1
EXHIBIT 10.40
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
GROUP 1 AUTOMOTIVE, INC.,
PF MERGER, INC.,
A WHOLLY OWNED SUBSIDIARY OF GROUP 1 AUTOMOTIVE, INC.,
PERIMETER FORD, INC.
AND THE STOCKHOLDERS OF PERIMETER FORD, INC.
DATED AS OF
DECEMBER 17, 1997
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE MERGER
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Escrowed Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.17 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.18 Leased Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.20 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.24 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
4.1 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 No Knowledge of Misrepresentations or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Conduct of Business by the Company Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.14 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.15 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.16 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.17 Phase I Environmental Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Delivery of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . 26
8.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 26
8.3 Additional Conditions Precedent to Obligations of the Stockholders. . . . . . . . . . . . . . . . 28
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Agreement by Group 1 to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Certain Post-Closing Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.3 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.4 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.6 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.8 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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10.9 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.10 Legal Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.11 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.18 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated as
of the 17th day of December, 1997, is among Group 1 Automotive, Inc., a
Delaware corporation ("Group 1"), PF Merger, Inc., a Delaware corporation and a
wholly owned subsidiary of Group 1 (Merger Sub"), Perimeter Ford, Inc., a
Delaware corporation ("the Company") and the persons listed on the signature
pages hereof under the caption "Stockholders" (collectively, the
"Stockholders," and each of those persons, individually, a "Stockholder").
RECITALS:
WHEREAS, the parties to this Agreement have determined it is in their
best long-term interests to effect a business combination pursuant to which:
(A) The Company will merge with and into Merger Sub on
the terms and subject to the conditions set forth herein (the
"Merger");
(B) Group 1 will acquire by merger (the "Other Mergers")
Koons Ford, Inc., a Florida corporation and Courtesy Ford, Inc., a
Florida corporation (each an "Other Company" and, collectively with
the Company, the "Companies") pursuant to agreements entered into
among those entities and their equity owners, Group 1 and subsidiaries
of Group 1 (collectively, the "Other Agreements"); and
WHEREAS, the respective Boards of Directors of Group 1, Merger Sub and
the Company have approved this Agreement and the Merger pursuant to the terms
and conditions herein set forth.
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined
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has the meaning ascribed to it in accordance with GAAP; (c) "or" is not
exclusive; (d) "including" means "including, without limitation;" (e) words in
the singular include the plural; (f) words in the plural include the singular;
(g) words applicable to one gender shall be construed to apply to each gender;
(h) the terms "hereof," "herein," "hereby," "hereto" and derivative or similar
words refer to this entire Agreement; (i) the terms "Article" or "Section"
shall refer to the specified Article or Section of this Agreement; and (j)
section and paragraph headings in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and pursuant to the Agreement and Plan of Merger
between Merger Sub and the Company, a form of which is attached hereto as
Exhibit A (the "Plan of Merger"), at the Effective Time (as hereinafter
defined) the Company shall be merged with and into Merger Sub, the separate
existence of the Company shall cease, and Merger Sub shall (i) continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Perimeter Ford, Inc.", (ii) be governed
by the laws of Delaware, (iii) maintain a registered office in the State of
Delaware at c/o The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware, and (iv) succeed to and assume all of the rights, properties and
obligations of Merger Sub and the Company in accordance with the Delaware
General Corporation Law. Subject to the terms and conditions of this Agreement
and the Plan of Merger, Group 1 agrees, at or prior to the Closing, to cause
Merger Sub to execute and deliver, the Plan of Merger in form and substance
substantially similar to the form attached hereto as Exhibit A. Subject to the
terms and conditions of this Agreement and the Plan of Merger, the Stockholders
agree, at or prior to the Closing, to cause the Company to execute and deliver
the Plan of Merger in form and substance substantially similar to the form
attached hereto as Exhibit A.
2.2 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, Houston, Texas 77002 on the last day of
the month in which all conditions set forth in Article VIII hereof are
satisfied or waived or at such other time and place and on such other date as
Group 1 and the Company shall agree; provided, that the conditions set forth in
Article VIII shall have been satisfied or waived at or prior to such time. The
date on which the Closing occurs is herein referred to as the "Closing Date."
2.3 Effective Time. As soon as practicable after all conditions
set forth in Article VIII hereof are satisfied or waived, the parties hereto
will file with the Secretary of State of the State of Delaware, articles of
merger in such form as required by, and executed in accordance with, the
relevant provisions of the Delaware General Corporation Law, with instructions
that such articles of merger are to be issued and effective as of the Closing
Date (the effective time of the issuance of a certificate of merger by the
Secretary of State of the State of Delaware being the "Effective Time").
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2.4 Escrowed Shares. In the event that James S. Carroll has not
been approved by American Honda Motor Co., Inc. ("Honda") as a 5% stockholder
of Group 1 before Closing, 105,000 shares of Group 1 Common Stock due James S.
Carroll under this Agreement will be placed in Escrow at Closing pending
release as provided in this Section 2.4. These shares will remain in Escrow
until the first of the following to occur: (1) the second anniversary of the
Closing Date, (2) Honda's approval of James S. Carroll as a 5% stockholder of
Group 1, or (3) such time as Group 1 is no longer required to obtain Honda's
approval of each 5% stockholder of Group 1. In the event these shares become
issuable from Escrow as a result of (1) above, Group 1 may, at its option,
elect to pay cash to James S. Carroll in lieu of the escrowed shares in an
amount equal to 105,000 times the greater of (i) the average closing price of
Group 1 Common Stock on the New York Stock Exchange for the five trading days
immediately preceding the date on which the escrowed shares become issuable or
(ii) $14.00. In the event these shares become issuable from Escrow as a result
of (2) or (3) above, the shares will be issued from escrow to James S. Carroll
as soon as reasonably practicable after receipt of such approval.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
The Stockholders hereby represent and warrant to Group 1 and Merger
Sub as follows:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with all requisite corporate power and
authority to own or lease its properties and conduct its business as now owned,
leased or conducted and to execute, deliver and perform this Agreement and each
instrument, document or agreement required hereby to be executed and delivered
by it at, or prior to, the Closing. True and complete copies of the articles
of incorporation and bylaws (or other organizational documents) of the Company
are included in Schedule 3.1. The minute books of the Company previously made
available to Group 1 are complete and accurately reflect all action taken prior
to the date of this Agreement by their respective boards of directors and
stockholders in their capacities as such.
3.2 Qualification. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of the business as now conducted or the character of the property
owned or leased by it makes such qualification necessary. Schedule 3.2 sets
forth a list of the jurisdictions in which the Company is qualified to do
business, if any.
3.3 Authorization. The execution and delivery by the Company, the
performance of its obligations pursuant to this Agreement and the execution,
delivery and performance of each instrument, document or agreement required
hereby to be executed and delivered by the Company at, or prior to, the Closing
have been duly and validly authorized by all requisite corporate action on the
part of the Company and no other corporate proceedings on the part of the
Company are
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necessary to authorize this Agreement or any other instrument, document or
agreement required hereby to be executed by the Company at, or prior to, the
Closing. The Board of Directors of the Company has voted to recommend approval
of the Merger to the stockholders of the Company and such determination remains
in effect. THE EXECUTION OF THIS AGREEMENT BY THE STOCKHOLDERS CONSTITUTES
UNANIMOUS STOCKHOLDER CONSENT TO THE MERGER, THE TERMS AND PROVISIONS OF THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY WITHIN IN ACCORDANCE WITH
SECTION 228(a) OF THE DELAWARE GENERAL CORPORATION LAW. THIS EXECUTED
AGREEMENT SHALL ALSO CONSTITUTE THE STOCKHOLDERS' WRITTEN WAIVER OF ALL
APPLICABLE NOTICE REQUIREMENTS. THIS EXECUTED AGREEMENT SHALL BE FILED IN THE
MINUTE BOOKS OF THE COMPANY AS EVIDENCE OF SUCH STOCKHOLDER ACTION. This
Agreement has been, and each instrument, document or agreement required hereby
to be executed and delivered by the Company at, or prior to, the Closing will
then be, duly executed and delivered by it, and this Agreement constitutes,
and, to the extent it purports to obligate the Company, each such instrument,
document or agreement will constitute (assuming due authorization, execution
and delivery by each other party thereto), the legal, valid and binding
obligation of the Company enforceable against it in accordance with its terms.
3.4 Approvals. Except for the applicable filings with the
Secretary of State of the State of Delaware relating to the Merger and except
for applicable requirements, if any, of the HSR Act, and except to the extent
set forth in Schedule 3.4, no filing or registration with, and no consent,
approval, authorization, permit, certificate or order of any Court or
Governmental Authority is required by any applicable Law or by any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority to permit the Company to execute, deliver or perform this Agreement
or any instrument required hereby to be executed and delivered by it at the
Closing.
3.5 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.5, neither the execution and delivery by the Company of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by the Company of its obligations under this Agreement or any such instrument,
document or agreement will (assuming receipt of all consents, approvals,
authorizations, permits, certificates and orders disclosed as requisite in
Schedule 3.4) (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) any applicable permits
received from any Governmental Authority (iv) the articles of incorporation or
bylaws or other organizational documents of the Company or (v) any contract or
agreement to which the Company is a party or by which it, or any of its
properties, is bound, or (b) result in the creation or imposition of any Lien
on any of the properties or assets of the Company, or (c) result in the
cancellation, forfeiture, revocation, suspension or adverse modification of any
existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority, or (d) with the passage of time
or the giving of notice or the taking of any action of any third party have any
of the effects set forth in clause (a), (b) or (c) of this Section.
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3.6 Subsidiaries; Equity Investments. The Company has not
controlled directly or indirectly, or had any direct or indirect equity
participation in any corporation during the five-year period preceding the date
hereof.
3.7 Capitalization.
(a) The authorized capital stock of the Company consists
of 5,000 shares of common stock, par value $100.00 per share, of which
1,579 shares are issued and outstanding (no shares being held in
treasury) (the "Company Common Stock"). Each outstanding share of the
Company Common Stock has been duly authorized, is validly issued,
fully paid and nonassessable and was not issued in violation of any
preemptive rights of any stockholder. Set forth in Schedule 3.7(a)
are the names, social security or I.R.S. identification numbers and
addresses (as reflected in the corporate records of the Company) of
each record holder of the Company Common Stock, together with the
number of shares held by each such person.
