1
EXHIBIT 10.50
ASSET PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
CASA CHEVROLET INC.,
A WHOLLY OWNED SUBSIDIARY OF GROUP 1 AUTOMOTIVE, INC.,
UNITED MANAGEMENT, INC.,
AND
THE STOCKHOLDERS OF
UNITED MANAGEMENT, INC.
DATED AS OF
February 25, 1998
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE ACQUISITION
2.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Working Capital Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Group 1 Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
3.1 Approval and Authority; Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Authorization of Agreement - No Violation - No Consents . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.14 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.16 Affiliate Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.17 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.18 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.21 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.22 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.23 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.24 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE STOCKHOLDERS
4.1 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
COVENANTS OF THE SELLER AND THE STOCKHOLDERS
6.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Conduct of Business by Seller Pending the Acquisition . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.14 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.15 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.16 Audit of Seller Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.17 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.18 Record Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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ARTICLE VII
COVENANTS OF PURCHASER
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 New Limited Partnership Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.7 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.8 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.9 Security for Newco Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . . 26
8.2 Additional Conditions Precedent to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . 26
8.3 Additional Conditions Precedent to Obligations of Seller and the Stockholders . . . . . . . . . . . 27
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by Seller and the Stockholders to Indemnify . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Agreement by Purchaser to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.4 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 Statutory Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Certain Post-Closing Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.3 Certain Repurchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.4 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.6 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.8 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.9 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.10 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.11 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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GROUP 1 AUTOMOTIVE, INC.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of the 25th
day of February, 1998, is among GROUP 1 AUTOMOTIVE, INC., a Delaware
corporation ("Group 1"), CASA CHEVROLET INC. a New Mexico corporation and a
wholly owned subsidiary of Group 1 ("Newco," and together with Group 1,
"Purchaser"), UNITED MANAGEMENT, INC., a New Mexico corporation ("Seller"), and
THE STOCKHOLDERS OF SELLER (each a "Stockholder" and collectively the
"Stockholders") set forth on the signature page hereof.
RECITALS:
WHEREAS, Seller is presently a party to a Sales and Service Agreement
with General Motors Corporation (the "Manufacturer"), which provides for the
sale and service of Chevrolet vehicles ("Acquired Dealership") at 7201 Lomas
NE, Albuquerque, New Mexico (the "Acquired Dealership Location");
WHEREAS, Purchaser wishes to acquire the Assets (as hereinafter
defined) of the Acquired Dealership for the purpose of succeeding Seller as the
authorized Chevrolet dealer at the Acquired Dealership Location (the
"Acquisition");
WHEREAS, Group 1 has formed Newco to acquire the Assets;
WHEREAS, the parties hereto have executed an agreement substantially
similar to this Agreement (the "Other Agreement") dated as of the date hereof
by and among Group 1, Casa Chrysler Plymouth Jeep Inc., a wholly-owned
subsidiary of Group 1 ("Other Newco"), Seller and the Stockholders providing
for Group 1's acquisition (the "Other Acquisition") of all assets related to
Seller's sale and service of Chrysler, Plymouth and Jeep vehicles (the "Other
Dealership") at 9733 Coors Blvd. NW, Albuquerque, New Mexico. For the purposes
of this Agreement, the Acquired Dealership and the Other Dealership shall be
referred to collectively as the "Acquired Dealerships."
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which Purchaser shall purchase, and
Seller shall sell, all of the Assets; and
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 I 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 has the meaning
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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 ACQUISITION
2.1 The Acquisition.
(a) Assets to be Sold.
(i) Subject to the terms and conditions of this
Agreement, at the closing provided for in Section 2.5 hereof
(the "Closing"), Seller will, sell, convey, assign, transfer
and deliver to Newco all of Seller's right, title and interest
at the time of the Closing in and to the Assets free and clear
of any mortgage, pledge, lien, charge, encumbrance or other
adverse claim (whether absolute, accrued, contingent or
otherwise), except as otherwise disclosed in Schedule 3.1.
(ii) Such sale, conveyance, assignment, transfer
and delivery will be effected by delivery by Seller to Newco
of (A) a duly executed bill of sale ("Bill of Sale") in the
form of Exhibit A annexed hereto, (B) instruments of
assignment (collectively the "Instruments of Assignment"), and
(C) such other good and sufficient instruments of conveyance
and transfer as shall be necessary to vest in Newco (subject
to the terms of this Agreement) good and marketable title to
the Assets (collectively the "Other Instruments"), free and
clear of all mortgages, pledges, liens, charges, encumbrances
and other adverse claims (whether absolute, accrued,
contingent or otherwise), except as otherwise disclosed in
Schedule 3.1.
