STOCK PURCHASE AGREEMENT
DATED SEPTEMBER 5, 1996
AMONG
UNITED AUTO GROUP, INC.,
UAG TENNESSEE, INC.,
STANDEFER MOTOR SALES, INC.
d/b/a STANDEFER NISSAN,
CHARLES A. STANDEFER
AND
CHARLES A. STANDEFER AND KAREN S. NICELY,
TRUSTEES UNDER THE IRREVOCABLE TRUST AGREEMENT
OF CHARLES B. STANDEFER
FOR THE PRIMARY BENEFIT OF CHILDREN
DATED DECEMBER 21, 1992
This STOCK PURCHASE AGREEMENT, dated September 5, 1996 is by and among
United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Tennessee, Inc., a
Delaware corporation ("Sub"), Standefer Motor Sales, Inc., a Tennessee
corporation d/b/a Standefer Nissan (the "Company"), Charles A. Standefer
("Standefer") and Charles A. Standefer and Karen S. Nicely Trustees under the
Irrevocable Trust Agreement of Charles B. Standefer for the primary benefit of
Children dated December 21, 1992 (the "Trust" and together with Standefer, the
"Stockholders").
W I T N E S S E T H:
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WHEREAS, the Company operates a Nissan automobile dealership and related
businesses in Chattanooga, Tennessee;
WHEREAS, the Stockholders own all of the issued and outstanding shares of
common stock, no par value, of the Company (the "Common Stock");
WHEREAS, Sub is a wholly-owned subsidiary of UAG; and
WHEREAS, Sub desires to purchase all of the issued and outstanding shares
of Common Stock from the Stockholders (such shares being collectively referred
to herein as the "Shares"), and the Stockholders desire to sell the Shares to
Sub (upon the terms and subject to the conditions set forth in this Agreement),
such that immediately after giving effect to such purchase and sale, Sub will
own one hundred (100%) percent 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 Sub, and Sub shall
purchase from the Stockholders, the Shares for an aggregate purchase price equal
to Eighteen Million Two Hundred Thousand Dollars ($18,200,000) (the "Base
Price"), which Base Price is subject to adjustment after Closing as provided in
SECTION 1.2 hereof. At the Closing referred to in SECTION 1.1(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver
to Sub the Shares representing 100% of the outstanding Common Stock,
free and clear of all Liens (as defined in SECTION 10.11), and shall
deliver the certificates representing such Shares accompanied by
stock powers duly executed in blank; and
(ii) Sub shall accept and purchase the Shares from the
Stockholders and in payment therefor shall deliver to the Stockholders
immediately available funds in an aggregate amount equal to the Base
Price less the Escrow Amount (as defined in Section 1.3) by certified
funds; and
(iii) the Escrow Agent (as defined in SECTION 1.3) shall deliver
to the Stockholders the Escrow Amount pursuant to the terms of the
Escrow Agreement.
(b) 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 a location to be agreed upon by the parties, on the earlier of the
UAG Public Offering Date (as defined in SECTION 10.11) or a mutually agreeable
date no later than January 3, 1997. The date on which the Closing occurs is
herein referred to as the "Closing Date".
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth in
this Agreement, at the Closing:
(i) the Stockholders shall deliver to Sub (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 Sub 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) Sub shall pay and deliver to the Stockholders funds as
required by SECTION 1.1(a)(ii) hereof and all opinions, certificates
and other instruments and documents required to be delivered by Sub at
or prior to the Closing or otherwise required in connection herewith;
(iii) Standefer Investment Company, a Tennessee limited
partnership ("Landlord") and the Company shall enter into a lease for
the real property used in the business of the Company and known as
2121 Chapman Road, Chattanooga, Hamilton County, Tennessee 37412 in a
form mutually acceptable to the parties (the "Lease") and UAG shall
guarantee the performance of the obligations of Sub thereunder. The
Lease shall be for a twenty (20) year term commencing on the Closing
Date. The initial monthly lease rate shall be Twenty Seven Thousand
Five Hundred Dollars ($27,500), and (x) on the fifth anniversary of
the Closing Date the monthly lease rate shall be adjusted to an amount
equal to the greater of the then current lease rate and nine-tenths of
one percent (0.9%) of the then Appraised Value (as defined below), and
(y) on the tenth anniversary of the Closing Date the monthly lease
rate shall be adjusted to an amount equal to the greater of the then
current lease rate and one percent (1%) of the then Appraised Value,
and (z) on the fifteenth anniversary of the Closing Date the lease
rate shall be adjusted to an amount equal to the greater of the then
current lease rate and one percent (1%) of the then Appraised Value.
The Lease shall provide the Company
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with the option to extend the lease term for an additional five-year
period (the "First Option") commencing on the twentieth anniversary of
the Closing Date at a monthly lease rate equal to the greater of the
then current lease rate and one and five-one hundredths percent
(1.05%) of the then Appraised Value. The Lease shall further provide
that, in the event the Company exercises the First Option, the Company
shall have the option to extend the lease term for an additional
five-year period commencing with the twenty-fifth anniversary of the
Closing Date at a monthly lease rate equal to the greater of the then
current lease rate and one and five-one hundredth percent (1.05%) of
the then Appraised Value. For purposes of this section, Appraised
Value shall mean the value of the real property assuming it is leased
for use as a car dealership as appraised by a certified appraiser
agreed to by the lessor and lessee.
(iv) Sub, and the Company shall enter into an employee
agreement with Karen S. Nicely ("Nicely") in a form mutually
acceptable to UAG, Sub and Nicely (the "Employment Agreement"). The
Employment Agreement shall provide that Nicely shall be employed as
Executive Manager of the Company.