(b) There is not outstanding any capital stock or other
security, including without limitation any option, warrant or right,
entitling the holder thereof to purchase or otherwise acquire any
shares of capital stock of the Company. Except as disclosed in
Schedule 3.7(b), there are no contracts, agreements, commitments or
arrangements obligating the Company (i) to issue, sell, pledge,
dispose of or encumber any shares of, or any options, warrants or
rights of any kind to acquire, or any securities that are convertible
into or exercisable or exchangeable for, any shares of, any class of
capital stock of the Company or (ii) to redeem, purchase or acquire or
offer to acquire any shares of, or any outstanding option, warrant or
right to acquire, or any securities that are convertible into or
exercisable or exchangeable for, any shares of, any class of capital
stock of the Company.
3.8 Financial Statements. Included in Schedule 3.8 are copies of
the financial statements of the Company consisting of (i) an unaudited balance
sheet of the Company as of October 31, 1997 (the "Interim Balance Sheet") and
the related unaudited statement of income for the ten month period then ended
(collectively with the Interim Balance Sheet, the "Company Interim Financial
Statements") and (ii) an audited balance sheet of the Company as of December
31, 1996 (the "Company 1996 Balance Sheet") and the related audited statements
of income, changes in stockholders' equity and cash flows for the year then
ended (including the notes thereto) (collectively with the Company 1996 Balance
Sheet, the "Company 1996 Financial Statements") and (collectively with the
Company Interim Financial Statements, the "Company Financial Statements"). The
Company Financial Statements are true and complete in all material respects.
The Company 1996 Financial Statements are true and complete in all respects.
The Company Financial Statements present fairly the financial position of the
Company and the results of its operations and changes in financial position as
of the dates and for the periods indicated therein in conformity with GAAP.
The Company Financial Statements do not omit to state any liabilities, absolute
or contingent, required to be stated therein in accordance with GAAP. All
accounts receivable of the Company reflected in the Company Financial
Statements and as incurred since October 31, 1997 represent sales made in the
ordinary course of business, are collectible (net of any reserves for doubtful
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accounts shown in the Company Interim Financial Statements) in the ordinary
course of business and, except as set forth in Schedule 3.8, are not in dispute
or subject to counterclaim, set-off or renegotiation. Schedule 3.8 contains an
aged schedule of accounts receivable included in the Interim Balance Sheet.
References regarding GAAP compliance in this Section 3.8 shall be qualified by
the exceptions set forth in Section 3.9 below.
3.9 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet, or
relating to the items listed below in this Section 3.9, or as set forth in
Schedule 3.9, the Company does not have any material liabilities or obligations
of any nature whether absolute, accrued, contingent or otherwise, and whether
due or to become due. The reserves reflected in the Interim Balance Sheet are
adequate, appropriate and reasonable in accordance with GAAP, except for
possible adjustments to current year's depreciation provisions, LIFO
adjustments, management company fees, profit sharing provisions, general
manager year-end bonuses and the month-end payroll tax accrual.
3.10 Certain Agreements. Except as set forth in Schedule 3.10,
neither the Company, nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a noncompetition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
3.11 Contracts and Commitments. Schedule 3.11 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of its officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.12 Absence of Changes. Except as set forth in Schedule 3.12,
there has not been, since October 31, 1997, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.12, since
October 31, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, the
Company makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since October 31,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
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3.13 Tax Matters.
(a) Except as set forth in Schedule 3.13(a) (and except
for filings and payments of assessments the failure of which to file
or pay will not materially adversely affect the Company), (i) all Tax
Returns which are required to be filed on or before the Closing Date
by or with respect to the Company have been or will be duly and timely
filed, (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) all Taxes which have
become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, (iv) all
withholding Tax requirements imposed on or with respect to the Company
have been or will be satisfied in full, and (v) no penalty, interest
or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) All Tax Returns of, or with respect to, the Company
have been audited by the applicable governmental authority, or the
applicable statute of limitations has expired, for all periods up to
and including December 31, 1996 except as included on Schedule
3.13(b).
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to the
Company, other than those disclosed (and to which are attached true
and complete copies of all audit or similar reports) in Schedule
3.13(c).
(d) Except as set forth in Schedule 3.13(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company, or any
waiver or agreement for any extension of time for the assessment or
payment of any Tax of or with respect to the Company.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes (except for payroll tax accrual for
October 31, 1997), whether or not assessed or disputed, which are, or
are hereafter found to be, or to have been, due by or with respect to
the Company up to and through the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company shall be terminated prior to the Closing Date and no
payments shall be due or will become due by the Company on or after
the Closing Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 3.13(g), the Company
will not be required to include any amount in income for any taxable
period as a result of a change in accounting method for any taxable
period pursuant to any agreement with any Tax authority with respect
to any such taxable period.
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(h) The Company has not consented to have the provisions
of section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(i) Since the date of the Company's S Corp election on
December 31, 1986, the Company (a) continuously has been and will be
an S Corporation within the meaning of section 1361 of the Code, and
(b) each holder of common stock of the Company has been an individual
resident of the United States or an estate or trust described in
section 1361(c)(2) that is permitted to hold the stock of an S
Corporation.
3.14 Litigation.
(a) Except as set forth in Schedule 3.14(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Company, threatened against or
specifically affecting the Company before or by any Court or
Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.14(b), the Company has performed
all obligations required to be performed by it to date and is not in
default under, and, to the knowledge of the Company, no event has
occurred which, with the lapse of time or action by a third party
could result in a default under any contract or other agreement to
which any of the Company is a party or by which it or any of its
properties is bound or under any applicable Order of any Court or
Governmental Authority.
3.15 Compliance with Law. Except as set forth in Schedule 3.15,
the Company is in compliance with all applicable statutes and other applicable
laws and all applicable rules and regulations of all federal, state, foreign
and local governmental agencies and authorities.
3.16 Permits. Except as set forth in Schedule 3.16, the Company
owns or holds all franchises, licenses, permits, consents, approvals and
authorizations of all Governmental Authorities necessary for the conduct of its
business. A listing of all such items, with their expiration dates, is
included in Schedule 3.16. Each franchise, license, permit, consent, approval
and authorization so owned or held is in full force and effect, and the Company
is in compliance with all of its obligations with respect thereto, and no event
has occurred which allows, or upon the giving of notice or the lapse of time or
otherwise would allow, revocation or termination of any franchise, license,
permit, consent, approval or authorization so owned or held.
3.17 Employee Benefit Plans and Policies.
(a) Schedule 3.17(a) provides a description of each of
the following which is sponsored, maintained or contributed to by any
of the Company for the benefit of its employees, or has been so
sponsored, maintained or contributed to within six years prior to the
Closing Date:
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(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not described in Section 3.17(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) The Company does not contribute to or have an
obligation to contribute to, and has not at any time contributed to or
had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in Schedule 3.17(c),
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would adversely affect such qualified status;
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(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan or Benefit Program
or Agreement than it otherwise would or (B) create or give
rise to any additional vested rights or service credits under
any Plan or Benefit Program or Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
(e) Termination of employment of any employee of any of
the Company after consummation of the transactions contemplated by
this Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) Schedule 3.17(g) sets forth by name and job
description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.18 Leased Properties.
(a) On the Closing Date, the Company will not own any
real property or any interest therein. Schedule 3.18(a) sets forth
the location and size of, principal improvements and buildings on, and
Liens on all parcels of real estate leased by the Company
(individually a "Leased Property" and collectively the "Leased
Properties"). True and correct copies of all Liens are attached to
Schedule 3.18(a). Except as set forth in Schedule 3.18(a), with
respect to each Leased Property:
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(i) the Company has good and valid leasehold
interests in each parcel of its Leased Property, free and
clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
the Company or the Stockholders, threatened condemnation
proceedings, suits or administrative actions relating to the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) except as set forth in Schedule 3.18(a)(iii),
the legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(v);
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Leased Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.18(a)(vii)
who are in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used; and
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(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(xi).
(b) Except as set forth in Schedule 3.18(b), the Company
has good and marketable title to all of its Assets, free and clear of
any Liens or restrictions on use. The Fixed Assets currently in use
for the business and operations of the Company are in good operating
condition, normal wear and tear excepted and have been maintained in
accordance with sound industry practices.
3.19 Insurance. Schedule 3.19 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.19, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. The Company has not
received any notice or other communication from any such insurer canceling or
materially amending any of such insurance policies, and no such cancellation is
pending or threatened. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.20 Affiliate Interests. Except as set forth in Schedule 3.20, no
employee, officer or director, or former employee, officer or director, of the
Company has any interest in any property, tangible or intangible, including
without limitation, patents, trade secrets, other confidential business
information, trademarks, service marks or trade names, used in or pertaining to
the business of the Company, except for the normal rights of employees and
stockholders.
3.21 Environmental Matters. Except as set forth in Schedule 3.21,
to the best of the knowledge of the Stockholders:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. The Company is
not currently liable for any penalties, fines or forfeitures for
failure to comply with any Environmental Laws. The Company is in
compliance with all required notice, record keeping and reporting
requirements of all Environmental Laws, and has complied with all
informational requests or demands arising under the Environmental
Laws.
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(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of their business as presently conducted, including, without
limitation, all air emission, water discharge, water use and solid
waste, hazardous waste and other Waste generation, transportation,
transfer, storage, treatment or disposal Licenses (a listing of such
items being included in Schedule 3.21(b)), and the Company is in
compliance with all the terms, conditions and requirements of such
Licenses, and copies of such Licenses have been made available to
Group 1. There are no administrative or judicial investigations,
notices, claims or other proceedings pending or threatened by any
Governmental Authority or third parties against the Company or its
business, operations, properties, or assets, which question the
validity or entitlement of the Company to any License required by the
Environmental Laws for the ownership of each of the respective
properties and assets of the Company and the operation of its
business.
(c) The Company has not received and is not aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of its business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leased Properties.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle, treat,
spill, leak, dump, discharge, release or dispose of, any material
quantities of Hazardous Substances or other waste upon property
currently or previously owned or leased by it, except in compliance
with Environmental Laws.
