Company or any securities
convertible into, or other rights to acquire, any shares of capital stock of the
Company, or (ii) obligates the Company to grant, offer or enter into any of the
foregoing, or (iii) relates to the voting or control of such capital stock,
securities or rights, except as set forth on SCHEDULE 2.3 hereto. The Company
has not agreed to register any securities under the Securities Act of 1933, as
amended (the "Securities Act").
2.4 AUTHORITY; APPROVALS AND CONSENTS. The Company has the corporate
power and authority to enter into this Agreement and the Documents (as defined
in SECTION 10.11 hereof) to which it is a party and to perform its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and the Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the Documents and the transactions contemplated hereby and
thereby. This Agreement has been, and on the Closing Date the Documents will
be, duly executed and delivered by, and constitute a valid
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and binding obligation of, the Company, enforceable against the Company in
accordance with their respective terms. The execution, delivery and performance
by the Company and each Stockholder of this Agreement and the Documents to which
it or he is a party and the consummation of the transactions contemplated hereby
and thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws (including any comparable governing
instrument with a different name) of any Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any
right of termination or acceleration in respect of, any Company
Agreement (as defined in SECTION 2.15 hereof) or, except as set forth
on SCHEDULE 2.4 hereto, require any consent or waiver of any party to
any Company Agreement;
(iii) result in the creation of any Security Interest upon,
or any person obtaining any right to acquire, any properties, assets
or rights of the Company (other than the rights of UAG to acquire the
Shares pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as
defined in SECTION 2.9 hereof) applicable to the Company or any of
their respective businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except
in connection with or in compliance with the provisions of the H-S-R
Act (as defined in SECTION 5.3 hereof) and the Arkansas Securities
Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental administrative or judicial authority is necessary to be
obtained or made by the Company to enable the Company to continue to conduct its
business and operations and use its properties after the Closing in a manner
which is in all material respects consistent with that in which they are
presently conducted.
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2.5 FINANCIAL STATEMENTS. Except as otherwise indicated below,
attached as SCHEDULE 2.5 are true and complete copies of:
(i) (A) the audited consolidated balance sheet of the
Company as of December 31, 1994 (the "Company Balance Sheet"),
and the related consolidated statements of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1994,
together with the notes thereto, in each case examined by and
accompanied by the report of O'Conner & Drew, independent
certified public accountants, and (B) the consolidated balance
sheet of the Company as of December 31, 1993, and the related
consolidated statements of income, stockholders' equity and cash
flow for the fiscal year ended December 31, 1993, together with
the notes thereto, in each case prepared in accordance with the
agreed upon procedures set forth in the letter dated January 18,
1995, from O'Conner & Drew to the Company and examined by and
accompanied by the report of O'Conner & Drew; and
(ii) the most recent monthly and year-to-date financial
statements provided to each franchisor of the Company (each, a
"Company Factory Statement" and, collectively, the "Company Factory
Statements");
(all the foregoing financial statements (except for the financial statements
referred to in clause (ii) above), including the notes thereto, being referred
to herein collectively as the "Company Financial Statements"). The Company
Financial Statements are in accordance with the books and records of the
Company, fairly present the consolidated financial position, results of
operations, stockholders' equity and changes in financial position of the
Company as of the dates and for the periods indicated, in the case of the
financial statements referred to in clause (i) above in conformity with GAAP
consistently applied (except as otherwise indicated in such statements) during
such periods, and can be legitimately reconciled with the financial statements
and the financial records maintained and the accounting methods applied by the
Company for federal income tax purposes, and the unaudited financial statements
included in the Company Financial Statements indicate all adjustments, which
consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the Company Financial
Statements do not contain any items of special or nonrecurring income except as
expressly specified therein, and the balance sheets included in the Company
Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets. The books and accounts of the Company are complete
and correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses of
the Company consistent with prior practices of the Company.
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2.6 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have
any liability of any nature whatsoever (whether known or unknown, due or to
become due, accrued, absolute, contingent or otherwise), including, without
limitation, any unfunded obligation under employee benefit plans or arrangements
as described in SECTION 2.18 AND 2.19 hereof or liabilities for Taxes (as
defined in SECTION 2.8 hereof), except for (i) liabilities reflected or reserved
against the most recent Company Financial Statement, (ii) current liabilities
incurred in the ordinary course of business and consistent with past practice
after the date of the Company Balance Sheet which, individually and in the
aggregate, do not have, and cannot reasonably be expected to have, a Material
Adverse Effect, and (iii) liabilities disclosed on SCHEDULE 2.6 hereto. The
Company is not a party to any Company Agreement, or subject to any charter or
by-law provision, any other corporate limitation or any Legal Requirement, which
has, or can reasonably be expected to have, a Material Adverse Effect.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1993, the Company has operated in the
ordinary course of business consistent with past practice, except as set forth
on SCHEDULE 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the Company, and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have
a Material Adverse Effect;
(ii) any material loss, damage, destruction or other
casualty to the property or other assets of the Company, whether or
not covered by insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of
any key employee of the Company.
(b) Since December 31, 1993, except as set forth in SCHEDULE
2.7(b) hereto, the Company has not:
(i) incurred any material obligation or liability
(whether absolute, accrued, contingent or otherwise), except in the
ordinary course of business consistent with past practice;
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(ii) failed to discharge or satisfy any lien or pay or
satisfy any obligation or liability (whether absolute, accrued,
contingent or otherwise), other than liabilities being contested in
good faith and for which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of
its property or other assets, except for mechanics' liens and liens
for taxes not yet due and payable;
(iv) sold or transferred any assets or cancelled any
debts or claims or waived any rights, except in the ordinary course of
business consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written
off as uncollectible any accounts receivable or any portion thereof
not reflected in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits
of employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs
and maintenance;
(x) discontinued any franchise or the sale of any
products or product line or program;
(xi) incurred any obligation or liability for the payment
of severance benefits; or
(xii) entered into any agreement or made any commitment to
do any of the foregoing.
2.8 TAXES. The Company and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined or
consolidated basis with the Company any such other corporation, have filed
timely all federal, state, local and foreign tax returns, reports and
declarations required to be filed (or have obtained or timely applied for an
extension
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with respect to such filing) correctly reflecting the Taxes (as defined below)
and all other information required to be reported thereon and have paid, or made
adequate provision for the payment of, all Taxes which are due pursuant to such
returns or pursuant to any assessment received by the Company or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments, including but not limited to income, excise, property, sales,
franchise, withholding, social security and unemployment taxes imposed by the
United States, any state, county, local or foreign government, or any
subdivision or agency thereof or taxing authority therein, and any interest,
penalties or additions to tax relating to such taxes, charges, fees, levies or
other assessments. Copies of all tax returns for the fiscal years ended since
December 31, 1986 have been furnished to UAG or its representatives and such
copies are accurate and complete as of the date hereof. The Company has also
furnished to UAG correct and complete copies of all notices and correspondence
sent or received since December 31, 1986 by the Company to or from any federal,
state or local tax authorities. The Company has adequately reserved for the
payment of all Taxes with respect to periods ended on, prior to or through the
Closing Date for which tax returns have not yet been filed. In the ordinary
course, the Company makes adequate provision on its books for the payment of all
Taxes (including for the current fiscal period) owed by the Company. Except to
the extent reserves therefor are reflected on the Company Balance Sheet, the
Company is not liable, or will not become liable, for any Taxes for any period
ending on, prior to or through the Closing Date. Except as set forth on
SCHEDULE 2.8 hereto, the Company has not been subject to a federal or state tax
audit of any kind, and no adjustment has been proposed by the Internal Revenue
Service ("IRS") with respect to any return for any subsequent year. With
respect to the audits referred to on SCHEDULE 2.8 hereto, no such audit has
resulted in an adjustment in excess of $50,000. Neither the Company nor any
Stockholder knows of any basis for an assertion of a deficiency for Taxes
against the Company. The Stockholders will cooperate, and will cause their
Affiliates to cooperate, with the Company in the filing of any returns and in
any audit or refund claim proceedings involving Taxes for which the Company may
be liable or with respect to which the Company may be entitled to a refund.
2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto, (i) there is
no claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company or
any Stockholder, threatened against or affecting, the Company, any of its
officers, directors, employees, agents or Affiliates involving, affecting or
relating to any assets, properties or operations of
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the Company, any ERISA Plan (as defined in SECTION 2.18(a) hereof) or any of
their respective properties or rights before or by any court, arbitrator, panel,
agency or other governmental, administrative or judicial entity, domestic or
foreign, nor is any basis known to any Stockholder, the Company or any of its
directors, officers, employees or agents for any such Claims, and (ii) the
Company is not subject to any judgment, decree, writ, injunction, ruling or
order (collectively, "Judgments") of any governmental, administrative or
judicial authority, domestic or foreign. SCHEDULE 2.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy.
(b) The businesses of the Company are being conducted in
compliance with all laws, ordinances, codes, rules, regulations, standards,
judgments and other requirements of all governmental, administrative or judicial
entities (collectively, "Legal Requirements") applicable to the Company or any
of its respective businesses or properties, except where the failure to be in
such compliance could not have a Material Adverse Effect. The Company holds,
and is in compliance with, all franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations (collectively, "Permits")
required by all applicable Legal Requirements and where the failure to hold or
be in compliance with such Permits could have a Material Adverse Effect. A list
of all such Permits is set forth on SCHEDULE 2.9(b) hereto.
(c) The Company owns or holds all Permits material to the
conduct of its business. No event has occurred and is continuing which permits,
or after notice or lapse of time or both would permit, any modification or
termination of any Permit.
2.10 PROPERTY. The properties and assets owned by or leased to the
Company are adequate for the conduct of the respective businesses of the Company
as presently conducted. Set forth on SCHEDULE 2.10 hereto is a list of all
interests in real property owned by or leased to the Company (including all
interests in real property owned or leased by any Stockholder used in the
businesses of the Company) and of all options or other contracts to acquire any
such interest (collectively, the "Real Property"). All improvements to the Real
Property ("Improvements") and all machinery, equipment and other tangible
property owned or used by or leased to the Company are in good operating
condition and in good repair, ordinary wear and tear excepted. Such tangible
properties and all Improvements owned or leased by the Company conform in all
material respects with all applicable laws, ordinances, rules and regulations
and other Legal Requirements and such Improvements do not encroach in any
respect on property of others.
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2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the
Company, the Real Property, the Improvements and any property formerly owned,
occupied or leased as part of the business of the Company are in full compliance
with all Environmental Laws (as defined below), (ii) the Company has obtained
all Environmental Permits (as defined below), (iii) such Environmental Permits
are in full force and effect, and (iv) the Company is in full compliance with
all terms and conditions of such Environmental Permits. As used herein,
"Environmental Laws" shall mean all applicable requirements of environmental,
public or employee health and safety, public or community right-to-know,
ecological or natural resource laws or regulations or controls, including all
applicable requirements imposed by any law (including without limitation common
law), rule, order, or regulations of any federal, state, or local executive,
legislative, judicial, regulatory, or administrative agency, board, or
authority, or any applicable private agreement (such as covenants, conditions
and restrictions), which relate to, (i) noise, (ii) pollution or protection of
the air, surface water, groundwater, or soil, (iii) solid, gaseous, or liquid
waste generation, treatment, storage, disposal or transportation, (iv) exposure
to Hazardous Materials (as defined below), or (v) regulation of the manufacture,
processing, distribution and commerce, use, or storage of Hazardous Materials.
As used herein, "Environmental Permits" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Law in connection with the ownership, use and/or operation of the
Company or the Real Property and Improvements of the Company.