1.2 NET WORTH ADJUSTMENT.
(a) As soon as practicable after the Closing Date, the Stockholders
shall deliver to Sub a balance sheet of the Company dated as of the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). UAG shall reimburse the Company for reasonable fees or
expenses incurred by the Company's certified public accountant in connection
with the preparation of the Closing Date Balance Sheet or the Estimated Closing
Date Balance Sheet referred to in SECTION 6.6. 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 set forth on SCHEDULE 1.2(a) hereto (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
and the Reviewer (as defined below) and other representatives of Sub will
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, Sub
and the Stockholders (or the respective representatives thereof) will prepare a
schedule, which shall be signed by each of Sub and the Stockholders, setting
forth the nature and quality of such inventory and such other items as shall be
agreed upon by Sub and the Stockholders to be included in the Closing Date
Balance Sheet.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the
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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, computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(iii)
hereof. Sub 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 Sub 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 to the Stockholders of the Reviewed Balance Sheet to present in writing
to Sub 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.
During said forty-five (45) day period, the Stockholders, their accountants and
other representatives of the Stockholders may examine Reviewer's work papers,
schedules, research notes and all correspondence between Reviewer and Sub or UAG
or any representative of Sub or UAG, which relate to the Closing Date Balance
Sheet or Reviewed Balance Sheet and any entry thereto made or considered by
Reviewer. 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 Sub and the
Stockholders.
(d) If the Stockholders shall raise any objection within the 45-day
period, Sub 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 Sub 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
certified public accountants having a reputation for special expertise in
automobile dealership accounting and mutually acceptable to Sub 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 determination to
Sub and the Stockholders and the Supplemental Closing, if any, shall take place
five (5) Business Days following the receipt of such determination by Sub 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 Sub and one half by the
Stockholders.
(f) Sub and the Stockholders agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected by
Sub and the Stockholders
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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
shall be less than Five Million Ninety Thousand Dollars ($5,090,000) (the amount
of any such deficiency being referred to herein as the "Net Worth Deficiency"),
the Stockholders shall pay to Sub at the Supplemental Closing, by wire transfer
of immediately available funds to an account designated in writing by Sub 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) If the Net Worth as shown on the Closing Date Balance Sheet is
equal to or greater than Five Million Ninety Thousand Dollars ($5,090,000) and
the Net Worth as shown on the Reviewed Balance Sheet as finally determined
through the operation of SECTIONS 1.2(a) THROUGH (e) hereof shall be greater
than the Net Worth as shown on the Closing Date Balance Sheet (the amount of any
such excess being referred to herein as the "Net Worth Excess"), Sub shall pay
to the Stockholders at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing within two (2) Business Days
of the Supplemental Closing, an amount equal to the Net Worth Excess, 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.).
(iii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets (plus the amount of any Last-In First-Out ("LIFO") inventory
reserves) 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.
1.3 ESCROW.
Within 5 days of 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, Sub shall deposit into escrow funds in the amount of
Five Hundred Thousand Dollars ($500,000) (the "Escrow Amount") by delivering
such funds to Rogers & Hardin (the "Escrow Agent") which Escrow Amount shall be
held and disbursed by the Escrow Agent pursuant to the terms of an escrow
agreement to be agreed upon by the parties.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that certain of the
Schedules referred to in this ARTICLE 2 are to be delivered by the Company and
the Stockholders no later than September 6, 1996, the Company and the
Stockholders hereby jointly and severally represent and warrant to UAG and Sub
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 Tennessee 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 jurisdiction where qualification as a foreign corporation is required,
except where the lack of such qualification would not have a material adverse
effect on the financial condition of the Company. SCHEDULE 2.1(a) 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 and has
conducted business during the past five years. Attached as SCHEDULE 2.1(b) are
complete and correct copies of the Company's Charter and Bylaws as amended and
presently in effect.
2.2 SUBSIDIARIES.
Except as set forth in SCHEDULE 2.2 hereof, 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 that are issued and outstanding are set forth on SCHEDULE 2.3(a) 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. Except for the stock
restriction agreement set forth on SCHEDULE 2.3(b) hereto (the "Stock
Restriction Agreement") which will be terminated prior to the Closing Date,
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 provided in this Agreement. The Company has not
agreed to register any securities under the Securities Act.
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2.4 AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement 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 transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by, and constitutes a valid and
binding obligation of, the Company, enforceable against the Company in
accordance with its terms. The execution, delivery and performance by the
Company and the Stockholders of this Agreement and the Lease and the
consummation of the transactions contemplated hereby and thereby do not and will
not:
(i) contravene any provisions of the Charter or By-Laws of the
Company;
(ii) to the knowledge of the Company or the Stockholders,
(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, require any consent or waiver of
any party to any Company Agreement, except where such conflict or
default would not have a material adverse effect on the financial
condition of the Company or on the ability of the parties to
consummate the transactions contemplated by this Agreement;
(iii) result in the creation of any Lien upon, or any Person
obtaining any right to acquire, any properties, assets or rights of
the Company (other than the rights of Sub to acquire the Shares
pursuant to this Agreement);
(iv) to the knowledge of the Company or the Stockholders,
violate or conflict with any Legal Requirements (as defined in SECTION
2.9 hereof) applicable to the Company or any of its businesses or
properties, except where such conflict or default would not have a
material adverse effect on the financial condition of the Company or
on the ability of the parties to consummate the transactions
contemplated by this Agreement; 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 5.11 hereof), except where such conflict or
default would not have a material adverse effect on the financial
condition of the Company or on the ability of the parties to
consummate the transactions contemplated by this Agreement.
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Except as referred to above, no permit or approval of, or notice to 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.
