STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 6, 1996
AMONG
UNITED AUTO GROUP, INC.
UAG WEST, INC.,
SCOTTSDALE JAGUAR, LTD.,
SA AUTOMOTIVE, LTD.,
SL AUTOMOTIVE, LTD.,
SPA AUTOMOTIVE, LTD.,
LRP, LTD.,
SUN BMW, LTD.,
SCOTTSDALE MANAGEMENT GROUP, LTD.,
6725 DEALERSHIP, LTD.,
STEVEN KNAPPENBERGER REVOCABLE TRUST
DATED APRIL 15, 1983, AS AMENDED
BROCHICK 6725 TRUST DATED DECEMBER 29, 1992,
BESKIND 6725 TRUST DATED DECEMBER 29, 1992,
KNAPPENBERGER 6725 TRUST DATED DECEMBER 29, 1992,
STEVEN KNAPPENBERGER,
JAY P. BESKIND
AND
GEORGE W. BROCHICK
This STOCK PURCHASE AGREEMENT, dated as of June 6, 1996, is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG West, Inc., a
Delaware corporation ("UAG West"), Scottsdale Jaguar, Ltd., an Arizona
corporation ("Scottsdale Jaguar"), SA Automotive, Ltd., an Arizona corporation
("SA"), SL Automotive, Ltd., an Arizona corporation ("SL"), SPA Automotive,
Ltd., an Arizona corporation ("SPA"), LRP, Ltd., an Arizona corporation ("LRP"),
Sun BMW, Ltd., an Arizona corporation ("Sun BMW"), 6725 Dealership, Ltd., an
Arizona corporation ("6725"), Scottsdale Management Group, Ltd., an Arizona
corporation ("Scottsdale Management" and collectively with Scottsdale Jaguar,
SA, SL, SPA, LRP, 6725 and Sun BMW, the "Companies"), Steven Knappenberger
Revocable Trust Dated April 15, 1983, as amended ("Knappenberger Trust"),
Brochick 6725 Trust Dated December 29, 1992 ("Brochick 6725 Trust"), Beskind
6725 Trust Dated December 29, 1992 ("Beskind 6725 Trust"), Knappenberger 6725
Trust Dated December 29, 1992 ("Knappenberger 6725 Trust"), Jay P. Beskind
("Beskind"), George W. Brochick ("Brochick" and together with Brochick 6725
Trust, Beskind 6725 Trust, Knappenberger 6725 Trust, Knappenberger Trust and
Beskind, the "Stockholders"), and Steven Knappenberger ("Mr. Knappenberger").
W I T N E S S E T H:
WHEREAS, UAG West is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate franchise automobile dealerships and
related businesses;
WHEREAS, there are 842,749 shares of common stock, no par value, of
Scottsdale Jaguar issued and outstanding (the "Scottsdale Jaguar Common Stock");
WHEREAS, there are 1,713,010 shares of common stock, no par value of
SA issued and outstanding (the "SA Common Stock");
WHEREAS, there are 625,000 shares of common stock, no par value of SL
issued and outstanding (the "SL Common Stock");
WHEREAS, there are 547,125 shares of common stock, no par value of SPA
issued and outstanding (the "SPA Common Stock");
WHEREAS, there are 500,000 shares of common stock, no par value of LRP
issued and outstanding (the "LRP Common Stock");
WHEREAS, there are 900,000 shares of common stock, no par value of Sun
BMW issued and outstanding (the "Sun BMW Common Stock" and together with the
Scottsdale Jaguar Common Stock, the SA Common Stock, the SL Common Stock, the
SPA Common Stock and the LRP Common Stock, the "Companies' Common Stock");
WHEREAS, Knappenberger Trust, Beskind and Brochick own all of the
issued and outstanding shares of the Companies' Common Stock;
WHEREAS, UAG West desires to purchase 842,749 shares of Scottsdale
Jaguar Common Stock from Knappenberger Trust, Beskind and Brochick (such shares
being collectively referred to as the "Scottsdale Jaguar Shares"), and
Knappenberger Trust, Beskind and Brochick desire to sell the Scottsdale Jaguar
Shares to UAG West (in each case upon the terms and subject to the conditions
set forth in this Agreement), such that immediately after giving effect to such
purchase and sale, UAG West will own one hundred (100%) percent of the issued
and outstanding shares of Scottsdale Jaguar Common Stock, on a fully diluted
basis;
WHEREAS, UAG West desires to purchase 1,713,010 shares of SA Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "SA Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the SA Shares to UAG West (in each case upon the
terms and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG West will own one
hundred (100%) percent of the issued and outstanding shares of SA Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 625,000 shares of SL Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "SL Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the SL Shares to UAG West (in each case upon the
terms and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG West will own one
hundred (100%) percent of the issued and outstanding shares of SL Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 547,125 shares of SPA Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "SPA Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the SPA Shares to UAG West (in each case upon the
terms and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG West will own one
hundred (100%) percent of the issued and outstanding shares of SPA Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 500,000 shares of LRP Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "LRP Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the LRP Shares to UAG West (in each case upon the
terms and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG West will own one
hundred (100%) percent of the issued and outstanding shares of LRP Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 900,000 shares of Sun BMW
Common Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "Sun BMW Shares" and together with the
Scottsdale Jaguar Shares, the
-2-
SA Shares, the SL Shares, the SPA Shares and the LRP Shares, the "Shares"), and
Knappenberger Trust, Beskind and Brochick desire to sell the Sun BMW Shares to
UAG West (in each case upon the terms and subject to the conditions set forth in
this Agreement), such that immediately after giving effect to such purchase and
sale, UAG West will own one hundred (100%) percent of the issued and outstanding
shares of Sun BMW Common Stock, on a fully diluted basis;
WHEREAS, there are 101,251 shares of common stock, no par value of
Scottsdale Management issued and outstanding (the "Scottsdale Management Common
Stock");
WHEREAS, Knappenberger Trust owns all of the issued and outstanding
shares of the Scottsdale Management Common Stock;
WHEREAS, UAG West desires to purchase 101,251 shares of Scottsdale
Management Common Stock from Knappenberger Trust (such shares being referred to
as the "Scottsdale Management Shares") and Knappenberger Trust desires to sell
the Scottsdale Management Shares to UAG West (upon the terms and subject to the
conditions set forth in this Agreement), such that immediately after giving
effect to such purchase and sale, UAG West will own one hundred (100%) percent
of the issued and outstanding shares of Scottsdale Management Common Stock, on a
fully diluted basis;
WHEREAS, there are 1,250 shares of common stock, no par value of 6725
issued and outstanding (the "6725 Common Stock");
WHEREAS, the Brochick 6725 Trust, the Beskind 6725 Trust and the
Knappenberger 6725 Trust own one hundred percent of the issued and outstanding
shares of 6725 (the "6725 Common Stock");
WHEREAS, UAG West desires to purchase 1,250 shares of 6725 Common
Stock from the 6725 Trusts (such shares being referred to as the "6725 Shares")
and the 6725 Trusts desire to sell the 6725 Shares to UAG West (upon the terms
and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG West will own one
hundred (100%) percent of the issued and outstanding shares of 6725 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 CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
-3-
(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) "Bank of America Note" shall mean those certain Working Capital
Term Loans, in the approximate aggregate principal amount of $5,450,000.00, by
certain of the Companies as makers in favor of Bank of America Arizona.
(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) "Maas Note" shall mean that certain Promissory Note, dated
February 27, 1995, by Sun BMW as maker in favor of Camelback Automotive, Inc. in
the principal amount of $500,000.00.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Companies (including the businesses thereof) which is, or is reasonably
likely to be, materially adverse to the business, operations, assets, or
condition (financial or otherwise) of the Companies taken as a whole.
(g) "Max Consulting Agreement" shall mean that certain Consulting and
Non-Compete Agreement dated June 7, 1985 between Max Haechler and Scottsdale
Jaguar (by assignment from SPA Automotive, formerly known as Scottsdale Porsche
& Audi, Ltd.).
(h) "Person" shall mean and include an individual, corporation,
limited liability company, partnership, joint venture, association, trust, any
other unincorporated organization or entity and a governmental entity or any
department or agency thereto.
(i) "Purchased Real Property" shall mean the real property used in
the businesses of the Companies and known as 6725 E. McDowell Road, Scottsdale,
Arizona, 6825 E. McDowell Road, Scottsdale, Arizona and 6905 E. McDowell Road,
Scottsdale, Arizona.
(j) "Scottsdale Road Leases" shall mean (i) that certain lease dated
July 27, 1987, between Anthony A. Batarse, Jr., as Trustee under the Trustors'
Trust Established under Article 1 of the Batarse Family Trust Agreement dated
May 7, 1987, as amended (by assignment from Anthony A. Batarse, Jr. on September
30, 1987) as lessor, and SA, as lessee; and (ii) that certain lease dated July
27, 1987, between Anthony A. Batarse, Jr., as Trustee
-4-
under the Trustors' Trust Established under Article 1 of the Batarse Family
Trust Agreement dated May 7, 1987, as amended (by assignment from Esther Batarse
on August 20, 1987), as lessor, and SA, as lessee.
(k) "6925 Lease" shall mean that certain Sublease dated August 11,
1980, by and between Max of Switzerland, as Sublessor, and Scottsdale Porsche &
Audi, Ltd. (now known as SPA), as Sublessee, as amended by that certain
Amendment to Sublease dated June 7, 1985, that certain Agreement dated July 15,
1985, and that certain Third Amendment to Sublease dated November 30, 1992.
(l) "6905 Lease" shall mean that certain Sublease, dated June 7,
1985, by and between Max of Switzerland, as Sublessor, and Scottsdale Porsche &
Audi, Ltd. (now known as SPA), as Sublessee, as amended by that certain
Amendment to the Sublease, dated November 11, 1985, and that certain Second
Amendment to Sublease dated July 30, 1986.
1.2 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholders shall sell to UAG West, and UAG
West shall purchase from the Stockholders, the Shares and the 6725 Shares for an
aggregate purchase price (the "Purchase Price") equal to (i) Twenty-four Million
Fifty Thousand Dollars ($24,050,000) (the "Base Price") (the Base Price shall be
allocated pro rata among the Stockholders) which Base Price is subject to
adjustment at the time of Closing as provided in SECTION 1.3 below and which
Base Price is subject to adjustment after Closing as provided in SECTION 1.4
below, and (ii) the Additional Payments (if any) made pursuant to SECTION 1.5
below. At the Closing referred to in SECTION 1.2(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver to
UAG West the Shares and the 6725 Shares representing 100% of the Scottsdale
Jaguar Common Stock, 100% of the SA Common Stock, 100% of the SPA Common
Stock, 100% of the SL Common Stock, 100% of the LRP Common Stock, 100% of
the Sun BMW Common Stock and 100% of the 6725 Common Stock and deliver the
certificates representing such shares accompanied by stock powers duly
executed in blank; and
(ii) UAG West shall accept and purchase the Shares and the 6725
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 Deposits (as defined in SECTION 1.6 hereof) by wire
transfer to accounts designated in writing by the Stockholders or by
certified funds.
(b) CAPITAL CONTRIBUTION AND REPAYMENT OF LOAN. On the Closing Date,
UAG West shall make a capital contribution to the
-5-
Companies in an aggregate amount equal to the principal and accrued but unpaid
interest on the Bank of America Note as of the Closing Date ("the Payoff
Amount"), and the Companies shall pay the Payoff Amount to Bank of America
Arizona in full satisfaction of the Bank of America Note.
(c) ASSUMPTION OF INDEBTEDNESS. Except as otherwise set forth
herein, UAG and UAG West hereby acknowledge and agree that, as a result of the
transactions contemplated hereby, UAG West shall, directly or indirectly, assume
all obligations of the Companies, including without limitation, the indebtedness
listed on SCHEDULE 1.2(e)(vii) hereof. UAG and UAG West acknowledge and agree
to accept in connection with any consent to the transactions arising out of such
direct or indirect assumption, changes to the existing terms of such obligations
provided that the obligations as so revised are commercially reasonable taken as
a whole.
(d) CLOSING. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares and the 6725 Shares pursuant to this
Agreement (the "Closing") shall take place within ten days of the Stockholders
receiving written notice from UAG stating that all conditions to closing have
been satisfied and that UAG is prepared to close (the "UAG Notice") or on
December 2, 1996, whichever occurs first (the "Closing Date") at a time and
place to be agreed upon by the parties; PROVIDED, HOWEVER, that the Stockholders
may, at their option, elect to have the Closing Date be within ten days after
the UAG Notice or within ten days after January 2, 1997, whichever occurs first,
by giving UAG written notice of such election on or before November 15, 1996.
(e) DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) The Stockholders shall deliver to UAG West certificates
representing the Shares and the 6725 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 1.2(a)(i) hereof, and any other documents
that are necessary to transfer to UAG West good title to all the Shares and
the 6725 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) Knappenberger Trust shall deliver to UAG West certificates
representing the Scottsdale Management 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 1.8(a)(ii) hereof, and any other documents
that are necessary to transfer to UAG West good title to all the Scottsdale
Management Shares;
(iii) UAG West shall (a) pay to the Stockholders funds as required
by SECTION 1.2(a)(ii) hereof, (b) pay to Knappenberger Trust funds as
required by SECTION 1.8(a)(ii)
-6-
hereof, and (c) deliver to the Stockholders all opinions, certificates and
other instruments and documents required to be delivered by UAG or UAG West
at or prior to the Closing or otherwise required in connection herewith;
(iv) UAG West shall enter into an employment agreement with Mr.
Knappenberger in a form mutually acceptable to UAG, UAG West and Mr.
Knappenberger (the "Knappenberger Employment Agreement"). The
Knappenberger Employment Agreement shall provide that Mr. Knappenberger
shall be employed as President and Chief Operating Officer of UAG West and
as dealer principal for all manufacturers relating to the Companies'
current dealerships and shall be for a five-year term, which term shall
automatically be extended for one year on each anniversary of the Closing
Date unless such annual extensions are terminated by the parties.
(v) UAG West shall enter into an employment agreement with Jay
Beskind ("Beskind") in a form mutually acceptable to UAG, UAG West and
Beskind (the "Beskind Employment Agreement"). The Beskind Employment
Agreement shall provide that Beskind shall be employed as a General Manager
and as Executive Vice-President of UAG West and shall be for a five-year
term, which term shall automatically be extended for an additional year on
each anniversary of the Closing Date unless such annual extensions are
terminated by the parties.
(vi) UAG West shall enter into an employment agreement with
George Brochick ("Brochick") in a form mutually acceptable to UAG, UAG West
and Brochick (the "Brochick Employment Agreement"). The Brochick
Employment Agreement shall provide that Brochick shall be employed as a
General Manager and as Executive Vice-President of UAG West and shall be
for a five-year term, which term shall automatically be extended for an
additional year on each anniversary of the Closing Date unless such annual
extensions are terminated by the parties.
(vii) UAG and UAG West shall guaranty the obligations of the
Companies under the leases set forth on SCHEDULE 1.2(e)(vii) hereof (the
"Leases"), the debt set forth on SCHEDULE 1.2(e)(vii) hereof, the Broker's
Agreement between UAG West and KBB, Inc. (the "Broker's Agreement") and the
Knappenberger, Beskind and Brochick Employment Agreements, and shall
deliver to the creditors or lessors, and to KBB, Inc., Mr. Knappenberger,
Beskind and Brochick, as the case may be, one or more guarantees in a form
mutually acceptable to UAG and such other persons (collectively, the
"Guarantees").
(viii) Provided that there is no uncured default by sellers under
the real estate purchase agreement relating to the real property used in
the business of SL and known as 6905 E. McDowell Road, Scottsdale, Arizona
(the "6905
-7-
Property") entered into by UAG West and the owners of the 6905 Property on
the date hereof (the "Real Estate Purchase Agreement"), UAG West (or its
assignee) shall purchase the 6905 Property on the terms and subject to the
conditions set forth in the Real Estate Purchase Agreement.
(ix) UAG West shall enter into the Broker's Agreement.
1.3 MAX CONSULTING.
In the event that the Companies, or any of them, have any liabilities
or obligations relating to the Max Consulting Agreement as of the Closing Date,
then the Base Price shall be reduced by the after tax present value of such
liabilities or obligations. For purposes of determining present value under
this SECTION 1.3, the discount rate shall be ten (10%) percent per annum, and
the assumed tax rate shall be 40%.
1.4 NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable after the Closing
Date, the Stockholders shall deliver to UAG balance sheets of the Companies
estimated as of the Closing Date (such balance sheets so delivered are referred
to herein as the "Closing Date Balance Sheets"). The Closing Date Balance
Sheets 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 2.5 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 Sheets, the Stockholders and the
Companies shall permit the Reviewer (as defined below) and other representatives
of UAG, at UAG's expense, to conduct a physical inventory at each location where
inventory is held by the Companies. From the results of such inventory and
prior to the Closing Date, UAG and the Stockholders (or the respective
representatives thereof) will prepare a schedule, which shall be signed by each
of UAG and the Stockholders, setting forth such inventory.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheets, (i) Coopers & Lybrand or such other accounting firm selected by
UAG and reasonably approved by the Stockholders (the "Reviewer") shall audit or
otherwise review, at UAG's expense, the Closing Date Balance Sheets in such
manner as UAG and the Reviewer deem reasonably appropriate, and (ii) UAG shall
deliver such reviewed balance sheet (the "Reviewed Balance Sheets"), together
with the Reviewer's report thereon, to the Stockholders. The Reviewed Balance
Sheets (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
-8-
the Final Net Worth (as defined in SECTION 1.4(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.4(g)(iii)
hereof. UAG and the Reviewer shall have the opportunity to consult with the
Stockholders, the Companies and each of the accountants and other
representatives of the Stockholders and the Companies and examine the work
papers, schedules and other documents prepared by the Stockholders, the
Companies and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheets. The Stockholders and the
Stockholders' independent public accountants shall have the opportunity to
consult with the Reviewer and examine the work papers, schedules and other
documents prepared by UAG and the Reviewer during the preparation of the
Reviewed Balance Sheets.