As used in this SECTION 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"), as amended
by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.) ("RCRA"), the Occupational Safety and Health Act of 1970
(29 U.S.C. Section 651 et seq.) ("OSHA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq. ("HMTA"), the Arkansas
Remedial Action Trust Fund Act ("RATFA"), Ark. Code Ann. Sections 8-7-501 et
seq., the Arkansas Emergency Response Fund Act ("ERFA"), Ark. Code Ann. Sections
8-7-408 et seq., the Asbestos Law, Ark. Code Ann. Sections 20-27-1003 et seq.,
the Lead Law, Ark. Code Ann. Sections 20-27-601 et seq., the Storage Tank Law,
Ark. Code Ann. Sections 8-7-802 et seq., and in the regulations promulgated
pursuant to such laws, all as amended,
-18-
(ii) those substances listed in the United States Department of Transportation
Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection
Agency (or any successor agency) as hazardous substances (40 CFR part 302 and
amendments thereto), (iii) any material, waste or substance which is or
contains (A) petroleum, including crude oil or any fraction thereof, natural
gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos,
(C) polychlorinated biphenyls, (D) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq.
(33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317), (E) flammable explosives, (F) radioactive
materials, and (iv) such other substances, materials and wastes which are or
become regulated or classified as hazardous, toxic or as "special wastes" under
any Environmental Laws.
(b) The Company and the Stockholders have not violated, done or
suffered any act which could give rise to liability under, and are not otherwise
exposed to liability under, any Environmental Law. No event has occurred with
respect to the Real Property, the Improvements, any property formerly owned,
occupied or leased as part of the business of the Company, or the Company which,
with the passage of time or the giving of notice, or both, would constitute a
violation of or non-compliance with any applicable Environmental Law. The
Company has no contingent liability under any Environmental Law. There are no
liens under any Environmental Law on the Real Property.
(c) Except as set forth on SCHEDULE 2.11(c) hereto, (i) neither
the Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased as part of the business of the
Company, nor, to the knowledge of the Stockholders, any property adjacent to the
Real Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site, (ii) none of the Real
Property or portion thereof, the Improvements or any property formerly owned,
occupied or leased as part of the business of the Company has been subject to
investigation by any governmental authority evaluating the need to investigate
or undertake Remedial Action (as defined below) at such property, and (iii) none
of the Real Property, the Improvements or any property formerly owned, occupied
or leased as part of the business of the Company, or any site or location where
the Company sent waste of any kind, is identified on the current or proposed
(A) National Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive
Environmental Response Compensation and Liability Inventory System list, or
(C) any list arising from any statute analogous to CERCLA. As used herein,
"Remedial Action" shall mean any
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action required to (i) clean up, remove or treat Hazardous Materials, (ii)
prevent a release or threat of release of any Hazardous Material, (iii) perform
pre-remedial studies, investigations or post-remedial monitoring and care, (iv)
cure a violation of Environmental Law or (v) take corrective action under
sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on SCHEDULE 2.11(d) hereto, there have
been and are no (i) aboveground or underground storage tanks, subsurface
disposal systems, or wastes, drums or containers disposed of or buried on, in or
under the ground or any surface waters, (ii) asbestos, asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers, or (iv) wetlands (as defined
under any Environmental Law) located within any portion of the Real Property,
nor have any liens been placed upon any portion of the Real Property, the
Improvements or any property formerly owned, occupied or leased as part of the
business of the Company in connection with any actual or alleged liability under
any Environmental Law.
(e) Except as set forth on SCHEDULE 2.11(e) hereto, (i) there is
no pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Company, the Real Property, the
Improvements, any property formerly owned, leased or occupied as part of the
business of the Company, any offsite contamination affecting the business of the
Company or any operations conducted at the Real Property, (ii) there are no
ongoing negotiations with or agreements with any governmental authority relating
to any Remedial Action or other environmentally-related claim, (iii) the Company
has not submitted notice pursuant to Section 103 of CERCLA or analogous statute
or notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) the Company has not received
any notice, claim, demand, suit or request for information from any governmental
or private entity with respect to any liability or alleged liability under any
Environmental Law, nor to knowledge of the Stockholders, the Company, has any
other entity whose liability therefor, in whole or in part, may be attributed to
the Company, received such notice, claim, demand, suit or request for
information.
(f) The Stockholders or the Company have provided to UAG all
environmental studies and reports pertaining to the Real Property, the
Improvements, the Company and any property formerly owned, occupied or leased as
part of the businesses of the Company, and has permitted (or will have permitted
as of the Closing Date), the testing of the soil, groundwater, building
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components, tanks, containers and equipment on the Real Property, the
Improvements, any property formerly owned, occupied or leased as part of the
businesses of the Company by UAG or UAG's agents or experts as they have or
shall have deemed necessary or appropriate to confirm the condition of such
properties.
2.12 INVENTORIES. The values at which inventories are carried on the
Company Balance Sheet and Company Factory Statement of the Company reflect the
normal inventory valuation policies of the Company, and, in the case of the
Company Balance Sheet, such values are in conformity with GAAP consistently
applied. All inventories reflected on the Company Balance Sheet and Company
Factory Statement of the Company or arising since the date thereof are currently
marketable and can reasonably be anticipated to be sold at normal mark-ups
within 120 days after the date hereof in the ordinary course of business
(subject to the reserve for obsolete, off-grade or slow-moving items that is set
forth on the Company Balance Sheet), except for spare parts inventory which
inventory is good and usable.
2.13 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
Company Balance Sheet and Company Factory Statement of the Company or arising
since the date thereof (subject to the reserve for bad debts reflected on such
Company Balance Sheet and Company Factory Statement) are good and have been
collected or are collectible, without resort to litigation or extraordinary
collection activity, within 90 days of the Closing Date, and are subject to no
defenses, set-offs or counterclaims other than normal cash discounts accrued in
the ordinary course of business of the Company.
2.14 INSURANCE. All properties and assets of the Company which are of
an insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner reasonable in light of the risks attendant
to the businesses and activities in which the Company are or have been engaged
and customary for companies engaged in similar businesses or owning similar
assets. Set forth on SCHEDULE 2.14 hereto is a list and brief description
(including the name of the insurer, the type of coverage provided, the amount of
the annual premium for the current policy period, the amount of remaining
coverage and deductibles and the coverage period) of all policies for such
insurance and the Company previously has furnished to UAG true and complete
copies of all such policies. All such policies are in full force and effect,
underwritten by financially sound and reputable insurers, sufficient for all
applicable requirements of law and will not in any way be effected by or
terminated or lapsed by reason of the consummation of the transactions
contemplated by this Agreement and the Documents. No notice of cancellation or
non-renewal with respect to, or disallowance of
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any claim under, any such policy has been received by the Company.
2.15 CONTRACTS; ETC. As used in this Agreement, the term "Company
Agreements" shall mean all mortgages, indenture notes, agreements, contracts,
leases, licenses, franchises, obligations, instruments or other commitments,
arrangements or understandings of any kind, whether written or oral, binding or
non-binding, (including all leases and other agreements referred to on SCHEDULE
2.10 hereto) to which the Company is a party or by which the Company or any of
their respective properties may be bound or affected, including all amendments,
modifications, extensions or renewals of any of the foregoing. Set forth on
SCHEDULE 2.15 hereto is a complete and accurate list of each Company Agreement
which is material to the businesses, operations, assets, condition (financial or
otherwise) or prospects of the Companies. True and complete copies of all
written Company Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10 hereto
have heretofore been delivered or made available to UAG, and the Company has
provided UAG with accurate and complete written summaries of all such Company
Agreements which are unwritten. The Company is not, nor, to the knowledge of
the Company and the Stockholders, any other party thereto, is in breach of or
default under any Company Agreement, and no event has occurred which (after
notice or lapse of time or both) would become a breach or default under, or
would permit modification, cancellation, acceleration or termination of, any
Company Agreement or result in the creation of any Security Interest upon, or
any person obtaining any right to acquire, any properties, assets or rights of
the Company in any such case where such breach, default or other event would
have, or could reasonably be expected to have, a Material Adverse Effect. There
are no material unresolved disputes involving any Company under the Company
Agreement.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of
all salaries and accrued wages and has complied in all material respects with
all applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and has withheld and paid to the appropriate
governmental authority, or is holding for payment not yet due to such authority,
all amounts required by law or agreement to be withheld from the wages or
salaries of its employees.
(b) Except as set forth on SCHEDULE 2.16(b) hereto, the Company
is not a party to any (i) outstanding employment agreements or contracts with
officers or employees that are not terminable at will, or that provide for the
payment of any bonus
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or commission, (ii) agreement, policy or practice that requires it to pay
termination or severance pay to salaried, non-exempt or hourly employees (other
than as required by law), (iii) collective bargaining agreement or other labor
union contract applicable to persons employed by the Company, nor do the
Stockholders, any Company know of any activities or proceedings of any labor
union to organize any such employees. The Company has furnished to UAG complete
and correct copies of all such agreements ("Employment and Labor Agreements").
The Company has not breached or otherwise failed to comply with any provisions
of any Employment or Labor Agreement, and there are no grievances outstanding
thereunder.
(c) Except as set forth in SCHEDULE 2.16(c) hereto, (i) there is
no unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholders' or
the Company's knowledge, threatened, against or affecting the Company, and the
Company has not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question concerning
representation exists relating to the employees of the Company, (iv) there are
no charges with respect to or relating to any Company pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices, (v) the Company
has not received formal notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Company and no such investigation is in progress
and (vi) the consents of the unions that are parties to any Employment and Labor
Agreements are not required to complete the transactions contemplated by this
Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. Sections 2101-2109, and the
regulations promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(a) hereto is a true and complete
list of:
(i) each employee pension benefit plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA"), maintained by the Company or
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to which the Company is required to make contributions ("Pension
Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in
Section 3(1) of ERISA, maintained by the Company or to which the
Company is required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare Benefit Plans
(collectively, "ERISA Plans") have been delivered to UAG together with, as
applicable with respect to each such ERISA Plan, trust agreements, summary plan
descriptions, all IRS determination letters or applications therefor with
respect to any Pension Benefit Plan intended to be qualified pursuant to Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and
valuation or actuarial reports, accountant's opinions, financial statements, IRS
Form 5500s (or 5500-C or 5500-R) and summary annual reports for the last three
years.
(b) With respect to the ERISA Plans:
(i) there is no ERISA Plan which is a "multi-employer"
plan as that term is defined in Section 3(37) of ERISA ("Multiemployer
Plan") other than those listed as such on SCHEDULE 2.17(b);
(ii) no event has occurred or (to the knowledge of the
Company or any Stockholder) is threatened or about to occur which
would constitute a prohibited transaction under Section 406 of ERISA
or under Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed
under ERISA and the Code and has timely filed Form 5500e (or 5500-C or
5S00-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local
or foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder has been
exempt from taxation under Section 501(a) of the Code and is currently
in compliance with applicable federal laws;
-24-
(ii) has been operated, since its inception, in accordance
with its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review
by the IRS or (to the knowledge of the Company or any Stockholder) no such
action is contemplated or under consideration and the IRS has not asserted
that any Pension Benefit Plan is not qualified under Section 401(a) of the
Code or that any trust established under a Pension Benefit Plan is not
exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of SECTION
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty
Corporation ("PBGC") under Sections 4062-4064 of ERISA has been incurred by
the Company since the effective date of ERISA and all premiums due and
owing to the PBGC have been timely paid;
(ii) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of ERISA
to terminate any such plan;
(iii) no event has occurred since the inception of any
Pension Benefit Plan or (to the knowledge of the Company or any
Stockholder) is threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code); and
(v) if any of such Pension Benefit Plans were to be
terminated on the Closing Date (A) no liability under Title IV of ERISA
would be incurred by any Company and (B) all benefits accrued to the day
prior to the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such plan
for valuation purposes.
(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
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(f) The aggregate of the amounts of contributions by the Company to
be paid or accrued under ERISA Plans is not expected to exceed approximately
$250,000 for the current fiscal year. To the extent required in accordance with
GAAP, the Company Balance Sheet reflects in the aggregate an accrual of all
amounts of employer contributions accrued but unpaid by the Company under the
ERISA Plans as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since December 31, 1986, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and S205 of
ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1994; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in
Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan, whether written or oral, which any Company maintains or is required
to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director, employee or consultant of the Company pursuant to
which payments may be required to be made at any time following the date
hereof (including, without limitation, any employment, deferred
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compensation, severance, supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of the Company whose aggregate
compensation for the fiscal year ended December 31, 1993 exceeded $50,000.