2.5 FINANCIAL STATEMENTS.
Attached as SCHEDULE 2.5 are true and complete copies of:
(i) (A) the unaudited balance sheet of the Company as of
December 31, 1995, and the related statements of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1995,
together with the notes thereto, in each case accompanied by the
compilation report of independent certified public accountants, and
(B) the unaudited balance sheet of the Company as of December 31,
1994, and the related statements of income, stockholders' equity and
cash flow for the fiscal year ended December 31, 1994, together with
the notes thereto, in each case accompanied by the compilation report
of independent certified public accountants; and
(ii) the unaudited balance sheet of the Company as of June 30,
1996 (the "Company Balance Sheet") and the unaudited statements of
income and stockholders' equity for the periods ended on such date,
together with the notes thereto;
(iii) the most recent monthly and year-to-date financial
statements provided to Nissan (the "Company Factory Statements");
(the financial statements referred to in clause (i) and (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 the 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 or on SCHEDULE 1.2 hereof) 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 financial statements
included in the Company Financial Statements include 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 except as expressly stated therein.
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 material 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 2.17 AND 2.18 hereof or liabilities for Taxes (as defined in
SECTION 2.8 hereof), except for (i) liabilities reflected or reserved against
in 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
bylaw 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, 1995, except as set forth on SCHEDULE 2.7(a)
hereto, the Company has operated in the ordinary course of business consistent
with past practice 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, 1995, 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;
(ii) failed to disclose 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;
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(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;
(xi) incurred any obligation or liability to any employee 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.
Since January 1, 1985, 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 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 (including property taxes paid by the Company
pursuant
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to any lease), 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 each fiscal year since the formation of the Company have been furnished
or made available to UAG or its representatives and such copies are accurate
and complete as of the date hereof. The Company has also furnished or made
available to UAG correct and complete copies of all material notices and
correspondence sent or received since January 1, 1992 by the Company to or
from any federal, state or local tax authorities. The unpaid Taxes of the
Company with respect to periods ended on, prior to or through the date of the
Company Balance Sheet will not exceed by any material amount the reserve for
Taxes reflected on such financial statements. In the ordinary course, the
Company makes adequate provision on its books (on an annual basis) 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 date of the Company
Balance Sheet. On the Closing Date Balance Sheet, the Company will have
adequately reserved for the payment of any Taxes for any period ending on,
prior to or through the date of the Closing Date Balance Sheet. 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 since January 1, 1985, and no
adjustment has been proposed by the Internal Revenue Service ("IRS") with
respect to any return for any 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 the Stockholders knows of any basis for an
assertion of a deficiency for Taxes against the Company. The Stockholders
will 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 and
the Company shall reimburse the Stockholders for any reasonable out-of-pocket
expenses directly related to the Company's tax liability; PROVIDED, HOWEVER,
that the Company will not reimburse the Stockholders for any expenses
relating to Stockholders' tax liability.
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
the Stockholders, threatened against or affecting, the Company, any ERISA Plan
(as defined in SECTION 2.18(a) hereof) or any of their respective assets,
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 the Stockholders or the Company 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.
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(b) To the knowledge of the Stockholders or the Company, 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 comply would
not have a material adverse effect upon the financial condition of the Company.
To the knowledge of the Stockholders or the Company, 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, except where the failure to
comply would not have a material adverse effect upon the financial condition of
the Company. A list of all Permits is set forth on SCHEDULE 2.9(b) hereof.
(c) To the knowledge of the Stockholders or the Company, the Company
owns or holds all Permits material to the conduct of its business. To the
knowledge of the Company or the Stockholders, 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.
(a) The properties and assets owned by or leased to the Company
(including improvements to the Real Property (the "Improvements") and all
machinery, equipment and other tangible property 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 real property owned or
leased by the Stockholders (directly or indirectly) and used in the
businesses of the Company and of all options or other contracts to acquire
any such interest (collectively, the "Real Property "). To the knowledge of
the Stockholders or the Company, 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. To the knowledge of the Stockholders or the Company, there are no
latent defects with respect to the Improvements. The Real Property is
currently zoned to permit the conduct of the respective businesses of the
Company as presently conducted. To the knowledge of the Stockholders or the
Company, no Certificate of Occupancy is required with respect to the
Improvements. To the knowledge of the Stockholders or the Company, all
utilities servicing the Real Property and the Improvements are provided by
publicly-dedicated utility lines and are located within public rights-of-way
and do not cross or encumber any private land. No notice of any pending,
threatened or contemplated action by any governmental authority or agency
having the power of eminent domain has been given to the Company or the
Stockholders with respect to the Real Property. Except as otherwise
represented herein, the machinery, equipment and other tangible property are
transferred "as is".
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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 by the Company are in 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 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's business or the Real Property or
Improvements.
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. 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"), and the Hazardous
Materials Transportation Act, 49 U.S.C. SECTION 1801 ET SEQ. ("HMTA"), and in
the regulations promulgated pursuant to such laws, all as amended, (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.
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(b) To the knowledge of the Stockholders or the Company, 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. To the knowledge of the Stockholders or the Company, no
event has occurred with respect to the Real Property, the Improvements or any
property formerly owned, occupied or leased by 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. To the knowledge of
the Stockholders or the Company, 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 by the Company, nor, to the
knowledge of the Company or 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 and there has been no
spill, release or migration of any Hazardous Materials on or under the Real
Property and no Hazardous Material is present on or under the Real Property
(provided, however, that certain petroleum products are stored and handled on
the Real Property in the ordinary course of the Company's business in compliance
with all Environmental Laws including the existing regulations of the United
States Environmental Protection Agency and the State of Tennessee requiring
spill protection, overfill protection and corrosion protection by December 22,
1998), (ii) to the knowledge of the Stockholders or the Company, none of the
Real Property or portion thereof, the Improvements or any property formerly
owned, occupied or leased by 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) to the knowledge
of the Stockholders or the Company, none of the Real Property, the Improvements
or any property formerly owned, occupied or leased by 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 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, to the knowledge
of the Stockholders or the Company, 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 or 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
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portion of the Real Property, the Improvements or any property formerly owned,
occupied or leased by 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, to the knowledge of the Stockholders or the Company, 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 by 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 Environ-
mental 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 or 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 and the Company have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Company and any property formerly
owned, occupied or leased by the Company, and have permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, and any property formerly owned, occupied or leased by 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
reflect the normal inventory valuation policies of the Company, and such values
are in conformity with GAAP consistently applied, except that no adjustment to
the LIFO reserves will be recorded on such financial statement. All inventories
reflected on the Company Balance Sheet and Company Factory Statement 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 reflected in the Company Balance Sheet),
except for spare parts inventory which inventory is good and usable.