(c) The Stockholders shall have a period of forty-five (45) days
after delivery of the Reviewed Balance Sheets to present in writing to UAG all
objections the Stockholders may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such 45-day period, the Reviewed Balance Sheets
shall be deemed accepted and approved by the Stockholders and a supplemental
closing (the "Supplemental Closing") shall take place within five (5) Business
Days following the expiration of such 45-day period, or on such other date as
may be mutually agreed upon in writing by UAG and the Stockholders.
(d) If the Stockholders shall raise any objection within the 45-day
period, UAG and the Stockholders shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheets, then
the specific matters in dispute shall be submitted to a firm of independent
public accountants mutually acceptable to UAG and the Stockholders, which firm
shall make a final and binding determination as to such matter or matters. Such
accounting firm shall send its written determination to UAG and the Stockholders
and the Supplemental Closing, if any, shall take place five (5) Business Days
following the receipt of such determination by UAG and the Stockholders. The
fees and expenses of the accounting firm referred to in this SECTION 1.4(e)
shall be paid one-half by UAG and one-half by the Stockholders.
(f) UAG and the Stockholders agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected by
UAG and the Stockholders pursuant to SECTION 1.4(e) hereof in order that any and
all matters in dispute shall be resolved as soon as practicable.
-9-
(g) (i) If the aggregate Net Worth as shown on the Reviewed Balance
Sheets as finally determined through the operation of SECTIONS 1.4 (a) THROUGH
(e) hereof (such amount being referred to herein as the "Final Net Worth") shall
be less than Six Million Four Hundred Thousand Seven Hundred and Thirty Dollars
($6,400,730) (the "March 31, 1996 Net Worth") (the amount of any such deficiency
being referred to herein as the "Net Worth Deficiency"), the Stockholders shall
pay to UAG at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing by UAG two (2) Business Days
prior to 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.); PROVIDED, HOWEVER, that the
Stockholder shall not be required to make any payment pursuant to this SECTION
1.4(g)(i) unless the Net Worth Deficiency exceeds One Hundred Thousand Dollars
($100,000).
(ii) If the Final Net Worth shall be more than the March 31,
1996 Net Worth (the amount of any such excess being referred to herein as the
"Net Worth Excess"), UAG West shall pay to the Stockholders at the Supplemental
Closing, by wire transfer of immediately available funds to an account
designated in writing by the Stockholders two (2) Business Days prior to the
date 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" shall have the meaning ascribed to it in
SCHEDULE 1.4(g)(iii) delivered on the date hereof, which sets forth the
calculation of Net Worth for March 31, 1996.
1.5 ADDITIONAL PURCHASE PRICE.
(a) If the Companies, on a combined basis, achieve Pre-Tax Earnings
(as defined below) of at least $15,000,000 for the period commencing on
October 1, 1996 and ending on September 30, 1998 (the "Additional Payment
Period"), then, in consideration for the sale of the Shares by the Stockholders
to UAG West, UAG West will make an additional payment to the Stockholders (the
"Additional Purchase Price Payment") in the aggregate amount set forth below
(the "Additional Purchase Price Payment Amount"), which Additional Purchase
Price Payment shall be allocated among the Stockholders pro rata:
-10-
If: Then:
TOTAL PRE-TAX EARNINGS (TE) ADDITIONAL PURCHASE PRICE PAYMENT
AMOUNT
$15,000,000 to $15,999,999 $[(TE - 15,000,000) x 2 DIVIDED BY 3]
$16,000,000 or over $[1,666,667 +[(TE - 16,000,000) DIVIDED BY 5]]
(b) In the event that UAG West is required to make an Additional
Purchase Price Payment, then UAG West shall pay to the Stockholders an aggregate
amount equal to eighty (80%) percent of UAG's estimate of the Additional
Purchase Price Payment Amount (the "Estimated Additional Purchase Price
Payment") within thirty (30) days after the completion of the Additional Payment
Period. Within sixty (60) days after the completion of the review by the
Companies' certified public accountants of the financial statements prepared in
accordance with SECTION 1.5(c) hereof covering the Additional Purchase Price
Payment Period (but, in no event, more than 90 days after the end of the
Additional Payment Period), (i) if the Additional Purchase Price Payment Amount
shall exceed the amount of the Estimated Additional Purchase Price Payment (the
amount of any such excess being referred to herein as the "Additional Purchase
Price Payment Deficiency"), then UAG West shall pay to the Stockholders, by wire
transfer of immediately available funds to accounts designated in writing by the
Stockholders, an aggregate amount equal to the Additional Purchase Price Payment
Deficiency, and (ii) if the Additional Purchase Price Payment Amount shall be
less than the amount of the Estimated Additional Purchase Price Payment (the
amount of any such deficiency being referred to herein as the "Additional
Purchase Price Payment Surplus"), the Stockholders shall pay to UAG West, by
wire transfer of immediately available funds to an account designated in writing
by UAG West, an aggregate amount equal to the Additional Purchase Price Payment
Surplus.
(c) For purposes of this ARTICLE I, "Pre-Tax Earnings" shall mean the
consolidated net earnings (or losses), before taxes, of the Companies, computed
in accordance with the Accounting Principles and reflected on financial
statements prepared in accordance with the Accounting Principles and reviewed by
the certified public accountants of the Companies; PROVIDED, HOWEVER, that for
purposes of this SECTION 1.5, Pre-Tax Earnings shall be calculated giving effect
to the consolidated net earnings (or losses) of any satellites of existing
franchises and Land Rover of Tucson, shall add back any LIFO inventory
adjustments and shall be calculated without including (i) depreciation or
amortization expenses; (ii) overhead expenses of UAG or UAG West attributed to
the Companies; (iii) interest expenses relating to the Bank of America Note or
any refinancing or replacement thereof; (iv) expenses relating to the Scottsdale
Road Leases; (v) expenses relating to the Max Consulting Agreement; (vi)
interest expense on any new debt (excluding new vehicle financing); (vii) direct
expenses relating to the expansion of UAG West (through acquisitions, start-ups
or otherwise); (viii) any additional rent expense resulting from the sale of any
of the
-11-
Companies' facilities to a third party; or (ix) any distributions on capital
stock permitted under SECTION 5.4(a)(vi) hereof.
1.6 DEPOSITS.
(a) INITIAL DEPOSIT. Upon the execution of this Agreement by all of
the parties hereto, UAG shall pay to the Stockholders, pro rata, a deposit in
the aggregate amount of Five Hundred Thousand Dollars ($500,000) (the "Initial
Deposit"). The Initial Deposit shall be non-refundable except that if this
Agreement is terminated pursuant to SECTION 8 hereof (i) within thirty (30) days
of the payment of the Initial Deposit to the Stockholders as the result of a
material misrepresentation or omission on the financial statements set forth on
SCHEDULE 2.5 hereto or (ii) within five (5) days of the delivery by the
Stockholders and the Companies of the Schedules set forth in ARTICLES 2 AND 3
hereof if the Schedules are not satisfactory to UAG, then, within five (5) days
of such termination, the Stockholders shall refund to UAG Two Hundred and Fifty
Thousand Dollars ($250,000) of the Initial Deposit. Without limitation of the
foregoing, the Stockholders shall be entitled to keep the Initial Deposit if UAG
and UAG West terminate this Agreement because of their failure to obtain the
approval of their respective Boards of Directors as provided in SECTION 6.8
hereof.
(b) SECOND DEPOSIT. Within five (5) days after the parties hereto
receive (i) the approvals set forth in SECTION 6.11, and (ii) binding consents
to the release at Closing of the 6925 Lease Guaranty, the 6905 Lease Guaranty,
the Bank of America Note Guaranty, the Bank of America Flooring Guaranty, the
Bank of America Real Property Guaranty I and the Bank of America Real Property
Guaranty II (each of which is defined in SECTION 5.12 hereto) UAG shall pay to
the Stockholders an additional deposit in the amount of Two Million Dollars
($2,000,000) (the "Second Deposit" and together with the Initial Deposit, the
"Deposits"). If, after payment of the Second Deposit, this Agreement is
terminated pursuant to SECTION 8.1 hereof, then, within five (5) days of such
termination, the Stockholders shall refund the full amount of the Second
Deposit; PROVIDED, HOWEVER, that the Stockholders shall have no obligation to
refund the Second Deposit (i) if this Agreement is terminated by the
Stockholders pursuant to SECTION 8.1(vi) or pursuant to SECTION 8.1(v) (unless
such termination results from the failure to satisfy any condition set forth in
the second sentence of SECTION 7.2(a), SECTION 7.2(b), SECTION 7.4, SECTION 7.6,
SECTION 7.7 or SECTION 7.12 and any such condition is not waived by the
Stockholders) or (ii) if all conditions to Closing have been satisfied or are
capable of being satisfied by UAG prior to the Closing Date (as determined in
accordance with SECTION 1.2(d) hereof) and the Stockholders were prepared to
transfer the Shares and the 6725 Shares to UAG West on the Closing Date and this
Agreement is terminated by the Stockholders pursuant to SECTION 8.1(ii) hereof.
If this Agreement is not terminated, then at the Closing, the Deposits shall be
credited against the Base Price as set forth in ARTICLE I hereof.
-12-
1.7 MAAS NOTE.
On or before the Closing Date, the Stockholders shall pay the
outstanding principal and all accrued but unpaid interest on the Maas Note in
full satisfaction of the Companies' obligations arising out of or relating to
the Maas Note.
1.8 PURCHASE AND SALE OF SCOTTSDALE MANAGEMENT.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, Knappenberger Trust shall sell to UAG West, and UAG
West shall purchase from Knappenberger Trust, the Scottsdale Management Shares
for an aggregate purchase price equal to Seven Hundred Fifty Thousand Dollars
($750,000) (the "Scottsdale Management Purchase Price"). At the Closing
referred to in SECTION 1.2(b) hereof:
(i) Knappenberger Trust shall sell, assign, transfer and deliver
to UAG West the Scottsdale Management Shares representing 100% of the
Scottsdale Management Common Stock and deliver the certificates
representing such Scottsdale Management Shares accompanied by stock powers
duly executed in blank; and
(ii) UAG West shall accept and purchase the Scottsdale Management
Shares from Knappenberger Trust and in payment therefor shall deliver to
Knappenberger Trust immediately available funds in an aggregate amount
equal to the Scottsdale Management Purchase Price by wire transfer to an
account designated in writing by Knappenberger Trust or by certified funds.
(b) NET WORTH. The parties acknowledge that, prior to the Closing
Date, Knappenberger Trust will transfer the assets of Scottsdale Management to
Knappenberger Trust (or to a third party) and the net worth of Scottsdale
Management on the Closing Date will be zero.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this ARTICLE 2 are to be delivered by the Companies and
the Stockholders no later than June 14, 1996, the Companies and the Stockholders
hereby jointly and severally represent and warrant to UAG and UAG West as
follows (except for representations and warranties relating to Scottsdale
Management which are made solely by Knappenberger Trust). Where any
representation or warranty is made "to the knowledge of the Stockholders" or to
"the Stockholders' knowledge", or subject to a similar knowledge limitation,
such representation or warranty is made to the knowledge of the Knappenberger
Trust, Mr. Knappenberger, Brochick, Beskind, 6725 Brochick Trust, 6725 Beskind
Trust, 6725 Knappenberger Trust, and, solely with respect to the
-13-
6905 Property, the Steven Knappenberger Revocable Trust II, dated May 12, 1992,
or any of them, and shall include any information that any of them would or
should have known in the exercise of reasonable diligence by an owner or lessor
of commercial real property or an owner and operator of automobile and light
truck dealerships, as the case may be.
2.1 ORGANIZATION AND GOOD STANDING.
The Companies are corporations duly organized, validly existing and in
good standing under the laws of the State of Arizona and have the corporate
power and authority to own, lease and operate the properties used in their
businesses and to carry on their businesses as now being conducted. The
Companies are duly qualified to do business and are 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
the Companies would not, or could not reasonably be expected to, in the
aggregate have a Material Adverse Effect. SCHEDULE 2.1 hereto lists (i) the
states and other jurisdictions where the Companies are so qualified and (ii) the
assumed names under which the Companies conduct business. Attached to SCHEDULE
2.1(b) hereto are complete and correct copies of the Companies' Articles of
Incorporation and Bylaws (including comparable governing instruments with
different names), as amended and presently in effect.
2.2 SUBSIDIARIES.
Except as set forth in SCHEDULE 2.2 and with respect to their interest
in one another, the Companies do not have any interest or investment in any
Person.
2.3 CAPITALIZATION.
The authorized stock of the Companies and the number of shares of
capital stock which are issued and outstanding are set forth on SCHEDULE 2.3
hereto. The shares listed on SCHEDULE 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Companies and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law and
no personal liability attaches to the ownership thereof. There is no security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of the Companies or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Companies, or (ii)
obligates the Companies to grant, offer or enter into any of the foregoing, or
(iii) relates to the voting or control of such capital stock, securities or
rights, except as set forth on SCHEDULE 2.3 hereto.
-14-
The Companies have not agreed to register any securities under the Securities
Act of 1933, as amended (the "Securities Act").
2.4 AUTHORITY; APPROVALS AND CONSENTS.
(a) The Companies have the corporate power and authority to enter
into this Agreement and the documents referred to herein (the "Documents") to
which they are a party and to perform their obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Documents to which they are a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by the
Board of Directors of each of the Companies and no other corporate proceedings
on the part of the Companies are necessary to authorize and approve this
Agreement and the Documents and the transactions contemplated hereby and
thereby. This Agreement has been, and on the Closing Date the Documents will
be, duly executed and delivered by, and constitute valid and binding obligations
of, each of the Companies, enforceable against the Companies in accordance with
their respective terms.
(b) Except as set forth in SCHEDULE 2.4, the execution, delivery and
performance by each of the Companies and each Stockholder of this Agreement and
the Documents to which it or he is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Articles of Incorporation
or By-Laws (including any comparable governing instrument with a different
name) of any Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement which is
material (as defined in SECTION 2.15 hereof) or require any consent or
waiver of any party to any Company Agreement that would or could reasonably
be expected to, in the aggregate, have a Material Adverse Effect;
(iii) result in the creation of any security interest upon, or any
person obtaining any right to acquire, any properties, assets or rights of
the Companies (other than the rights of UAG West to acquire the Shares, the
6725 Shares and the Scottsdale Management Shares pursuant to this
Agreement) that would or could reasonably be expected to, in the aggregate,
have a Material Adverse Effect;
(iv) violate or conflict with any Legal Requirements (as defined
in SECTION 2.9 hereof) applicable to the Companies or any of their
respective businesses or properties
-15-
that would or could reasonably be expected to, in the aggregate, have a
Material Adverse Effect; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act (as
defined in SECTION 5.3 hereof) that would or could reasonably be expected
to, in the aggregate, have a Material Adverse Effect.
Except as set forth in SCHEDULE 2.4 or referred to above, no
authorization, consent, order, permit or approval of, or notice to, or filing,
registration or qualification with, any governmental administrative or judicial
authority is necessary to be obtained or made by the Companies to enable the
Companies to continue to conduct their respective businesses and operations and
use their respective 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.
Except as otherwise indicated below, attached as SCHEDULE 2.5 are true
and complete copies of:
(i) (A) the unaudited balance sheets of the Companies 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 and (b) the unaudited balance sheets of the
Companies 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 reviewed by and
accompanied by the report of independent certified public accountants;
(ii) the unaudited balance sheets of the Companies as of March
31, 1996 (the "Company Balance Sheets") and the unaudited statements of
income and stockholders' equity for the month periods ended on such date,
together with the notes thereto; and
(iii) the financial statements for and as of March 31, 1996,
provided to each franchiser of the Companies (each, a "Company Factory
Statement" and, collectively, the "Company Factory Statements");
(all the foregoing financial statements (except for the financial statements
referred to in clause (iii) 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
Companies, fairly present the financial position, results of operations,
-16-
stockholders' equity and changes in financial position of the Companies 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 in SCHEDULE 2.5 and except
for the absence of footnote disclosure on interim financial statements) during
such periods, and can be legitimately reconciled with the financial statements
and the financial records maintained and the accounting methods applied by the
Companies for federal income tax purposes, and the unaudited financial
statements included in the Company Financial Statements indicate all
adjustments, which consist of only normal recurring accruals, necessary for such
fair presentations. The statements of income included in the Company Financial
Statements do not contain any items of special or nonrecurring income except as
expressly specified therein or as set forth in SCHEDULE 2.5, 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 set forth in
SCHEDULE 2.5. The books and accounts of the Companies 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
Companies consistent with prior practices of the Companies.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise) that could exceed $50,000, including, without limitation, any
unfunded obligation under employee benefit plans or arrangements as described in
SECTION 2.18 AND 2.19 hereof or liabilities for Taxes (as defined in SECTION 2.8
hereof), except for (i) liabilities reflected or reserved against on the most
recent Company Financial Statements, (ii) current liabilities incurred in the
ordinary course of business and consistent with past practice after the date of
the Company Balance Sheets 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 the Schedules hereto, including SCHEDULE 2.6
hereto.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, the Companies have operated in the
ordinary course of business consistent with past practice, except as set forth
on SCHEDULE 2.7(a) hereto or as disclosed herein or on any Schedules hereto, and
there has not been:
(i) any material adverse change in the assets, properties,
business, operations, net income or financial condition of the Companies,
and no factor, event, condition or circumstance exists which threatens or
may threaten to have a Material Adverse Effect;
-17-
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of the Companies, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Companies;
(iv) any loss of the employment, services or benefits of any key
employee of the Companies.