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(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the Leased Properties or to any
properties adjacent thereto except in compliance with the
Environmental laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge,
of any Hazardous Substance on, into or beneath the surface of the
Owned Properties or the Leased Properties or to any properties
adjacent thereto.
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor have they allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Stockholders have received notice or have knowledge of
any facts which could give rise to any notice, that the Company is a
potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA, RCRA or any other
applicable Environmental Laws. The Company has not submitted and has
not been required to submit any notice pursuant to Section 103(c) of
CERCLA with respect to any properties owned by, or used in the
business of, the Company. The Company has not received any written
or, to the knowledge of the Stockholders, oral request for information
in connection with any federal or state environmental cleanup site, or
in connection with any of the real property or premises where the
Company has transported, transferred or disposed of other Wastes. The
Company has not been required to and has not undertaken any response
or remedial actions or clean-up actions at the request of any
Governmental Authorities or at the request of any other third party.
The Company has no liability under any Environmental Laws for personal
injury, property damage, natural resource damage, or clean up
obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.21(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which the Company is
aware undertaken by the Company or its agents, or by the Stockholders,
or by any Governmental Authority, or by any third party, relating to
the Company, or any of the Owned Properties or the Leased Properties;
(ii) the results of which the Company is aware of any ground, water,
soil, air or asbestos monitoring undertaken by the Company or their
agents, or by the Stockholders, or by any Governmental Authority, or
by any third party, relating to the Company or any of the Owned
Properties or the Leased Properties; (iii) all written communications
between the Company and any Governmental Authority arising under or
related to Environmental Laws; and (iv) all citations issued under
OSHA, or similar
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state or local statutes, laws, ordinances, codes, rules, regulations,
orders, rulings, or decrees, relating to or affecting the Company or
any of the Owned Properties or the Leased Properties.
(j) Schedule 3.21(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.21(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule
3.21(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, or threatened against or directly affecting the
Company or any of its assets or operations relating to the use,
handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
(k) Any references in this Section 3.21 to the "Leased
Properties" are deemed to also refer to any properties previously
leased by the Company.
3.22 Intellectual Property. Except as set forth in Schedule 3.22,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that are necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Stockholders, (a) the use of the Intellectual Property by the Company does not
infringe on the rights of any Person, and (b) no Person is infringing on any
right of the Company with respect to any Intellectual Property. No claims are
pending or, to the knowledge of the Stockholders, threatened that the Company
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the knowledge of the Stockholders, no
Person is infringing the rights of the Company with respect to any
Intellectual Property. All of the Intellectual Property that is owned by the
Company is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by the Company is licensed pursuant to valid and existing license
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss of any Intellectual Property.
3.23 Bank Accounts. Schedule 3.23 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.24 Brokers. Except as disclosed in Schedule 3.24, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.25 Disclosure. The Stockholders have disclosed in writing, or
pursuant to this Agreement and the Schedules attached hereto, all facts
material to the business, assets, prospects and condition (financial or
otherwise) of the Company. No representation or warranty to Group 1 by the
Stockholders contained in this Agreement, and no statement contained in the
Schedules attached
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hereto, any certificate, list or other writing furnished to Group 1 by the
Stockholders pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any certificate, list, document
or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed a representation and warranty
of the Stockholders for all purposes of this Agreement.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby, severally and not jointly, represents and
warrants to Group 1 and Merger Sub that:
4.1 Capital Stock. Such Stockholder is the beneficial and record
owner of the number of shares of Company Common Stock as set forth in Schedule
3.7(a). On the Closing Date all such shares will be owned free and clear of
any lien, claim, pledge, encumbrance or other adverse claim. Except for such
shares of Company Common Stock set forth in Schedule 3.7(a) hereto, such
Stockholder does not own, beneficially or of record, any capital stock or other
security, including without limitation any option, warrant or right entitling
the holder thereof to purchase or otherwise acquire any shares of capital stock
of the Company.
4.2 Authorization of Agreement.
(a) Such Stockholder has full legal right, power,
capacity and authority to execute, deliver and perform its obligations
pursuant to this Agreement and to execute, deliver and perform its
obligations under each instrument, document or agreement required
hereby to be executed and delivered by such Stockholder at, or prior
to, the Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
such Stockholder at, or prior to, the Closing will then be, duly
executed and delivered by such Stockholder, and this Agreement
constitutes and, to the extent it purports to obligate such
Stockholder, each such instrument, document or agreement will
constitute (assuming due authorization, execution and delivery by each
other party thereto), the legal, valid and binding obligation of such
Stockholder enforceable against it in accordance with its terms.
4.3 Approvals. Except for filings with the Secretary of State of
Delaware relating to the Merger, and except for applicable requirements, if
any, of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Governmental
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
such Stockholder to execute, deliver
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or perform this Agreement or any instrument required hereby to be executed and
delivered by it at the Closing.
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by such Stockholder of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by such Stockholder of its obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) the organizational
documents of such Stockholder or (iv) any contract or agreement to which such
Stockholder is a party or by which it, or any of its properties, is bound, or
(b) result in the creation or imposition of any Lien on any of the properties
or assets of such Stockholder, or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit, certificate or order of any Court or
Governmental Authority, or (d) with the passage of time or the giving of notice
or the taking of any action of any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section.
4.5 Investment Intent. Each Stockholder makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Stockholder will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Merger to such Stockholder solely for such Stockholder's
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution; (ii) such Stockholder is not a party to any agreement or
other arrangement for the disposition of any shares of Group 1 Common Stock;
(iii) such Stockholder is an "accredited investor" as defined in Securities Act
Rule 501(a); (iv) such Stockholder (A) is able to bear the economic risk of an
investment in the Group 1 Common Stock acquired pursuant to this Agreement, (B)
can afford to sustain a total loss of that investment, (C) has such knowledge
and experience in financial and business matters, and such past participation
in investments, that he or she is capable of evaluating the merits and risks of
the proposed investment in the Group 1 Common Stock, (D) has received and
reviewed the SEC Documents, (E) has had an adequate opportunity to ask
questions and receive answers from the officers of Group 1 concerning any and
all matters relating to the transactions contemplated hereby, including the
background and experience of the current officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of Group 1 and any plans of Group 1 for additional
mergers or acquisitions of automotive dealerships, and (F) has asked all
questions of the nature described in the preceding clause (E), and all those
questions have been answered to his or her satisfaction; (v) such Stockholder
acknowledges that the shares of Group 1 Common Stock to be delivered to such
Stockholder pursuant to the Merger have not been and will not be registered
under the Securities Act or qualified under applicable blue sky laws and
therefore may not be resold by such Stockholder without compliance with Rule
144 of the Securities Act; (vi) such Stockholder acknowledges that he or she
has agreed, pursuant to Section 10.8 herein, not to sell the shares of Group 1
Common Stock to be delivered to such Stockholder pursuant to the Merger for a
period of one year (or two years with respect to James S. Carroll) from the
Closing Date; (vii) such Stockholder, if a corporation, partnership, trust or
other entity, acknowledges that it was not formed for the specific
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purpose of acquiring the Group 1 Common Stock; and (viii) without limiting any
of the foregoing, such Stockholder agrees not to dispose of any portion of
Group 1 Common Stock unless either (1) a registration statement under the
Securities Act is in effect as to the applicable shares and the disposition is
made in accordance with that registration statement, or (2) the disposition is
made in full compliance with SEC Rule 144 and any other requirements of the
Securities Act. Additionally, for the three-year period following the Closing
Date a disposition pursuant to (viii)(2) above may be made only if the
Stockholder has notified Group 1 of the proposed disposition and the
disposition is made through a national brokerage firm selected by Group 1 and
the Stockholder to offer disposition services for Group 1 Common Stock (in the
absence of agreement between Group 1 and the Stockholder seeking to make a
disposition, Goldman, Sachs & Co., Inc. will be the firm to handle such
disposition).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
Group 1 and Merger Sub hereby represent and warrant, jointly and
severally, to the Company and the Stockholders that:
5.1 Corporate Organization. Group 1 is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority to execute, deliver
and perform this Agreement and each instrument required hereby to be executed
and delivered by it at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Merger Sub of this Agreement, the performance by Group 1 and Merger Sub of
their respective obligations pursuant to this Agreement, and the execution,
delivery and performance of each instrument required hereby to be executed and
delivered by Group 1 or Merger Sub at the Closing have been duly and validly
authorized by all requisite corporate action on the part of Group 1 or Merger
Sub, as the case may be. This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by Group 1
or Merger Sub at, or prior to, the Closing will then be, duly executed and
delivered by Group 1 or Merger Sub, as the case may be. This Agreement
constitutes, and, to the extent it purports to obligate Group 1 or Merger Sub,
each such instrument, document or agreement will constitute (assuming due
authorization, execution and delivery by each other party thereto), the legal,
valid and binding obligation of Group 1 or Merger Sub, as the case may be,
enforceable against them in accordance with its terms.
5.3 Approvals. Except for filings with the Secretary of State of
Delaware relating to the Merger, and except for applicable requirements, if
any, of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Group 1 or Merger Sub, as the case may be, to execute, deliver or consummate
the transactions contemplated by this Agreement or any instrument required
hereby to be executed and delivered by either of them at or prior to the
Closing.
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5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 or Merger Sub, as the case may be, of this Agreement or any instrument
required hereby to be executed by it at or prior to the Closing nor the
performance by Group 1 or Merger Sub, as the case may be, of its obligations
under this Agreement or any such instrument will (a) violate or breach the
terms of or cause a default under (i) any applicable Law, (ii) any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority, (iii) the organizational documents of Group 1 or Merger Sub or (iv)
any contract or agreement to which Group 1 or Merger Sub is a party or by which
it or any of its property is bound, or (b) result in the creation or imposition
of any Liens on any of the properties or assets of Group 1 or Merger Sub (other
than any Lien created by the Company ), or (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit certificate or order of any
Court or Governmental Authority or (d) with the passage of time or the giving
of notice or the taking of any action by any third party have any of the
effects set forth in clause (a), (b) or (c) of this Section, except, with
respect to clauses (a), (b), (c) or (d) of this Section, where such matter
would not have a material adverse effect on the business, assets, prospects or
condition (financial or otherwise) of Group 1 and its subsidiaries, taken as a
whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Merger are duly authorized and will, when
issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations of the Commission promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Group 1 included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with GAAP during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Group 1 and its consolidated
subsidiaries as of the dates thereto and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information, for normal year-end adjustments).