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2.13 ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Balance Sheet are, and
all accounts receivable that will be or will have been reflected on the Closing
Date Balance Sheet will be, good and have been or will have been collected or
are collectible in accordance with their terms at their recorded amounts, and
are subject to no material defenses, setoffs or counterclaims other than normal
cash discounts accrued in the ordinary course of business, subject to the
reserve for bad debts set forth on the Company Balance Sheet, as adjusted for
operations and transactions through the Closing Date in the ordinary course of
business and consistent with past practices.
2.14 INSURANCE.
All material 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 is 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 has made or
will make available to UAG true and complete copies of all such policies. All
such policies are in full force and effect 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 Lease. No notice of cancellation or non-renewal with respect
to, or disallowance of 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 its assets or properties (including
the Real Property and the Improvements) 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 Company. True and complete copies
of all written Company Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10
hereto have 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. Except as set forth on SCHEDULE 2.15, to the
knowledge of the Stockholders or the Company, neither the Company nor any other
party thereto is in breach of or default in any
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material respect under any Company Agreement, and no event has occurred which
(after notice or lapse of time or both) would become a breach or default in
any material respect under, or would permit modification, cancellation,
acceleration or termination of, any Company Agreement or result in the
creation of any Lien upon, or any Person obtaining any right to acquire, any
properties, assets or rights of the Company. There are no material unresolved
disputes involving any Company under any 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 govern-
mental 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 payment of any
bonus 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 or the 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 material
provisions of any Employment or Labor Agreement.
(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 the 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, to the knowledge of the Company, no such investigation is in
progress and (vi) the consents of the unions that are parties to any
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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 to which the Company is required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(i) 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 or made
available 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, except as set forth on SCHEDULE
2.17(b):
(i) there is no ERISA Plan which is a "multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Company
or the Stockholders) 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 in all material respects with the reporting and disclosure
requirements imposed under ERISA and the Code and has timely filed
Form 5500e (or 5500-C or 5500-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
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(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;
(ii) has been operated, since its inception, in all material
respects 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 the Stockholders) 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) to the knowledge of the Stockholders or the Company, no
event has occurred since the inception of any Pension Benefit Plan or
(to the knowledge of the Company or the Stockholders) 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 the 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.
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(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.
(f) The aggregate of the amounts of contributions by the Company to
be paid or accrued under ERISA Plans for the current fiscal year is not
expected to exceed approximately one hundred and ten percent of the amounts
of such contributions for the past 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 its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205
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, 1995; 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 the 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 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, 1995 exceeded, and
whose aggregate compensation for the fiscal year ended December 31,
1996 is likely to exceed, $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
the Company or the Stockholders) 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, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any
director or officer of the Company, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(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
- 21 -
intermediaries, the beneficial owner of 30% 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, to the knowledge of the
Stockholders or the Company, 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.
Except as set forth on SCHEDULE 2.21, neither the Company nor the
Stockholders, nor any of their Affiliates, have 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
is engaged in the retail sale of automobiles in Tennessee.
2.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof, nor
the Stockholders or any representative of the Stockholders, 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 Lease.
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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 DISCLOSURE.
Neither the Company nor any Stockholder has made any material
misrepresentation to UAG relating to the Company or the Shares and neither
the Company nor any Stockholder has omitted to state to UAG any material fact
relating to the Company or the Shares which is necessary in order to make the
information given by or on behalf of the Company or the Stockholders to UAG
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's Financial Statements or the schedules to this
Agreement.
2.25 NET WORTH.
On the Closing Date, the Net Worth of the Company, as determined in
accordance with the Accounting Principles, will be no less than Five Million
Ninety Thousand Dollars ($5,090,000).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this ARTICLE 3 are to be delivered by the
Company and the Stockholders no later than September 6, 1996, each
Stockholder hereby jointly and severally represents and warrants to UAG and
Sub 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 hereof and has, and shall transfer to Sub at the
Closing, good and marketable title to the Shares owned by him, free and clear
of any and all Liens, claims and encumbrances and free and clear of any
restrictions on transfer (other than restrictions on transfer imposed by
applicable federal and state securities laws), proxies and voting or other
agreements.
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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 to consummate the transactions contemplated hereby (including
the disposition of the Shares to Sub as contemplated by this Agreement).
This Agreement has been duly executed and delivered by each Stockholder and
constitutes a valid and binding obligation of each Stockholder, enforceable
against each Stockholder in accordance with its terms. Except as set forth
on SCHEDULE 3.2, the execution, delivery and performance of this Agreement by
each Stockholder and the consummation of the transactions contemplated
hereby 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 any Stockholders is a party or to which any
Stockholders or any of such Stockholders's property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to any 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.
3.3 REAL PROPERTY AND IMPROVEMENTS.
Landlord owns the Real Property and Improvements in fee simple, free
and clear of all Liens, claims and encumbrances, except those disclosed in
SCHEDULE 3.3(a), none of which currently or, to each Stockholder's knowledge,
in the future will affect the use of the Real Property or the Improvements
for the conduct of the respective businesses of the Company as presently
conducted. No assessments have been made against any portion of the Real
Property which are unpaid (except ad valorem taxes for the current year that
are not yet due and payable), whether or not they have become Liens. There
are no disputes concerning the location of the lines and corners of the Real
Property. No one has been granted any right to purchase or lease the Real
Property or Improvements other than the existing lease in favor of the
Company, which is to be terminated at Closing. Attached as SCHEDULE 3.3 are
all surveys, title binders, title policies and copies of any exceptions to
title.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG AND SUB
UAG and Sub hereby represent and warrant to the Company and the
Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING.