(b) Since December 31, 1995, except as set forth in SCHEDULE 2.7(b)
hereto or as disclosed herein or on any Schedules hereto, the Companies have
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 discharge or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics' liens and liens for taxes
not yet due and payable other than in the ordinary course in connection
with any refinancing of indebtedness or acquisition of new inventory,
property or equipment;
(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) in any material respect, 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
-18-
excess of $500,000 (in each case, excluding loaner cars), or additions to
property, plant and equipment other than ordinary repairs and maintenance;
(x) discontinued any franchise or the sale of any products or
product line or program;
(xi) incurred any material obligation or liability for the
payment of severance benefits; or
(xii) entered into any agreement or made any commitment to do any
of the foregoing.
2.8 TAXES.
Since January 1, 1990, the Companies 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 Companies 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
Companies or any such other corporation. As used herein, "Taxes" shall mean all
taxes, fees, levies or other assessments, including but not limited to income,
excise, property, sales, franchise, withholding, social security and
unemployment taxes imposed by the United States, any state, county, local or
foreign government, or any subdivision or agency thereof or taxing authority
therein, and any interest, penalties or additions to tax relating to such taxes,
charges, fees, levies or other assessments. Copies of all income tax returns
for the fiscal years ended after December 31, 1992 have been furnished to UAG or
its representatives and such copies are accurate and complete as of the date
hereof. The Companies have also furnished to UAG correct and complete copies of
all notices and correspondence contesting any tax deficiency or asserting any
tax deficiency after December 31, 1989 by the Companies to or from any federal,
state or local tax authorities where the amount in dispute was in excess of
$50,000. The Companies have adequately reserved for the payment of all Taxes
with respect to periods ended on, prior to or through the Closing Date for which
tax returns have not yet been filed. In the ordinary course, the Companies make
adequate provision on their books for the payment of all Taxes (including for
the current fiscal period) owed by the Companies. Except to the extent reserves
therefor are reflected on the Company Balance Sheets, the Companies are not
liable, or will not become liable, for any Taxes for any period ending on, prior
to or through the Closing Date. Except as set forth on SCHEDULE 2.8 hereto,
after December 31, 1989 the Companies have not been subject to a federal tax
audit of any kind or a state tax audit of any kind where the dispute was in
excess of $50,000, and no adjustment has
-19-
been proposed by the Internal Revenue Service ("IRS") with respect to any return
for any subsequent year. With respect to the audits referred to on SCHEDULE 2.8
hereto, no such audit has resulted in an adjustment in excess of $50,000 in
taxes, penalties and interest. Neither the Companies nor any Stockholder knows
of any basis for an assertion of a deficiency for Taxes against the Companies.
The Stockholders will cooperate, and will cause their Affiliates to cooperate,
with the Companies in the filing of any returns and in any audit or refund claim
proceedings involving Taxes for which the Companies may be liable or with
respect to which the Companies may be entitled to a refund.
2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the
Stockholders, threatened against or affecting, the Companies, the Real Property,
the Improvements (both as defined in SECTION 2.10 hereof) or any ERISA Plan (as
defined in SECTION 2.18(a) hereof) or any of their respective properties or
rights before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, domestic or foreign, nor is any basis known
to the Stockholders for any such Claims, and (ii) the Companies are not subject
to any judgment, decree, writ, injunction, ruling or order (collectively,
"Judgments") of any governmental, administrative or judicial authority, domestic
or foreign.
(b) The businesses of the Companies 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 Companies or any of their
respective businesses or properties, except where the failure to be in such
compliance could not reasonably be expected to have a Material Adverse Effect.
The Companies hold, and are in compliance with, all material franchises,
licenses, permits, registrations, certificates, consents, approvals or
authorizations (collectively, "Permits") required by all applicable Legal
Requirements except where the failure to hold or be in compliance with such
Permits could not reasonably be expected to have a Material Adverse Effect. A
list of all such permits is set forth on SCHEDULE 2.9(b) hereof.
(c) The Companies own or hold all Permits material to the conduct of
its business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination of
any Permit.
2.10 PROPERTY.
(a) The properties and assets owned by or leased to the Companies are
adequate for the conduct of the respective businesses of the Companies as
presently conducted and no properties
-20-
and assets presently used in the business of the Companies are owned by any
Affiliates of the Companies (other than one of the other Companies and except
for the leased property at 6905 E. McDowell Road, Scottsdale, Arizona, or as set
forth on SCHEDULE 2.10 hereto). Set forth on SCHEDULE 2.10 hereto is a list of
all interests in real property owned by or leased to the Companies (including
all such real property owned by the Companies or leased by the Stockholders
(directly or indirectly) and used in the businesses of the Companies) and of all
options or other contracts to acquire any such interest (collectively, the "Real
Property"). In all material respects, the improvements to the Real Property
("Improvements") and the machinery, equipment and other tangible property (the
"Tangible Property") owned or used by or leased to the Companies are in good
operating condition and in good repair and are fit for the particular purposes
for which they are used by the Companies, subject only to ordinary wear and
tear. The Real Property, Tangible Property and all Improvements owned or leased
by the Companies 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 material respect on property of others. To
the Stockholders' knowledge, 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 Companies as presently conducted, and there is no
pending or threatened application for changes in the zoning applicable to the
respective Real Property. Except as set forth in SCHEDULE 2.10 Certificates of
Occupancy have been issued with respect to the Improvements without special
conditions or restrictions that limit the Companies' ability to operate their
businesses after the Closing in a manner consistent with past practices. To the
knowledge of the Stockholders, all utilities servicing the Real Property and the
Improvements are provided by publicly-dedicated utility lines and are installed
and operational. No written or, to the knowledge of the Stockholders, oral
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
Companies or the Stockholders with respect to the Real Property. All
contractors, subcontractors and other persons or entities furnishing work,
labor, materials or supplies with respect to any of the Real Property,
Improvements or Tangible Property have been, or in the ordinary course will be,
paid and there are no liens against such property in connection therewith.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the
Companies, the Real Property and the Improvements are, and any property formerly
owned, occupied or leased by the Companies were, during the period of ownership,
occupancy or lease by the Companies, in compliance with all Environmental Laws
(as defined below), (ii) the Companies have obtained all Environmental Permits
(as defined below), (iii) such Environmental Permits are in full force and
effect, and (iv) the Companies are in compliance with all terms and conditions
of such Environmental Permits.
-21-
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 Companies' businesses 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.
(b) Except as set forth in SCHEDULE 2.11(b), the Companies and the
Stockholders have not violated, done or suffered any act which could give rise
to liability under, and are not otherwise exposed to liability under, any
Environmental Law. No
-22-
event has occurred with respect to the Real Property or the Improvements nor, to
the knowledge of the Stockholders, during the period of ownership, lease or
occupancy by the Companies of any property formerly owned, occupied or leased by
the Companies has an event occurred, 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. Except as set forth in SCHEDULE 2.11(b),
the Companies have no contingent liability under any Environmental Law; and
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
Companies, the Real Property or any portion thereof, the Improvements, or, to
the knowledge of the Stockholders, any property formerly owned, occupied or
leased by the Companies, nor, to the knowledge of the Stockholders, any property
adjacent to the Real Property is being used or has been used for the treatment,
generation, transportation, processing, handling, production or disposal of any
Hazardous Materials or as a landfill or other waste disposal site 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 Companies' businesses in
compliance with all Environmental Laws including the existing regulations of the
United States Environmental Protection Agency requiring spill protection,
overfill protection and corrosion protection by December 22, 1998), (ii) none of
the Real Property or portion thereof, the Improvements or, during the period of
ownership, lease or occupancy by the Companies, any property formerly owned,
occupied or leased by the Companies 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, none of the Real Property, the Improvements or, during the period
of ownership, lease or occupancy by the Companies, any property formerly owned,
occupied or leased by the Companies, or, to the knowledge of the Companies or
the Stockholders, any site or location where the Companies 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, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or con-
-23-
tainers 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
portion of the Real Property, the Improvements or, to the knowledge of the
Stockholders, have any liens been placed upon any property formerly owned,
occupied or leased by the Companies 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, threatened claim, litigation,
or administrative proceeding, or known prior claim, litigation or administrative
proceeding, arising under any Environmental Law involving any of the Companies,
the Real Property, the Improvements, any property formerly owned, leased or
occupied by the Companies, any offsite contamination affecting the business of
the Companies 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 Companies have not submitted notice pursuant to Section 103 of CERCLA or
analogous statute or notice under any other applicable Environmental Law
reporting a release of a Hazardous Material into the environment, and (iv) the
Companies have 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, and the Companies, has any other entity whose liability
therefor, in whole or in part, may be attributed to the Companies, received such
notice, claim, demand, suit or request for information.
(f) By June 14, 1996, the Stockholders and the Companies shall have
provided to UAG all environmental studies and reports in their possession, and
shall have advised UAG of any material environmental studies and reports known
to them but not in their possession, pertaining to the Real Property, the
Improvements, the Companies and any property formerly owned, occupied or leased
by the Companies, 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, 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
Sheets and Company Factory Statements reflect the normal, LIFO inventory
valuation policies of the Companies, and, in the case of the Company Balance
Sheets, such values are in conformity with GAAP consistently applied (except as
disclosed on
-24-
SCHEDULE 2.5 hereto). In all material respects, the inventories reflected on
the Company Balance Sheets and Company Factory Statements or arising since the
date thereof are currently marketable and can reasonably be anticipated to be
sold 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 Sheets),
except for spare parts inventory which inventory is, in all material respects,
good and usable.
2.13 ACCOUNTS RECEIVABLE.
In all material respects, the accounts receivable reflected on the
Company Balance Sheets are, and all accounts receivable that will be or will
have been reflected on the Closing Date Balance Sheets, will be good, and have
been or will have been collected or are collectible, without resort to
litigation, within 90 days of the Closing Date, and are subject to no valid
defenses, setoffs or counterclaims other than normal cash discounts accrued in
the ordinary course of business.
2.14 INSURANCE.
All material properties and assets of the Companies 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 Companies are engaged and, to the
knowledge of the Stockholders, 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 Companies have made or will
make available to UAG true and complete copies of all such policies. All such
policies are in full force and effect are sufficient for all applicable
requirements of law and will not in any way be affected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement. Except as described in SCHEDULE 2.14, no notice of cancellation or
non-renewal with respect to, or disallowance of any claim under, any such policy
has been received by the Companies.
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 either of the Companies is a party or by which either of the Companies
or any of their respective assets or properties (including the Real Property and
the Improvements) may be bound or affected, including all amendments,
modifications, extensions
-25-
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 (i.e.,
involves payments over a period of twelve months or less of $100,000 or more and
is not cancelable at will without penalty) to the business, operations, assets
or condition (financial or otherwise) of the Companies. True and complete
copies of all written Company Agreements referred to on SCHEDULE 2.15 and
SCHEDULE 2.10 hereto, exclusive of individual vehicle titles and/or
manufacturer's certificates of origin and floor plan liens applicable to
individual vehicles, have been delivered or made available to UAG, and the
Companies have provided UAG with accurate and complete written summaries of all
such Company Agreements which are unwritten. Except as set forth on SCHEDULE
2.15, the Companies are not, nor, to the knowledge of the Stockholders is, any
other party thereto, in breach of or default under any Company Agreement, and no
event has occurred which (after notice or lapse of time or both) would become a
breach or default under, or would permit modification, cancellation,
acceleration or termination of, any Company Agreement or result in the creation
of any lien upon, or any Person obtaining any right to acquire, any properties,
assets or rights of the Companies in any such case where such breach, default or
other event would have, or could reasonably be expected to have, a Material
Adverse Effect. To the knowledge of the Stockholders, there are no material
unresolved disputes involving any of the Companies under any Company Agreement.
2.16 LABOR RELATIONS.
(a) The Companies have paid or made provision for the payment of all
salaries and accrued wages and have 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 have withheld and paid to the appropriate
governmental authority, or are 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 their employees.
(b) Except as described in Sections 6.12, 6.13 AND 6.14 and as set
forth on SCHEDULE 2.16(b) hereto, the Companies are not a party to any (i)
outstanding employment agreements or contracts with officers or employees
providing for annual compensation in excess of $100,000 that are not terminable
at will, or that provide for payment of any bonus or commission expected to
exceed $100,000, (ii) agreement, policy or practice that requires any of them 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 Companies, nor do the
Stockholders know of any activities or proceedings of any labor union to
organize any such employees. The Companies have furnished to UAG complete and
correct copies of all such agreements ("Employment and Labor Agreements"). The
Companies
-26-
have not breached or otherwise failed to comply with any 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'
knowledge, threatened, against or affecting the Companies, and the Companies
have 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
Companies, (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 Companies, (iv) there are no charges
with respect to or relating to the Companies pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment-practices, (v) the Companies have 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 Companies and, to the knowledge of the Stockholders, no
such investigation is in progress and (vi) the consents of the unions that are
parties to any Employment and Labor Agreements are not required to complete the
transactions contemplated by this Agreement and the Documents.
(d) The Companies have 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 Companies or to which the Companies are required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(1) of ERISA, maintained by the Companies or to which the Companies are
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
-27-
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) to the knowledge of the Stockholders, no event has occurred
or 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 complied with the reporting and
disclosure requirements imposed under ERISA and the Code; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under Section
401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and, to the knowledge of the Stockholders, there exists no fact
which would materially adversely affect its qualified status; and
(iii) to the knowledge of the Stockholders, is not currently under
investigation, audit or review by the IRS and 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) None of the Companies' Pension Benefit Plans is a defined benefit
plan under Section 414(j) of the Code.
(e) None of the Companies' Pension Benefit Plans to which ERISA has
applied has been or is being terminated, nor is termination contemplated with
respect to any such plans.
-28-
(f) The approximate aggregate of the amounts of contributions by the
Companies to be paid or accrued under ERISA Plans for the current fiscal year is
set forth on SCHEDULE 2.17(f) (the "Aggregate ERISA Contributions"), and the
Aggregate ERISA Contributions are not expected to exceed the total amount set
forth on SCHEDULE 2.17(f). To the extent required in accordance with GAAP, the
Company Balance Sheets reflect in the aggregate an accrual of all amounts of
employer contributions accrued but unpaid by the Companies under the ERISA Plans
as of the date of the Company Balance Sheets.
(g) With respect to the Welfare Benefit Plans:
(i) Except as set forth on SCHEDULE 2.17(g), there are no
material liabilities of the Companies under Welfare Benefit Plans with
respect to any condition which relates to a claim filed on or before the
Closing Date.
(ii) To the knowledge of the Stockholders, 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 Companies maintain or are 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 Companies pursuant to which
payments in excess of $100,000 per individual may be required to be made at
any time following the date hereof (including, without limitation, any
employment, deferred compensation, severance, supplemental pension,
termination or consulting agreement or arrangement); and
(iii) each employee of the Companies 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, $100,000. 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 Companies, 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
-29-
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) to the knowledge of the Stockholders, is not currently under
investigation, audit or review by the IRS or any other federal or state
agency and (to the knowledge of the Companies or the Stockholders) no such
action is contemplated or under consideration;
(iii) has no material liability for any federal, state, local or
foreign Taxes;
(iv) to the knowledge of the Stockholders, has no claims subject
to dispute or litigation; and
(v) has met all applicable requirements, if any, of the Code and
ERISA.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto is a complete and accurate
description of all material transactions between the Companies 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 Companies, and any Affiliate (other than the Companies),
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 (other than the Companies) of which such person is an officer or
partner or is, directly or indirectly, through one or more 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.
-30-
2.20 PROPRIETY OF PAST PAYMENTS.
To the knowledge of the Stockholders, no funds or assets of the
Companies have been used for illegal purposes; no unrecorded funds or assets of
the Companies have been established for any purpose; no accumulation or use of
the Companies' corporate funds or assets has been made without being properly
accounted for in the respective books and records of the Companies; all payments
by or on behalf of the Companies 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 Companies for any reason; no
payment has been made by or on behalf of the Companies 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 Companies have 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 Companies 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 Companies 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 4.9% 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 Companies that is engaged
in the retail sale of automobiles or light duty trucks in the United States.
2.22 BROKERS.
Neither the Companies, 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 Documents.