True and complete copies of all of the written plans, arrangements and
agreements referred to on SCHEDULE 2.18(a) ("Compensation Commitments")
have been provided to UAG together with, where prepared by or for the
Company, any valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation Commitment for the last
three years. An accurate and complete written summary has been provided to
UAG with respect to any Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review
by the IRS or any other federal or state agency and (to the knowledge of
any Company or any Stockholder) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or
foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the
Code; and
(vi) has operated since its inception in material compliance
with the reporting and disclosure requirements imposed under ERISA and the
Code.
2.19 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 2.19 hereto is a
complete and accurate description of all material transactions between the
Company or any ERISA Plan, on the one hand, and any Insider, on the other hand,
that have occurred since January 1, 1987. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any
director, officer, key employee of the Company, and any Affiliate,
Associate or Relative of any of the foregoing persons;
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(ii) the term "Associate" used to indicate a relationship
with any person means (A) any corporation, partnership, joint venture or
other entity of which such person is an officer or partner or is, directly
or indirectly, through one or more intermediaries, the beneficial owner of
10% or more of (1) any class or type of equity securities or other profits
interest or (2) the combined voting power of interests ordinarily entitled
to vote for management or otherwise, and (B) any trust or other estate in
which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's
spouse, such person's parents, sisters, brothers, children and the spouses
of the foregoing, and any member of the immediate household of such person.
2.20 PROPRIETY OF PAST PAYMENTS. Except as set forth in SCHEDULE 2.20
hereto, no funds or assets of the Company have been used for illegal purposes;
no unrecorded funds or assets of the Company have been established for any
purpose; no accumulation or use of the Company's corporate funds or assets has
been made without being properly accounted for in the respective books and
records of the Company; all payments by or on behalf of the Company have been
duly and properly recorded and accounted for in their respective books and
records; no false or artificial entry has been made in the books and records of
the Company for any reason; no payment has been made by or on behalf of the
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such payment;
and the Company has not made, directly or indirectly, any illegal contributions
to any political party or candidate, either domestic or foreign. Neither the
IRS nor any other federal, state, local or foreign government agency or entity
has initiated or threatened any investigation of any payment made by the Company
of, or alleged to be of, the type described in this SECTION 2.20.
2.21 INTEREST IN COMPETITORS. Neither the Company nor any Stockholder, nor
any of their officers, directors or key employees or Affiliates, has any
interest, either by way of contract or by way of investment (other than as
holder of not more than 2% of the outstanding capital stock of a publicly traded
person, so long as such holder has no other connection or relationship with such
person) or otherwise, directly or indirectly, in any person other than the
Company that provides any services or designs, produces or sells any product or
product lines or engages in any activity similar to or competitive with any
activity currently proposed to be conducted by the Company.
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2.22 BROKERS. Except for Geneva Capital Markets, Inc. and John Dorey,
neither the Company, nor any director, officer or employee thereof, nor any
Stockholder or any representative of any Stockholder, has employed any broker or
finder or has incurred or will incur any broker's, finder's or similar fees,
commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement or the Documents.
2.23 ACCOUNTS. SCHEDULE 2.23 hereof correctly identifies each bank account
maintained by or on behalf or for the benefit of the Company and the name of
each person with any power or authority to act with respect thereto.
2.24 NET WORTH OF THE COMPANIES. The Net Worth of the Company, as
determined in accordance with the Accounting Principles, will exceed $8,000,000
on the Closing Date.
2.25 DISCLOSURE. Neither the Company nor any Stockholder has made any
material misrepresentation to UAG relating to this Agreement or the Shares and
neither the Company nor any Stockholder has omitted to state to UAG any material
fact relating to this Agreement or the Shares which is necessary in order to
make the information given by or on behalf of the Company or any Stockholder to
UAG or their representatives at or prior to Closing not misleading or which if
disclosed would reasonably affect the decision of a person considering an
acquisition of the Shares. No fact, event, condition or contingency exists or
has occurred which has, or in the future can reasonably be expected to have, a
Material Adverse Effect, which has not been disclosed in the Company Financial
Statements or the Schedules to this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby jointly and severally further represents and
warrants to UAG as follows:
3.1 OWNERSHIP OF SHARES; TITLE. Each Stockholder is the owner of record
and beneficially of the Shares set forth on SCHEDULE 3.1 hereto and has, and
shall transfer to UAG at the Closing, good and marketable title to the Shares
owned by him, free and clear of any and all Security Interests, proxies and
voting or other agreements except as contemplated by the Shareholders Agreement
and restrictions on transfer imposed by applicable securities laws.
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3.2 AUTHORITY. Each Stockholder has all requisite power and authority and
has full legal capacity and is competent to execute, deliver and perform this
Agreement and the Documents to which he is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of the
Shares to UAG as contemplated by this Agreement). This Agreement has been duly
executed and delivered by each Stockholder and constitutes, and the Documents
when executed and delivered by each Stockholder will constitute, a valid and
binding obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms. The execution, delivery and performance of this
Agreement and the Documents by each Stockholder and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to which
each Stockholder is a party to or which each Stockholder or any of such
Stockholder's property is subject;
(ii) violate or conflict with any Legal Requirements
applicable to each Stockholder or any of such Stockholder's businesses or
properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF UAG
UAG hereby represents and warrants to the Company and the Stockholders
as follows:
4.1 ORGANIZATION AND GOOD STANDING. UAG is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to own, lease and operate the
properties used in its business and to carry on its business as now being
conducted. UAG is duly qualified to do business and is in good standing as a
foreign corporation in each state and jurisdiction where
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qualification as a foreign corporation is required, except for such failures to
be qualified and in good standing, if any, which when taken together with all
other such failures of UAG and the UAG Subsidiaries (as defined below) would
not, or could not reasonably be expected to, in the aggregate have a material
adverse effect on UAG and the UAG Subsidiaries, taken as a whole. SCHEDULE 4.1
hereto lists (i) the states and other jurisdictions where UAG is so qualified
and (ii) the assumed names under which UAG conducts business. UAG has
previously delivered to Landers Auto complete and correct copies of its charter
and by-laws (including comparable governing instruments with different names),
as amended and presently in effect.
4.2 SUBSIDIARIES. Set forth on SCHEDULE 4.2 hereto is a true and complete
list of all UAG Subsidiaries (as defined below) stating, with respect to each
UAG Subsidiary, its jurisdiction of incorporation, capitalization, equity
ownership and jurisdictions in which it is qualified to do business. As used in
this Agreement, the term "UAG Subsidiary" shall mean any corporation or other
entity in which UAG, directly or indirectly, owns beneficially securities
representing 50% or more of (i) the aggregate equity or profit interests or (ii)
the combined voting power of voting interests ordinarily entitled to vote for
management or otherwise. Each of the UAG Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own,
lease and operate the properties and assets used in its business and to carry on
its business as now being conducted, and is duly qualified to do business and in
good standing as a foreign corporation in each jurisdiction where qualification
as a foreign corporation is required, except for such failures to be qualified
and in good standing, if any, which when taken together with all other such
failures of UAG and the UAG Subsidiaries would not, or could not reasonably be
expected to, in the aggregate have a material adverse effect on UAG and the UAG
Subsidiaries, taken as a whole. All of the outstanding shares of capital stock
of the UAG Subsidiaries have been validly authorized and issued, are fully paid
and non-assessable, have not been issued in violation of any preemptive rights
or of any federal or state securities law, and, except as set forth on SCHEDULE
4.2 hereto, are owned by UAG or a wholly owned UAG Subsidiary of record and
beneficially free and clear of any Security Interest. Except as set forth on
SCHEDULE 4.2 hereto, UAG does not own, directly or indirectly, any ownership,
equity, profits or voting interest in any corporation, partnership, joint
venture or other person, nor has any right, agreement or commitment to purchase
any such interest. UAG has previously delivered to Landers Auto complete and
correct copies of the charter and by-laws (including comparable governing
instruments with different names) of each of the UAG Subsidiaries, as amended
and presently in effect.
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4.3 CAPITALIZATION. The authorized stock of UAG and the number of shares
of capital stock which are issued and outstanding are set forth on SCHEDULE 4.3
hereto. The shares listed on SCHEDULE 4.3 hereto constitute all the issued and
outstanding shares of capital stock of UAG and have been validly authorized and
issued, are fully paid and nonassessable, have not been issued in violation of
any preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof. There is no security, option,
warrant, right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly
(i) calls for the issuance, sale, pledge or other disposition of any shares of
capital stock of UAG or any securities convertible into, or other rights to
acquire, any shares of capital stock of UAG, or (ii) obligates UAG to grant,
offer or enter into any of the foregoing, or (iii) relates to the voting or
control of such capital stock, securities or rights, except as set forth on
SCHEDULE 4.3 hereto.
4.4 AUTHORITY; APPROVALS AND CONSENTS. UAG has the corporate power and
authority to enter into this Agreement and the Documents to which it is a party
and to perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized and approved by the Board of Directors of UAG and no
other corporate proceedings on the part of UAG are necessary to authorize and
approve this Agreement and the Documents and the transactions contemplated
hereby and thereby. This Agreement has been, and on the Closing Date the
Documents will be, duly executed and delivered by, and constitute a valid and
binding obligation of, UAG, enforceable against UAG in accordance with their
respective terms. Except as set forth on SCHEDULE 4.4 hereto, the execution,
delivery and performance by UAG of this Agreement and the Documents to which it
is a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws (including any comparable governing instrument
with a different name) of UAG;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any UAG Agreement (as defined
below) or require any consent or waiver of any party to any UAG Agreement;
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(iii) result in the creation of any Security Interest upon,
or any person obtaining any right to acquire, any properties, assets or
rights of any UAG or any UAG Subsidiary;
(iv) violate or conflict with any Legal Requirements
applicable to UAG or any UAG Subsidiary or any of their respective
businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental administrative or judicial authority is necessary to be
obtained or made by UAG to enable UAG to continue to conduct its business and
operations and use its properties after the Closing in a manner which is in all
material respects consistent with that in which they are presently conducted.
4.5 FINANCIAL STATEMENTS. Attached as SCHEDULE 4.5 are true and complete
copies of the consolidated balance sheet of UAG and its consolidated UAG
Subsidiaries as of December 31 in each of the years 1993 and 1994 (such balance
sheet as of December 31, 1994 being referred to herein as the "UAG Balance
Sheet"), and the related consolidated statements of income, stockholders' equity
and cash flows for the fiscal years ended on such dates, together with the notes
thereto, in each case examined by and accompanied by the report of Coopers &
Lybrand, independent certified public accountants (all the foregoing financial
statements, including the notes thereto, being referred to herein collectively
as the "UAG Financial Statements"). The UAG Financial Statements are in
accordance with the books and records of UAG and the UAG Subsidiaries, fairly
present the consolidated financial position, results of operations,
stockholders' equity and changes in financial position of UAG and the UAG
Subsidiaries as of the dates and for the periods indicated, in each case in
conformity with GAAP consistently applied (except as otherwise indicated in such
statements) during such periods, and can be legitimately reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by UAG and the UAG Subsidiaries for federal income tax purposes,
and the unaudited financial statements included in the UAG Financial Statements
indicate all adjustments, which consist of only normal recurring accruals,
necessary for such fair presentations. The statements of income included in the
UAG Financial Statements do not contain any items of special or
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nonrecurring income except as expressly specified therein, and the balance
sheets included in the UAG Financial Statements do not reflect any write-up or
revaluation increasing the book value of any assets. The books and accounts of
UAG and the UAG Subsidiaries are complete and correct in all material respects
and fairly reflect all of the transactions, items of income and expense and all
assets and liabilities of the businesses of UAG and the UAG Subsidiaries
consistent with prior practices of UAG and the UAG Subsidiaries.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither UAG nor any UAG
Subsidiary has any liability of any nature whatsoever (whether known or unknown,
due or to become due, accrued, absolute, contingent or otherwise), including,
without limitation, any unfunded obligation under employee benefit plans or
arrangements as described in SECTION 4.17 AND 4.18 hereof or liabilities for
Taxes (as defined in SECTION 4.8 hereof), except for (i) liabilities reflected
or reserved against the most recent UAG Financial Statement, (ii) current
liabilities incurred in the ordinary course of business and consistent with past
practice after the date of the UAG Balance Sheet which, individually and in the
aggregate, do not have, and cannot reasonably be expected to have, a material
adverse effect on UAG and the UAG Subsidiaries, taken as a whole, and (iii)
liabilities disclosed on SCHEDULE 4.6 hereto. Neither UAG nor any UAG
Subsidiary is a party to any UAG Agreement, or subject to any charter or by-law
provision, any other corporate limitation or any Legal Requirement, which has,
or can reasonably be expected to have, a material adverse effect on UAG and the
UAG Subsidiaries, taken as a whole.