5.7 Merger Sub. Merger Sub is a corporation recently and duly
incorporated under the laws of the State of Delaware, is validly existing and
in good standing under such laws and is a wholly-owned subsidiary of Group 1.
Merger Sub has no assets, liabilities or obligations and has engaged in no
business except as contemplated by this Agreement.
5.8 No Knowledge of Misrepresentations or Omissions. Neither
Group 1, Merger Sub nor any of their agents or representatives has any actual
knowledge that the representations of the Stockholders made in this Agreement
are not true and correct in all material respects, and none of
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such persons has any actual knowledge of any material errors in, or material
omissions from, the Schedules to this Agreement.
ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals. Prior to the Closing Date, neither the
Company, any of its officers, directors, employees or agents nor any
Stockholder shall agree to, solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, business combination
or purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, the Company, other than the transactions with Group 1
contemplated by this Agreement. The Company and Stockholders will notify Group
1 promptly of any unsolicited offer.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Company or the Stockholders pursuant to this Agreement.
6.3 Conduct of Business by the Company Pending the Merger. The
Stockholders covenant and agree that, from the date of this Agreement until the
Closing Date, unless Group 1 shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement:
(a) The business of the Company shall be conducted only
in, and the Company shall not take any action except in, the ordinary
course of business and consistent with past practice. In connection
therewith, the parties agree that the Company may dealer trade
vehicles for similar models, but the Company shall not liquidate or
otherwise dispose of any of their new vehicles other than in the
ordinary course of business to retail buyers. The Company agrees to
maintain their advertising expenditures and activities commensurate
with prior business practices. The Company shall not advertise a
"Going Out of Business" sale;
(b) The Company shall not directly or indirectly do any
of the following: (i) issue, sell, pledge, dispose of or encumber, (A)
any capital stock (or securities convertible into capital stock) of
the Company or (B) other than in the ordinary course of business and
consistent with past practice and not relating to the borrowing of
money, any assets of the Company, (ii) amend or propose to amend the
articles of incorporation or bylaws (or other organizational
documents) of the Company, (iii) split, combine or reclassify any
outstanding capital stock of the Company, or declare, set aside or pay
any dividend payable in cash, stock, property or otherwise with
respect to its capital stock whether now or hereafter outstanding
(except as provided in Section 6.3(j) below), (iv) redeem, purchase or
acquire or offer to acquire any of its capital stock, (v) create,
incur, assume, guarantee or otherwise
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become liable or obligated with respect to any indebtedness for
borrowed money (other than floor plan indebtedness incurred in the
ordinary course of business), or (vi) except in the ordinary course of
business and consistent with past practice, enter into any contract,
agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than consistent with past business
practices of the Company; and shall not grant, to any individual,
severance or termination pay that exceeds the lesser of (i) such
individual's compensation for the calendar month immediately preceding
such individual's grant of severance or termination pay, or (ii)
$50,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Merger set forth in Article
VIII not being satisfied;
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
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executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement, program, practice or understanding (other than
the Plans and the Benefit Programs or Agreements);
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement; and
(j) Notwithstanding anything in this Agreement to the
contrary, dividends or other form of distribution to the Stockholders
may be made after the date of the Interim Balance Sheet so long as
such distributions do not cause the Company to be in violation of any
manufacturer working capital or equity guidelines or requirements. In
computing the Company's manufacturer working capital requirements, the
effect of the approximately $1,000,000 misclassification relating to
the renovation of the Perimeter facility shall be excluded.
6.4 Confidentiality. The Company shall, and the Company's
officers, directors, employees, representatives and consultants shall, hold in
confidence, and not disclose to others for any reason whatsoever, any
non-public information received by them or their representatives in connection
with the transactions contemplated hereby, including but not limited to all
terms, conditions and agreements related to this transaction, except (i) as
required by law; (ii) for disclosure to officers, directors, employees and
representatives of the Company as necessary in connection with the transactions
contemplated hereby; and (iii) for information which becomes publicly available
other than through the actions of the Company or a Stockholder. In the event
the Merger is not consummated, the Company and the Stockholders will return all
non-public documents and other material obtained from Group 1 or its
representatives in connection with the transactions contemplated hereby or
certify to Group 1 that all such information has been destroyed.
6.5 Notification of Certain Matters. The Company shall give
prompt notice to Group 1, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date hereof to the Effective Time, (ii) any
failure of the Company, or any officer, director, employee or agent thereof, or
any Stockholder to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder, or (iii) any litigation, or
any claim or controversy or contingent liability of which the Company has
knowledge of that might reasonably be expected to become the subject of
litigation, against the Company or affecting any of its assets, in each case in
an amount in controversy in excess of $50,000, or that is seeking to prohibit
or restrict the transactions contemplated hereby.
6.6 Consents. Subject to the terms and conditions of this
Agreement, the Company shall (i) obtain all consents, waivers, approvals
(including all applicable automobile manufacturers approvals, and such
approvals shall not contain any unreasonably burdensome restrictions on the
Company, Group 1 or Merger Sub), authorizations and orders required in
connection with the
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authorization, execution and delivery of this Agreement and the consummation of
the Merger; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary or proper to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, the
Company and the Stockholders shall cooperate and use reasonable efforts to
defend against and respond thereto. Costs of this defense and response will be
borne by Group 1.
6.8 Stockholders' Agreements Not to Sell. Each of the
Stockholders hereby covenants and agrees not to sell, pledge, transfer or
dispose of or encumber any shares of Company Common Stock currently owned,
either beneficially or of record, by such Stockholder, except as contemplated
by this Agreement and the Plan of Merger.
6.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
6.10 Removal of Related Party Guarantees. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
terminate, waive or release all guarantees by the Company (such guarantees
shall be referred to herein as "Related Guarantees", as described in Schedule
6.10 pursuant to Section 3.11 of this Agreement) of indebtedness or other
obligations of any of the Company's officers, directors, shareholders,
employees or affiliates of any such Persons.
6.11 Termination of Related Party Agreements. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to terminate
the Related Party Agreements except those Related Party Agreements that are
disclosed in Schedule 6.11 as agreements that shall not be subject to this
Section 6.11.
6.12 Related Party Agreements. The Company agrees, and the
Stockholders agree to cause the Company, not to enter into any Related Party
Agreements or engage in any transactions with the Stockholders or their
affiliates; except for those Related Party Agreements or transactions with
affiliates that are disclosed in Schedule 6.12 as agreements or transactions
that shall not be subject to this Section 6.12.
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6.13 Release.
(a) AS OF THE CLOSING, EACH OF THE STOCKHOLDERS DOES HEREBY FOR
HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES
REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY OF AND FROM ANY AND
ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN
OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT, WHICH EACH OF SUCH
STOCKHOLDERS NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR
HELD AGAINST THE COMPANY INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED
AS A RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF THE COMPANY
AND ITS EMPLOYEES AND AGENTS, EXISTING AS OF THE CLOSING OR RELATING TO ANY
MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING; PROVIDED, HOWEVER, THAT ANY
CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION
WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR
OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS
OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS SHALL
NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT; AND PROVIDED FURTHER
ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS OR AGREEMENTS LISTED ON THE
SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS THAT HE HAS
NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO
ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS,
LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS
RELEASED HEREIN. EACH OF THE STOCKHOLDERS COVENANTS AND AGREES THAT HE WILL
NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF
THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
OR OBLIGATIONS TO BE RELEASED HEREIN. EACH OF THE STOCKHOLDERS REPRESENTS AND
WARRANTS THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION
6.13 AND THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN
CONNECTION WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Leases. Stockholders hereby agree to cause certain of their
affiliates to enter into a lease agreement with the Company on the basic terms,
and covering the real property and improvements, described on Exhibit B.
6.15 Employment Agreements. The Stockholders agree to enter into
employment agreements with Group 1 and the Company in form and substance
substantially similar to Exhibit C attached hereto.
6.16 Certain Tax Matters
(a) The Stockholders shall use the amounts reflected in
Section 1.6(b)(i) of the Plan of Merger for purposes of preparation of
their Tax Returns. With respect to the shares of Group 1 Common Stock
received by the Stockholders, $14.00 per share shall be used for
purposes of determining the value of the stock portion of the purchase
price.
(b) The Stockholders shall (i) file all required 1998
federal income tax returns of the Company by September 30, 1998; (ii)
use an interim closing of the books of the
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Company effective as of the Closing Date for the purposes of preparing
such returns; and (iii) deliver such returns to Group 1 for its review
at least five (5) days prior to the filing of such returns.
6.17 Phase I Environmental Assessments. The Stockholders have
delivered all Phase I Environmental Surveys requested by Group 1. Prior to
Closing the Stockholders will complete at their cost all cure and remediation
efforts recommended in such surveys, and, to the best of Stockholders'
knowledge, the Company will have no residual liability with regard to any
matter revealed in such surveys.
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Merger is not consummated, Group 1 will return all non-public
documents and other material obtained from the Company or its representatives
in connection with the transactions contemplated hereby or certify to the
Company that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Merger.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger;
and (ii) take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, Group 1
agrees to cooperate and use reasonable efforts to defend against and respond
thereto. Costs of this defense and response will be borne by Group 1.
7.5 Delivery of Certificates. On the Closing Date, Group 1 will
deliver to each holder of certificates which represented Company Common Stock
prior to the Effective Time a letter of
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transmittal and other information advising such holder of the consummation of
the Merger and to enable such holder to effect the exchange of stock
certificates as contemplated by Article II of this Agreement.
7.6 Certain Tax Matters
(a) Group 1 shall use the amounts reflected in Section
1.6(b)(i) of the Plan of Merger for purposes of preparation of its Tax
Returns. With respect to the shares of Group 1 Common Stock received
by the Stockholders, $14.00 per share shall be used for purposes of
determining the value of the stock portion of the purchase price.