2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Companies and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Companies nor the Stockholders has made any material
misrepresentation to UAG or UAG West relating to the Companies, the Shares, the
6725 Shares or the Scottsdale Manage-
-31-
ment Shares and neither the Companies nor the Stockholders has omitted to
state to UAG any material fact relating to the Companies or the Shares, the
6725 Shares or the Scottsdale Manage-ent Shares which is necessary in order
to make the information given by or on behalf of the Companies 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, the
6725 Shares or the Scottsdale Management Shares.
2.25 WORKING CAPITAL.
On the Closing Date, the aggregate net working capital of the Companies
(other than Scottsdale Management and 6725), as reflected on the Estimated
Closing Date Balance Sheet (as defined in Section 6.6 hereof) will be equal to
or greater than the aggregate net working capital of the Companies as of March
31, 1996 as reflected on the Company Balance Sheets, and such net working
capital will be sufficient to operate the respective businesses of the Companies
(other than Scottsdale Management and 6725) consistent with past practices.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this ARTICLE 3 are to be delivered by the Companies and
the Stockholders no later than June 14, 1996, each Stockholder hereby jointly
and severally further represents and warrants to UAG as follows (except for
representations and warranties relating to Scottsdale Management which are made
solely by Knappenberger Trust). Where any representation or warranty is made
"to the knowledge of the Stockholders" or to "the Stockholder's knowledge", or
subject to a similar knowledge limitation, such representation or warranty is
made to the knowledge of the Knappenberger Trust, Mr. Knappenberger, Brochick,
Beskind, 6725 Brochick Trust, 6725 Beskind Trust, 6725 Knappenberger Trust, and,
solely with respect to the 6905 Property, the Steven Knappenberger Revocable
Trust II, dated May 12, 1992, or any of them, and shall include any information
that any of them would or should have known in the exercise of reasonable
diligence by an owner or lessor of commercial real property or an owner and
operator of automobile and light truck dealerships, as the case may be.
3.1 OWNERSHIP OF SHARES; TITLE.
Each Stockholder is the owner of record and beneficially of the
Shares, the 6725 Shares and the Scottsdale Management Shares as set forth on
SCHEDULE 3.1 hereof and has, and shall transfer to UAG West at the Closing, good
and marketable title to the Shares, the 6725 Shares and the Scottsdale
Management Shares owned by him, free and clear of any and all security
interests, liens, encumbrances, proxies and voting or other agreements
-32-
except restrictions on transfer imposed by applicable federal and state
securities laws.
3.2 AUTHORITY.
Each Stockholder has all requisite power and authority and has full
legal capacity and is competent to execute, deliver and perform this Agreement
and the Documents to which he or it is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of the
Shares, the 6725 Shares and the Scottsdale Management Shares to UAG West as
contemplated by this Agreement). This Agreement has been duly executed and
delivered by each Stockholder and constitutes, and the Documents to which each
Stockholder is a party when executed and delivered by each Stockholder will
constitute, a valid and binding obligation of each Stockholder, enforceable
against each Stockholder in accordance with its terms. Except as set forth on
SCHEDULE 3.2, the execution, delivery and performance of this Agreement and the
Documents by each Stockholder and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to which
any Stockholder is a party or to which any Stockholder or any of such
Stockholder'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.
The owners of each of the Purchased Real Property (the "Owners") as
set forth on SCHEDULE 3.3(a) hereof own the Purchased Real Property and the
Improvements thereon in fee simple, free and clear of all liens, claims and
encumbrances, except the leases and options described in SCHEDULE 2.10 hereof,
those disclosed in the title insurance commitments described in SECTION 6.17
hereof and in SCHEDULE 3.3(b) hereof, none of which currently adversely affect
the use of the Purchased Real Property and the Improvements thereon for the
conduct of the respective businesses of the Companies as presently conducted.
With regard to the Purchased Real Property, the aggregate principal and
-33-
interest on the Bank of American real estate loans relating thereto is
approximately Ten Million Six Hundred Thousand Dollars ($10,600,000), the
Purchased Real Property does not secure any other indebtedness other than
indebtedness of the Companies to Bank of America and there are no defaults under
any indebtedness secured by the Purchased Real Property. No assessments have
been made against any portion of the Real Property which are unpaid (except ad
valorem taxes and assessments for the current year that are not yet due and
payable), whether or not they have become liens. The Owners of the Purchased
Real Property are solvent and none have made a general assignment for the
benefit of creditors, nor been adjudicated bankrupt, nor has a receiver been
appointed with respect to any of their properties. To the Stockholders'
knowledge, there are no disputes concerning the location of the lines and
corners of the Real Property. Except as provided herein, no one has been
granted any right to purchase or lease the Purchased Real Property or the
Improvements thereon other than existing lessees under the leases in favor of
the Companies or Mr. Knappenberger, which are to be terminated at Closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this ARTICLE 4 are to be delivered by UAG no later than
June 14, 1996, UAG hereby represents and warrants to the Companies 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. Attached hereto as
SCHEDULE 4.1 are complete and correct copies of UAG's Certificate of
Incorporation and By-laws, as amended and presently in effect.
4.2 CAPITALIZATION.
The authorized stock of UAG and UAG West and the number of shares of
capital stock which are issued and outstanding are set forth on SCHEDULE 4.2
hereto. The shares listed on SCHEDULE 4.2 hereto constitute all the issued and
outstanding shares of capital stock of UAG and UAG West and have been validly
autho-
-34-
rized and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law and
no personal liability attaches to the ownership thereof. There is no security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of UAG and UAG West or any securities convertible into,
or other rights to acquire, any shares of capital stock of UAG and UAG West or
(ii) obligates UAG and UAG West to grant, offer or enter into any of the
foregoing, or (iii) relates to the voting or control of such capital stock,
securities or rights, except as set forth on SCHEDULE 4.2 hereto.
4.3 AUTHORITY; APPROVALS AND CONSENTS.
(a) UAG and UAG West have the corporate power and authority to enter
into this Agreement and the Documents to which they are a party and to perform
their respective obligations hereunder and thereunder. Unless this Agreement is
terminated prior to July 10, 1996, then, on or before July 10, 1996, the
execution, delivery and performance of this Agreement and the Documents to which
they are a party and the consummation of the transactions contemplated hereby
and thereby will have been duly authorized and approved by the Board of
Directors of UAG and UAG West and no other corporate proceedings on the part of
UAG or UAG West will be necessary to authorize and approve this Agreement and
the Documents and the transactions contemplated hereby and thereby. This
Agreement has been, and on the Closing Date the Documents will be, duly executed
and delivered by, and constitute valid and binding obligations of UAG and UAG
West, enforceable against UAG and UAG West in accordance with their respective
terms.
(b) Except as set forth on SCHEDULE 4.3 hereto, the execution,
delivery and performance by UAG and UAG West of this Agreement and the Documents
to which they are a party and the consummation of the transactions contemplated
hereby and thereby do not and will not:
(i) contravene any provisions of the Certificates of
Incorporation or Bylaws of UAG or UAG West;
(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 mortgage, indenture, note,
agreement, contract, lease, license, franchise, obligation, instrument, or
other commitment, arrangement or understanding of any kind that is material
to the business, operation or assets of UAG or its subsidiaries, taken as a
whole (each a "UAG Agreement") 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
-35-
be expected to have a material adverse effect on the business, operation,
assets or condition (financial or otherwise) of UAG, UAG West and their
subsidiaries taken as a whole (a "UAG Material Adverse Effect");
(iii) result in the creation of any security interest upon, or any
person obtaining any right to acquire, any properties, assets or rights of
UAG or any UAG subsidiary that would or could reasonably be expected to
have a UAG Material Adverse Effect;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or any UAG subsidiary or any of their respective businesses or
properties that would or could reasonably be expected to have a UAG
Material Adverse Effect; 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 the provisions of the H-S-R Act that would or could
reasonably be expected to have a UAG Material Adverse Effect.
4.4 FINANCIAL STATEMENTS.
Attached as SCHEDULE 4.4 are true and complete copies of:
(i) the audited consolidated balance sheet of UAG and its
subsidiaries as of December 31, 1994 and the unaudited consolidated balance
sheet of UAG and its subsidiaries as of December 31, 1995 and the related
audited consolidated statements of income, stockholders' equity and cash
flows for the fiscal years ended on such dates, together with the notes
thereto, and, in the case of the December 31, 1994 statements, examined by
and accompanied by the report of Coopers & Lybrand, independent certified
public accountants; and
(ii) the unaudited consolidated balance sheet of UAG and its
subsidiaries as of March 31, 1996 (the "UAG Balance Sheet"), and the
unaudited consolidated statements of income, stockholders' equity and cash
flows for the month period ended on such date, together with the notes
thereto;
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and its
subsidiaries, fairly present the consolidated financial position, results of
operations, stockholders' equity and changes in financial position of UAG and
its subsidiaries as of the dates and for the periods indicated, in each case in
conformity with GAAP consistently applied (except as otherwise indicated in such
statements) during such periods, and can be legitimately recon-
-36-
ciled with the financial statements and the financial records maintained and the
accounting methods applied by UAG and its subsidiaries for federal income tax
purposes, and the unaudited financial statements included in the UAG Financial
Statements indicate all adjustments, which consist of only normal recurring
accruals, necessary for such fair presentations. The statements of income
included in the UAG Financial Statements do not contain any items of special or
nonrecurring income except as expressly specified therein, and the balance
sheets included in the UAG Financial Statements do not reflect any write-up or
revaluation increasing the book value of any assets, except as expressly stated
therein. The books and accounts of UAG and its subsidiaries are complete and
correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses of
UAG and its subsidiaries consistent with prior practices of UAG and its
subsidiaries.
4.5 BROKERS.
Neither UAG, UAG West 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
Documents.
4.6 DISCLOSURE.
Neither UAG nor UAG West has made any material misrepresentation to
the Stockholders and neither UAG nor UAG West has omitted to state to the
Stockholders any material fact relating to UAG or UAG West which is necessary in
order to make the information given by UAG or UAG West not misleading or which
if disclosed would reasonably affect the decision of the seller of a business to
UAG.
4.7 FINANCIAL CAPACITY.
UAG and UAG West have the financial capacity to consummate the transactions
and to comply with all of their obligations on the terms set forth herein.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholders and the
Companies will (i) provide to the officers and other authorized representatives
of UAG and UAG West full access, during normal business hours, to any and all
premises, properties, files, books, records, documents, and other information of
the Companies and will cause their officers to furnish to UAG and UAG West and
their authorized representatives any and all financial, technical and operating
data and other information
-37-
pertaining to the businesses and properties of the Companies, and (ii) make
available for inspection and copying by UAG and UAG West true and complete
copies of any documents relating to the foregoing. UAG and UAG West will hold
in confidence (unless and to the extent compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law) all Confidential Information (as defined below) of the Companies 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 UAG West, provided that any such
third party is advised of and is bound by the confidentiality provisions hereof.
If this Agreement is terminated, UAG and UAG West will promptly return to the
Companies, upon the reasonable request of the Companies, all Confidential
Information furnished by the Companies and held by UAG and UAG West, including
all copies and summaries thereof. As used herein, "Confidential Information"
shall mean all information concerning a party obtained 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 Companies and not known
to the recipient to be bound by an obligation of confidentiality or (z) which is
or becomes known to the public, other than through a breach by UAG of this
Agreement. The Stockholders will hold in confidence (unless and to the extent
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law) all Confidential Information of
UAG 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 the Stockholders. If this Agreement is
terminated, the Stockholders will promptly return to UAG, upon the reasonable
request of UAG, all Confidential Information furnished by UAG and held by the
Stockholders, including all copies and summaries thereof.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Companies, on the one hand, and UAG and UAG
West, 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 Companies or UAG and UAG West, respectively, required for inclusion in
any statement or application made by UAG or the Companies to any governmental or
regulatory body or in connection with obtaining any third party consent in
connection with the transactions contemplated by this Agreement. Neither the
Stockholders nor the Companies, on the one hand, nor UAG nor UAG West, on the
other hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law.
-38-
5.3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and UAG West and the Stockholders and the Companies, 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 be responsible for all expenses
(except for Stockholders' attorney's fees) incurred in the preparation of the H-
S-R Act filings and the filing fee to be paid in connection with the H-S-R Act
filings. The parties shall use their reasonable best efforts to make such
filings promptly, to respond to any requests for additional information made by
either of such agencies, to cause the waiting periods under the H-S-R Act to
terminate or expire at the earliest possible date and to resist vigorously, at
their respective cost and expense (including, without limitation, the
institution or defense of legal proceedings) any assertion that the transactions
contemplated herein constitute a violation of the antitrust laws, all to the end
of expediting consummation of the transactions contemplated herein; PROVIDED,
HOWEVER, that if UAG or the Stockholders shall determine after issuance of any
preliminary injunction that continuing such resistance is not in their best
interests, UAG or the Stockholders, as the case may be, may, by written notice
to the other party, terminate this Agreement with the effect set forth in
SECTION 8.2 hereof.
5.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Companies shall, and the Stockholders shall cause the Companies to,
conduct their respective businesses solely in the ordinary course consistent
with past practices and, without the prior written consent of UAG, which consent
shall not be unreasonably withheld, neither the Stockholders nor the Companies
will, except as required or permitted pursuant to the terms hereof or as set
forth in SCHEDULE 5.4, permit the Companies to:
(i) make any material change in the conduct of their respective
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 their Articles of Incorporation or By-
laws, issue any additional shares of capital stock or equity securities or
grant any option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for their
capital stock or alter any material term of any of their outstanding
securities or make any change in their outstanding shares of capital stock
or other ownership interests or its capitalization, whether by reason of a
-39-
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(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 Companies, or (C) issue any options or other rights to
acquire from the Companies, directly or indirectly, debt securities of the
Companies or any security convertible into or exchangeable for such debt
securities;
(iv) except as permitted hereby, make any sale, assignment,
transfer, abandonment or other conveyance of any of their assets or any
part thereof, except transactions pursuant to existing contracts set forth
in SCHEDULE 2.15 hereto and dispositions of inventory or of worn-out or
obsolete equipment for fair or reasonable value in the ordinary course of
business consistent with past practices;
(v) subject any of their assets, or any part thereof, to any
lien or suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practices by operation of
law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination thereof)
in respect of any shares of their capital stock which could reasonably be
expected to decrease the aggregate Net Worth of the Companies below the
March 31, 1996 Net Worth or redeem, retire, purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than 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
-40-
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 $75,000, or aggregate capital expenditures in
excess of $500,000, in each case excluding loaner cars;
(x) except as permitted hereby, 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 their Affiliates except in the
ordinary course of business consistent with past practice;
(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 the Companies (or on behalf
of the Companies) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any person outside 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;
(xvii) take any other action that would cause any of the
representations and warranties made by the Companies in this Agreement not
to remain true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Companies will use their reasonable best efforts to, and the Stockholders will
use their reasonable best efforts to, cause the Companies to:
-41-
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply in all material respects with all applicable
Environmental Laws, and, in the event the Companies shall receive notice
that there exists a violation of any Environmental Law with respect to
their operations or any Real Property, promptly (and in any event within
the time period permitted by the applicable governmental authority)
commence action to and pursue until complete any removal or remedy related
to 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 the Companies unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
(iv) keep their books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve their 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 them; and
(vi) continue to conduct their business in the ordinary course
consistent with past practices.
5.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on SCHEDULE 5.5 hereto, at the Closing there will
be no intercompany payables or intercompany receivables due and/or owing between
the Stockholders and their Affiliates (other than the Companies) on the one
hand, and the Companies, on the other hand, other than those incurred in the
ordinary course of business generally disclosed in the Notes to the Companies'
financial statements or elsewhere herein, including any Schedule hereto.
5.6 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the termination
of this Agreement, no Stockholder, nor the Companies, nor their officers,
directors, employees, advisors, agents, representatives, Affiliates or anyone
acting on behalf of the Stockholders, the Companies 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
-42-
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
Companies. The Stockholders shall promptly communicate to UAG any serious
inquiries or communications concerning any such transaction (including the
identity of any person making such inquiry or communication) which any
Stockholder may receive or of which any Stockholder may become aware.
5.7 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Companies and UAG will use their respective reasonable 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
Companies of all their material properties and (c) the conduct after the
Closing by the Companies of their respective businesses as conducted by
them on the date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.8 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its reasonable 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 Companies shall take all such necessary action.
-43-
5.9 INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after the
date of this Agreement, the Companies will deliver to UAG unaudited balance
sheets of the Companies, and UAG will deliver to the Stockholders unaudited
consolidated balance sheets of UAG, in each case as at the end of such calendar
month and at the end of the corresponding calendar month of the preceding fiscal
year, together with the related unaudited statements of income and, with regard
to UAG, the unaudited statements of cash flow for the fiscal months then ended.
All such financial statements shall fairly present the financial position and
results of operations of the Companies and UAG, as applicable, as of the date or
for the periods indicated. All unaudited financial statements delivered
pursuant to this SECTION 5.9 shall be prepared on a basis consistent with the
Company Financial Statements and the UAG Financial Statements, as applicable.
5.10 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation or warranty of such party
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which could
result in the failure to satisfy a condition specified in ARTICLE 6 or ARTICLE 7
hereof, as applicable, (iii) any notice or other communication from any third
person alleging that the consent of such third person is or may be required in
connection with the transactions contemplated by this Agreement, and (iv) in the
case of the Stockholders and the Companies, 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, except where
such default could not reasonably be expected to have a Material Adverse Effect.