Each of UAG and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state
of its incorporation 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. Each of UAG and each of its subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each state and 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 its
subsidiaries would not, or could not reasonably be expected to, in the
aggregate have a material adverse effect on UAG and its subsidiaries, taken
as a whole.
4.2 AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and to perform their respective obligations hereunder. This
Agreement has been duly executed and delivered by, and constitutes valid and
binding obligation of, UAG and Sub, enforceable against UAG and Sub in
accordance with its terms. Except as set forth on SCHEDULE 4.2 hereto, the
execution, delivery and performance by UAG and Sub of this Agreement and the
consummation of the transactions contemplated hereby do not and will not:
(i) contravene any provisions of the certificate of
incorporation or bylaws of UAG or Sub;
(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 other than agreements the breach or violation of
which could not reasonably be expected to have a material adverse
effect on UAG and its subsidiaries, taken as a whole;
(iii) violate or conflict with any Legal Requirements
applicable to UAG or any of its subsidiaries or any of their
respective businesses or properties; or
(iv) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative
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or judicial authority, except in connection with or in compliance with
the provisions of the H-S-R Act.
4.3 BROKERS.
Neither UAG, Sub nor any of their directors, officers or employees 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 Lease. UAG shall
indemnify the Company and the Stockholder for any claim by Jappie Dickinson
for a broker's, finder's or similar fee, commission or expense arising out of
this transaction.
4.4 DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Stockholders and neither UAG nor Sub has omitted to state to the Stockholders
any material fact relating to UAG or Sub which is necessary in order to make
the information given by UAG or Sub not misleading or which if disclosed
would reasonably affect the decision of a person considering the sale of the
Shares.
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 and Sub 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 the Company's 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 (including the Real Property and the Improvements), and (ii) make
available for inspection and copying by UAG and Sub true and complete copies
of any documents relating to the foregoing. UAG and Sub will hold, and will
cause their representatives to 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 and Sub. If this Agreement is terminated, UAG and Sub will, and will
cause their representatives to, promptly return to the Company, upon the
reasonable request of the Company, all Confidential Information furnished by
the Company, including all copies and summaries thereof. As used herein,
"Confidential Information" shall mean all information concerning the Company
obtained by UAG, Sub and their representa-
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tives 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 or Sub or any of their representatives of
this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Company, on the one hand, and UAG and Sub, 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 and Sub, respectively, required for
inclusion in any statement or application made by UAG or Sub or the Company
or the Stockholders to any governmental or regulatory body or to any
manufacturer or distributor or in connection with obtaining any third party
consent in connection with the transactions contemplated by this Agreement.
Neither the Stockholders or the Company, on the one hand, nor UAG or Sub, on
the other hand, nor 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. UAG shall reimburse the Company and the
Stockholders for reasonable expenses incurred by the Company and the
Stockholder in connection with this Section.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) Except as set forth on SCHEDULE 5.3(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 Charter or Bylaws, 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 (which will be set forth
in SCHEDULE 2.15 hereto) and dispositions 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;
(vi) 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
decrease the Net Worth of the Company below Five Million Ninety
Thousand Dollars ($5,090,000) or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock which
would decrease the Net Worth of the Company below Five Million Ninety
Thousand ($5,090,000) Dollars;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than 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, except in the ordinary course of business and
except for the purchase of a computer system for approximately
$125,000;
(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, except in the ordinary course
of business;
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(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, except in the ordinary course of business;
(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; or
(xvii) commit itself to do any of the foregoing.
(b) Except as set forth on SCHEDULE 5.3(b), from and after the date
hereof and until the Closing Date, the Stockholders and the Company will use
their reasonable best efforts to cause the Company to:
(i) continue to maintain, in all material respects, the
Company's properties, the Real Property and the Improvements 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, the Improvements 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;
- 29 -
(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 its business in the ordinary course
consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
At the Closing there will be no intercompany payables or intercompany
receivables due and/or owing between the Stockholders and any of their
Affiliates, on the one hand, and the Company, on the other hand, except for
the Standefer Loan as set forth in SECTION 5.13 hereof, which shall be paid
in full on or before the Closing Date.
5.5 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the termination
of this Agreement pursuant to SECTION 8.1 hereof, no Stockholder, nor the
Company, nor the Company's 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 the
Stockholders may receive or of which the Stockholders may become aware.
5.6 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Company and UAG and Sub 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.
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(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
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.7 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.
5.8 INTERIM FINANCIAL STATEMENTS.
If requested by UAG and at UAG's expense, within thirty (30) days after
the end of each calendar month after June 30, 1996 the Company will deliver
to UAG unaudited consolidated balance sheets of the Company 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. The
Company will also deliver to UAG copies of the Company Factory Statements
provided to Nissan after the date hereof within five days of their delivery
to Nissan. All such financial statements shall fairly present the financial
position and results of operations of the Company as of the date or for the
periods indicated. All unaudited financial statements delivered pursuant to
this SECTION 5.8 shall be prepared on a basis consistent with the Company
Financial Statements.
5.9 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 made 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 communication relating to, any default or event which, with notice or
lapse of time or both, would become a default under any Company Agreement set
forth on SCHEDULE 2.15. The Company and the Stockholders will (x) promptly
advise
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UAG of any event that has, or could reasonably be expected in the future to
have, a Material Adverse Effect on the Company, (y) confer on a regular and
frequent basis with one or more designated representatives of UAG to report
operational matters and to report the general status of ongoing operations,
and (z) notify UAG of any emergency or other change in the normal course of
business or relating to the Real Property or Improvements of the Company and
of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or adjudicatory proceedings
involving the Company, the Real Property or the Improvements and will keep
UAG 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.