(b) Group 1 shall act as reasonably necessary to assist
the Stockholders in preparing their federal income tax returns in
accordance with Section 6.16(b) hereof.
(c) Group 1 shall cause the Company, as soon as
practicable, to calculate and distribute pro rata to the Stockholders
a cash amount equal to the net assets of the Company as of the Closing
Date less the applicable manufacturer's minimum working capital
requirement as of the Closing Date.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the Merger;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Merger;
(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated; and
(d) Receipt of Ford Motor Company's approval of the
Merger and the transactions contemplated thereby.
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Merger is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
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(a) The representations and warranties of the Company and
the Stockholders contained in Article III and Article IV,
respectively, shall be true and correct in all respects as of the date
when made and as of the Closing Date as though such representations
and warranties had been made at and as of the Closing Date; all of the
terms, covenants and conditions of this Agreement to be complied with
and performed by the Company and the Stockholders on or before the
Closing Date shall have been duly complied with and performed in all
respects, a certificate to the foregoing effect dated the Closing Date
and signed by the chief executive officer of the Company and each of
the Stockholders shall have been delivered to Group 1, and a copy of
the resolutions of each Company's Board of Directors, certified by the
Secretary of the Company as of the Closing Date, approving the terms
of this Agreement and all transactions contemplated hereby shall have
been delivered to Group 1;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Merger and the transactions contemplated
thereby will be in compliance with applicable laws;
(c) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements and the simultaneous
closing of each of the Other Mergers;
(d) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.10 and 6.11 hereto;
(e) Group 1 shall have received executed representations
from each Stockholder stating that such Stockholder (with respect to
shares owned beneficially or of record by him or her) has no current
plan or intention to sell or otherwise dispose of the Group 1 Common
Stock to be received by him or her in the Merger;
(f) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have occurred, and the
Company shall not have suffered any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting
the properties or business of the Company and Group 1 shall have
received a certificate signed by the chief executive officer of the
Company dated the Closing Date to such effect;
(g) Receipt by Group 1, at Stockholders' expense, of a
Policy of Title Insurance, issued by a title company, approved by
Group 1, subject only to the exceptions described in Schedule 8.2(g)
("Permitted Title Exceptions");
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(h) Receipt by Group 1, at Stockholders' expense, of a
current survey of the Leased Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1;
(i) Closing of the purchase by Group 1 of the Premier
Auto Finance, L.P., limited partnership interest from J. Carroll
Enterprises, Inc.;
(j) Execution of employment agreements pursuant to Section
6.15; and
(k) Execution of the lease agreement pursuant to Section
6.14.
8.3 Additional Conditions Precedent to Obligations of the
Stockholders. The obligation of the Stockholders to effect the Merger is also
subject to the fulfillment at or prior to the Closing Date of the following
condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date, all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects, a certificate to the foregoing effect dated the Closing Date
and signed by the chief executive officer of Group 1 shall have been
delivered to the Company, and a copy of the resolutions of the Board
of Directors of Group 1, certified by the Secretary of Group 1 as of
the Closing Date, approving the terms of this Agreement and all
transactions contemplated hereby shall have been delivered to the
Company; and
(b) Receipt of an opinion from Crowe Chisek & Company,
dated as of the Closing Date, to the effect that the Merger will
constitute a non-taxable reorganization as defined in Section 368(a)
of the Code.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify. Each of the
Stockholders agrees to severally indemnify, defend and hold Group 1 harmless
(subject to the limitations set forth in Section 9.1(e) below) from and against
the aggregate of all Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all actual
expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by Group 1, on a pre-tax consolidated basis to
the extent (i) resulting from any breach of a representation or
warranty made by the Company or such Stockholder in or pursuant to
this Agreement, (ii) resulting from any breach of the covenants or
agreements
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made by the Company or such Stockholder pursuant to this Agreement, or
(iii) resulting from any inaccuracy in any certificate delivered by
the Company or any of the Stockholders pursuant to this Agreement;
provided, however, that "Indemnifiable Damages" shall not include any
damages arising from the employment agreements executed pursuant to
Section 6.15, the lease agreements executed pursuant to Section 6.14
and the non- competition provisions of Section 10.4.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Group 1
shall have the right to be put in the same pre-tax consolidated
financial position as Group 1 would have been in had each of the
representations and warranties of the Company and such Stockholder
hereunder been true and correct and had the covenants and agreements
of the Company and such Stockholder hereunder been performed in full.
(c) Each of the representations and warranties made by
the Company and the Stockholders in this Agreement or pursuant hereto
shall survive for a period of three years after the Closing Date,
except that the representations and warranties of the Stockholders
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 4.1, 4.2, 4.3 and
4.4 shall not expire, but shall continue indefinitely. No claim for
the recovery of Indemnifiable Damages may be asserted by Group 1
against the Stockholders after such representations and warranties
shall expire, provided, however, that claims for Indemnifiable Damages
first asserted within the applicable period shall not thereafter be
barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the
right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Group 1 believes it is entitled to a claim for any
Indemnifiable Damages hereunder, Group 1 shall promptly give written
notice to the Stockholders of such claim and the amount or the
estimated amount of such claim, and the basis for such claim. If the
Stockholders do not pay the amount of the claim for Indemnifiable
Damages to Group 1 within 10 days, then Group 1 may exercise its
respective rights under Section 9.3 and/or take any action or exercise
any remedy available to it by appropriate legal proceedings to collect
the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, the Stockholders' liability for Indemnifiable
Damages shall be limited as follows:
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(1) Group 1 shall have no claim for Indemnifiable
Damages unless and until all Indemnifiable
Damages incurred by Group 1 exceed an
aggregate of $350,000.00 with respect to this
Agreement and the Other Agreements (the
"Basket Amount"), in which event the
Stockholders shall be liable for only such
Indemnifiable Damages in excess of the Basket
Amount; and
(2) The total amount of Indemnifiable Damages for
which each Stockholder shall be liable to
Group 1 shall not exceed the total value of
the Initial Stock Consideration and the
Initial Cash Consideration received by such
Stockholder in the Merger and the Other
Mergers. For the purposes of this Section
9.1(e)(2), all Initial Stock Consideration
shall be assigned a per share value of
$14.00.
THE STOCKHOLDERS ACKNOWLEDGE AND AGREE THAT FOR PURPOSES OF
THE BASKET AMOUNT, INDEMNIFIABLE DAMAGES UNDER THE OTHER AGREEMENTS
WILL AFFECT THEIR OBLIGATION TO INDEMNIFY GROUP 1 UNDER THIS
AGREEMENT, EVEN THOUGH THE STOCKHOLDERS MAY OWN DIFFERING PERCENTAGES
OF THE DEALERSHIPS BEING ACQUIRED BY GROUP 1 PURSUANT TO THE OTHER
AGREEMENTS. FOR EXAMPLE, IF CLAIMS FOR INDEMNIFIABLE DAMAGES UNDER
ONE OF THE OTHER AGREEMENTS EQUAL OR EXCEED $350,000, THEN THE
STOCKHOLDERS UNDER THIS AGREEMENT WILL BE OBLIGATED TO INDEMNIFY GROUP
1 FOR CLAIMS FOR ALL AMOUNTS WITHOUT THE BENEFIT OF ANY BASKET AMOUNT.
9.2 Agreement by Group 1 to Indemnify. Group 1 agrees to
indemnify, defend and hold the Stockholders harmless from and against the
aggregate of all Stockholders Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Stockholders
Indemnifiable Damages" means, without duplication, the aggregate of
all expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by the Stockholders, on a pre-tax consolidated
basis, to the extent (i) resulting from any breach of a representation
or warranty made by Group 1 in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by Group
1 in or pursuant to this Agreement, or (iii) resulting from any
inaccuracy in any certificate delivered by Group 1 pursuant to this
Agreement; provided, however, that "Stockholders Indemnifiable
Damages" shall not include any damages arising from the employment
agreements executed pursuant to Section 6.15, the lease agreements
executed pursuant to Section 6.14 and the non-competition provisions
of Section 10.4.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Stockholders Indemnifiable Damages,
the Stockholders have the right to be put in the same pre-tax
consolidated financial position as he, she or it would have been in
had
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each of the representations and warranties of Group 1 hereunder been
true and correct and had the covenants and agreements of Group 1
hereunder been performed in full.
(c) Each of the representations and warranties made by
Group 1 in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date, except that the
representations and warranties of Group 1 contained in Sections 5.1,
5.2, 5.3, 5.4 and 5.5 shall not expire, but shall continue
indefinitely. No claim for the recovery of Stockholders Indemnifiable
Damages may be asserted by the Stockholders against Group 1 after such
representations and warranties shall thus expire, provided, however,
that claims for Stockholders Indemnifiable Damages first asserted
within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) In the event that the Stockholders believe they are
entitled to a claim for any Stockholders Indemnifiable Damages
hereunder, the Stockholders shall promptly give written notice to
Group 1 of such claim and the amount or the estimated amount of such
claim, and the basis for such claim. If Group 1 does not pay the
amount of the claim for Indemnifiable Damages to the Stockholders
within 10 days, then the Stockholders may exercise their respective
rights under Section 9.3 and/or take any action or exercise any remedy
available to them by appropriate legal proceedings to collect the
Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.2, the Stockholders shall have no claim for
Stockholders Indemnifiable Damages unless and until the aggregate
Stockholders Indemnifiable Damages incurred by the Stockholders under
this Agreement and the Other Agreements shall exceed an aggregate of
$350,000, in which event Group 1 shall be liable for only such
Stockholders Indemnifiable Damages in excess of $350,000.
9.3 Conditions of Indemnification. The obligations and
liabilities of the Stockholders and Group 1 hereunder with respect to their
respective indemnities pursuant to this Article IX resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such
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Indemnifying Party is harmed by the failure of the Indemnified Party
to provide timely notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Group 1 or Merger Sub, then Group 1 shall have the right to
control the defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights.
(a) In connection with Group 1's future dealership
acquisitions in which the seller of such dealership seeks to sell the
real estate and facilities component thereof (and Group 1 elects not
to purchase such real estate and facilities), Group 1 agrees to
introduce and recommend World Partner Associates, Ltd. as a suitable
buyer of such real estate and facilities, with the understanding that
World Partner Associates, Ltd. will lease such real estate and
facilities to Group 1 under terms and conditions substantially similar
to the lease agreement between Courtesy Ford, Inc. and K.C.