Each party hereto will (x) promptly advise the other party hereto of any event
that has, or could in the future have, a Material Adverse Effect or material
adverse effect on UAG and its subsidiaries, taken as a whole, as applicable, (y)
confer on a regular and frequent basis with one or more designated
representatives of the other party to report operational matters and to report
the general status of ongoing operations, and (z) notify the other party of any
emergency or other change in the normal course of business or in the operation
of the properties of the Companies and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or adjudicatory proceedings involving any property of the
Companies or UAG, as applicable, and will keep the other party fully informed of
such events and permit UAG's representatives access to all materials prepared in
connection therewith. Each Stockholder shall give prompt notice to UAG of any
notice or other communication from any third person asserting any right, title
or interest in any of the Shares held by such Stockholder (including, without
limitation, any threat to commence, or notice of the commencement
-44-
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, the 6725 Shares or the
Scottsdale Management Shares as contemplated hereby.
5.11 ASSURANCE BY THE STOCKHOLDERS.
The Stockholders and Mr. Knappenberger shall cause each of the
Companies to comply with their respective covenants set forth in this Agreement.
5.12 RELEASE OF GUARANTEES.
UAG and UAG West shall use their reasonable best efforts to cause the
Stockholders and their spouses as applicable, Mr. Knappenberger and his spouse
as applicable, and the Steven Knappenberger Revocable Trust II to be released
from all personal liability relating to the personal guarantees of (i) the
obligations under the Max Consulting Agreement ("Max Consulting Guaranty"); (ii)
the obligations arising out of the 6925 Lease ("6925 Lease Guaranty"); (iii) the
obligations arising out of the 6905 Lease ("6905 Lease Guaranty"); (iv) the
obligations arising out of the Bank of America Note ("Bank of America Note
Guaranty"); (v) the obligations arising out of that certain Second Amended and
Restated Automobile Flooring and Security Agreement dated November 27, 1995
between certain of the Companies and the Bank of America Arizona ("Bank of
America Flooring Guaranty"); (vi) the obligations arising out of that certain
Promissory Note Secured by Deed of Trust dated December 30, 1993 by SA as maker
in favor of Bank of America Arizona in the original principal sum of $2,593,332
("Bank of American Real Property Guaranty I"); (vii) the obligations arising out
of that certain Promissory Note Secured by Deed of Trust dated December 30, 1993
by Marion K. Bolin, as trustee of H.M. Knappenberger Trust No. 1, No. 2 and No.
3 as maker in favor of Bank of America Arizona in the principal sum of
$2,077,332 ("Bank of America Real Property Guaranty II") and (viii) the
obligations arising out of the Scottsdale Road Leases.
5.13 ACCESS TO RECORDS.
After Closing, UAG shall provide the Stockholders with reasonable
access to the books and records of the Companies.
5.14 BANK OF AMERICA NOTE.
The Stockholders shall cause the Companies to pay all principal and
interest on the Bank of America Note that becomes due and payable from the date
hereof until the Closing Date and shall not permit the principal outstanding
under the Bank of America Note to be increased between the date hereof and the
Closing Date.
-45-
5.15 SPORTS TICKETS.
At Mr. Knappenberger's request, the Companies shall assign to Mr.
Knappenberger any and all rights that the Companies have to sports tickets and,
to the extent that the Companies assign such rights to Mr. Knappenberger, Mr.
Knappenberger shall assume any liabilities or obligations of the Companies in
connection therewith.
5.16 MANUFACTURERS' AND DISTRIBUTORS' APPROVAL.
As soon as practicable after the date hereof, Mr. Knappenberger shall
initiate and UAG shall seek the consent, authorization and approval of each of
the manufacturers and distributors whose consent is required for the
transactions contemplated hereby. Mr. Knappenberger and UAG shall use their
best efforts to obtain the consent, authorization and approval of such
manufacturers and distributors, within 90 days of the date hereof, on terms
substantially similar to those granted to the Companies immediately prior to the
execution of this Agreement; PROVIDED, HOWEVER, that UAG shall accept any
reasonable requirements of the manufacturers or distributors so long as those
requirements could not be expected to have a material adverse effect on UAG, UAG
West or the Companies. UAG acknowledges that certain manufacturer's agreements
include a right of first refusal in favor of the manufacturer in the event of a
sale such as the transaction contemplated herein and the parties acknowledge
that any manufacturer attempting to exercise such right shall be deemed to have
not consented to the transactions.
5.17 BANK OF AMERICA NOTE.
On the Closing Date, UAG West shall make a capital contribution to the
Companies in an aggregate amount equal to the principal and accrued but unpaid
interest on the Bank of America Note as of the Closing Date ("the Payoff
Amount"), and the Companies shall pay the Payoff Amount to Bank of America in
full satisfaction of the Bank of America Note.
5.18 UAG FINANCIAL STATEMENTS.
On or before June 30, 1996, UAG shall deliver to the Stockholders the
audited consolidated balance sheet of UAG and its subsidiaries as of December
31, 1995, and the related consolidated statements of income and cash flows for
the fiscal year then ended, together with the notes thereto, accompanied by the
report of Coopers & Lybrand, independent certified public accountants.
5.19 LEASE/PURCHASE OPTION.
The parties acknowledge and agree that, prior to the Closing Date, Sun
BMW may transfer or assign its rights to purchase that certain real property
known as 1144 E. Camelback
-46-
Road, Scottsdale, Arizona to Beskind, Brochick and Knappenberger Trust, or their
mutually agreed upon assignee.
5.20 ENVIRONMENTAL STUDIES.
UAG shall obtain Phase I environmental studies of the Real Property. At
its option, UAG may also obtain Phase II environmental studies. The cost of all
Phase I studies shall be borne by UAG and the cost of all Phase II studies that
are recommended as a result of a Phase I study shall be borne one-half by UAG
and one-half by the Stockholders. UAG and UAG West shall indemnify and hold the
Stockholders and the Companies harmless from any injury, cost, liability or
expense to person or property caused by their testing of the Real Property as
permitted hereunder.
5.21 MAINTENANCE OF KNAPPENBERGER TRUST.
The Knappenberger Trust shall not, and Mr. Knappenberger both individually
and as Trustee of the Knappenberger Trust, shall not permit the Knappenberger
Trust (i) to be revoked or otherwise terminated prior to its satisfaction of all
of its obligations (including contingent obligations) hereunder (the
"Obligations") or (ii) to distribute or otherwise transfer or assign its assets
if immediately after such distribution, transfer or assignment, it would have
insufficient assets to satisfy its Obligations, unless, prior to such
revocation, transfer, distribution or assignment either (x) the persons or
entities receiving the Knappenberger Trust's assets agree in writing to assume
the Obligations or (y) Mr. Knappenberger agrees in writing to assume the
Obligations, in each case to the extent necessary to satisfy any deficiency
created by the distribution, transfer or revocation; PROVIDED, HOWEVER, that
nothing in this SECTION 5.21 shall be deemed to modify or expand such
Obligations.
5.22 SALE OF PURCHASED REAL PROPERTY TO A THIRD PARTY.
Prior to the Closing, with the consent of the Stockholders and the
Companies, which consent will not be unreasonably withheld, and subject to the
Real Estate Purchase Agreement (as defined herein), UAG and UAG West may
contract to sell all of the Purchased Real Property to a third party, provided
that such consent shall be given if (i) the sale occurs simultaneously with the
Closing hereunder, (ii) the purchaser fully assumes all obligations of the
Purchaser under the Real Estate Purchase Agreement, (iii) all loans secured by
the Purchased Real Estate are refinanced and all security arrangements are
released, or the purchaser fully assumes all such loans and security
arrangements and, in either case, all existing guarantees are released, (iv) the
Stockholders and Seller (as defined in the Real Estate Purchase Agreement)
receive proportionately with their interests as they may agree 75% of any
consideration payable by the purchaser which exceeds the approximately Ten
Million Six Hundred Thousand Dollars ($10,600,000) in real estate-related loans
which are secured by the Purchased Real Property, and (v) the sale has no
adverse effect on the Companies' other indebtedness or lending
-47-
relationships, including their ability to obtain any necessary consents to the
transactions contemplated herein.
5.23 COMPANY INDEBTEDNESS.
The Companies shall pay all principal and interest on all indebtedness
listed on SCHEDULE 1.2(c) hereof that becomes due and payable from the date
hereof until the Closing Date.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
The obligations of UAG and UAG West 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 or UAG
West as provided herein except as otherwise required by applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Companies and the
Stockholders contained in this Agreement shall be true and correct in all
material respects as of the date hereof and (having been deemed to have been
made again at and as of the Closing) shall be true and correct in all material
respects as of the Closing. Each of the obligations of the Companies 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, UAG shall have received a
certificate, dated the Closing Date and duly executed by the Stockholders and
the Chairman or President of each of the Companies, to the effect that the
conditions set forth in the two preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by the Companies. All filings required to be made under
the H-S-R Act in connection with the transactions contemplated hereby shall have
been made and all applicable waiting periods with respect to each such filing,
including any extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Companies have entered into a franchise
agreement (or comparable instrument) (subject to the provisions of SECTION 5.16
hereof), the Companies' lenders (subject to the
-48-
provisions of SECTION 1.2(c) hereof) and the lessors under the Leases) required
to consummate the transactions contemplated hereby and all consents or waivers
shall have been made or obtained.
6.3 OPINIONS OF THE COMPANIES' AND THE STOCKHOLDERS' COUNSEL.
UAG and UAG West shall have been furnished with the opinion of counsel
for the Companies and the Stockholders, dated the Closing Date, in form and
substance reasonably satisfactory to UAG, UAG West and their counsel, which
opinion shall have been rendered with respect to substantially those matters
contained in SECTIONS 2.1, 2.3, 2.4, 2.9(a), 3.1 AND 3.2 hereof. In rendering
the foregoing opinion, such counsel may rely as to factual matters upon
representations and warranties made by the Stockholders herein and upon
certificates or other documents furnished by officers, directors and
stockholders for their opinions. Such counsel may specify the state or states
in which they are admitted to practice, that they are not admitted to the Bar in
any other state or experts in the law of any other state, that such opinions are
limited to Arizona and federal laws, and that, where appropriate, such opinions
are to the knowledge of those persons working on this transaction.
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 UAG West effectively to exercise
full rights of ownership of the Shares, the 6725 Shares and the Scottsdale
Management Shares. No action, suit or proceeding before any court or any
governmental or regulatory entity shall be pending (or threatened by any
governmental or regulatory entity), and no investigation by any governmental or
regulatory entity shall have been commenced (and be pending), seeking to
restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which UAG or UAG West, 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, net income or financial condition of the Companies taken
as a whole.
-49-
6.6 WORKING CAPITAL REQUIREMENTS.
On the Closing Date, the Stockholders shall deliver to UAG balance
sheets of the Companies dated as of the most recent practicable date preceding
the Closing Date, prepared in accordance with the Accounting Principles (the
"Estimated Closing Date Balance Sheets"). The Estimated Closing Date Balance
Sheets shall show as of the date thereof aggregate net working capital for the
Companies (other than 6725 and Scottsdale Management) equal or greater than the
aggregate net working capital for the Companies (other than 6725 and Scottsdale
Management) on March 31, 1996 as reflected on the Company Balance Sheets.
6.7 COMPLETION OF DUE DILIGENCE.
UAG and UAG West shall have completed their due diligence examination
of the Companies, the Real Property and the Improvements and the results of such
examination, including any Phase I and Phase II environmental audits of the
Companies, the Real Property and the Improvements, shall be reasonably
satisfactory to UAG and UAG West; PROVIDED, HOWEVER, that, with the exception of
due diligence relating to any environmental issues as to which UAG and UAG West
shall have 90 days to complete from execution hereof, such due diligence shall
be completed, and shall be deemed completed, no later than thirty (30) days
after the execution of this Agreement. UAG and UAG West shall have five (5)
Business Days from the completion of the due diligence period to notify the
Stockholders of any objections arising out of the due diligence examination. If
the Stockholders do not cure or otherwise satisfy all such objections within ten
(10) Business Days of the receipt of such notice (the "Cure Period") and UAG and
UAG West do not terminate this Agreement pursuant to SECTION 8.1 hereof by
sending a notice of termination to the Stockholders within five (5) Business
Days after the expiration of the Cure Period, this condition shall be deemed to
be satisfied.
6.8 BOARD APPROVAL.
The Board of Directors of UAG and UAG West shall have approved the
consummation of all of the transactions contemplated by this Agreement,
PROVIDED, HOWEVER, that this condition shall be deemed waived after July 10,
1996 unless on or before July 10, 1996, UAG notifies the Stockholders that this
condition has not been met.
6.9 CERTIFICATES.
The Stockholders and the Companies shall have furnished UAG and UAG
West 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 AND 6.6 hereof and shall have furnished UAG and UAG West with such
any other certificates of its officers and others as UAG and UAG West may
reasonably request to evidence compliance with the conditions set forth in this
ARTICLE 6.
-50-
6.10 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholders and the
Companies 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
Companies in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG and UAG West.
6.11 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholders and the Companies shall have obtained the consent,
authorization and approval of the manufacturers and distributors whose consent
is required on terms substantially similar to those granted to the Companies
immediately prior to the execution of this Agreement; PROVIDED, HOWEVER, that
UAG shall accept any reasonable requirements of the manufactures or distributors
so long as these requirements could not reasonably be expected to have a
material adverse effect on UAG, or the Companies.
6.12 KNAPPENBERGER EMPLOYMENT AGREEMENT.
Mr. Knappenberger shall have entered into the Knappenberger Employment
Agreement on the terms set forth in SECTION 1.2(c).
6.13 BESKIND EMPLOYMENT AGREEMENT.
Beskind shall have entered into the Beskind Employment Agreement on
the terms set forth in SECTION 1.2(c).
6.14 BROCHICK EMPLOYMENT AGREEMENT.
Brochick shall have entered into the Brochick Employment Agreement on
the terms set forth in SECTION 1.2(c).
6.15 PURCHASE OF REAL PROPERTY.
The Stockholders shall have taken all action necessary on their part
to effect the sale of the 6905 Property pursuant to the terms and conditions of
the Real Estate Purchase Agreement and all conditions to Closing under the Real
Estate Purchase Agreement not in UAG West's control shall have been satisfied.
6.16 NONDISTURBANCE AGREEMENTS.
UAG shall have been provided with nondisturbance agreements in form
and substance reasonably satisfactory to the Companies and UAG with respect to
the properties that are the subject of the Leases; PROVIDED, HOWEVER, to the
extent the respective lessees under the Leases are not entitled to obtain
nondisturbance agreements pursuant to the terms of the Leases,
-51-
UAG and UAG West may not cancel this Agreement as a result of the Stockholders'
or the lessees' inability to obtain such nondisturbance agreements so long as
the Stockholders and the lessees have used their reasonable best efforts to
obtain nondisturbance agreements.
6.17 TITLE INSURANCE.
(a) Promptly following execution of this Agreement, the Companies
shall arrange for First American Title Insurance Company ("Escrow Agent") to
deliver current preliminary title reports (the "Reports") on the Real Property
to UAG West and the Companies. The Reports shall show the status of title to
the Real Property as of the date of the Reports and shall be accompanied by
legible copies of all documents referred to in the Reports.
(b) Promptly following delivery of the Reports, UAG West shall cause
ALTA surveys of the Real Property (the "Surveys") to be prepared by an Arizona
licensed civil engineer or land surveyor, at UAG West's expense. The Surveys
shall be certified to be accurate, complete and correct to UAG, UAG West, the
Companies and the Escrow Agent and shall be in a form acceptable to Escrow Agent
for issuance of the title insurance required by this SECTION 6.17.
(c) UAG West shall have ten (10) Business Days (the "Review Period")
following receipt of both the Reports and the Surveys to approve or disapprove
any Survey matters and the status of title as shown by the Reports and the
Surveys; provided that such matters may be disapproved only if they, in UAG
West's reasonable judgment, have a Material Adverse Effect. If Escrow Agent
issues a supplemental or amended title report (and Escrow Agent shall issue such
report no later than ten (10) days but no earlier than fifteen (15) days prior
to Closing) showing additional exceptions to title (an "Amended Report"), UAG
West shall have a period of time equal to five (5) Business Days (a
"Supplemental Review Period") from the date of receipt of the Amended Report and
a copy of each document referred to in the Amended Report in which to give
notice of dissatisfaction as to any additional exceptions which may in UAG
West's reasonable judgment have a Material Adverse Effect. If UAG West provides
notice of dissatisfaction with any matter shown on the Surveys or with any
exception to title as shown in the Reports or in an Amended Report as permitted
herein, UAG West shall provisionally accept the title subject to the Companies'
or the owner of 6905 E. McDowell Road ("Trust"), as the case may be, removal of
any disapproved matters, exceptions or objections, or the Companies or Trust, as
the case may be, obtaining title insurance endorsements satisfactory to UAG West
against such matters, exceptions and objections before the Closing; PROVIDED,
HOWEVER, it is understood and agreed that the Companies or Trust shall have no
duty whatsoever to eliminate or secure a title insurance endorsement against any
such matter or exception. If the Companies or Trust, as the case may be, cannot
remove such matters, exceptions
-52-
and objections to UAG West's reasonable satisfaction before the Closing, then
UAG West may terminate this Agreement pursuant to SECTION 8.1(iv), or UAG West
may waive such objections and proceed with the transaction.
(d) Notwithstanding anything herein to the contrary, it is understood
and agreed that title to the Purchased Real Property shall, at the Closing, be
free and clear of all monetary liens and encumbrances (other than liens
evidencing the assumed debt described in SCHEDULE 6.17 and the lien for current
real property taxes and assessments not yet due and payable) and that such
monetary liens and encumbrances shall be released from the Purchased Real
Property by the Companies at their sole expense on or before Closing or UAG West
may cause their release and the cost thereof shall be credited against the Base
Price.