5.10 ASSURANCE BY THE STOCKHOLDERS.
Each Stockholder shall use its best efforts to cause the Company to
comply with its respective covenants set forth in this Agreement.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG, 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 the
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. UAG shall pay the H-S-R filing fee relating to such
filings. 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 UAG's 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 shall determine that continuing such resistance is not
in its best interests, UAG may, by written notice to the other party,
terminate this Agreement with the effect set forth in SECTION 8.2 hereof.
5.12 USE OF "STANDEFER" NAME.
After the Closing Date, UAG and the Company shall not use the name
"Standefer" in connection with the business of the Company; PROVIDED,
HOWEVER, that the Company may continue to use the "Standefer" name in a
manner consistent with its use prior to the Closing for a period of sixty
(60) days after the Closing. After the Closing, neither Standefer nor
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any of his Affiliates (other than adult children) shall use the name
"Standefer" in connection with the sale or servicing of new or used
automobiles or light duty trucks prior to the fifth year anniversary of the
Closing Date; PROVIDED, HOWEVER, that relatives of Standefer may use the
Standefer name in connection with the sale of new or used automobiles or
light duty trucks (other than the sale of Nissans in Hamilton County,
Tennessee) so long as Standefer does not have a direct or indirect ownership
interest in any such business and does not directly or indirectly assist in
the management or operation of such business (except that nothing herein
shall prevent Standefer from making loans to or leasing property (at fair
market value) to an entity engaged in the sale of new or used automobiles or
light duty trucks).
5.13 STANDEFER LOAN.
On or before the Closing Date, the Stockholders shall cause the Company
to pay the outstanding principal and all accrued but unpaid interest on the
Standefer Loan. For purposes of this Section, the Standefer Loan shall mean
the loan to the Company from Standefer and his Affiliates as set forth on the
Company Balance Sheet in the approximate amount of $1,865,000.
5.14 DISTRIBUTION OF SUBSIDIARY'S STOCK.
The parties acknowledge and agree that the interest in Scenic City,
Ltd., a Nevada limited partnership, owned by the Company shall be distributed
to the Stockholders or an Affiliate of the Stockholders (at book value) prior
to the Closing Date.
5.15 CONTRIBUTION OF EQUIPMENT.
The parties acknowledge and agree that the equipment owned by the
Landlord and used in the business of the Company will be contributed to the
Company on or before the Closing Date, subject to the existing liabilities
set forth on SCHEDULE 5.15 hereof.
5.16 STOCK RESTRICTION AGREEMENT.
Prior to the Closing Date, the Stock Restriction Agreement shall be
terminated in accordance with its terms and the parties thereto shall have
released any and all claims arising under or relating to the Stock
Restriction Agreement and its termination.
5.17 SPLIT-DOLLAR AGREEMENT.
Prior to the Closing Date, the Split-Dollar Agreement between the
Charles B. Standefer Irrevocable Insurance Trust and the Company shall be
terminated and the Closing Date Balance Sheet shall not include as an asset
of the Company the amount owed for premium advances relating to such
Split-Dollar Agreement.
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5.18 PERSONAL ITEMS.
The parties acknowledge and agree that the Stockholders may retain
certain personal items (which items are not reflected as assets on the
Company Balance Sheet and will not be reflected as assets on the Closing Date
Balance Sheet). These items will include personal pictures, awards and
mementos.
5.19 S CORPORATION TAX RETURNS.
The S corporation federal income tax returns (Form 1120S) of the
Company for the tax year beginning on January 1, 1996, shall be prepared by
the regular accounting firm of the Company, at the sole cost and expense of
the Company, with the Stockholders having a right to review and make comments
on such return prior to its being filed with the Internal Revenue Service.
5.20 AUDITS.
Sub shall (i) grant to each Stockholder access at all reasonable times
to all of the Company's books and records (including tax workpapers and
returns and correspondence with tax authorities), including the right to take
extracts therefrom and make copies thereof, to the extent that such books and
records relate to taxable periods ending on or prior to or that include the
Closing Date, and (ii) otherwise cooperate with the Stockholders in
connection with any audit of taxes that relate to the business of the Company
prior to the Closing. Sub will allow the Stockholders and their counsel to
participate at their own expense in any audits of the Company's federal
income tax returns to the extent that such returns could affect the
Stockholders. Sub will not allow the Company to settle any such audit in a
manner which would or could adversely affect the Stockholders after the
Closing Date without the prior written consent of the Stockholders, which
consent shall not unreasonably be withheld.
5.21 NO LIABILITY; SECTION 338 ELECTION.
The Stockholders shall under no circumstances be liable for any federal
income tax liability of the Company arising from or occasioned by any
election by Sub with respect to the Company (whether actual or deemed) under
Section 338 of the Internal Revenue Code.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub 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 UAG and Sub
as provided herein except as otherwise required by applicable law:
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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 on the
date made and shall be true and correct in all material respects 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 material respects as of the
Closing. At the Closing, Sub shall have received a certificate, dated the
Closing Date and duly executed by the Stockholders 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 Lease, and the
consummation of the transactions contemplated hereby 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 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 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 and Sub shall have been furnished with the opinion of the Company's
and the Stockholders' counsel, dated the Closing Date, in form and substance
satisfactory to UAG and Sub and their counsel, which opinion shall have been
rendered with respect to those matters contained in SECTIONS 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 opinions may be limited to
Tennessee and federal laws.
6.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United 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 or Sub 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
- 35 -
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 or Sub, 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, 1995 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, other than payments to Stockholders in accordance with the terms of
this Agreement.
6.6 NET WORTH.
On the Closing Date, the Stockholders shall deliver to Sub a balance
sheet of the Company dated as of the most recent practicable date preceding
the Closing Date, 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
payment of any of the fees, costs and expenses by the Company incurred in
connection with this Agreement, Net Worth no less than Five Million Ninety
Thousand Dollars ($5,090,000).