Partnership entered into as of the Closing Date (and providing for an
annual rental of 10% of the purchase price for such real estate),
provided, however, that if Group 1 has a business arrangement with an
affiliated real estate company or with a Group 1 lender providing for
economic benefit to Group 1 as a result of the real estate company's
acquisition of the real estate and facilities component of an
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acquired dealership, such business arrangement will supersede Group
1's obligations to World Associates, Ltd. hereunder. The rights and
obligations created hereunder shall expire on the tenth anniversary of
the Closing Date.
(b) Group 1 agrees that if a third party makes an offer
to purchase one or more of the Companies in a transaction not
involving (i) a substantial portion of the other operations of Group 1
(other than the Companies) or (ii) a substantial portion of the Group
1 operations under the management of James S. Carroll in Florida and
Georgia (other than the Companies), James S. Carroll has the right of
first refusal to purchase the Company or Companies subject to the
third party offer on the same terms as such offer, provided, however,
that as a condition of closing such offer, all Designated Persons (as
defined herein) who will own, operate or manage the repurchased
Company or Companies shall resign from employment with Group 1. The
right granted hereunder shall expire on the tenth anniversary of the
Closing Date and is personal to James S. Carroll and is non-assignable
and non-transferrable.
10.2 Certain Post-Closing Payments.
(a) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 10.2(a). Beginning
with the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section
10.2(a) will be paid in cash and Group 1 Common Stock, in the same
proportions as the aggregate consideration received by each
Stockholder in the Merger and the Other Mergers. For the purposes of
determining the number of shares of Group 1 Common Stock payable to
the Stockholders hereunder, such shares shall be assigned a per share
value of the average closing price of the Group 1 Common Stock on the
New York Stock Exchange for the five trading days preceding the date
on which such shares are issued.
The aggregate consideration paid by Group 1 pursuant to this
Section 10.2(a) and Section 10.2(a) of the Other Agreements (the
"Contingent Consideration") shall not exceed $7.5 million, $2.5
million of which (the "Guaranteed Payments") will be paid regardless
of the results of the above computation, as follows: $900,000 on the
first anniversary of the Closing Date, $900,000 on the second
anniversary of the Closing Date, and $700,000 on the third anniversary
of the Closing Date. The aggregate Guaranteed Payments actually paid
to the Stockholders shall carry forward and be applied against any
additional Contingent Consideration payable to the Stockholders
hereunder. The Guaranteed Payments shall be
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reduced by the difference between the aggregate Contingent
Consideration previously paid to the Stockholders and $2.5 million.
The Contingent Consideration payable under this Section
10.2(a) is additional consideration for the Stockholders' interests in
the Company, and the parties hereto agree to report such amounts on
such basis for income tax purposes.
(b) If a Stockholder sells any of the Initial Stock
Consideration received by such Stockholder pursuant to the Plan of
Merger for a per share price of less than fourteen dollars ($14.00),
Group 1 shall pay the difference between the price per share at which
such shares were sold and $14.00 per share; provided, that this
Section 10.2(b) shall only apply to sales (i) occurring after the
expiration of the applicable Stockholder's Restricted Period and (ii)
made in the public market; and provided, further that this Section
10.2(b) shall terminate five (5) years following the termination of
the applicable Stockholder's Restricted Period. A Stockholder shall
promptly notify Group 1 in writing of any sale of Group 1 Common Stock
pursuant to this Section 10.2(b), and Group 1 shall make any payments
due to such Stockholder hereunder within ten (10) business days of
receipt of notice.
10.3 Schedules to this Agreement. The Schedules to this Agreement
contain all disclosure required to be made by the Company under the various
terms and provisions of this Agreement.
10.4 Non-Competition Obligations.
(a) As part of the consideration for the Merger, and as
an additional incentive for Group 1 to enter into this Agreement,
James S. Carroll, Janet L. Giles and Ralph S. Kerr (each a "Designated
Person" and collectively, the "Designated Persons") and Group 1 agree
to the non-competition provisions of this Section 10.4. Each
Designated Person agrees that during the period of such Designated
Person's non-competition obligations hereunder, such Designated Person
will not, directly or indirectly for such Designated Person or for
others, within twelve miles of or in the county of any operations sold
to Group 1 under this Agreement or operations subsequently managed by
such Designated Person as of the date in question or during the
previous twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates engaged in automotive retailing;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates engaged in automotive
retailing; or
(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or
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affiliates, or hire or assist in the hiring of any such
employee by person, association, or entity not affiliated with
Group 1 or any of its subsidiaries or affiliates.
For the purposes of this Section 10.4, "operations
subsequently managed" shall mean (i) in the case of James S. Carroll,
all Florida and Georgia operations of Group 1 and its affiliates under
the executive management authority of James S. Carroll and (ii) in the
case of the other Designated Persons, all operations of Group 1 and
its affiliates under the day-to-day general management authority of
such Designated Persons.
These non-competition obligations shall apply until the later
of (i) three years after the Closing or (ii) the period specified in
any employment agreement entered into by such Designated Person with
Group 1 or its Subsidiaries.
If Group 1 or any of its subsidiaries or affiliates abandons a
particular aspect of its business, that is, ceases such aspect of its
business with the intention to permanently refrain from such aspect of
its business, then this non-competition covenant shall not apply to
such former aspect of that business.
Notwithstanding the foregoing, the non-competition obligations
of this Section 10.4 shall not apply to (x) the leasing of property or
facilities owned by the Designated Persons or their affiliates to a
competitor of Group 1 if such property or facilities were previously
leased to Group 1 under a lease agreement which Group 1 materially
breached, failed to renew or terminated (for reasons other than
lessor's breach), or (y) any Designated Person's operation and
management of any dealership purchased in accordance with Section
10.1(b) hereof.
(b) During this non-competition period James S. Carroll
will not engage in these restricted activities or assist in the
industry consolidation efforts on behalf of any publicly held entity
in the automotive retailing industry (nor any entity with the ultimate
intention of becoming a publicly held entity or being acquired in any
manner by a publicly held entity), regardless of geographic area or
market; provided, however, that this paragraph (b) shall not prohibit
James S. Carroll from selling, to a publicly held entity, any
dealership acquired by him in full compliance with his post-employment
non-competition obligations hereunder and held by him for at least one
year.
(c) The Designated Persons understand that the foregoing
restrictions may limit their ability to engage in certain businesses
during the period provided for above, but acknowledge that the
Designated Persons will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction. Each
of the Designated Persons acknowledges that money damages would not be
sufficient remedy for any breach of this Section 10.4 by such
Designated Person, and such remedies shall not be deemed the
exclusive remedies for a breach of this Section 10.4, but shall be in
addition to all remedies available at law or in equity to Group 1 or
any of its subsidiaries or affiliates, including,
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without limitation, the recovery of damages from Group 1 and such
Designated Person's agents involved in such breach.
(d) It is expressly understood and agreed that Group 1
and the Designated Persons consider the restrictions contained in this
Section 10.4 to be reasonably necessary to protect the legitimate
business interests of Group 1 and its affiliates, including the
confidential and proprietary information and trade secrets of Group 1
and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions
therein set forth to be modified by such courts so as to be reasonable
and enforceable and, as so modified by the court, to be fully
enforced.
(e) The parties hereto expressly acknowledge that Group
1's rights under this Section 10.4 are assignable and that such rights
shall be fully enforceable by any of Group 1's assignees or successors
in interest.
10.5 Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated herein may be abandoned at any time
prior to the Closing:
(a) by mutual consent of Group 1 and the Stockholders;
(b) by either Group 1 or the Stockholders if the Merger
has not been effected on or before March 31, 1998;
(c) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate under
this Section 10.5(c) shall expire at midnight on January 31, 1998;
(d) by either Group 1 or the Stockholders if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Merger or the other transactions contemplated hereby shall have been
entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations,
financial condition or prospects of the Company; (ii) there has been a
material breach of any representation, warranty, covenant or other
agreement set forth in this Agreement by the Company or the
Stockholders (except for any representation, warranty or covenant
qualified by materiality or knowledge according to its terms, in which
case any breach thereof will give rise to Group 1's right to terminate
hereunder) which breach has not been cured within ten business days
following receipt by the Company of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice) or (iii) there is a material adverse change in the aggregate
projected 1998
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pre-tax income of $6.8 million expected for the Company and the Other
Companies, on which the consideration paid to the Stockholders in
connection with the Merger was based; or
(f) by the Stockholders if there has been a material
breach of any representation or warranty set forth in this Agreement
by Group 1 which breach has not been cured within ten business days
following receipt by Group 1 of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice).
10.6 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.5, the parties hereto shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.7 survive any such termination.
10.7 Expenses. Regardless of whether the Merger is consummated,
all costs and expenses in connection with this Agreement and the transactions
contemplated hereby incurred by Group 1 shall be paid by Group 1 and all such
costs and expenses incurred by the Stockholders shall be paid by the Company
and the Stockholders; provided, that all expenses borne by the Company will be
paid prior to the completion of the distributions contemplated by Sections
6.3(j) and 7.6(c) hereof, and that such expenses will be deducted from the
Company's working capital for the purpose of calculating such distributions.
The Stockholder and Group 1 each represent and warrant to each other that there
is no broker or finder involved in the transactions contemplated hereby.