(e) If UAG West does not object to a Survey matter or an exception to
title as disclosed by a Report or Amended Report within the applicable time
period, such matter shall be deemed to have been approved by UAG West.
(f) At Closing, UAG West shall have obtained, at UAG's expense, an
ALTA extended coverage owner's policy of title insurance issued by Escrow Agent
in the amounts with respect to each parcel of the Real Property set forth on
SCHEDULE 6.17, effective as of the Closing, insuring UAG West that good and
marketable fee simple title to the Purchased Real Property and the leasehold
estates in the leased Real Property are vested in the Companies or UAG West,
subject only to the usual printed exceptions and exclusions contained in such
title insurance policies, to the matters approved by UAG West as provided above
in this SECTION 6.17, to any other matters approved in writing by UAG West, to
liens evidencing the assumed debt described in SCHEDULE 6.17, and current taxes
and assessments not yet due and payable, and containing any endorsements
requested by UAG West. The contingency for delivery of the title insurance
policies on or before Closing called for in this SECTION 6.17 shall be satisfied
if, at the Closing, Escrow Agent has made an unconditional commitment to issue
the policies in the form required by this SECTION 6.17 and if such policies are
delivered within a reasonable time following the Closing.
6.18 TERMINATION OF SECURITY INTERESTS, LIENS, ETC..
UAG shall have received evidence reasonably satisfactory to UAG that
any and all liens, security interests or other encumbrances on the Real
Property, the Improvements or any assets of the Companies guaranteeing, securing
or otherwise arising out of or relating to the Bank of America Note, the Maas
Note or the Max Consulting Agreement have been released or terminated. UAG
shall have received evidence reasonably satisfactory to UAG that the stock
pledges set forth in SCHEDULE 2.3 hereof have been released and that the
shareholders' agreement set forth on SCHEDULE 2.3 hereof has been terminated.
-53-
6.19 SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG and UAG
West all Schedules referred to in ARTICLES 2 AND 3 and such Schedules shall be
reasonably acceptable in form and substance to UAG and UAG West. UAG and UAG
West shall have five (5) Business Days from receipt thereof to reject the
Schedules, or this condition shall be deemed satisfied; PROVIDED, HOWEVER, that
nothing in this Section shall be construed as limiting UAG and UAG West's right
to conduct due diligence pursuant to SECTION 6.7 hereof with respect to all
matters disclosed on such Schedules.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Companies 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 Companies 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 UAG West
contained in this Agreement shall be true and correct in all material respects
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 UAG West 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 the chief financial officer of UAG and of UAG
West to the effect that the conditions set forth in the preceding two sentences
have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG
and UAG West. 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
-54-
with whom the Companies 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 UAG WEST'S COUNSEL.
The Stockholders shall have been furnished with the opinion of Rogers
& Hardin, counsel to UAG and UAG West, dated the Closing Date, in form and
substance reasonably satisfactory to the Stockholders and their counsel, which
opinions, when taken together, shall have been rendered with respect to
substantially those matters contained in SECTIONS 4.1, 4.2 AND 4.3(a) hereof.
In rendering the foregoing opinions, such counsel may rely as to factual matters
upon the representations and warranties made by UAG and UAG West herein and upon
certificates or other documents furnished by officers and directors of UAG and
UAG West and by government officials, and upon such other documents and data as
such counsel deems appropriate as a basis for its opinion. Such counsel may
specify the state or states in which they are admitted to practice, that they
are not admitted to the Bar in any other state or experts in the law of any
other state, that such opinions are limited to the General Corporate Law of the
State of Delaware and federal laws, and that, where appropriate, such opinions
are to the knowledge of those persons working on this transaction.
7.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect that prevents or delays the
consummation of any of the transactions contemplated hereby. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been commenced
(and be pending), seeking to restrain or prohibit (or questioning the validity
or legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which Stockholders, in good
faith and with the advice of counsel, believes makes it undesirable to proceed
with the consummation of the transactions contemplated hereby.
7.5 CERTIFICATES.
UAG and UAG West shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in ARTICLE 7 as may be reasonably requested by the
Stockholders.
7.6 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG
-55-
or UAG West under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of UAG or UAG West in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for the Stockholders.
7.7 DUE DILIGENCE.
The Stockholders shall have completed their due diligence examination
of UAG and the results of such examination shall be satisfactory to the
Stockholders; PROVIDED, HOWEVER, that such due diligence shall be completed, and
shall be deemed completed, no later than thirty (30) days after the execution of
this Agreement. The Stockholders shall have five (5) Business Days from the
completion of the due diligence period to notify UAG of any objections arising
out of the due diligence examination. If UAG and UAG West do not cure or
otherwise satisfy all such objections within ten (10) Business Days of the
receipt of such notice (the "UAG Cure Period") and the Stockholders do not
terminate this Agreement pursuant to SECTION 8.1 hereof by sending a notice of
termination to UAG within five (5) Business Days after the expiration of the UAG
Cure Period, this condition shall be deemed satisfied.
7.8 KNAPPENBERGER EMPLOYMENT AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Knappenberger Employment Agreement.
7.9 BESKIND EMPLOYMENT AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Beskind Employment Agreement.
7.10 BROCHICK EMPLOYMENT AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Brochick Employment Agreement.
7.11 PURCHASE OF REAL PROPERTY.
UAG shall have taken all actions necessary on their part to effect the
purchase of the 6905 Property pursuant to the terms and conditions of the Real
Estate Purchase Agreement.
7.12 SCHEDULES.
UAG shall have delivered to Knappenberger Trust all Schedules referred
to in ARTICLE 4 and such Schedules shall be reasonably acceptable in form and
substance to the Stockholders. The Stockholders shall have five (5) Business
Days from receipt thereof to reject the Schedules, or this condition shall be
deemed satisfied; PROVIDED, HOWEVER, that nothing in this Section shall be
construed as limiting the Stockholders' rights to con-
-56-
duct due diligence pursuant to SECTION 7.7 hereof with respect to matters
disclosed on such Schedules.
7.13 RELEASE OF PERSONAL GUARANTEES.
The Stockholders and their spouses, as applicable, and Mr.
Knappenberger and his spouse, as applicable, and the Steven Knappenberger
Revocable Trust II shall have been released from the 6905 Lease Guaranty, the
6925 Lease Guaranty, the Bank of America Note Guaranty, the Bank of America
Flooring Guaranty, the Bank of America Real Property Guaranty I and the Bank of
America Real Property Guaranty II.
7.14 BROKER'S AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Broker's Agreement.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, UAG West and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall not
have taken place on or prior to (a) December 2, 1996, or if the Closing
Date is extended by the Stockholders pursuant to SECTION 1.2(b) hereof,
January 12, 1997, (b) such later date as shall have been approved by UAG,
UAG West and the Stockholders (provided that the terminating party is not
otherwise in material breach of its representations, warranties, covenants
or agreements under this Agreement);
(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or UAG West if any of the conditions specified in
ARTICLE 6 hereof have not been met by the Stockholders or waived by UAG or
UAG West at such time as such condition is no longer capable of
satisfaction (provided UAG and UAG West are not otherwise in material
breach of its representations, warranties, covenants or agreements under
this Agreement);
-57-
(v) by the Stockholders if any of the conditions specified in
ARTICLE 7 hereof have not been met by UAG or UAG West or waived by the
Stockholders at such time as such condition is no longer capable of
satisfaction (provided that neither any Stockholder nor the Companies is
otherwise in material breach of his or its representations, warranties
covenants or agreements under this Agreement); or
(vi) by either UAG or the Stockholders if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured within ten (10) Business Days following receipt by the breaching
party of written notice of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to
the provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
8.2 EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
(ii) for the obligations contained in SECTIONS 5.1 AND 10.2 hereof and/or the
Confidentiality Agreement dated February 26, 1996 and (iii) as set forth in
SECTIONS 9.1 AND 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 6725
Shares or the Scottsdale Management Shares, each Stockholder jointly and
severally, indemnifies and agrees to fully defend, save and hold harmless UAG,
UAG West, the Companies (after Closing), and any of their respective officers,
directors, employees, stockholders, advisors, representatives, agents and
Affiliates (each a "UAG Indemnified Party"), if a UAG Indemnified Party
(including the Companies after the Closing Date) shall at any time or from time
to time suffer any Costs (as defined in SECTION 9.5 below) arising, directly or
indirectly, out of or resulting from, or shall pay or become obligated to pay
any sum on account of, any and all Events of Breach (as defined below). As used
herein, "Event of Breach" shall be and mean any one or more of the following:
(i) any untruth or inaccuracy in any representation of the Stockholders or the
Companies or the breach of any warranty of the Stockholders or the Companies
contained in this Agreement, including, without limitation, any misrepresen-
-58-
tation in, or omission from, any agreement, certificate, schedule, exhibit, or
similar document furnished pursuant to this Agreement by the Stockholders or the
Companies (or any representative of the Stockholders or the Companies) to UAG
(or any representative of UAG) and any misrepresentation in or omission from any
document furnished to UAG in connection with the Closing, and (ii) any failure
of any Stockholder or the Companies duly to perform or observe any term,
provision, covenant, agreement or condition on the part of such Stockholder or
the Companies to be performed or observed.
9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless the Stockholders, the Companies (prior to
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 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, any and all UAG Events of Breach (as defined below). As used
herein, "UAG Event of Breach" shall be and mean any one or more of the
following: (i) any untruth or inaccuracy in any representation of UAG or the
breach of any warranty of UAG contained in this Agreement, including, without
limitation, any misrepresentation in, or omission from, any agreement,
certificate, schedule, exhibit or other similar document furnished pursuant to
this Agreement by UAG (or any representative of UAG) to the Stockholders (or any
representative of the Stockholders) and any misrepresentation in or omission
from any document furnished to the Stockholders in connection with the Closing,
(ii) any failure of UAG or UAG West (or after the Closing, the Companies) duly
to perform or observe any term, provision, covenant, agreement or condition on
their part to be performed or observed, (iii) any Claim before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, which Claim involves, affects or relates to any assets, properties or
operations of UAG or the conduct of the business of UAG prior to the Closing
Date or (iv) any personal guarantees referenced in SECTION 5.12 which are not
released as of and in connection with the Closing.
9.3 PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that a Stockholder has become obligated to a UAG Indemnified Party
pursuant to SECTION 9.1 or (ii) a UAG Event of Breach occurs or is alleged and a
Stockholder Indemnified Party asserts that UAG has become obligated to an
Indemnified Party pursuant to SECTION 9.2, or if a claim is begun, made or
instituted by a third party (a "Third Party Claim") as a result of which an
Indemnifying Party may become obligated to an Indemnified Party hereunder (for
purposes of this ARTICLE 9, any UAG Indemnified Party and any Stockholder
Indemnified Party is
-59-
sometimes referred to as an "Indemnified Party" and UAG and the Stockholders are
sometimes referred to as an "Indemnifying Party," 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 except to the extent prejudiced thereby. 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 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, with the reasonable consent of the
Indemnifying Parties, 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, which
shall not be unreasonably withheld. 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 shall not be unreasonably withheld)
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 or
condition (financial or otherwise) of the Indemnified Party.
-60-
9.4 LIMITATION ON INDEMNIFICATION.
(a) INDEMNIFICATION BY THE STOCKHOLDERS.
(i) A UAG Indemnified Party shall be entitled to indemnification in
connection with an Event of Breach only if the
aggregate Costs incurred or sustained by all UAG Indemnified Parties exceed Five
Hundred Thousand Dollars ($500,000); PROVIDED, HOWEVER, that notwithstanding the
preceding limitation, a UAG Indemnified Party shall be entitled to
indemnification for all Costs incurred or sustained by such UAG Indemnified
Party as a result of any untruth or inaccuracy in, or breach of, a
representation, warranty or covenant (or failure to perform or observe any term,
agreement or condition) contained in ARTICLE 1 OR SECTIONS 2.3, 2.4(a), 3.1 AND
10.2 hereof. In the event that the aggregate Costs incurred or sustained by all
UAG Indemnified Parties exceeds Five Hundred Thousand Dollars ($500,000), then
the Stockholders shall be fully liable for all such Costs that exceed Two
Hundred Fifty Thousand Dollars ($250,000). The limitations in this SECTION
9.4(a)(i) shall not apply to SECTION 1.4(g).
(ii) The aggregate Costs for which the Stockholders shall be obligated
to indemnify the UAG Indemnified Parties shall not exceed Four Million Dollars
($4,000,000) in the case of Costs incurred or sustained by all UAG Indemnified
Parties in connection with an Event of Breach; PROVIDED, HOWEVER, that a UAG
Indemnified Party shall be entitled to indemnification for all Costs incurred or
sustained by such UAG Indemnified Party as a result of any untruth or inaccuracy
in, or breach of, a representation, warranty or covenant (or failure to perform
or observe any term, agreement or condition) contained in ARTICLE 1 OR SECTIONS
2.3, 2.4(a) AND 3.1 hereof. The limitations in this SECTION 9.4(a)(ii) shall
not apply to SECTION 1.4(g).
(b) INDEMNIFICATION BY UAG.
(i) A Stockholder Indemnified Party shall be entitled to
indemnification in connection with a UAG Event of Breach only if the aggregate
Costs incurred or sustained by all Stockholder Indemnified Parties exceed Five
Hundred Thousand Dollars ($500,000); PROVIDED, HOWEVER, that, notwithstanding
the preceding limitation, a Stockholder Indemnified Party shall be entitled to
indemnification for all Costs incurred or sustained by such Stockholder
Indemnified Party as a result of (a) any failure to have the guarantees referred
to in SECTION 5.12 released as of and in connection with the Closing, (b) any
untruth or inaccuracy in, or breach of, a representation, warranty or covenant
(or failure to perform or observe any term, agreement or condition) contained in
ARTICLE 1 OR SECTIONS 4.3 OR 4.7 hereof or in the Broker's Agreement or the
Knappenberger, Beskind or Brochick Employment Agreements, or (c) any failure of
UAG West to pay money or assume debt in accordance with the terms and subject to
the conditions of the Real Estate Purchase Agreement. In the
-61-
event the aggregate Costs incurred or sustained by all Stockholder Indemnified
Parties exceeds Five Hundred Thousand Dollars ($500,000), then UAG shall be
fully liable for all such Costs that exceed Two Hundred Fifty Thousand Dollars
($250,000).
(ii) The aggregate Costs for which UAG shall be obligated to
indemnify the Stockholder Indemnified Parties shall not exceed Four Million
Dollars ($4,000,000) in the case of Costs incurred or sustained by all
Stockholder Indemnified Parties in connection with a UAG Event of Breach;
PROVIDED, HOWEVER, that a Stockholder Indemnified Party shall be entitled to
indemnification for all Costs incurred or sustained by such Stockholder
Indemnified Party as a result of (a) any failure to have the guarantees referred
to in SECTION 5.12 released as of and in connection with the Closing, (b)
untruth or inaccuracy in, or breach of, a representation, warranty or covenant
(or failure to perform or observe any term, agreement or condition) contained in
ARTICLE 1 OR SECTIONS 4.3 OR 4.7 hereof or in the Broker's Agreement or the
Knappenberger, Beskind or Brochick Employment Agreements, or (c) any failure of
UAG West to pay money or assume debt in accordance with the terms and subject to
the conditions of the Real Estate Purchase Agreement.
9.5 DEFINITIONS.
For purposes of this ARTICLE 9 "Costs" shall mean all liabilities,
losses, costs, damages (not including consequential damages), expenses, claims,
attorneys' fees, experts' fees, consultants' fees, and disbursements of any kind
or of any nature whatsoever. For purposes of application of the indemnity
provisions of this ARTICLE 9, the amount of any Cost arising from the breach of
any representation, warranty, covenant or agreement shall be the entire amount
of any Cost suffered, paid or required to be paid by the respective Indemnified
Party as a result of such breach.
9.6 TAX SAVINGS AND INSURANCE PROCEEDS.
Costs arising or resulting from Events of Breach or UAG Events of
Breach shall be reduced to the extent of the amount of (i) any tax savings
resulting from the indemnified matter to which such Costs relate which are
actually realized by the Indemnified Party and (ii) any insurance proceeds
actually received by the Indemnified Party in respect of the indemnified matter
to which such Costs relate.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing
-62-
Date) shall survive the Closing Date and the consummation of the transactions
contemplated by this Agreement, subject to SECTION 10.1(b) below.
(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 shall survive, and not be affected in any respect
by, the Closing for a period terminating on the later of (i) the date two years
after the Closing Date, and (ii) with respect to any claim asserted with respect
to any breach of such representation or warranty pursuant to SECTION 9.3 hereof
before the expiration of such representation or warranty, on the date such claim
is finally liquidated or otherwise resolved, except with respect to the
representations and warranties in SECTION 2.8 AND 2.11 hereof, which shall
survive the Closing Date for a period terminating on the later of (y) the date
three years after the Closing Date and (z) with respect to any claim asserted
with respect to any breach of such representations or warranties pursuant to
SECTION 9.3 hereof before the expiration of such representations or warranties,
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 as a result of a breach of SECTION 5.6 hereof, then
the Stockholders or the Companies 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 (other than expenses relating
to UAG's review and audit of the Companies' Financial Statements) 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:
-63-
If to the Companies before the Closing Date:
Steven W. Knappenberger
6725 E. McDowell Road
Scottsdale, Arizona 85257
with a copy to:
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: Steven D. Pidgeon, Esq.