4.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1993, UAG and each UAG Subsidiary has operated
in the ordinary course of business consistent with past practice, except as set
forth on SCHEDULE 4.7(a) hereto, and there has not been:
(i) any material loss, damage, destruction or other
casualty to the property or other assets of UAG or any UAG Subsidiary,
whether or not covered by insurance;
(ii) any change in any method of accounting or accounting
practice of UAG or any UAG Subsidiary; or
(iii) any loss of the employment, services or benefits of any
key employee of UAG or any UAG Subsidiary.
(b) Since December 31, 1993, except as set forth in SCHEDULE 4.7(b)
hereto, neither UAG nor any UAG Subsidiary has:
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(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or
satisfy any obligation or liability (whether absolute, accrued, contingent
or otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics' liens and liens for taxes
not yet due and payable;
(iv) sold or transferred any assets or cancelled any debts
or claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) written down the value of any inventory or written off
as uncollectible any accounts receivable or any portion thereof not
reflected in the UAG Financial Statements;
(vii) discontinued any franchise or the sale of any products
or product line or program; or
(viii) entered into any agreement or made any commitment to
do any of the foregoing that has not been terminated.
4.8 TAXES. UAG, each UAG Subsidiary and, for any period during all or
part of which the tax liability of any other corporation was determined on a
combined or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. Copies of all tax returns
for the fiscal years ended since December 31, 1992 have been furnished to the
Stockholders or their representatives and such copies are accurate and complete
as of the date hereof. UAG has also furnished to the Stockholders correct and
complete copies of all notices and correspondence sent or received since
December 31, 1992 by UAG or the UAG Subsidiaries to or from any
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federal, state or local tax authorities. UAG has adequately reserved for the
payment of all Taxes with respect to periods ended on, prior to or through the
Closing Date for which tax returns have not yet been filed. In the ordinary
course, UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG Subsidiaries.
Except to the extent reserves therefor are reflected on the UAG Balance Sheet or
on SCHEDULE 4.8 hereto, neither UAG nor any UAG Subsidiary is liable, or will
become liable, for any Taxes for any period ending on, prior to or through the
Closing Date. Neither UAG nor any UAG Subsidiary has been subject to a federal
or state tax audit of any kind, and no adjustment has been proposed by the IRS
with respect to any return for any subsequent year. UAG knows of no basis for
an assertion of a deficiency for Taxes against UAG or any UAG Subsidiary.
4.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 4.9(a) hereto, (i) there are no
Claims pending against, or, to the knowledge of UAG or any UAG Subsidiary,
threatened against or affecting, UAG, any UAG Subsidiary, any of their
respective officers, directors, employees, agents or Affiliates involving,
affecting or relating to any assets, properties or operations of UAG or any UAG
Subsidiary, any UAG ERISA Plan (as defined below) or any of their respective
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, nor is any
basis known to UAG, any UAG Subsidiary or any of their directors, officers,
employees or agents for any such Claims, and (ii) neither UAG nor any UAG
Subsidiary is subject to any Judgments of any governmental, administrative or
judicial authority, domestic or foreign. SCHEDULE 4.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy. As used in this Agreement, the term "UAG ERISA Plans" shall mean the
employee pension benefit plans and employee welfare benefit plans set forth on
SCHEDULE 4.17 hereto.
(b) The businesses of UAG and the UAG Subsidiaries are being
conducted in compliance with all Legal Requirements applicable to UAG or any UAG
Subsidiary or any of their respective businesses or properties, except where the
failure to be in such compliance could not have a material adverse effect on UAG
and the UAG Subsidiaries, taken as a whole. Except as set forth on SCHEDULE
4.9(b) hereto, UAG and the UAG Subsidiaries hold, and are in compliance with,
all Permits required by all applicable Legal Requirements and where the failure
to hold or be in compliance with such Permits could have a material adverse
effect on UAG and the UAG Subsidiaries, taken as a whole. A list of all such
Permits is set forth on SCHEDULE 4.9(b) hereto.
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(c) UAG and each UAG Subsidiary owns or holds all Permits material to
the conduct of its business. No event has occurred and is continuing which
permits, or after notice or lapse of time or both would permit, any modification
or termination of any Permit.
4.10 PROPERTY. The properties and assets owned by or leased to UAG and the
UAG Subsidiaries are adequate for the conduct of the respective businesses of
UAG and the UAG Subsidiaries as presently conducted. All improvements (the "UAG
Improvements") to the real property (the "UAG Real Property") owned by or leased
to UAG and each UAG Subsidiary and all machinery, equipment and other tangible
property owned or used by or leased to UAG or any UAG Subsidiary are in good
operating condition and in good repair, ordinary wear and tear excepted. Such
tangible properties and all UAG Improvements owned or leased by UAG or any UAG
Subsidiary conform in all material respects with all applicable laws,
ordinances, rules and regulations and other Legal Requirements and such UAG
Improvements do not encroach in any respect on property of others.
4.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 4.11(a) hereto, (i) UAG and each
UAG Subsidiary, the UAG Real Property, the UAG Improvements and any property
formerly owned, occupied or leased as part of the business of UAG or any UAG
Subsidiary are in full compliance with all Environmental Laws, (ii) UAG and the
UAG Subsidiaries have obtained all UAG Environmental Permits, (iii) such
Environmental Permits are in full force and effect, and (iv) UAG and the UAG
Subsidiaries are in full compliance with all terms and conditions of such UAG
Environmental Permits. As used herein, "UAG Environmental Permits" shall mean
all permits, licenses, approvals, authorizations, consents or registrations
required under applicable Environmental Laws in connection with the ownership,
use and/or operation of UAG and the UAG Subsidiaries or the UAG Real Property
and UAG Improvements. As used in this SECTION 4.11, "Hazardous Materials" shall
mean, in addition to those substances set forth in clauses (ii), (iii) and (iv)
in the second paragraph of SECTION 2.11(a) hereof, those substances included
within the definitions of or identified as "hazardous chemicals," "hazardous
waste," "hazardous substances," "hazardous materials," "toxic substances" or
similar terms in or pursuant to, without limitation, CERCLA, RCRA, OSHA, HMTA,
the Industrial Site Recovery Act (N.J.S.A. 13:1K-6, et seq.) ("ISRA"), the New
Jersey Spill Compensation and Control Act (N.J.S.A. 58:10-23.11, et seq.), the
Solid Waste Management Act (N.J.S.A. 13:1K-1 et seq.), the New Jersey
Underground Storage of Hazardous Substances Act (N.J.S.A. 58:10A-21 et seq.),
any article of the Environmental Conservation Law of New York State, including,
but not limited to, any Title of E.C.L. Article 27,
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and in the Connecticut
Hazardous Waste Law (Conn. Gen. Stat. Section 22a-114, et seq.), and in the
regulations promulgated pursuant to such laws, all as amended.
(b) UAG and the UAG Subsidiaries have not violated, done or suffered
any act which could give rise to liability under, and are not otherwise exposed
to liability under, any Environmental Law. No event has occurred with respect
to the UAG Real Property, the UAG Improvements, any property formerly owned,
occupied or leased as part of the business of UAG or any UAG Subsidiary, or UAG
or any UAG Subsidiary which, with the passage of time or the giving of notice,
or both, would constitute a violation of or non-compliance with any applicable
Environmental Law. UAG and the UAG Subsidiaries have no contingent liability
under any Environmental Law. There are no liens under any Environmental Law on
the UAG Real Property.
(c) Except as set forth on SCHEDULE 4.11(C) hereto, (i) neither UAG,
the UAG Subsidiaries, the UAG Real Property or any portion thereof, the UAG
Improvements or any property formerly owned, occupied or leased as part of the
business of UAG or any UAG Subsidiary, nor, to the knowledge of UAG, any
property adjacent to the UAG Real Property, is being used or has been used for
the treatment, generation, transportation, processing, handling, production or
disposal of any Hazardous Materials or as a landfill or other waste disposal
site, (ii) none of the UAG Real Property or portion thereof, the Improvements or
any property formerly owned, occupied or leased as part of the business of UAG
or any UAG Subsidiary has been subject to investigation by any governmental
authority evaluating the need to investigate or undertake Remedial Action (as
defined below) at such property, and (iii) none of the UAG Real Property, the
UAG Improvements or any property formerly owned, occupied or leased as part of
the business of UAG or any UAG Subsidiary, or any site or location where UAG or
any UAG Subsidiary sent waste of any kind, is identified on the current or
proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B,
(B) Comprehensive Environmental Response Compensation and Liability Inventory
System list, or (C) any list arising from any statute analogous to CERCLA.
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(d) Except as set forth on SCHEDULE 4.11(D) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos, asbestos containing materials
or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-containing
equipment, including transformers, or (iv) wetlands (as defined under any
Environmental Law) located within any portion of the UAG Real Property, nor have
any liens been placed upon any portion of the UAG Real Property, the UAG
Improvements or any property formerly owned, occupied or leased as part of the
business of UAG or any UAG Subsidiary in connection with any actual or alleged
liability under any Environmental Law.
(e) Except as set forth on SCHEDULE 4.11(E) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or known
prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving UAG or any UAG Subsidiary, the UAG Real Property,
the UAG Improvements, any property formerly owned, leased or occupied as part of
the business of UAG or any UAG Subsidiary, any offsite contamination affecting
the business of UAG or any UAG Subsidiary or any operations conducted at the UAG
Real Property, (ii) there are no ongoing negotiations with or agreements with
any governmental authority relating to any Remedial Action or other
environmentally-related claim, (iii) neither UAG nor any UAG Subsidiary has
submitted notice pursuant to Section 103 of CERCLA or analogous statute or
notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) neither UAG nor any UAG
Subsidiary has received any notice, claim, demand, suit or request for
information from any governmental or private entity with respect to any
liability or alleged liability under any Environmental Law, nor to knowledge of
UAG and the UAG Subsidiaries, has any other entity whose liability therefor, in
whole or in part, may be attributed to UAG or any UAG Subsidiary, received such
notice, claim, demand, suit or request for information.
(f) UAG and the UAG Subsidiaries have provided to Landers Auto all
environmental studies and reports pertaining to the UAG Real Property, the UAG
Improvements, UAG and the UAG Subsidiaries and any property formerly owned,
occupied or leased as part of the businesses of UAG or any UAG Subsidiary, and
has permitted (or will have permitted as of the Closing Date), the testing of
the soil, groundwater, building components, tanks, containers and equipment on
the UAG Real Property, the UAG Improvements, any property formerly owned,
occupied or leased as part of the businesses of UAG and the UAG Subsidiaries by
Landers Auto or Landers Auto's agents or experts as they have or shall have
deemed necessary or appropriate to confirm the condition of such properties.