10.8 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period") (two-year period with respect to James S. Carroll), no
Stockholder voluntarily will: (i) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (A) any shares of Group 1
Common Stock received by any Stockholder in the Merger or (B) any interest in
(including any option to buy or sell) any of those shares of Group 1 Common
Stock, in whole or in part, and Group 1 will have no obligation to, and shall
not, treat any such attempted transfer as effective for any purpose; or (ii)
engage in any transaction, whether or not with respect to any shares of Group 1
Common Stock or any interest therein, the intent or effect of which is to
reduce the risk of owning the shares of Group 1 Common Stock acquired pursuant
to the Plan of Merger (including for example engaging in put, call, short-sale,
straddle or similar market transactions). Notwithstanding the foregoing, each
Stockholder may (i) pledge shares of Group 1 Common Stock, provided that the
pledgee of such shares shall agree not to sell or otherwise dispose of any such
shares for the Restricted Period; (ii) transfer shares to immediate family
members or the estate of any such individual (including, without limitation,
any transfer by such Stockholder to or among any trust, custodial or other
similar accounts or funds that are for the benefit of his or her immediate
family members), provided that such person or entity shall agree not to sell or
otherwise dispose of any such shares for the Restricted Period; and (iii)
transfer shares by will or the laws of descent and distribution or otherwise by
reason of such Stockholder's death. The certificates evidencing the Group 1
Common Stock delivered to each Stockholder pursuant to the Plan of Merger will
bear a legend substantially in the form set forth below and containing such
other information as Group 1 may deem necessary or appropriate:
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EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE [ONE-YEAR] [TWO-YEAR] PERIOD ENDING ON ______________ [DATE
THAT IS THE [FIRST] [SECOND] ANNIVERSARY OF THE CLOSING DATE] (THE
"RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE
SPECIFIED ABOVE.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of Group 1 Common Stock to be
delivered to that Stockholder pursuant to the Plan of Merger have not been and,
if applicable, will not be registered under the Securities Act and therefore
may not be resold by that Stockholder without compliance with the Securities
Act and (ii) covenants that none of the shares of Group 1 Common Stock issued
to that Stockholder pursuant to the Plan of Merger will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all the applicable provisions of the Securities Act
and the rules and regulations of the Commission and applicable state securities
laws and regulations. All certificates evidencing shares of Group 1 Common
Stock issued pursuant to the Plan of Merger will bear the following legend in
addition to the legend prescribed by Section 10.8(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Plan of Merger to each Stockholder will bear any legend
required by the securities or blue sky laws of the state in which that
Stockholder resides.
10.9 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party entitled to the benefits thereof. This
Agreement may not be amended or supplemented
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at any time, except by an instrument in writing signed on behalf of each party
hereto. The waiver by any party hereto of any condition or of a breach of
another provision of this Agreement shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
10.10 Legal Fees. Except as otherwise provided herein, the losing
party shall pay all reasonable legal fees and expenses and costs of litigation
through appeal incurred by the prevailing party in any dispute arising from
this Agreement.
10.11 Public Statements. The Stockholders and Group 1 agree to
consult with each other prior to issuing any press release or otherwise making
any public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
10.12 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
10.13 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
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if to the Company: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
if to the Stockholders: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.13. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor. Delivery to the Stockholders' representative, if any, of any
notice to Stockholders hereunder shall constitute delivery to all
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Stockholders and any notice given by such Stockholders' representative shall be
deemed to be notice given by all Stockholders.
10.14 Governing Law. Except as otherwise specified herein, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, excluding any choice of law rules that may direct the
application of the laws of another jurisdiction.
10.15 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.16 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.17 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.18 Entire Agreement; Third Party Beneficiaries. This Agreement,
including the Exhibits and the Schedules hereto, constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
oral and written, among the parties or any of them, with respect to the subject
matter hereof (except as contemplated otherwise by this Agreement) and neither
this nor any document delivered in connection with this Agreement, confers upon
any Person not a party hereto any rights or remedies hereunder.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-------------------------------------
Name: B.B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
PF MERGER, INC.
By: /s/ JOHN T. TURNER
-------------------------------------
Name: John T. Turner
Title: President
PERIMETER FORD, INC.
By: /s/ RALPH S. KERR
-------------------------------------
Name: Ralph S. Kerr
Title: President
STOCKHOLDERS
J. CARROLL ENTERPRISES TRUST
/s/ JAMES S. CARROLL
-----------------------------------------
By: James S. Carroll, Trustee
/s/ RALPH S. KERR
-----------------------------------------
Ralph S. Kerr
JANET L. GILES REVOCABLE LIVING TRUST
/s/ JANET L. GILES
-----------------------------------------
By: Janet L. Giles, Trustee
48
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Agreement and Plan of Reorganization made
and entered into as of December ____, 1997 by and among Group 1, Merger Sub,
the Company and the Stockholders thereof, including any amendments thereto and
each Annex (including this Annex A), Exhibit and schedule thereto (including
the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Leased Properties, whether personal or mixed, tangible
or intangible, wherever located.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.17.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Carroll Group" shall mean all dealerships under the executive
management responsibility of James S. Carroll in Florida and Georgia (including
the Companies and any other dealerships acquired by Group 1 after the Closing
Date) and additional dealerships acquired by Group 1 as a result of the efforts
of James S. Carroll (whether or not such dealerships are under the executive
management control of James S. Carroll).
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
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49
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Perimeter Ford, Inc., a Delaware corporation, all
predecessor entities of the Company and its successors from time to time.
"Company Common Stock" shall mean the issued and outstanding common
stock of the Company, as set forth in Section 3.7.
"Company's 1996 Balance Sheet" shall have the meaning set forth in
Section 3.8 herein.
"Company's 1996 Financial Statements" shall have the meaning set forth
in Section 3.8 herein.
"Contingent Consideration" shall have the meaning set forth in Section
10.2(a) herein.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Designated Person" and "Designated Persons" shall have the meanings
set forth in Section 10.4 herein.
"Effective Time" shall mean the effective time of the issuance of a
certificate of merger by the Secretary of State of the State of Delaware
recognizing the Merger.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the 1996 Balance Sheet or acquired by the Company since the
date of the 1996 Balance Sheet.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Group 1" shall mean Group 1 Automotive, Inc., a Delaware corporation.
"Group 1 Common Stock" shall mean the common stock, par value $.01 per
share of Group 1.
"Guaranteed Payments" shall have the meaning set forth in Section
10.2(a) herein.
"Guarantees" shall have the meaning set forth in Section 3.11 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has
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been or shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Incremental Return" shall mean return on Group 1's investment in the
operations of the Carroll Group that were not a part of the Companies on the
date of this Agreement (total income after income taxes divided by total
investment). " Income" and "investment" used for these purposes will be before
any Group 1 management fees, allocations of indirect costs, cost of capital
(including interest, loan origination fees, points and any other expenses
incurred in obtaining or maintaining a loan) or amortization of goodwill.
"Total investment" in these operations will include any loan proceeds, cash or
stock invested by Group 1 to acquire the operations added to the Carroll Group
after the date of this Agreement (including all investments made by Group 1 as
a condition to manufacturer approval of such acquisitions).
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" shall have the meaning set
forth in Section 3.18 herein.
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
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"Material Contract" has the meaning set forth in Section 3.11 herein.
"Material Leases" shall have the meaning set forth in Section 3.11
herein.
"Merger" shall mean the merger of Merger Sub with and into the
Company.
"Merger Sub" shall mean PF Merger, Inc., a Delaware corporation and a
wholly owned subsidiary of Group 1.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Other Agreements" shall have the meaning set forth in the Recitals
hereto.
"Other Company" and "Other Companies" shall have the meanings set
forth in the Recitals hereto.
"Owned Properties" shall mean any real estate previously owned by the
Company.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
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(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Phase I Environmental Surveys" shall mean the environmental reports
of S.E. Environmental Consultants, Inc. dated September, 1997.
"Plan" shall have the meaning set forth in Section 3.17.
"Plan of Merger" shall mean the Agreement and Plan of Merger made and
entered into as of __________, 1998 by and between Merger Sub and the Company.
"Related Party Agreements" shall have the meaning set forth in Section
3.11 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person with any Governmental Authority.
"Restricted Period" shall have the meaning set forth in Section 10.8
herein.
"Schedules" shall mean all schedules required to be provided by the
Company or the Stockholders under this Agreement, including any amendments or
supplements thereto.
"SEC Documents" shall mean the Group 1 Automotive, Inc. Prospectus
dated October 29, 1997 and the Form 10-Q for the third quarter ended September
30, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Stockholders Indemnifiable Damages" shall have the meaning set forth
in Section 9.2 herein.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
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"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person within six
years prior to the date of the Agreement but which have been terminated prior
to the date of the Agreement.
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
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EXHIBIT A
______________, 1998
AGREEMENT AND PLAN OF MERGER
Merging PERIMETER FORD, INC. into PF MERGER, INC.
THIS AGREEMENT AND PLAN OF MERGER, dated as of _________, 1998 (this
"Plan of Merger"), is by and between PF Merger, Inc., a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of Group 1 Automotive, Inc., a
Delaware corporation ("Group 1") and Perimeter Ford, Inc., a Delaware
corporation (the "Company"). Merger Sub and the Company are hereinafter
sometimes referred to as the "Constituent Corporations."
PRELIMINARY STATEMENT
Group 1, Merger Sub and the Company desire that the Company merge with
and into Merger Sub.
This Plan of Merger is being entered into pursuant to an Agreement and
Plan of Reorganization dated as of December 17, 1997 (the "Agreement") among
Group 1, Merger Sub, the Company and the stockholders of the Company.
Group 1 will acquire by merger (the "Other Mergers") Koons Ford, Inc.,
a Florida corporation and Courtesy Ford, Inc., a Florida corporation
(collectively, the "Other Companies") pursuant to plans of merger entered into
among the Other Companies and subsidiaries of Group 1 (collectively, the "Other
Plans of Merger").
The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $.01 per share ("Merger Sub Common Stock"), of which
1,000 shares are outstanding, all of which are owned by Group 1. The
authorized capital stock of the Company consists of 5,000 shares of common
stock, par value $100.00 per share ("Company Common Stock"), of which 1,579
shares are outstanding and no shares are held in the Company's treasury.
The Boards of Directors of each of the Constituent Corporations,
respectively, have approved the Agreement and the Plan of Merger.
Accordingly, in consideration of the premises, and the mutual
covenants and agreements herein contained, the parties hereto hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
56
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.3), the Company shall be merged with and into the Merger Sub, the separate
existence of the Company shall cease, and the Merger Sub (i) shall continue as
the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Perimeter Ford, Inc.", (ii) shall be
governed by the laws of Delaware (iii) shall maintain a registered office in
the State of Delaware at c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware, and shall (iv) succeed to and assume all of the rights,
properties and obligations of Merger Sub and the Company in accordance with the
applicable provisions of the Delaware General Corporation Law (the "Code").