If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance, Esq.,
Executive Vice President and General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower,
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholders:
Steven W. Knappenberger
6725 E. McDowell Road
Scottsdale, Arizona 85257
and
George Brochick
6242 E. Laurel Lane
Scottsdale, Arizona 85254
and
Jay Beskind
6513 E. Paradise Lane
Scottsdale, Arizona 85254
with a copy to:
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: Steven D. Pidgeon, Esq.
-64-
If to UAG or UAG West:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance, Esq.,
Executive Vice President and General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower,
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto (and with respect to the
Stockholders, the personal representatives and heirs of the Stockholders) and
their respective successors and permitted assigns, and the provisions of ARTICLE
9 hereof shall inure to the benefit of the Indemnified Parties referred to
therein; PROVIDED, HOWEVER, that neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties. Notwithstanding the
foregoing, UAG shall have the unrestricted right to assign this Agreement and to
delegate all or any part of its obligations hereunder to any Affiliate of UAG,
but in such event UAG shall remain fully liable for the performance of all of
such obligations in the manner prescribed in this Agreement.
10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
-65-
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders and the Companies as one Party, and UAG and
UAG West as the other Party 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 by facsimile signature(s) and 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 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined or
modified in this Agreement shall have the respective meanings given to them in
accordance with GAAP.
10.10 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.
10.11 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
-66-
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.
10.12 REMEDIES.
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 and specific performance as set forth in SECTION 10.15, shall be
the exclusive remedy of either party for a breach of this Agreement.
10.13 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
10.14 GOVERNING LAW.
This Agreement shall be governed under the laws of the State of
Arizona without regard to conflict of law principles.
10.15 SPECIFIC PERFORMANCE.
The parties hereto agree that any violation of this Agreement will
result in irreparable injury to the non-breaching party and that damages at law
would not be reasonable or adequate compensation to such non-breaching party for
a violation of this Agreement, and the non-breaching party shall be entitled to
have the provisions of this Agreement specifically enforced by preliminary and
permanent injunctive relief without the necessity of proving actual damages and
without posting bond or other security.
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/ Carl Spielvogel
----------------------------------------
Carl Spielvogel, Chief Executive Officer
-67-
UAG WEST, INC.
By: /s/ Carl Spielvogel
-------------------------------
Its: Chief Executive Officer
-------------------------------
SCOTTSDALE JAGUAR, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SA AUTOMOTIVE, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SL AUTOMOTIVE, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SPA AUTOMOTIVE, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
LRP, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
-68-
SUN BMW, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SCOTTSDALE MANAGEMENT GROUP, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
6725 DEALERSHIP, LTD.
By: /s/ Illegible
-------------------------------
Its: President
-------------------------------
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By: /s/ Steven Knappenberger
-------------------------------
Steven Knappenberger, Trustee
/s/ Steven Knappenberger
----------------------------------------------
Steven Knappenberger (with respect to Sections
5.11, 5.16 and 5.21)
/s/ Jay Beskind
-------------------------------
Jay Beskind, Individually
/s/ Diana R. Beskind
-------------------------------
Diana R. Beskind, Spouse of Jay Beskind
/s/ George Brochick
-------------------------------
George Brochick, Individually
/s/ Christine S. Brochick
-------------------------------
Christine S. Brochick, Spouse of George Brochick
-69-
BROCHICK 6725 TRUST DATED DECEMBER 29, 1992
By: /s/ George W. Brochick
-------------------------------
George W. Brochick, Trustee
BESKIND 6725 TRUST DATED DECEMBER 29, 1992
By: /s/ Jay P. Beskind
-------------------------------
Jay P. Beskind, Trustee
KNAPPENBERGER 6725 TRUST DATED DECEMBER 29, 1992
By: /s/ Steven Knappenberger
-------------------------------
Steven Knappenberger, Trustee
-70-
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This Amendment No. 1 to Stock Purchase Agreement (the "Amendment") is made
and entered into this ___ day of October, 1996 between and among United Auto
Group, Inc. ("UAG"), a Delaware corporation, UAG West, Inc. ("UAG West"), a
Delaware corporation, Scottsdale Jaguar, Ltd. ("Scottsdale Jaguar"), an Arizona
corporation, SA Automotive, Ltd. ("SA"), an Arizona corporation, SL Automotive,
Ltd. ("SL"), an Arizona corporation, SPA Automotive, Ltd. ("SPA"), an Arizona
corporation, LRP, Ltd. ("LRP"), an Arizona corporation, Sun BMW, Ltd. ("Sun
BMW"), an Arizona corporation, Scottsdale Management Group, Ltd. ("Scottsdale
Management"), an Arizona corporation, 6725 Dealership, Ltd. ("6725"), an Arizona
corporation, Steven Knappenberger Revocable Trust, dated April 15, 1983, as
amended, Brochick 6725 Trust dated December 29, 1992, Beskind 6725 Trust dated
December 29, 1992, Knappenberger 6725 Trust dated December 29, 1992, Steven
Knappenberger, Jay P. Beskind ("Beskind") and George W. Brochick ("Brochick").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Stock Purchase
Agreement dated as of June 6, 1996 (the "Stock Purchase Agreement");
WHEREAS, the parties hereto desire to amend the terms of the Stock Purchase
Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Stock Purchase Agreement.
2. Prior to the Closing, Scottsdale Jaguar shall form a subsidiary, SK
Motors, Ltd., an Arizona corporation, d/b/a Scottsdale Porsche ("Scottsdale
Porsche"). Scottsdale Porsche shall be authorized to issue common stock, no par
value ("Porsche Stock"). Immediately prior to the transactions described in
Section 4, Scottsdale Jaguar shall transfer to Scottsdale Porsche all of the
assets of Scottsdale Jaguar relating to the sale or servicing of Porsche
vehicles, including without limitation new Porsche automobiles, related used
vehicles, Porsche special tools, and the Porsche franchise (the "Porsche
Assets"). Immediately prior to the transactions described in Section 4 hereof,
Scottsdale Jaguar shall own 100% of the issued and outstanding shares of Porsche
Stock (the "Porsche Shares").
3. The parties hereby acknowledge and agree that for all income tax
purposes, Scottsdale Jaguar and the Stockholders will report the transfer of the
Porsche Assets to Scottsdale Porsche as an "applicable asset acquisition" within
the meaning of section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"), by Scottsdale Porsche for consideration equal to the Porsche
Purchase Price (as defined below) and not as a tax-free contribution to the
capital
of the transferee pursuant to section 351 of the Code. For this purpose, the
Porsche Purchase Price shall be allocated among the various Porsche Assets as
set forth in IRS Form 8594, the content of which shall be mutually agreed upon
by the parties hereto. In this regard, the parties hereby expressly agree that
(a) all items of depreciated property shall be valued at their book value for
federal income tax purposes, (b) all other transferred assets (excluding the
Porsche franchise) shall be valued at their cost to Scottsdale Jaguar, and (c)
the balance of the Porsche Purchase Price shall be allocated to the Porsche
franchise. Each of the parties shall report this transaction for all income tax
purposes in accordance with such allocation of the purchase price. Scottsdale
Jaguar shall timely file such IRS Form 8594 (or an exact replica thereof), and
UAG shall cause Scottsdale Porsche to timely file such IRS Form 8594.
4. At the Closing, in consideration for a portion of the Purchase Price
in cash (as reasonably determined by UAG) (the "Porsche Purchase Price") paid to
Scottsdale Jaguar (by which amount the Purchase Price in Section 1.2 of the
Stock Purchase Agreement will be reduced), Scottsdale Jaguar shall sell, assign,
transfer and deliver to UAG West the Porsche Shares, representing 100% of the
capital stock of Scottsdale Porsche and shall deliver the certificates
representing such shares to UAG West accompanied by stock powers duly executed
in blank. In consideration for the payment of $10 in cash by Knappenberger
Trust to UAG West, UAG West shall sell, assign, transfer and deliver nineteen
(19%) of the Porsche Shares to Knappenberger Trust and shall deliver the
certificates representing such shares accompanied by stock powers duly executed
in blank, such that immediately after the transfer, Knappenberger Trust shall
hold 19% of the issued and outstanding shares of Porsche Stock and UAG West
shall own 81% of the issued and outstanding shares of Porsche Stock. UAG West
and Knappenberger Trust shall enter into a Shareholders Agreement in the form
attached hereto, which agreement, together with the transfer of Porsche Shares
to Knappenberger Trust, has been approved by Porsche Cars of North America
("Porsche Cars").
5. Scottsdale Jaguar shall distribute to the Stockholders all amounts
paid to Scottsdale Jaguar as consideration for the sale to UAG West of 100% of
the Porsche Shares.
6. The definition of Companies in the Stock Purchase Agreement is hereby
amended to include Scottsdale Porsche.
7. The obligations of the parties hereunder including the obligations
required to be performed by them at the Closing shall be subject to the
Stockholders, the Companies, UAG and UAG West having obtained the consent,
authorization and approval of Porsche Cars.
8. The Stockholders and Scottsdale Jaguar hereby represent and warrant
that the transfer of assets pursuant to Section 2 hereof will be valid, binding
and enforceable against Scottsdale Jaguar and that, after the transfer,
Scottsdale Porsche will have good title to such assets.
2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: ______________________________
Its: ______________________________
UAG WEST, INC.
By: ______________________________
Its: ______________________________
SCOTTSDALE JAGUAR, LTD.
By: ______________________________
Its: ______________________________
SA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
SL AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
SPA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
LRP, LTD.
By: ______________________________
3
Its: ______________________________
SUN BMW, LTD.
By: ______________________________
Its: ______________________________
SCOTTSDALE MANAGEMENT GROUP, LTD.
By: ______________________________
Its: ______________________________
6725 DEALERSHIP, LTD.
By: ______________________________
Its: ______________________________
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By: ______________________________
Steven Knappenberger, Trustee
___________________________________
Steven Knappenberger (with respect to
Sections 5.11, 5.16 and 5.21 of the
Stock Purchase Agreement)
___________________________________
Jay P. Beskind, Individually
___________________________________
Diana R. Beskind, Spouse of Jay Beskind
4
___________________________________
George W. Brochick, Individually
___________________________________
Christine S. Brochick, Spouse of
George Brochick
BROCHICK 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
BESKIND 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
KNAPPENBERGER 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
5
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
This Amendment No. 2 to Stock Purchase Agreement (the "Amendment") is made
and entered into this 21st day of October, 1996 between and among United Auto
Group, Inc. ("UAG"), a Delaware corporation, UAG West, Inc. ("UAG West"), a
Delaware corporation, Scottsdale Jaguar, Ltd. ("Scottsdale Jaguar"), an Arizona
corporation, SA Automotive, Ltd. ("SA"), an Arizona corporation, SL Automotive,
Ltd. ("SL"), an Arizona corporation, SPA Automotive, Ltd. ("SPA"), an Arizona
corporation, LRP, Ltd. ("LRP"), an Arizona corporation, Sun BMW, Ltd. ("Sun
BMW"), an Arizona corporation, Scottsdale Management Group, Ltd. ("Scottsdale
Management"), an Arizona corporation, 6725 Dealership, Ltd. ("6725"), an Arizona
corporation, Steven Knappenberger Revocable Trust, dated April 15, 1983, as
amended, Brochick 6725 Trust dated December 29, 1992, Beskind 6725 Trust dated
December 29, 1992, Knappenberger 6725 Trust dated December 29, 1992, Steven
Knappenberger ("Knappenberger"), Jay P. Beskind ("Beskind") and George W.
Brochick ("Brochick").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Stock Purchase
Agreement dated as of June 6, 1996 (the "Stock Purchase Agreement");
WHEREAS, the parties hereto desire to amend the terms of the Stock Purchase
Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Stock Purchase Agreement.
2. Prior to the Closing, Scottsdale Jaguar shall form a subsidiary,
Scottsdale Audi, Ltd., an Arizona corporation ("Scottsdale Audi"). Scottsdale
Audi shall be authorized to issue common stock, no par value ("Audi Common
Stock"). Immediately prior to the transactions described in Section 4,
Scottsdale Jaguar shall contribute to Scottsdale Audi all assets owned by
Scottsdale Jaguar other than those assets exclusively and specifically related
to the sale and servicing of Porsche, Jaguar or Aston Martin vehicles, which
assets shall include but not be limited to assets relating specifically and
exclusively to the sale and servicing of Audi vehicles, as well as Scottsdale
Jaguar's partnership interest in 6725 Agent. After the transfer of the assets
to Scottsdale Audi and a concurrent transfer of Porsche-related assets to SK
Motors, Ltd., the only assets to be owned by Scottsdale Jaguar shall be those
assets specifically and exclusively related to the sale and servicing of Jaguar
or Aston Martin vehicles. Immediately prior to the transactions described in
Section 4, Scottsdale Jaguar shall own 100% of the issued and outstanding Audi
Common Stock (the "Audi Shares").
3. The parties hereby acknowledge and agree that for all income tax
purposes, Scottsdale Jaguar and the Stockholders will report the transfer of the
Audi Assets to Scottsdale Audi as an "applicable asset acquisition" within the
meaning of section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), by Scottsdale Audi for consideration equal to the Audi Purchase Price
(as defined below) and not as a tax-free contribution to the capital of the
transferee pursuant to section 351 of the Code. For this purpose, the Audi
Purchase Price shall be allocated among the various Audi Assets as set forth in
an IRS Form 8594, the content of which shall be mutually agreed upon by the
parties hereto. In this regard, the parties hereby expressly agree that: (a)
all items of depreciated property shall be valued at their book value for
federal income tax purposes, (b) all other transferred assets (excluding
Scottsdale Jaguar's interest in 6725 Agent and the Audi franchise) shall be
valued at their cost to Scottsdale Jaguar, (c) Scottsdale Jaguar's interest in
6725 Agent shall be valued at an amount reasonably determined by UAG, and (d)
the balance of the Audi Purchase Price shall be allocated to the Audi franchise.
Each of the parties shall report this transaction for all income tax purposes in
accordance with such allocation of the Audi Purchase Price. Scottsdale Jaguar
shall timely file such Form 8594 (or an exact replica thereof), and UAG shall
cause Scottsdale Audi to timely file such IRS Form 8594.
4. At the Closing, in consideration for a portion of the Purchase Price
in cash (as reasonably determined by UAG) (the "Audi Purchase Price") paid to
Scottsdale Jaguar (by which amount the Purchase Price in Section 1.2 of the
Stock Purchase Agreement will be reduced), Scottsdale Jaguar shall sell, assign,
transfer and deliver to UAG West and UAG West shall acquire, purchase and accept
from Scottsdale Jaguar the Audi Shares, representing 100% of the capital stock
of Scottsdale Audi and shall deliver the certificates representing such shares
to UAG West accompanied by stock powers duly executed in blank. Scottsdale
Jaguar shall distribute to the Stockholders all amounts paid to Scottsdale
Jaguar as consideration for the sale to UAG West of 100% of the Audi Shares.
5. The Stockholders acknowledge that it is the parties' intent that,
immediately after the Closing, Scottsdale Jaguar's assets shall consist only of
those assets specifically and exclusively related to the sale and servicing of
Jaguar and Aston Martin vehicles and the Stockholders agree to use their best
efforts to take, or cause to be taken, all action and to do all things necessary
to effect the transfer of Scottsdale Jaguar's other assets to Scottsdale Audi or
SK Motors, as appropriate.
6. At the Closing, Scottsdale Jaguar and UAG West shall enter into a
management agreement with UAG West (the "Management Agreement") pursuant to
which Scottsdale Jaguar shall pay UAG West an annual fee in the amount of Five
Hundred Thousand Dollars which fee shall be increased annually to an amount
equal to the then current annual fee plus a percentage of the then current
annual fee equal to the percentage increase in the Consumer Price Index
published from time to time by the United States Department of Labor for the
preceding 12 months; provided that Scottsdale Jaguar may defer paying the
management fee during any period to the extent that the management fee for such
period exceeds Scottsdale Jaguar's net income
2
after tax before the management fee for such period, subject in all cases to the
specific terms of the Management Agreement.
7. The parties acknowledge that after the Closing, SK Motors, Inc., an
Arizona corporation d/b/a Scottsdale Porsche ("Scottsdale Porsche"), Scottsdale
Audi and Scottsdale Jaguar will each conduct business at 6725 E. McDowell Road,
Scottsdale, Arizona (the "6725 Facility"). At the Closing, Scottsdale Jaguar
shall enter into a lease (the "Lease") with the owner of the 6725 Facility for
the non-exclusive use of the 6725 Facility by Scottsdale Jaguar. The annual
lease rate shall be Seven Hundred Fifty Thousand Dollars ($750,000), payable
monthly, and shall be adjusted as provided in the Lease. The term of the Lease
shall be for twenty (20) years; provided, however, that the landlord thereunder
shall have the right to terminate the Lease at any time until April 30, 1998.
The Lease shall provide that Scottsdale Jaguar shall be responsible for a pro-
rata share of the joint operating expenses of the Facility to be calculated as
set forth in the Lease. The Lease shall be in a form mutually acceptable to
Scottsdale Jaguar and UAG West.
8. The definition of Companies in the Stock Purchase Agreement is hereby
amended to include Scottsdale Audi. The definition of Shares in the Stock
Purchase Agreement is hereby amended to exclude the Scottsdale Jaguar Shares.