4.12 INVENTORIES. The values at which inventories are carried on the UAG
Balance Sheet reflect the normal inventory valuation policies of UAG, and such
values are in conformity with GAAP consistently applied. All inventories
reflected on the UAG Balance Sheet or arising since the date thereof are
currently marketable and can reasonably be anticipated to be sold at normal
mark-ups within 120 days after the date hereof in the ordinary course of
business (subject to the reserve for obsolete, off-
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grade or slow-moving items that is set forth on the UAG Balance Sheet), except
for spare parts inventory which inventory is good and usable.
4.13 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the UAG
Balance Sheet or arising since the date thereof (subject to the reserve for bad
debts reflected on the UAG Balance Sheets) are good and have been collected or
are collectible, without resort to litigation or extraordinary collection
activity, within 90 days of the Closing Date, and are subject to no defenses,
set-offs or counterclaims other than normal cash discounts accrued in the
ordinary course of business of UAG and the UAG Subsidiaries.
4.14 INSURANCE. All properties and assets of UAG and the UAG Subsidiaries
which are of an insurable character are insured against loss or damage by fire
and other risks to the extent and in the manner reasonable in light of the risks
attendant to the businesses and activities in which UAG and the UAG Subsidiaries
are or have been engaged and customary for companies engaged in similar
businesses or owning similar assets.
4.15 CONTRACTS; ETC. As used in this Agreement, the term "UAG Agreements"
shall mean all mortgages, indenture notes, agreements, contracts, leases,
licenses, franchises, obligations, instruments or other commitments,
arrangements or understandings of any kind, whether written or oral, binding or
non-binding, to which UAG or any UAG Subsidiary is a party or by which UAG or
any UAG Subsidiary or any of their respective properties may be bound or
affected, including all amendments, modifications, extensions or renewals of any
of the foregoing. Set forth on SCHEDULE 4.15 hereto is a complete and accurate
list of each UAG Agreement which is material to the businesses, operations,
assets, condition (financial or otherwise) or prospects of UAG and the UAG
Subsidiaries. Neither UAG nor any UAG Subsidiary nor, to the knowledge of UAG
and each UAG Subsidiary, any other party thereto, is in breach of or default
under any UAG Agreement, and no event has occurred which (after notice or lapse
of time or both) would become a breach or default under, or would permit
modification, cancellation, acceleration or termination of, any UAG Agreement or
result in the creation of any Security Interest upon, or any person obtaining
any right to acquire, any properties, assets or rights of UAG or any UAG
Subsidiary in any such case where such breach, default or other event would
have, or could reasonably be expected to have, a material adverse effect on UAG
and the UAG Subsidiaries, taken as a whole. There are no material unresolved
disputes involving UAG or any UAG Subsidiary under any UAG Agreement.
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4.16 LABOR RELATIONS.
(a) UAG and each of the UAG Subsidiaries has paid or made provision
for the payment of all salaries and accrued wages and has complied in all
material respects with all applicable laws, rules and regulations relating to
the employment of labor, including those relating to wages, hours, collective
bargaining and the payment and withholding of taxes, and has withheld and paid
to the appropriate governmental authority, or is holding for payment not yet due
to such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of its employees.
(b) Except as set forth in SCHEDULE 4.16(b) hereto, (i) there is no
unfair labor practice charge or complaint pending before the NLRB, (ii) there is
no labor strike, material slowdown or material work stoppage or lockout actually
pending or, to UAG's or any of the UAG Subsidiaries' knowledge, threatened,
against or affecting UAG or any UAG Subsidiary, and neither UAG nor any UAG
Subsidiary has experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of UAG or any UAG Subsidiary, (iii) there is no representation claim
or petition pending before the NLRB or any similar foreign agency and no
question concerning representation exists relating to the employees of UAG or
any UAG Subsidiary, (iv) there are no charges with respect to or relating to UAG
or any UAG Subsidiary pending before the Equal Employment Opportunity Commission
or any state, local or foreign agency responsible for the prevention of unlawful
employment practices, (v) neither UAG nor any UAG Subsidiary has received formal
notice from any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws of an intention to conduct an
investigation of UAG or any UAG Subsidiary and no such investigation is in
progress and (vi) the consents of the unions that are parties to any UAG
Employment and Labor Agreements (as defined below) are not required to complete
the transactions contemplated by this Agreement and the Documents. As used in
this agreement, the term "UAG Employment and Labor Agreements" shall mean all
(i) outstanding employment agreements or contracts with officers or employees
that are not terminable at will, or that provide for the payment of any bonus or
commission, (ii) agreements, policies or practices that require UAG or any UAG
Subsidiary to pay termination or severance pay to salaried, non-exempt or hourly
employees (other than as required by law), (iii) collective bargaining
agreements or other labor union contracts applicable to persons employed by UAG
or any UAG Subsidiary.
(c) Neither UAG nor any UAG Subsidiary has ever caused any "plant
closing" or "mass layoff" as such actions are defined in the Worker Adjustment
and Retraining Notification Act, as
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codified at 29 U.S.C. Sections 2101-2109,
and the regulations promulgated therein.
4.17 EMPLOYEE BENEFIT PLANS. Set forth on SCHEDULE 4.17 hereto is a true
and complete list of:
(i) each employee pension benefit plan, as defined in Section
3(2) of ERISA, maintained by UAG or any UAG Subsidiary or to which UAG or
any UAG Subsidiary is required to make contributions; and
(ii) each employee welfare benefit plan, as defined in Section
3(1) of ERISA, maintained by UAG or any UAG Subsidiary or to which UAG or
any UAG Subsidiary is required to make contributions.
4.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS. Set forth on
SCHEDULE 4.18 hereto is a true and complete list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not a UAG ERISA
Plan, whether written or oral, which UAG or any UAG Subsidiary maintains or
is required to make contributions to; and
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director, employee or consultant of UAG or any UAG
Subsidiary pursuant to which payments may be required to be made at any
time following the date hereof (including, without limitation, any
employment, deferred compensation, severance, supplemental pension,
termination or consulting agreement or arrangement) (all of the written
plans, arrangements and agreements referred to on SCHEDULE 4.18 are
collectively referred to as the "UAG Compensation Commitments").
4.19 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 4.19 hereto is a
complete and accurate description of all material transactions between UAG or
any UAG Subsidiary or any UAG ERISA Plan, on the one hand, and any UAG Insider,
on the other hand, that have occurred since January 1, 1987. For purposes of
this Agreement, the term "UAG Insider" shall mean any director, officer, key
employee of UAG or any UAG Subsidiary, and any Affiliate, Associate or Relative
of any of the foregoing persons.
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4.20 PROPRIETY OF PAST PAYMENTS. Except as set forth in SCHEDULE 4.20
hereto, no funds or assets of UAG or any UAG Subsidiary have been used for
illegal purposes; no unrecorded funds or assets of UAG or any UAG Subsidiary
have been established for any purpose; no accumulation or use of UAG's or any
UAG Subsidiary's corporate funds or assets has been made without being properly
accounted for in the respective books and records of UAG or any UAG Subsidiary;
all payments by or on behalf of UAG and the UAG Subsidiaries have been duly and
properly recorded and accounted for in their respective books and records; no
false or artificial entry has been made in the books and records of UAG or any
UAG Subsidiary for any reason; no payment has been made by or on behalf of UAG
or any UAG Subsidiary with the understanding that any part of such payment is to
be used for any purpose other than that described in the documents supporting
such payment; and neither UAG nor any UAG Subsidiary has made, directly or
indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state, local
or foreign government agency or entity has initiated or threatened any
investigation of any payment made by UAG or any UAG Subsidiary of, or alleged to
be of, the type described in this SECTION 4.20.
4.21 BROKERS. Neither UAG nor any UAG Subsidiary, nor any director,
officer or employee thereof, has employed any broker or finder or has incurred
or will incur any broker's, finder's or similar fees, commissions or expenses,
in each case in connection with the transactions contemplated by this Agreement
or the Documents.
4.22 ACQUISITION OF THE SHARES FOR INVESTMENT. UAG is acquiring the Shares
for investment and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Shares.
4.23 DISCLOSURE. Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Companies or the Stockholders relating to this
Agreement and neither UAG nor any UAG Subsidiary has omitted to state to the
Companies or the Stockholders any material fact relating to this Agreement which
is necessary in order to make the information given by or on behalf of UAG or
any UAG Subsidiary to the Companies or the Stockholders or their representatives
at or prior to Closing not misleading. No fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be expected to
have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a
whole, which has not been disclosed in the UAG Financial Statements, the UAG
Balance Sheet, or the Schedules to this Agreement.
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ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing
Date, the Stockholders and the Company will (i) provide to the officers and
other authorized representatives of UAG full access, during normal business
hours, to any and all premises, properties, files, books, records, documents,
and other information of the Company and will cause their officers to furnish to
UAG and its authorized representatives any and all financial, technical and
operating data and other information pertaining to the businesses and properties
of the Company, and (ii) make available for inspection and copying by UAG true
and complete copies of any documents relating to the foregoing. UAG will hold
in confidence (unless and to the extent compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law) all Confidential Information (as defined below) and will not disclose
the same to any third party except in connection with obtaining financing and
otherwise as may reasonably be necessary to carry out this Agreement and the
transactions contemplated hereby, including any due diligence review by or on
behalf of UAG. If this Agreement is terminated, UAG will promptly return to the
Company, upon the reasonable request of such Company, all Confidential
Information furnished by the Company and held by UAG, including all copies and
summaries thereof. As used herein, "Confidential Information" shall mean all
information concerning the Company obtained by UAG from the Company in
connection with the transactions contemplated by this Agreement, except
information (x) ascertainable or obtained from public information, (y) received
from a third party not employed by or otherwise affiliated with the Company or
(z) which is or becomes known to the public, other than through a breach by UAG
of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS. The Stockholders and the
Company, on the one hand, and UAG, on the other hand, will, as soon as
practicable after reasonable request therefor, furnish to the other all the
information concerning the Stockholders and the Company or UAG, respectively,
required for inclusion in any statement or application made by UAG or the
Company to any governmental or regulatory body or in connection with obtaining
any third party consent in connection with the transactions contemplated by this
Agreement. Neither the Stockholders nor the Company, on the one hand, or UAG,
on the other hand, or any representative thereof, shall issue any press releases
or otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law.
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5.3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. UAG and the Stockholders and
the Company, as applicable, shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice any
notifications required to be filed by their respective "ultimate parent"
entities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "H-S-R Act"), and the rules and regulations promulgated thereunder,
with respect to the transactions contemplated herein. The parties shall use
their best efforts to make such filings promptly, to respond to any requests for
additional information made by either of such agencies, to cause the waiting
periods under the H-S-R Act to terminate or expire at the earliest possible date
and to resist vigorously, at their respective cost and expense (including,
without limitation, the institution or defense of legal proceedings), any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; PROVIDED, HOWEVER, that if UAG or the
Stockholders shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or his best interests, UAG or the
Stockholders, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in SECTION 8.2 hereof.