1.2 Effect of the Merger. The Merger shall have the effects set
forth in Section 251 of the Code.
1.3 Consummation of the Merger. As soon as practicable after all
conditions set forth in Article VIII of the Agreement have been satisfied or
waived, the parties hereto will file with the Secretary of State of the State
of Delaware articles of merger in such form as required by, and executed in
accordance with, the relevant provisions of the Code, with instructions that
such articles of merger are to be issued and effective as of the last day of
the month in which such articles are filed (the effective time of the issuance
of a certificate of merger by the Secretary of State of the State of Delaware
being the "Effective Time").
1.4 Certificate of Incorporation; Bylaws. The certificate of
incorporation and bylaws of the Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation and bylaws of the
Surviving Corporation and thereafter shall continue to be its certificate of
incorporation and bylaws until amended as provided therein and under the Code.
1.5 Directors and Officers. The directors of the Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation. The initial officers
of the Surviving Corporation shall be as follows: (i) Ralph S.
Kerr--President, (ii) James S. Carroll--Vice President, (iii) Janet L.
Giles--Treasurer, and (iv) Frank R. Todaro--Secretary, in each case until their
respective successors are duly elected or appointed and qualified.
1.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the Company, Merger Sub or
their respective stockholders:
(a) The shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (the "Shares")
shall be converted, subject to the provisions of this Section 1.6,
into (i) the rights to receive, immediately following the Effective
Date,
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57
a number of shares of Group 1 Common Stock (the "Initial Stock
Consideration") and an amount in cash (the "Initial Cash
Consideration," and together with the Initial Stock Consideration, the
"Initial Consideration") as set forth in Section 1.6(b) below, and
(ii) the rights to receive, periodically upon satisfaction of the
conditions set forth in Section 1.6(c) below, additional shares of
Group 1 Common Stock (the "Contingent Stock Consideration") and
amounts in cash (the "Contingent Cash Consideration," and together
with the Contingent Stock Consideration, the "Contingent
Consideration") as set forth in Section 1.6(c) hereof; provided,
however, that no fractional shares of Group 1 Common Stock shall be
issued, and, in lieu thereof, a cash payment shall be made pursuant to
Sections 1.6(h) and 1.6(i) hereof.
(b)(i) The Shares owned by J. Carroll Enterprises Trust shall
be converted into the right to receive Initial Stock Consideration of
311,383 shares and the rights to receive a portion of any Contingent
Consideration periodically payable to it in accordance with Section
1.6(c) hereof; (ii) the Shares owned by Janet L. Giles Revocable
Living Trust shall be converted into the right to receive Initial
Stock Consideration of 26,760 shares, Initial Cash Consideration of
$7,766 and the rights to receive a portion of any Contingent
Consideration periodically payable to it in accordance with Section
1.6(c) hereof; and (iii) the Shares owned by Ralph S. Kerr shall be
converted into the right to receive Initial Stock Consideration of
203,373 shares, Initial Cash Consideration of $59,025 and the rights
to receive a portion of any Contingent Consideration periodically
payable to him in accordance with Section 1.6(c) hereof.
(c) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 1.6(c). Beginning with
the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section 1.6(c)
will be paid in cash and Group 1 Common Stock, in the same proportions
as the aggregate consideration received by each Stockholder in the
Merger and the Other Mergers. For the purposes of determining the
number of shares of Group 1 Common Stock payable to the Stockholders
hereunder, such shares shall be assigned a per share value of the
average closing price of the Group 1 Common Stock on the New York
Stock Exchange for the five trading days preceding the date on which
such shares are issued.
The Contingent Consideration paid by Group 1 pursuant to this
Section 1.6(c) and Section 1.6(c) of the Other Plans of Merger shall
not exceed $7.5 million, $2.5 million of which (the "Guaranteed
Payments") will be paid regardless of the results of the above
computation, as follows: $900,000 on the first anniversary of the
Closing Date, $900,000 on
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the second anniversary of the Closing Date, and $700,000 on the third
anniversary of the Closing Date. The aggregate Guaranteed Payments
actually paid to the Stockholders shall carry forward and be applied
against any additional Contingent Consideration payable to the
Stockholders hereunder. The Guaranteed Payments shall be reduced by
the difference between the aggregate Contingent Consideration
previously paid to the Stockholders and $2.5 million.
The Contingent Consideration payable under this Section 1.6(c)
is additional consideration for the Stockholders' interests in the
Company, and the parties hereto agree to report such amounts on such
basis for income tax purposes.
(d) Each share of Company Common Stock that immediately
prior to the Effective Time was held in the treasury of the Company
shall be canceled and retired as a result of the Merger and no
securities or cash shall be issued or paid with respect thereto. Any
shares of preferred stock of the Company and any options, warrants or
other rights to purchase Company Common Stock or any other securities
of the Company which remain outstanding at the Effective Time shall
automatically be canceled and retired as a result of the Merger
without consideration therefor, and each holder thereof shall cease to
have any rights with respect thereto.
(e) At or after the Effective Time, each holder of an
outstanding certificate that prior thereto represented Shares shall be
entitled, upon surrender thereof to Group 1, to receive immediately in
exchange therefor (i) a certificate or certificates representing the
number of whole shares of Initial Stock Consideration in such
denominations and registered in such names as such holder may request
and (ii) cash in the amount equal to the Initial Cash Consideration,
into which the Shares so surrendered shall have been converted as
described above. Each holder of Shares who would otherwise be
entitled to a fraction of a share of Group 1 Common Stock shall, upon
surrender of the certificates that, prior to the Effective Time,
represented Shares held by such holder, to Group 1, be paid an amount
in cash in accordance with the provisions of Sections 1.6(i) and
1.6(j). Until so surrendered, each outstanding certificate that,
prior to the Effective Time, represented Shares shall be deemed from
and after the Effective Time, for all corporate purposes, other than
the payment of earlier dividends and distributions, to evidence the
ownership of the number of full shares of Initial Stock Consideration
and Initial Cash Consideration into which such Shares shall have been
converted pursuant to this Section 1.6. Unless and until any such
outstanding certificates shall be surrendered, no dividends or other
distributions payable to the holders of Group 1 Common Stock, as of
any time on or after the Effective Time, shall be paid to the holders
of such outstanding certificates which prior to the Effective Time
represented Shares; provided, however, that, upon surrender and
exchange of such outstanding certificates, there shall be paid to the
record holders of the certificates issued and exchanged therefor, the
amount, without interest thereon, of dividends and other
distributions, if any, that theretofore were declared and became
payable since the Effective Time with respect to the number of full
shares of Group 1 Common Stock issued to such holders.
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(f) All shares of Group 1 Common Stock into which the
Shares shall have been converted pursuant to this Section 1.6 shall be
issued and paid in full satisfaction of all rights pertaining to such
converted shares.
(g) If any certificate for shares of Group 1 Common Stock
is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall have paid to Group
1 any transfer or other taxes required by reason of the issuance of a
certificate for shares of Group 1 Common Stock in any name other than
that of the registered holder of the certificate surrendered, or
established to the satisfaction of Group 1 that such tax has been paid
or is not payable.
(h) In lieu of any fraction of a share of Initial Common
Stock, each holder of Shares who would otherwise be entitled to a
fraction of a share of Group 1 Common Stock shall, upon surrender of
the Shares held by such holder to Group 1, be paid an amount in cash
equal to the value of such fraction of a share based upon a per share
price $14.00. No interest shall be paid on such amount.
(i) In lieu of any fraction of a share of Contingent
Common Stock, each person who would otherwise be entitled to a
fraction of a share of Contingent Common Stock shall, upon
satisfaction of the conditions precedent to such persons receipt of
Contingent Common Stock, be paid an amount in cash equal to the value
of such fraction of a share based upon the average closing price of
Group 1 Common Stock on the New York Stock Exchange for the five
trading days preceding each respective issuance of Contingent Common
Stock. No interest shall be paid on such amount.
(j) None of Group 1, Merger Sub, the Company or the
Surviving Corporation shall be liable to a holder of the Shares for
any amount properly paid to a public official pursuant to applicable
property, escheat or similar law.
1.8 Taking of Necessary Action; Further Action. Merger Sub and
the Company shall take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company or Merger
Sub, such corporations shall direct their respective officers and directors to
take all such lawful and necessary action.
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ARTICLE II
MISCELLANEOUS
2.1 Counterparts. This Plan of Merger may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to each of the other parties.
2.2 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the laws of the State of Delaware.
2.3 Waiver and Amendment. Any provision of this Plan of Merger
may be waived at any time by the party that is, or whose stockholders are,
entitled to the benefits thereof. This Plan of Merger may not be amended or
supplemented at any time, except by an instrument in writing signed on behalf
of each party hereto, only as may be permitted by applicable provisions of the
Code. The waiver by any party hereto of any condition or of a breach of
another provision of this Plan of Merger shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this Plan of
Merger shall not preclude it from seeking redress for breach of this Plan of
Merger other than with respect to the condition so waived.
2.4 Certain Definitions.
(a) "Carroll Group" shall mean all dealerships under the
executive management responsibility of James S. Carroll in Florida and
Georgia (including the Companies and any other dealerships acquired by
Group 1 after the Closing Date) and additional dealerships acquired by
Group 1 as a result of the efforts of James S. Carroll (whether or
not such dealerships are under the executive management control of
James S. Carroll).
(b) "Incremental Return" shall mean return on Group 1's
investment in the operations of the Carroll Group that were not a part
of the Companies on the date of this Agreement (total income after
income taxes divided by total investment). " Income" and "investment"
used for these purposes will be before any Group 1 management fees,
allocations of indirect costs, cost of capital (including interest,
loan origination fees, points and any other expenses incurred in
obtaining or maintaining a loan) or amortization of goodwill. "Total
investment" in these operations will include any loan proceeds, cash
or stock invested by Group 1 to acquire the operations added to the
Carroll Group after the date of this Agreement (including all
investments made by Group 1 as a condition to manufacturer approval of
such acquisitions).
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
to be duly executed as of the date first above written.
PF MERGER, INC.
By:
-------------------------------------
Name: Ralph S. Kerr
Title: President
PERIMETER FORD, INC.
By:
-------------------------------------
Name: Ralph S. Kerr
Title: President
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