6.7 COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of the
Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to UAG and Sub. UAG will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, the expenses of the Phase II environmental audit shall be paid
one-half by UAG and one-half by the Stockholders; PROVIDED, HOWEVER, that the
Stockholders may elect not to pay any costs of the Phase II audit but, if the
Stockholders elect not to pay one-half of the costs of the Phase II audit and
the results of the Phase II audit conclude that remediation is necessary, the
Stockholders shall pay the entire costs of the Phase II audit. If UAG
determines that a Phase II is necessary, the Phase II audit shall be
performed by an environmental, engineering or consulting company mutually
agreeable to the Stockholders and UAG.
6.8 LEASE.
The Landlord and the Company shall have entered into the Lease in a
form and substance satisfactory to UAG.
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6.9 BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that the UAG Board shall consider the transactions
contemplated by this Agreement on or before the date that is fifteen days
after Standefer and UAG formally seek the approval of Nissan as set forth in
SECTION 6.12 hereof.
6.10 CERTIFICATES.
The Stockholders and the Company shall have furnished UAG and Sub with
a certificate, dated as of the Closing Date, executed by the Stockholders
certifying to the fulfillment of the conditions set forth in Section 6.5, 6.6
and 6.14 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request
to evidence compliance with the conditions set forth in this ARTICLE 6.
6.11 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 and Sub.
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
Nissan shall have consented to, authorized and approved the
transactions contemplated by this Agreement on terms no less favorable to
those granted to the Company immediately prior to the execution of this
Agreement.
6.13 EMPLOYMENT AGREEMENT.
Sub, the Company and Nicely shall have entered into the Employment
Agreement.
6.14 ENVIRONMENTAL LAWS.
The Company shall be in material compliance with all applicable
Environmental Laws.
6.15 NONDISTURBANCE AGREEMENT.
Standefer shall have obtained a nondisturbance agreement in form and
substance satisfactory to the Company and UAG.
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6.16 TITLE INSURANCE.
The Company shall have obtained title insurance with respect to the
leasehold estate in form and substance satisfactory to UAG. UAG shall be
responsible for the cost of such title insurance.
6.17 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.
The appropriate parties shall have executed a Lease Termination
Agreement and a Memorandum of Lease in form and substance satisfactory to UAG
and the Company.
6.18 RESIGNATION OF THE COMPANY'S DIRECTORS.
Each of the persons who is a director of the Company on the Closing
Date shall have tendered to Sub in writing his or her resignation as such in
form and substance satisfactory to UAG.
6.19 SCHEDULES.
The Company and the Stockholders shall have delivered to UAG and Sub
all Schedules referred to in ARTICLES 2 AND 3 and such Schedules shall be
acceptable in form and substance to UAG and Sub.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Company 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 the Company and 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 and Sub contained in
this Agreement shall be true and correct on the date made and shall be true
and correct in all material respects as of the Closing. Each of the
obligations of UAG and Sub 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 material respects as of the Closing. At the Closing, the Stockholders
shall have received a certificate, dated the Closing Date and duly executed
by an officer of UAG and of Sub to the effect that the conditions set forth
in the preceding two sentences have been satisfied.
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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 and Sub. 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 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 AND SUB'S COUNSEL.
The Stockholders shall have been furnished with the opinion of Rogers &
Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance
satisfactory to the Stockholders and their counsel, which opinions, when
taken together, shall have been rendered with respect to those matters
contained in SECTIONS 4.1 AND 4.2 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 Sub and by
government officials, and upon such other documents and data as such counsel
deems appropriate as a basis for its opinion. Such opinions may be limited
to federal laws and the General Corporation Law of the State of Delaware.
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 LEASE.
The Company shall have entered into the Lease in form and substance
satisfactory to the Landlord.
7.6 CERTIFICATES.
UAG and Sub 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.
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7.7 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholders.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, Sub and the Stockholders;
(ii) by either UAG, Sub, or the Stockholders if the Closing
shall not have taken place on or prior to December 31, 1996, or such
later date as shall have been approved by UAG, Sub 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, Sub, 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 or Sub if any of the conditions specified in
ARTICLE 6 hereof have not been met or waived by UAG and Sub at such
time as such condition is no longer capable of satisfaction (provided
that neither UAG nor Sub is 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 the Stockholders at
such time as such condition is no longer capable of satisfaction
(provided that neither the Stockholders 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, Sub or the Stockholders if there has been
a material breach on the part of the other of any representation,
warranty, covenant or agreement
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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, Sub or the Stockholders shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effected by notice to the
other parties specifying the provision hereof pursuant to which such
termination is made.
8.2 EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
and (ii) for the obligations contained in SECTIONS 5.1 AND 10.2 hereof, and
(iii) as set forth in SECTION 9.1 and SECTION 9.2 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, the
Stockholders indemnify and agree to fully defend, save and hold harmless on
an after-tax basis UAG, Sub, the Company (after the Closing), and any of
their respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (other than the Stockholders) (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 Stockholders 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
"Stockholders Third Party Claim"). As used herein, "Stockholders Event of
Breach" shall be and mean any one or more of the following: (i) any untruth
or inaccuracy in any representation of any Stockholder or the Company or the
breach of any warranty of any Stockholder 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 any Stockholder or the
Company (or any representative of any Stockholder or the Company) to UAG or
Sub (or any representative of UAG or Sub) and any misrepresentation in or
omission from any document furnished to UAG or Sub 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.
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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 (prior to the Closing), and any of their respective officers,
directors, employees, stockholders, advisors, representatives, agents and
Affiliates (each a "Stockholder Indemnified Party"), if a Stockholder
Indemnified Party (including the Company prior to Closing) 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 Sub 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 Sub
or the breach of any warranty of UAG or Sub 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 Sub (or any representative of
UAG or Sub) 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 or
Sub duly to perform or observe any term, provision, covenant, agreement or
condition on the part of UAG or Sub to be performed or observed.