5.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholders shall cause the Company to,
conduct its businesses solely in the ordinary course consistent with past
practices and, without the prior written consent of UAG, neither the
Stockholders nor the Company will, except as required or permitted pursuant to
the terms hereof, permit the Company to:
(i) make any material change in the conduct of its
businesses and operations or enter into any transaction other than in the
ordinary course of business consistent with past practices;
(ii) make any change in its Certificate of Incorporation or
By-laws, issue any additional shares of capital stock or equity securities
or grant any option, warrant or right to acquire any capital stock or
equity securities or issue any security convertible into or exchangeable
for its capital stock or alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or
other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
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(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Company, or (C) issue any options
or other rights to acquire from the Company, directly or indirectly, debt
securities of the Company or any security convertible into or exchangeable
for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or
other conveyance of any of its assets or any part thereof, except
transactions pursuant to existing contracts set forth in SCHEDULE 2.16
hereto and dispositions of inventory or of worn-out or obsolete equipment
for fair or reasonable value in the ordinary course of business consistent
with past practices;
(v) subject any of its assets, or any part thereof, to any
lien or suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practices by operation of
law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) (A) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination thereof)
in respect of any shares of its capital stock which would result in the Net
Worth of the Company to decrease below $8,000,000 (provided, however, that
if the Stockholders pay any such dividend or other such distribution that
has the effect of reducing the Net Worth of the Company on the Closing Date
below $8,000,000, then, in addition to any other rights the Company has
under this Agreement (including Section 1.2 and Article 9 hereof), the
Stockholders shall contribute to the Company, within thirty (30) days of
the Closing Date, an amount equal to $8,000,000 less the Net Worth of the
Company on the Closing Date as set forth on the Estimated Closing Date
Balance Sheet), or (B) declare, set aside or pay any such dividend or other
such distribution from the consolidated net earnings of the Company for the
period commencing immediately after the date of the Closing Date Balance
Sheet and ending on the Closing Date, or (C) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or
enter into any other transaction, other than
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in the ordinary course of
business consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000;
(x) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates;
(xi) guarantee any indebtedness for borrowed money or any
other obligation of any other person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained by it (or on behalf
of it) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any person;
(xiv) make any change in any method of accounting or
accounting principle, method, estimate or practice except for any such
change required by reason of a concurrent change in GAAP or write-down the
value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with past
practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material respect
or terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
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(xvii) take any other action that would cause any of the
representations and warranties made by it in this Agreement not to remain
true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Company will cause the Company to use their reasonable best
efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws, and, in
the event it shall receive notice that there exists a violation of any
Environmental Law with respect to its operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy such violation in
accordance with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against it unless the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue
to maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
(vi) continue to conduct their business in the ordinary
course consistent with past practices.
5.5 CONTRIBUTION OR LOAN; NO INTERCOMPANY PAYABLES OR
RECEIVABLES.
(a) Prior to the Closing Date, the Stockholders will contribute or
loan an aggregate of $1,947,000 to the Company (the "Landers Payable").
(b) At the Closing, except for the Landers Payable, there will be no
intercompany payables or intercompany
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receivables due and/or owing between the
Stockholders and their Affiliates (other than the Company), on the one hand, and
the Company, on the other hand.
5.6 NEGOTIATIONS. Until the earlier of 180 days from the date hereof and
the termination of this Agreement pursuant to clause (ii) of SECTION 8.1 hereof,
no Stockholder, nor the Company, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Stockholders, the Company or such persons, shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations with, or
provide any information to, any person (other than UAG or its representatives)
concerning any merger, sale of assets (other than in the ordinary course of
business), purchase or sale of shares of capital stock or similar transaction
involving the Company. The Stockholders shall promptly communicate to UAG any
inquiries or communications concerning any such transaction (including the
identity of any person making such inquiry or communication) which any
Stockholder may receive or of which any Stockholder may become aware.
5.7 CONSENTS; COOPERATION. Subject to the terms and conditions hereof,
the Stockholders and the Company and UAG will use their respective best efforts
at their own expense:
(i) to obtain prior to the earlier of the date required (if
so required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all third
parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on their
respective parts for (A) the consummation of the transactions contemplated
by this Agreement, (B) the ownership or leasing and operating after the
Closing by the Company of all its material properties and (C) the conduct
after the Closing by the Company of its businesses as conducted by it on
the date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance
as may reasonably be requested in connection with the foregoing.
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To the extent permitted by law, UAG, on the one hand, and the Stockholders and
the Company, on the other hand, will supply each other with copies of all
correspondence, filings or written communications between UAG, any Stockholder,
the Company or their respective representatives and any governmental authority
or third party from whom consent is required to consummate the transactions
contemplated by this Agreement or members of their respective staffs with
respect to this Agreement and the transactions contemplated hereby.
5.8 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts at its own
expense to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers of the Company shall take all such necessary action.
5.9 INTERIM FINANCIAL STATEMENTS. Within thirty (30) days after the end
of each calendar month after the date of this Agreement, the Company will
deliver to UAG unaudited consolidated balance sheets of the Company, and UAG
will deliver to the Stockholders unaudited consolidated balance sheets of UAG,
in each case as at the end of such calendar month and at the end of the
corresponding calendar month of the preceding fiscal year, together with the
related unaudited consolidated statements of income and cash flow for the fiscal
months then ended. All such financial statements shall fairly present the
financial position, results of operations and cash flow of the Company and UAG,
as applicable, as at the date or for the periods indicated. All unaudited
financial statements delivered pursuant to this SECTION 5.9 shall be prepared on
a basis consistent with the Company Financial Statements and the UAG Financial
Statements, as applicable.
5.10 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Closing, each party to this Agreement will give prompt notice in writing to the
other party hereto of: (i) any information that indicates that any
representation and warranty of such party contained herein was not true and
correct as of the date hereof or will not be true and correct as of the Closing,
(ii) the occurrence of any event which could result in the failure to satisfy a
condition specified in ARTICLE 6 or ARTICLE 7 hereof, as applicable, (iii) any
notice or other communication from any third person alleging that the consent of
such third person is or may be required in connection with the transactions
contemplated by this Agreement, and (iv) in the case of the Stockholders and the
Company, any notice of, or other
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communication relating to, any default or event which, with notice or lapse of
time or both, would become a default under any Company Agreement. Each party
hereto will (x) promptly advise the other party hereto of any event that has, or
could in the future have, a Material Adverse Effect or material adverse effect
on UAG and the UAG Subsidiaries, taken as a whole, as applicable, (y) confer on
a regular and frequent basis with one or more designated representatives of the
other party to report operational matters and to report the general status of
ongoing operations, and (z) notify the other party of any emergency or other
change in the normal course of business or in the operation of the properties of
the Company and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or adjudicatory
proceedings involving any property of the Company or UAG, as applicable, and
will keep the other party fully informed of such events and permit UAG's
representatives access to all materials prepared in connection therewith. Each
Stockholder shall give prompt notice to UAG of any notice or other communication
from any third person asserting any right, title or interest in any of the
Shares held by such Stockholder (including, without limitation, any threat to
commence, or notice of the commencement of any action or other proceeding with
respect to the Shares) or the occurrence of any other event of which such
Stockholder has knowledge which could result in any failure to consummate the
sale of the Shares as contemplated hereby.
5.11 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) On the Closing Date, UAG shall make a capital contribution to the
Company in an aggregate amount equal to $1,947,000, which amount shall be used
to fund the repayment in full of the Landers Payable.
(b) After the Closing, in order to fund the acquisition of dealerships
as mutually agreed upon by UAG and the Stockholders, UAG agrees to make equity
capital contributions in cash to the Company in an aggregate amount of up to
$5,000,000 (less any amount contributed by UAG or expended by the Company in
connection with the acquisition of the Spivey Interest contemplated by SECTION
5.12 hereof) at such times and in such amounts as UAG and the Stockholders shall
mutually determine.
5.12 PURCHASE OF CHEVROLET DEALERSHIP. In the event that Steve Landers or
John Landers (or an Affiliate thereof) acquire an interest in Spivey Chevrolet,
Inc., whether through the purchase of assets, capital stock or otherwise (the
"Spivey Interest"), the Company shall own, directly or indirectly, 100% of the
Spivey Interest immediately following such acquisition. In the event that the
transactions contemplated by this Agreement are consummated, then Landers
Chevrolet shall be deemed to be a
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"Company" for all purposes under this Agreement (except ARTICLE 1 and SECTION
2.24 hereof).
5.13 OBSERVER RIGHTS. After the Closing Date and for so long as the
Stockholders own in the aggregate at least 15% of the outstanding shares of
capital stock of the Company or 5% of the outstanding shares of capital stock of
UAG (the "Observance Period"), either John Landers or Steve Landers, as they
shall to determine (the "Observer"), shall be permitted to attend and observe,
and participate in all discussions at, all meetings of UAG's Board of Directors,
provided that the Observer shall not have the right to vote on any matter
presented to, or hold an office or other position on, UAG's Board of Directors,
and provided further that the Stockholders shall keep the information and
subject matters discussed at such meetings (whether written or oral)
confidential. During the Observance Period, UAG shall provide the Observer with
written or oral notice of each meeting of UAG's Board of Directors at the same
time and in the same manner as the members of UAG's Board of Directors receive
notice of such meetings. Notwithstanding anything contained in this SECTION
5.13, the Observer's right to attend meetings of UAG's Board of Directors and to
receive information shall be subject to the right of UAG to exclude the Observer
from any meeting (or any portion thereof) of UAG's Board of Directors, or
otherwise preclude the Observer from receiving any information, relating to the
Stockholders or their Affiliates. The Observer shall be reimbursed by the
Company for his reasonable expenses in attending meetings of UAG's Board of
Directors pursuant to this SECTION 5.13.
5.14 RELEASE OF GUARANTEES. UAG shall use its best efforts to cause the
Stockholders to be released from all personal liability relating to the personal
guarantees of the Stockholders set forth on SCHEDULE 5.14 hereto.
5.15 KEY MAN LIFE INSURANCE. The Company, Steve Landers and John Landers
shall each use its best efforts to obtain key man life insurance on the life of
each of Steve Landers and John Landers in the amount of $5,000,000 each (or such
lesser amounts as UAG may determine), on terms satisfactory to UAG.
5.16 ASSURANCE BY THE STOCKHOLDERS. The Stockholders shall cause each
Company to comply with their respective covenants set forth in this Agreement.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
The obligations of UAG required to be performed by it at the Closing
shall be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by UAG as provided herein
except as otherwise required by applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. Each of the
representations and warranties of the Company and the Stockholders contained in
this Agreement shall be true and correct as of the date hereof and (having been
deemed to have been made again at and as of the Closing) shall be true and
correct as of the Closing. Each of the obligations of the Company and the
Stockholders required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all respects as
of the Closing. At the Closing, UAG shall have received a certificate, dated
the Closing Date and duly executed by Steve Landers or John Landers and the
chief financial officer of each Company, to the effect that the conditions set
forth in the two preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS. (a) All corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
Documents, and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Company. All filings
required to be made under the H-S-R Act in connection with the transactions
contemplated hereby shall have been made and all applicable waiting periods with
respect to each such filing, including any extensions thereof, shall have
expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDERS' COUNSEL. UAG shall
have been furnished with the opinion of Davidson, Horne & Hollingsworth, counsel
for the Company and the Stockholders, dated the Closing Date, in form and
substance satisfactory to UAG and its counsel, which opinion shall have been
rendered with respect to those matters contained in SECTIONS
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2.1, 2.2, 2.3, 2.4, 2.9, 3.1 AND 3.2 hereof. In rendering the foregoing
opinion, such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of the Company and by government
officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such counsel may specify the state
or states in which they are admitted to practice, that they are not admitted to
the Bar in any other state or experts in the law of any other state and that
such opinions are limited to Arkansas and federal laws and the General
Corporation Law of the State of Delaware.
6.4 ABSENCE OF LITIGATION. No order, stay, injunction or decree of any
court of competent jurisdiction in the Untied States shall be in effect (i) that
prevents or delays the consummation of any of the transactions contemplated
hereby or (ii) would impose any limitation on the ability of UAG effectively to
exercise full rights of ownership of the Shares. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this Agreement
or seeking damages in connection therewith which UAG, in good faith and with the
advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT. During the period from December 31, 1993
to the Closing Date, there shall not have been any material adverse change in
the assets, properties, business, operations, prospects, net income or financial
condition of the Company.