9. The obligations of the parties hereunder and the obligations required
to be performed by them at the Closing shall be subject to the Stockholders, the
Companies, UAG and UAG West having obtained the consent, authorization and
approval of Audi of America, Inc.
10. The Stockholders and Scottsdale Jaguar represent and warrant that the
transfer of assets pursuant to Section 2 hereof will be valid, binding and
enforceable against Scottsdale Jaguar and that, after the transfer, Scottsdale
Audi will have good title to such assets.
11. The parties agree that, except for the payment to Scottsdale Jaguar of
the aggregate of the Audi Purchase Price and the Porsche Purchase Price (as
defined in Amendment No. 1 to the Stock Purchase Agreement) in connection with
the sale, assignment, transfer and delivery to UAG West of 100% of the Audi
Shares and the Porsche Shares (as defined in Amendment No. 1 to the Stock
Purchase Agreement), all of the Purchase Price shall be paid by UAG West to the
Stockholders.
12. The S election of Scottsdale Jaguar shall be terminated within ten
days after the Closing, unless the parties agree otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be duly executed as of the day and year first
above written.
UNITED AUTO GROUP, INC.
By: ______________________________
Its: ______________________________
UAG WEST, INC.
By: ______________________________
Its: ______________________________
SCOTTSDALE JAGUAR, LTD.
By: ______________________________
Its: ______________________________
SA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
SL AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
4
SPA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
LRP, LTD.
By: ______________________________
Its: ______________________________
SUN BMW, LTD.
By: ______________________________
Its: ______________________________
SCOTTSDALE MANAGEMENT GROUP, LTD.
By: ______________________________
Its: ______________________________
6725 DEALERSHIP, LTD.
By: ______________________________
Its: ______________________________
5
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By: ______________________________
Steven Knappenberger, Trustee
___________________________________
Steven Knappenberger (with respect to
Sections 5.11, 5.16 and 5.21)
___________________________________
Jay Beskind, Individually
___________________________________
Diana R. Beskind, Spouse of Jay Beskind
___________________________________
George Brochick, Individually
___________________________________
Christine S. Brochick, Spouse of
George Brochick
BROCHICK 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
6
BESKIND 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
KNAPPENBERGER 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
7
AMENDMENT NO. 3 TO STOCK PURCHASE AGREEMENT
This Amendment No. 3 to the Stock Purchase Agreement is made and entered
into this ____ day of October 1996, between and among United Auto Group, Inc., a
Delaware corporation ("UAG"), UAG West, Inc., a Delaware corporation, Scottsdale
Jaguar, Ltd., an Arizona corporation, SA Automotive, Ltd., an Arizona
corporation, SL Automotive, Ltd., an Arizona corporation, SPA Automotive, Ltd.,
an Arizona corporation, LRP, Ltd., an Arizona corporation, Sun BMW, Ltd., an
Arizona corporation, Scottsdale Management Group, Ltd., an Arizona corporation,
6725 Dealership, Ltd., an Arizona corporation, Steven Knappenberger Revocable
Trust dated April 15, 1983, as amended, Brochick 6725 Trust dated December 29,
1992, Beskind 6725 Trust dated December 29, 1992, Knappenberger 6725 Trust dated
December 29, 1992, Steven Knappenberger, Jay P. Beskind and George W. Brochick.
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Stock Purchase
Agreement dated as of June 6, 1996 (the "Stock Purchase Agreement"); and
WHEREAS, the parties hereto desire to amend the terms of the Stock Purchase
Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. CAPITALIZED TERMS. All capitalized terms used herein shall have the
same meaning ascribed to them in the Stock Purchase Agreement.
2. ADJUSTMENTS MADE BY COOPERS & LYBRAND LLP ("C&L").
(a) Pursuant to an audit performed by C&L in connection with the
initial public offering of UAG's common stock, the Companies agreed to
make certain adjustments to the Companies' financial statements.
Notwithstanding the foregoing, the adjustments requested by C&L shall
not be included in (i) preparing the Closing Date Balance Sheets (as
defined in Section 1.4(a) of the Stock Purchase Agreement); (ii)
preparing the Reviewed Balance Sheets (as defined in Section 1.4(b) of
the Stock Purchase Agreement); (iii) calculating the Final Net Worth
(as defined in Section 1.4(g) of the Stock Purchase Agreement); (iv)
determining whether there exists a Net Worth Deficiency (as defined in
Section 1.4(g) of the Stock Purchase Agreement); (v) preparing the
Estimated Closing Date Balance Sheets (as defined in Section 6.6 of
the Stock Purchase Agreement); or (vi) determining compliance with
Sections 2.25 or 6.6 (regarding working capital) of the Agreement.
Instead, the Closing Date Balance Sheets, Reviewed Balance Sheets and
Estimated Closing Date Balance Sheets (including the determinations of
net worth and working capital) shall be
prepared on the same basis as the Company Financial Statements (as defined
in Section 2.5 of the Stock Purchase Agreement) without regard to the
adjustments requested by C&L. Further, the fact that such adjustments were
made by the Companies pursuant to C&L's request does not constitute a
breach of any of the Companies' or the Stockholders' representations and
warranties contained in the Stock Purchase Agreement.
(b) Without limitation of the foregoing, for purposes of
calculating Net Worth, including the Final Net Worth, under Section
1.4 of the Stock Purchase Agreement, or working capital under Section
2.25 or 6.6 of the Agreement (x) the net worth and working capital of
Scottsdale Jaguar, Ltd. shall continue to be included in the
Companies' calculations of these items, and Scottsdale Jaguar, Ltd.
shall be deemed to include 100% of the Jaguar, Porsche, Aston Martin
and Audi operations (and separate working capital calculations of
these franchises shall not be made), notwithstanding the fact that
certain of these operations will not be transferred to UAG at Closing,
and (y) the effect of any transfer or assignment of the purchase
option referenced in Section 5.19 of the Stock Purchase Agreement
shall be disregarded.
3. CLOSING PRORATIONS. If the Closing occurs on or before the 15th day
of a given month, the Closing Date Balance Sheets, Reviewed Balance Sheets and
Estimated Closing Date Balance Sheets shall be prepared based upon the full
months' actual results, with net income for the month prorated based upon the
number of days in the month through and including the date of Closing. If the
Closing occurs after the fifteenth of a given month, the Closing Date Balance
Sheets, Reviewed Balance Sheets and Estimated Closing Date Balance Sheets shall
reflect the results of the Companies through the end of such month. As provided
in the Agreement, estimates will be made of all financial calculations on or
about Closing subject to final review as provided therein.
4. REFINANCING OF INDEBTEDNESS. UAG and UAG West acknowledge and agree
that all the indebtedness listed under the caption "2. Indebtedness:" of
Schedule 1.2(e)(vii) to the Stock Purchase Agreement (except for the
indebtedness described in Subsection C.3, which will continue as an obligation
of the Companies, and in Subsections C.4, C.5 and C.6, which have been paid off,
under the caption "2. Indebtedness:" of Schedule 1.2(e)(vii)) (the
"Indebtedness") will be paid off or refinanced by UAG and UAG West
contemporaneously with or immediately following the Closing. Without limitation
of the foregoing, pursuant to a Management Agreement with Scottsdale Jaguar,
Inc., UAG or UAG West shall arrange for new flooring financing. Accordingly,
Sections 6.2(b) and 7.2(b) of the Stock Purchase Agreement have been satisfied
to the extent Sections 6.2(b) and 7.2(b) require consents from the Companies'
lenders. Moreover, notwithstanding Section 6.17(d) of the Stock Purchase
Agreement, no adjustment shall be made to the Base Price with respect to any
monetary liens or encumbrances that are caused to be released from the Purchased
Real Property (as defined in Section 1.1(i) of the Stock Purchase Agreement) by
UAG or UAG West.
2
5. TERMINATION OF SECURITY INTERESTS. UAG and UAG West acknowledge and
agree that, notwithstanding Section 6.18 of the Stock Purchase Agreement, any
and all liens, security interests and other encumbrances relating to the
Indebtedness need not be released or terminated prior to the Closing.
Accordingly, the conditions to Closing set forth in Section 6.18 of the Stock
Purchase Agreement have been satisfied to the extent Section 6.18 requires
evidence that all liens, security interests and other encumbrances on the Real
Property, the Improvements or any assets of the Companies guaranteeing, securing
or otherwise arising out of or relating to the Bank of America Note (but not the
Maas Note or Max Consulting Agreement) have been released or terminated.
6. EXPIRATION OF OBJECTION PERIODS; COMPLETION OF DUE DILIGENCE. UAG and
UAG West acknowledge and agree that the periods within which they had an
opportunity to raise any issues identified during their due diligence
examination (including issues related to real property, leases, title and
surveys and environmental matters) or any objections to the Companies' Schedules
to the Stock Purchase Agreement have expired. Similarly, the Companies and the
Stockholders acknowledge and agree that the periods within which they had an
opportunity to raise any issues identified during their due diligence
examination or any objections to the UAG's and UAG West's Schedules to the Stock
Purchase Agreement have expired. Accordingly, the conditions to Closing set
forth in Sections 6.7, 6.17, 6.19, 7.7 and 7.12 of the Stock Purchase Agreement
have been satisfied.
7. MANUFACTURER AND DISTRIBUTOR APPROVALS. UAG and UAG West acknowledge
and agree that satisfactory consents, authorizations and approvals from all
other manufacturers and distributors of the Companies have been obtained, except
for approvals from Jaguar and Aston Martin which are the subject of a prior
Amendment to the Stock Purchase Agreement. Accordingly, the conditions to
Closing set forth in Section 6.11 of the Stock Purchase Agreement have been
satisfied.
8. RELEASE OF PERSONAL GUARANTEES. Nothing contained in this Amendment
shall be construed to waive or affect in any way the closing conditions set
forth in Section 7.13 of the Stock Purchase Agreement relating to the release of
the personal guarantees of Steve Knappenberger, his spouse and the Steven
Knappenberger Revocable Trust II, including without limitation, with respect to
any indebtedness, leases or other obligations of or affecting Scottsdale Jaguar,
Ltd.
9. ENVIRONMENTAL INDEMNITY.
(a) A new subsection (iii) shall be added to Section 9.1
(Indemnification) of the Agreement as follows:
"(iii) (a) testing, remediation and costs of obtaining clearance
from appropriate governmental authorities required under the
Environmental Laws in respect of any previous leaking of underground
storage tanks at the Companies' properties located at 6725, 6825 and
6905 E. McDowell Road, Scottsdale, Arizona, (b) registering, pursuant
to Arizona law, any drywell located at 6825 and 6905 E. McDowell,
3
Scottsdale, Arizona and performing any investigation and/or remediation
work required by any governmental agency pursuant to any Environmental Laws
for any condition directly related to such drywell, which condition existed
on or before the date of the Closing and (c) ensuring that any necessary
installation of secondary containment for above-ground storage tanks
located at 6825 and 6905 E. McDowell Road, and 1127 and 1144 N. Scottsdale
Road, Scottsdale, Arizona is completed to bring such tanks into compliance
with Environmental Laws, in each case as such laws are in effect as of the
date of the Closing.
(b) The indemnity provided for in subsection (iii) shall
terminate on the third anniversary of the Closing Date. However, the
indemnification obligations of subsection (iii) shall not be subject
to the limitations of Section 9.4(a).
10. ADDITIONAL PURCHASE PRICE. The "October 1, 1996" and "September 30,
1998" dates set forth in Section 1.5 of the Stock Purchase Agreement shall be
changed to the first day of the month following closing and the second
anniversary of the end of the month preceding Closing, respectively. In
addition, the term "Companies" in Section 1.5 includes Scottsdale Jaguar, SK
Motors, Ltd. d/b/a Scottsdale Porsche and Scottsdale Audi, Ltd.
11. CALCULATION OF PRE-TAX EARNINGS. In addition to the methodology for
computing Pre-Tax Earnings as set forth in Section 1.5(c) of the Stock Purchase
Agreement, UAG and UAG West acknowledge and agree that Pre-Tax Earnings shall be
computed by adding back payments by Scottsdale Jaguar of amounts in accordance
with Section 2.1 of the Management Agreement, any incremental increase in the
lease costs of the Companies over the lease costs existing as of the date of
execution of the Stock Purchase Agreement and any amounts paid pursuant to that
certain Indemnification Agreement between UAG, UAG West, Scottsdale Jaguar and
the Stockholders.
12. TAX REPRESENTATIONS AND WARRANTIES. Notwithstanding Section 9.1 of
the Stock Purchase Agreement, the Stockholders shall not have any liability
thereunder in connection with any breach or inaccuracy in any representation
relating to the reserve by the Companies for the payment of all Taxes with
respect to periods through the Closing under Section 2.8 of the Stock Purchase
Agreement if such a liability for Taxes arises by reason of any modification of
the transactions contemplated by the Stock Purchase Agreement, including
modifications necessitated by the refusal of Jaguar Cars, Inc. to consent to
such transactions.
13. ACCOUNTING AND TAX RETURN PREPARATION.
(a) With respect to each of the Companies other than Scottsdale
Jaguar, SK Motors, Ltd. d/b/a Scottsdale Porsche, and Scottsdale Audi,
Ltd. (each an "S Company" and collectively, the "S Companies"), the S
Companies' outstanding S elections will terminate by reason of the
transfers of stock of the S Companies to UAG West.
4
(b) Consistent with the termination of the S Companies' S
elections, the books of each of the S Companies shall, consistent with
Section 1362(e)(6)(D) of the Internal Revenue Code of 1986, as
amended, close effective as of the day preceding the date of the
Closing and, accordingly, a separate and distinct accounting period of
each of the S Companies shall commence on the date of the Closing.
(c) Each of the S Companies shall file two tax returns for the
taxable year in which the Closing occurs, one return covering each S
Company's "S short year" (within the meaning of Section 1362(e)(1)(A)
of the Code) and a second covering each S Company's "C short year"
(within the meaning of Section 1362(e)(1)(B) of the Code). The
Stockholders shall have sole and exclusive authority for the
preparation and filing of all tax returns relating to each S Company's
S short year and UAG shall have sole and exclusive authority for the
preparation and filing of the tax returns relating to each S Company's
C short year.
(d) UAG, UAG West, each of the S Companies, and the Stockholders
shall make available to each other, as reasonably requested, all
information, records or documents necessary for the filing of all tax
returns for each S Company's S short year and C short year, and shall
preserve all such information, records or documents until the
expiration of any applicable statute of limitations.
14. REPRESENTATIONS AND WARRANTIES. UAG and UAG West hereby acknowledge
that the representations and warranties of the Companies and Stockholders are
hereby modified to reflect that it is currently anticipated that the proposed
expansion of the Companies' Lexus facility will cost on the order of $300,000.
UAG and UAG West hereby acknowledge and agree that the Companies and the
Stockholders make no representations or warranties with respect to the
compliance of Amendments No. 1, 2 and 3 to the Stock Purchase Agreement and the
documents delivered thereunder with the Dealer Agreement between Scottsdale
Jaguar, Ltd. and Jaguar Cars, Inc.
15. STOCKHOLDER PLEDGE AGREEMENTS. Jay P. Beskind and Diana R. Beskind
hereby represent and warrant that, as of the Closing Date, the Stock Pledge
Agreement, dated February 17, 1995, by and between Jay P. Beskind, Diana R.
Beskind, Knappenberger Trust, SPA, SL, SA, Scottsdale Jaguar, Scottsdale
Management and Bank One Arizona has been terminated. George W. Brochick and
Christine S. Brochick also hereby represent and warrant that, as of the Closing
Date, the Stock Pledge Agreement, dated February 17, 1995, by and between George
W. Brochick, Christine S. Brochick, Knappenberger Trust, SPA, SL, SA, Scottsdale
Jaguar, Scottsdale Management and Bank One Arizona has been terminated.
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
UNITED AUTO GROUP, INC.
By:
------------------------------------
Its:
------------------------------------
UAG WEST, INC.
By:
------------------------------------
Its:
------------------------------------
SCOTTSDALE JAGUAR, LTD.
By:
------------------------------------
Its:
------------------------------------
SA AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
SL AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
SPA AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
LRP AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
6
SUN BMW, LTD.
By:
------------------------------------
Its:
------------------------------------
SCOTTSDALE MANAGEMENT GROUP, LTD.
By:
------------------------------------
Its:
------------------------------------
6725 DEALERSHIP, LTD.
By:
------------------------------------
Its:
------------------------------------
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By:
----------------------------------------
Steven Knappenberger, Trustee
--------------------------------------------
Steven Knappenberger, Individually
(Solely with respect to Sections 5.11,
5.16 & 5.21 of the Stock Purchase Agreement)
--------------------------------------------
Jay P. Beskind, Individually
--------------------------------------------
Diana R. Beskind, Spouse of Jay P. Beskind
--------------------------------------------
George W. Brochick, Individually
7
--------------------------------------------
Christine Brochick,
Spouse of George W. Brochick
BROCHICK 6725 TRUST DATED DECEMBER 29, 1992
By:
----------------------------------------
Robert W. Wyndelts, Trustee
BESKIND 6725 TRUST DATED DECEMBER 29, 1992
By:
----------------------------------------
Robert W. Wyndelts, Trustee
KNAPPENBERGER 6725 TRUST DATED
DECEMBER 29, 1992
By:
----------------------------------------
Robert W. Wyndelts, Trustee
8