9.3 PROCEDURES.
If (i) any Stockholders Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholders have become obligated to a
UAG Indemnified Party pursuant to SECTION 9.1, or if any Stockholder's Third
Party Claim is begun, made or instituted as a result of which the
Stockholders may become obligated to a UAG Indemnified Party hereunder, or
(ii) a UAG Event of Breach occurs or is alleged and a Stockholder Indemnified
Party asserts that UAG has become obligated to a Stockholder 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 Stockholder
Indemnified Party hereunder (for purposes of this ARTICLE 9, any UAG
Indemnified Party and any Stockholder 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
Stockholders 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 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
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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 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 (other than the Lease) of the other parties (or any Affiliate
(excluding the Landlord) of the other parties) to such Indemnified Party in
connection with this Agreement or the transactions contemplated hereby, 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 transactions
contemplated hereby.
9.5 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.
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9.6 LIMITATION ON INDEMNIFICATION.
No Indemnified Party shall be entitled to indemnification for any Costs
hereunder unless the aggregate amount of Costs incurred by such party exceeds
$200,000, in which event such party shall be entitled to indemnification for
all such Costs in excess of $200,000; PROVIDED, HOWEVER, that this limitation
shall not apply to any amounts owed by the parties pursuant to SECTION 1.2
hereof.
9.7 DEFINITIONS.
For purposes of this ARTICLE 9, "Costs" shall mean all liabilities,
losses, costs and actual damages (not including consequential damages) and
reasonable expenses, reasonable attorneys' fees, reasonable experts' fees,
reasonable consultants' fees, and reasonable 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.
9.8 TAX SAVINGS.
Costs arising or resulting from Stockholders Events of Breach or UAG
Events of Breach shall be reduced to the extent of the amount of any tax
savings resulting from the indemnified matter to which such Costs relate
which are actually realized (or can reasonably be expected to be realized in
future years) by the Indemnified Party.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, 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, or covenants,
the party to whom such representations or covenants have been made shall have
all rights and remedies for such breach available to it under the provisions
of this Agreement, regardless of any disclosures 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 and in any certificate delivered pursuant to
ARTICLE 6 or ARTICLE 7 hereof
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shall survive, and not be affected in any respect by the Closing, for a
period terminating on the later of (i) the date that is three (3) years after
the Closing Date, and (ii) with respect to any claim asserted with respect to
any breach of such representations and warranties 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.
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 5.5 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 fees, costs and expenses incurred by UAG in connection with this
Agreement and the transactions contemplated hereby.
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:
Charles A. Standefer
3715 Kings Road
Chattanooga, Tennessee 37416
with a copy to:
Mr. James D. Hutcherson, CPA
Henderson, Hutcherson, Walker & McCullough
1000 Riverfront Parkway
Chattanooga, Tennessee 37402-2103
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Gearhiser, Peters, Lockaby & Tallant
320 McCallie Avenue
Chattanooga, Tennessee 37402
Attn: R. Wayne Peters, Esq.
If to the Company after the Closing Date:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig
If to the Stockholders:
Charles A. Standefer
3715 Kings Road
Chattanooga, Tennessee 37416
with a copy to:
Mr. James D. Hutcherson, CPA
Henderson, Hutcherson, Walker & McCullough
1000 Riverfront Parkway
Chattanooga, Tennessee 37402-2103
Gearhiser, Peters, Lockaby & Tallant
320 McCallie Avenue
Chattanooga, Tennessee 37402
Attn: R. Wayne Peters, Esq.
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If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig
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 and Sub shall have the unrestricted right
to assign this Agreement and to delegate all or any part of their
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 Lease 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 Lease. Prior drafts of this Agreement shall not be used as
a basis for interpreting this Agreement.
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10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders, the Company, UAG and Sub 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 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 and construed in accordance the
laws of the State of Tennessee without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
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 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
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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) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment
sale agreements, encumbrances or charges of any kind.
(h) "Knowledge" means, with respect to the Stockholders, that the
Stockholders knew, or in the exercise of reasonable diligence, would or
should have known of the particular matter referred to; with respect to the
Company, that the President or the Executive Manager knew, or in the exercise
of reasonable diligence, would or should have known of the particular matter
referred to; and, with respect to UAG, that the President of UAG knew or, in
the exercise of reasonable diligence, would or should have known of the
particular matter referred to.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which is, or could reasonably be
expected to be, materially adverse to the business, operations, assets,
condition (financial or otherwise) or prospects of the Company.
(g) "Person" shall mean and include an individual, corporation,
limited liability company, partnership, joint venture, association, trust,
any other incorporated or unincorporated organization or entity and a
governmental entity or any department or agency thereto.
(h) "UAG Public Offering Date" shall mean the date of the
consummation of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offering and sale of shares of common stock, par value $.0001 per share
of UAG on a firm commitment basis.
10.12 SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall be considered as disclosure pursuant to any other provision,
subprovision, section or subsection of this Agreement or Schedule to this
Agreement.
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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 having 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 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
-------------------------------------
Name: George G. Lowrance
Title: Executive Vice-President
UAG TENNESSEE, INC.
By: /s/ George Lowrance
-------------------------------------
Name: George G. Lowrance
Title: Vice-President
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STANDEFER MOTOR SALES, INC. d/b/a
STANDEFER NISSAN
By: /s/ Charles A. Standefer
-------------------------------------
Name:
Title:
/s/ Charles A. Standefer
----------------------------------------
CHARLES A. STANDEFER, INDIVIDUALLY
CHARLES A. STANDEFER AND KAREN S. NICELY
TRUSTEES UNDER THE IRREVOCABLE TRUST
AGREEMENT OF CHARLES B. STANDEFER FOR
THE PRIMARY BENEFIT OF CHILDREN DATED
DECEMBER 21, 1992
By: /s/ Charles A. Standefer, Trustee
-------------------------------------
CHARLES A. STANDEFER, TRUSTEE
By: /s/ Karen S. Nicely, Trustee
-------------------------------------
KAREN S. NICELY, TRUSTEE
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