6.6 WORKING CAPITAL REQUIREMENTS. On the Closing Date, the Stockholders
shall deliver to UAG a consolidated balance sheet of the Company dated as of the
last day of the month immediately preceding the Closing Date (or such later date
as is practicable), in each case prepared in accordance with the Accounting
Principles (the "Estimated Closing Date Balance Sheet"). The Estimated Closing
Date Balance Sheet shall show as of the date thereof, after taking into account
the transactions contemplated by SECTION 5.5 hereof and the payment of any of
the Stockholders' fees, costs and expenses by the Company incurred in connection
with this Agreement, consolidated net working capital of not less than such
amount as shall be agreed upon by UAG and the Stockholders prior to the Closing
Date (the "Minimum Working Capital Amount") and set forth on SCHEDULE 6.6
hereto. If the consolidated net working capital of the Company on the Closing
Date (the "Actual Working Capital Amount") is less than the
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Minimum Working Capital Amount and UAG waives satisfaction of the condition to
Closing set forth in the second sentence of this SECTION 6.6, within thirty (30)
days of the Closing Date, UAG, at its sole option, can require the Stockholders
to loan to the Company an amount up to an amount equal to the Minimum Working
Capital Amount less the Actual Working Capital Amount. In the event UAG elects
to exercise the foregoing option, in consideration therefor, the Company will
issue the Working Capital Note to the Stockholders on the date such loan is made
to the Company.
6.7 COMPLETION OF DUE DILIGENCE. UAG shall have completed their due
diligence examination of the Company and the results of such examination,
including any Phase I or Phase II environmental audits of the Company, shall be
satisfactory to UAG.
6.8 EMPLOYMENT AGREEMENTS. The Company and Steve Landers, John Landers
and Dwight Everett shall have entered into the Steve Landers Employment
Agreement, the John Landers Employment Agreement and the Everett Employment
Agreement, respectively.
6.9 LEASES. The Stockholders and UAG shall have entered into the Leases.
6.10 SHAREHOLDERS AGREEMENT. UAG, Landers Auto, Steve Landers and John
Landers shall have entered into the Shareholders Agreement.
6.11 REGISTRATION RIGHTS AGREEMENT. Steve Landers and John Landers shall
have become a party to the Registration Rights Agreement.
6.12 BOARD APPROVAL. The Board of Directors of UAG shall have approved the
consummation of all of the transactions contemplated by this Agreement and the
Documents.
6.13 CERTIFICATES. The Stockholders and the Company shall have furnished
UAG with such certificates of its officers and others as UAG may reasonably
request to evidence compliance with the conditions set forth in this ARTICLE 6.
6.14 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the
Stockholders and the Company under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholders and the Company in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
UAG.
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders required to be performed by them
at the Closing shall be subject to the satisfaction, at or prior to the Closing,
of each of the following conditions, each of which may be waived by any
Stockholder on behalf of all of the Stockholders as provided herein except as
otherwise required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the
representations and warranties of UAG contained in this Agreement shall be true
and correct as of the date hereof and (having been deemed to have been made
again at and as of the Closing) shall be true and correct as of the Closing.
Each of the obligations of UAG required by this Agreement to be performed by it
at or prior to the Closing shall have been duly performed and complied with in
all respects as of the Closing. At the Closing, the Stockholders shall have
received a certificate, dated the Closing Date and duly executed by the chief
executive officer and chief financial officer of UAG to the effect that the
conditions set forth in the preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS. (a) All corporate action
necessary to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby shall have been
duly and validly taken by UAG. All filings required to be made under the H-S-R
Act in connection with the transactions contemplated hereby shall have been made
and all applicable waiting periods with respect to each such filing (including
any extensions thereof) shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
7.3 OPINIONS OF UAG'S COUNSEL. The Stockholders shall have been furnished
with opinions of Willkie Farr & Gallagher, counsel to UAG, and such other local
counsel selected by UAG (and reasonably satisfactory to counsel for the
Stockholders), each dated the Closing Date, in form and substance satisfactory
to the Stockholders, which opinions, when taken together, shall have
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been rendered with respect to those matters contained in SECTIONS 4.1, 4.2, 4.3,
4.4 AND 4.9 hereof. In rendering the foregoing opinions, such counsel may rely
as to factual matters upon certificates or other documents furnished by officers
and directors of UAG and by government officials, and upon such other documents
and data as such counsel deem appropriate as a basis for their opinions. Such
counsel may specify the state or states in which they are admitted to practice,
that they are not admitted to the Bar in any other state or experts in the law
of any other state and that such opinions are limited to New York and federal
laws and the General Corporation Law of the State of Delaware, and in the case
of local counsel selected by UAG, to Arkansas law.
7.4 ABSENCE OF LITIGATION. No order, stay, judgment or decree shall have
been issued by any court and be in effect restraining or prohibiting the
consummation of the transactions contemplated hereby.
7.5 EMPLOYMENT AGREEMENT. The Company and Steve Landers and John Landers
shall have entered into the Steve Landers Employment Agreement and the John
Landers Employment Agreement, respectively.
7.6 LEASES. The Stockholders and UAG shall have entered into the Leases.
7.7 SHAREHOLDERS AGREEMENT. UAG, Landers Auto, Steve Landers and John
Landers shall have entered into the Shareholders Agreement.
7.8 REGISTRATION RIGHTS AGREEMENT. Steve Landers and John Landers shall
have become a party to the Registration Rights Agreement.
7.9 CERTIFICATES. UAG shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Stockholders.
7.10 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of UAG under the
provisions of this Agreement, and all other actions and proceedings required to
be taken by or on behalf of UAG in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholders.
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ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing:
(i) by mutual consent of UAG and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall
not have taken place on or prior to August 31, 1995, or such later date as
shall have been approved by UAG and the Stockholders (provided that the
terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this Agreement);
(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG if any of the conditions specified in ARTICLE 6
hereof have not been met or waived by at such time as such condition is no
longer capable of satisfaction (provided UAG is not otherwise in material
breach of its representations, warranties, covenants or agreements under
this Agreement);
(v) by the Stockholders if any of the conditions specified
in ARTICLE 7 hereof have not been met or waived by any Stockholder at such
time as such condition is no longer capable of satisfaction (provided that
neither any Stockholder nor the Company is otherwise in material breach of
his or its representations, warranties covenants or agreements under this
Agreement); or
(vi) by either UAG or the Stockholders if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured within ten (10) Business Days following receipt by the breaching
party of written notice of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
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8.2 EFFECT OF TERMINATION. Except (i) for any breach of this Agreement
prior to its termination, (ii) for the obligations contained in SECTIONS 5.1 AND
10.2 hereof and (iii) as set forth in SECTION 9.1 hereof, upon the termination
of this Agreement pursuant to SECTION 8.1 hereof, this Agreement shall forthwith
become null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDERS. Notwithstanding the Closing or
the delivery of the Shares, each Stockholder, jointly and severally, indemnifies
and agrees to fully defend, save and hold harmless on an after-tax basis UAG,
the Company, and any of their respective officers, directors, employees,
stockholders, advisors, representatives, agents and Affiliates (each a "UAG
Indemnified Party"), if a UAG Indemnified Party (including the Company after the
Closing Date) shall at any time or from time to time suffer any Costs (as
defined in SECTION 9.7 below) arising, directly or indirectly, out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
(i) any and all Events of Breach (as defined below) or (ii) any Claim before or
by any court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, which Claim involves, affects or relates to any assets,
properties or operations of the Company or the conduct of the business of the
Company prior to the Closing Date (a "Landers Third Party Claim"). As used
herein, "Event of Breach" shall be and mean any one or more of the following:
(i) any untruth or inaccuracy in any representation of the Stockholders or the
Company or the breach of any warranty of the Stockholders or the Company
contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by the
Stockholders or the Company (or any representative of the Stockholders or the
Company) to UAG (or any representative of UAG) and any misrepresentation in or
omission from any document furnished to UAG in connection with the Closing, and
(ii) any failure of any Stockholder or the Company duly to perform or observe
any term, provision, covenant, agreement or condition on the part of such
Stockholder or the Company to be performed or observed.
9.2 INDEMNIFICATION BY UAG. Notwithstanding the Closing, UAG indemnifies
and agrees to fully defend, save and hold harmless on an after-tax basis the
Stockholders, the Company, and
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any of their respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "Landers Indemnified Party"), if
a Landers Indemnified Party shall at any time or from time to time suffer any
Costs arising, directly or indirectly, out of or resulting from, or shall pay or
become obligated to pay any sum on account of, (i) any and all UAG Events of
Breach (as defined below) or (ii) any Claim before or by any court, arbitrator,
panel, agency or other governmental, administrative or judicial entity, which
Claim involves, affects or relates to any assets, properties or operations of
UAG or the conduct of the business of UAG prior to the Closing Date (a "UAG
Third Party Claim"). As used herein, "UAG Event of Breach" shall be and mean
any one or more of the following: (i) any untruth or inaccuracy in any
representation of UAG or the breach of any warranty of UAG contained in this
Agreement, including, without limitation, any misrepresentation in, or omission
from, any statement, certificate, schedule, exhibit, annex or other document
furnished pursuant to this Agreement by UAG (or any representative of UAG) to
the Stockholders (or any representative of the Stockholders) and any
misrepresentation in or omission from any document furnished to the Stockholders
in connection with the Closing, and (ii) any failure of UAG duly to perform or
observe any term, provision, covenant, agreement or condition on the part of UAG
to be performed or observed.
9.3 PROCEDURES. If (i) any Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that a Stockholder has become obligated to a UAG
Indemnified Party pursuant to SECTION 9.1, or if any Third Party Claim is begun,
made or instituted as a result of which a Stockholder may become obligated to a
UAG Indemnified Party hereunder, or (ii) a UAG Event of Breach occurs or is
alleged and a Landers Indemnified Party asserts that UAG has become obligated to
a Landers Indemnified Party pursuant to SECTION 9.2, or if any UAG Third Party
Claim is begun, made or instituted as a result of which UAG may become obligated
to a Landers Indemnified Party hereunder (for purposes of this ARTICLE 9, any
UAG Indemnified Party and any Landers Indemnified Party is sometimes referred to
as an "Indemnified Party" and UAG and the Stockholders are sometimes referred to
as an "Indemnifying Party," and any UAG Third Party Claim and any Landers Third
Party Claim is sometimes referred to as a "Third Party Claim," in each case as
the context so requires), such Indemnified Party shall give written notice to
the Indemnifying Party of its or his obligation to provide indemnification
hereunder, provided that any failure to so notify the Indemnifying Party shall
not relieve them from any liability that it or he may have to the Indemnified
Party under this ARTICLE 9. If such notice relates to a Third Party Claim, each
Indemnifying Party, jointly and severally, agrees to defend, contest or
otherwise protect such Indemnified Party against any
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such Third Party Claim at his or its sole cost and expense. Such Indemnified
Party shall have the right, but not the obligation, to participate at its own
expense in the defense thereof by counsel of such Indemnified Party's choice and
shall in any event cooperate with and assist the Indemnifying Party to the
extent reasonably possible. If the Indemnifying Party fails timely to defend,
contest or otherwise protect against such Third Party Claim, such Indemnified
Party shall have the right to do so, including, without limitation, the right to
make any compromise or settlement thereof, and such Indemnified Party shall be
entitled to recover the entire Cost thereof from the Indemnifying Party,
including, without limitation, attorneys' fees, disbursements and amounts paid
(or of which such Indemnified Party has become obligated to pay) as the result
of such Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party Claim
within fifteen (15) days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its or
their right to defend such Third Party Claim. If the Indemnifying Party assumes
the defense of the particular Third Party Claim, the Indemnifying Party shall
not, in the defense of such Third Party Claim, consent to entry of any judgment
or enter into any settlement, except with the written consent of such
Indemnified Party. In addition, the Indemnifying Party shall not enter into any
settlement of any Third Party Claim (except with the written consent of such
Indemnified Party) which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to such Indemnified Party a full release
from all liability in respect of such Third Party Claim. Notwithstanding the
foregoing, the Indemnifying Party shall not be entitled to control (but shall be
entitled to participate at their own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement of any Third Party Claim to the extent the Third Party Claim seeks an
order, injunction or other equitable relief against the Indemnified Party which,
if successful, could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified Party.
9.4 LIMITATION ON INDEMNIFICATION.
(a) INDEMNIFICATION BY THE STOCKHOLDERS.
(i) A UAG Indemnified Party shall be entitled to indemnification in
connection with an Event of Breach only if the aggregate Costs incurred or
sustained by all UAG Indemnified Parties exceed the Basket (as defined in
SECTION 9.7 hereof); PROVIDED, HOWEVER, that, notwithstanding the Basket, a UAG
Indemnified Party shall be entitled to indemnification for all Costs incurred or
sustained by such UAG Indemnified Party as a
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result of any untruth or inaccuracy in, or breach of, a representation, warranty
or covenant (or failure to perform or observe any term, agreement or condition)
contained in SECTIONS 1.1, 1.2, 2.3, 2.8, 2.11, 3.1, 5.4(A)(II), 5.4(A)(VI),
5.4(B)(III), 5.5 AND 10.2 hereof.
(ii) The aggregate Costs for which the Stockholders shall be
obligated to indemnify the UAG Indemnified Parties shall not exceed $2,000,000
in the case of Costs incurred or sustained by all UAG Indemnified Parties in
connection with an Event of Breach; PROVIDED, HOWEVER, a UAG Indemnified Party
shall be entitled to indemnification for all Costs incurred or sustained by such
UAG Indemnified Party as a result of any untruth or inaccuracy in, or breach of,
a representation, warranty or covenant (or failure to perform or observe any
term, agreement or condition) contained in Sections 1.1, 1.2, 2.3, 2.8, 2.11,
3.1, 5.4(a)(ii), 5.4(a)(vi), 5.4(b)(iii), 5.5 and 10.2 hereof.
(b) INDEMNIFICATION BY UAG.
(i) A Landers Indemnified Party shall be entitled to indemnification
in connection with a UAG Event of Breach only if the aggregate Costs incurred or
sustained by all Landers Indemnified Parties exceed the Basket; PROVIDED,
HOWEVER, that, notwithstanding the Basket, a Landers Indemnified Party shall be
entitled to indemnification for all Costs incurred or sustained by such Landers
Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a
representation, warranty or covenant (or failure to perform or observe any term,
agreement or condition) contained in SECTIONS 1.1, 4.3, 4.8, 4.11 AND 10.2
hereof.
(ii) The aggregate Costs for which UAG shall be obligated to
indemnify the Landers Indemnified Parties shall not exceed $2,000,000 in the
case of Costs incurred or sustained by all Landers Indemnified Parties in
connection with a UAG Event of Breach; PROVIDED, HOWEVER, a Landers Indemnified
Party shall be entitled to indemnification for all Costs incurred or sustained
by such Landers Indemnified Party as a result of any untruth or inaccuracy in,
or breach of, a representation, warranty or covenant (or failure to perform or
observe any term, agreement or condition) contained in SECTIONS 1.1, 4.3, 4.8,
4.11 AND 10.2 hereof.
9.5 OFFSET. In addition to and not in limitation of all rights of offset
that an Indemnified Party may have under applicable law, the parties agree that,
at any Indemnified Party's option, any or all amounts owing to such Indemnified
Party under this ARTICLE 9 or any other provision of this Agreement or any other
liability of the other parties (or any Affiliate of the other parties) to such
Indemnified Party in
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connection with any of the Documents, may be recovered by the Indemnified Party
by an offset against any or all amounts due to such other parties pursuant to
this Agreement or the Documents.
9.6 REMEDIES. The rights of an Indemnified Party under this ARTICLE 9 are
in addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
9.7 DEFINITIONS. For purposes of this ARTICLE 9:
(a) "Basket" shall mean an amount equal to the Net Worth of the
Company as reflected on the Reviewed Balance Sheet less $7,500,000, provided
that in no event shall such amount exceed $500,000 for purposes of this ARTICLE
9. For purposes of determining whether the Basket has been exceeded, none of
the Stockholders' or UAG's representations and warranties shall be deemed to
include any qualifier in respect of a Material Adverse Effect or any other
qualifier in respect of materiality.
(b) "Costs" shall mean all liabilities, losses, costs, damages (not
including consequential damages), expenses, claims, attorneys' fees, experts'
fees, consultants' fees, and disbursements of any kind or of any nature
whatsoever. For purposes of application of the indemnity provisions of this
ARTICLE 9, the amount of any Cost arising from the breach of any representation,
warranty, covenant or agreement shall be the entire amount of any Cost suffered,
paid or required to be paid by the respective Indemnified Party as a result of
such breach and not just that portion of the Cost that exceeds the relevant
level of materiality.
9.8 INDEMNIFYING STOCKHOLDERS. Notwithstanding anything else contained in
this ARTICLE 9 to the contrary, for purposes of this ARTICLE 9, all references
to the term "Stockholder" or "Stockholders" shall be deemed to refer to Steve
Landers and John Landers only, and not Bob Landers, except that the term
"Stockholder" or "Stockholders" shall also be deemed to refer to Bob Landers if
there is an Event of Breach arising out of any untruth or inaccuracy in, or
breach of, a representation or warranty contained in SECTIONS 3.1 AND 3.2
hereof.
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ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, subject to
SECTION 10.1(b) below. In the event of a breach of any such representations,
warranties or covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for such breach
available to it under the provisions of this Agreement or otherwise, whether at
law or in equity, regardless of any disclosure to, or investigation made by or
on behalf of, such party on or before the Closing Date.
(b) Each of the representations and warranties set forth in ARTICLE
2, ARTICLE 3 and ARTICLE 4 hereof shall be deemed represented and made by the
Stockholders and the Company and UAG, as applicable, at the Closing as if made
at such time and shall survive (and not be affected in any respect by) the
Closing for a period terminating on the later of (i) the date three years after
the Closing Date, and (ii) with respect to any claim asserted with respect to
any breach of such representation or warranty or pursuant to SECTION 9.3 hereof
before the expiration of such representation or warranty, on the date such claim
is finally liquidated or otherwise resolved, except with respect to the
representations and warranties (i) in SECTIONS 2.8 AND 4.6, which shall survive
for six years following the due date (including extensions) of the income tax
returns of the Companies for the first taxable year (as defined in Section
441(b) of the Code) which will end after the Closing Date, (ii) in SECTIONS
2.11, 2.18 AND 4.13, which shall survive the Closing Date for a period of time
equal to any applicable statute of limitations, (iii) in SECTIONS 2.5 AND 4.5,
which shall survive until April 1, 1996, and (iv) in SECTION 3.1, which shall
survive indefinitely.
10.2 FEES AND EXPENSES. Except as otherwise expressly provided in this
Agreement, all legal and other fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby through the Closing
Date shall be paid by the party incurring such fees, costs or expenses;
PROVIDED, HOWEVER, that if the Closing does not occur and SECTION 5.6 hereof is
breached, then the Stockholders or the Company shall pay to UAG, within five (5)
Business Days after receipt of a request therefor, an amount equal to all of the
legal and other
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fees, costs and expenses incurred by UAG in connection with this Agreement and
the transactions contemplated hereby; PROVIDED FURTHER, HOWEVER, that if the
Closing does not occur solely as a result of UAG's failure to obtain the consent
of the automobile manufacturers contemplated by SECTION 7.2(B) hereof, then UAG
shall pay to the Shareholders, within five (5) Business Days after receipt of a
request therefor, an amount equal to all of the legal and other fees, costs and
expenses incurred by the Shareholders in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, any fees,
costs and expenses of, or any liabilities or obligations to, Geneva Capital
Markets, Inc. and/or John Dorey incurred in connection with this Agreement and
the transactions contemplated hereby shall be the sole responsibility of the
Stockholders and in no event will such fees, costs and expenses be the
responsibility of UAG or, after Closing, the Company.
10.3 HEADINGS. The section headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
10.4 NOTICES. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand, recognized overnight delivery service or facsimile transmission or
mailed by registered or certified mail, postage prepaid (return receipt
requested), as follows:
If to the Company before the Closing Date:
Landers Auto Sales, Inc.
Congo Exit 118 -- Highway I-30
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
Attn: Mr. Steve Landers
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 72203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
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If to the Company after the Closing Date (in addition to the foregoing
addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
If to any Stockholder:
Mr. Steve Landers
3316 Highway 5
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 72203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
If to UAG:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
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with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto (and with respect to
the Stockholders, the personal representatives and heirs of the Stockholders)
and their respective successors and permitted assigns, and the provisions of
ARTICLE 9 hereof shall inure to the benefit of the Indemnified Parties referred
to therein; PROVIDED, HOWEVER, that neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG shall have the unrestricted right to assign
this Agreement and to delegate all or any part of its obligations hereunder to
any Affiliate of UAG, but in such event UAG shall remain fully liable for the
performance of all of such obligations in the manner prescribed in this
Agreement.
10.6 ENTIRE AGREEMENT. This Agreement (including the Schedules hereto) and
the Documents embody the entire agreement and understanding of the parties with
respect to the transactions contemplated hereby and supersede all prior written
or oral commitments, arrangements or understandings between the parties with
respect thereto and all prior drafts of this Agreement. There are no
restrictions, agreements, promises, warranties, covenants or undertakings with
respect to the transactions contemplated hereby other than those expressly set
forth herein or in the Documents. Prior drafts of this Agreement shall not be
used as a basis for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS. Each of the Stockholders, the Company and UAG
may by written notice to the other parties (i) extend the time for the
performance of any of the obligations or other actions of the other parties,
(ii) waive any inaccuracies in the representations or warranties of the other
parties contained in this Agreement, (iii) waive compliance with any of
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the covenants of the other parties contained in this Agreement, (iv) waive
performance of any of the obligations of the other parties created under this
Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF ARKANSAS.
10.10 ACCOUNTING TERMS. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP.
10.11 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" of a specified person shall mean a person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified, and in the
case of a specified person who is a natural person, his spouse, his issue, his
parents, his estate and any trust entirely for the benefit of his spouse and/or
issue.
(b) "best efforts" shall be deemed to not include any obligation on
the part of any person to undertake any liabilities, expend any funds or perform
any acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such person; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions which are normally incident to or reasonably
foreseeable in connection with such obligation or the transactions contemplated
hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(d) "Documents" shall mean the Steve Landers Employment Agreement,
the John Landers Employment Agreement, the Shareholders Agreement, the UAG
Guaranty, the UAG Note I, the UAG Note II, the Leases and the Registration
Rights Agreement.
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(e) "GAAP" shall mean generally accepted accounting principles which,
for purposes of Sections 1.3 and 1.4 hereof, are in effect in the United States
on the Closing Date.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which is, or might be, materially
adverse to the business, operations, assets, condition (financial or otherwise)
or prospects of such Company.
(g) "person" shall mean and include an individual, corporation,
partnership, joint venture, association, trust, any other unincorporated
organization or entity and a governmental entity or any department or agency
thereto.
10.12 SCHEDULES. Disclosure of any matter in any Schedule hereto or in the
Financial Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
10.13 SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.14 REMEDIES. None of the remedies provided for in this Agreement,
including termination of this Agreement as set forth in ARTICLE 8,
indemnification as set forth in ARTICLE 9, the payment of certain fees, costs
and expenses as set forth in SECTION 10.2 or specific performance as set forth
in this SECTION 10.14, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies provided
in this Agreement, including an action for damages for breach of contract.
10.15 THE COMPANY. For purposes of this Agreement, any reference to the
"Company" as of a date prior to December 22, 1994 (the date on which Landers
Oldsmobile-GMC, Inc. and Landers Jeep-Eagle, Inc., previously wholly-owned
subsidiaries of the Company, were merged with and into the Company) shall also
be deemed to refer to Landers Oldsmobile-GMC, Inc. and Landers Jeep-Eagle, Inc.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LANDERS AUTO SALES, INC. UNITED AUTO GROUP, INC.
By: /s/ Steve Landers By: /s/ Carl Spielvogel
--------------------------- --------------------------
Name: Steve Landers Name: Carl Spielvogel
Title: President Title: Chairman and
Chief Executive Officer
THE STOCKHOLDERS:
/s/ Steve Landers
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Steve Landers
/s/ John Landers
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John Landers
/s/ Bob Landers
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Bob Landers
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