(b) Closing Payment. At the Closing, Seller will sell,
transfer, convey and deliver to Newco the Assets, in exchange for (a)
(i) $8,830,250 in cash, by a certified or bank cashier's check,
subject to adjustment as set forth in Section 2.2, and (ii) 481,250
shares of common stock, par value $.01 per share of Group 1 ("Group 1
Common Stock") as set forth in Section 2.3, (clauses (i) and (ii) are
collectively referred to as the "Closing Payment") and (b) the
assumption or discharge by Newco of the Assumed Liabilities, all of
which are listed on Annex IV attached hereto. Except for the Assumed
Liabilities, Purchaser shall not assume or otherwise be liable for,
and shall be indemnified with respect to, in accordance with the
provisions of Section 9.1 hereof, all other liabilities and
obligations of Seller.
(c) Assumption of Liabilities. Newco shall at Closing
execute and deliver to Seller an undertaking, in the form attached
hereto as Exhibit B (the "Undertaking"), whereby Newco will, as
specified therein, assume and agree to pay and discharge the Assumed
Liabilities of Seller.
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2.2 Working Capital Adjustment.
(a) Adjustment. The cash portion of the Closing Payment
set forth in Section 2.1(a)(i) shall be adjusted based on the product
of (i) the difference of (x) the amount of Working Capital (as defined
below) on the Closing Date, less (y) $5,163,000, times (ii) 0.55 (the
"Working Capital Adjustment"). If the Working Capital Adjustment is
positive, then the cash portion of the Closing Payment shall be
increased by the amount of the Working Capital Adjustment. If the
Working Capital Adjustment is negative, then the cash portion of the
Closing Payment shall be reduced by the amount of the Working Capital
Adjustment.
(b) Procedure. As promptly as possible, but in any event
within sixty (60) days after the Closing, Purchaser will deliver to
Seller a schedule setting forth the calculation of the Working Capital
Adjustment (the "Adjustment Schedule"). Seller and its independent
certified public accountant shall have the right to observe and
comment upon the preparation of such schedule, including the taking of
a physical inventory of the new and used automobiles of the Acquired
Dealership, which physical inventory shall be taken at Purchaser's
expense on the Closing Date. Within thirty (30) days after receipt of
the Adjustment Schedule by Seller, Seller may notify Purchaser in
writing that such schedule does not fairly state the Working Capital
Adjustment in accordance with the provisions of this Agreement,
setting forth in full the respects in which it fails to do so and the
reasons for reaching that conclusion. In the event that Purchaser and
Seller are unable to resolve any dispute so raised within sixty (60)
days after receipt of the Adjustment Schedule by Seller, they shall
appoint an independent, nationwide accounting firm acceptable to both
of them, whose expenses will be shared equally by Seller, on the one
hand, and Purchaser, on the other hand. Such accounting firm shall as
promptly as possible determine whether the Adjustment Schedule fairly
states, in accordance with the provisions of this Agreement, the
values of the items as to which Seller has taken issue and, if such
firm concludes that it does not do so with respect to any of such
items, the value which in such firm's opinion does so shall be final
and dispositive. The determination of the Working Capital Adjustment
by such independent firm shall be conclusive and binding on the
parties hereto.
(c) Payment. Within five (5) days after receipt of the
report by such accounting firm or the settlement of any dispute, or
within thirty-five (35) days following receipt of the Adjustment
Schedule by Seller if no dispute exists, payment shall be made of the
Working Capital Adjustment, if any. If the Working Capital Adjustment
is positive, such amount shall be paid in cash by a certified or bank
cashier's check by Purchaser to Seller. If the Working Capital
Adjustment is negative, such amount shall be paid in cash by a
certified or bank cashier's check by Seller to Purchaser.
(d) Working Capital. For purposes of calculating the
Working Capital Adjustment, the term "Working Capital" shall mean, as
of the Closing Date, the Seller's current assets less current
liabilities as of such date with respect to the Acquired Dealerships,
all calculated in accordance with GAAP, on a basis consistent with the
preparation of the Seller 1997 Balance Sheet, with inventory being
valued at the lower of cost, determined by the first-in, first-out
method ("FIFO"), or market; provided, however, that Seller's current
assets or liabilities with respect to the Acquired Dealership for the
purposes of this calculation shall not give effect to (i) any
charge-back reserve resulting from the audit of the Seller 1997
Balance Sheet, and (ii) any expenditures of working capital, made in
accordance with Section 6.3 hereof, to acquire equipment and other
Fixed Assets sold to Purchaser pursuant to this Agreement.
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2.3 Group 1 Common Stock. The number of shares of Group 1 Common
Stock to be issued to Seller at Closing shall be appropriately adjusted to give
effect to any stock split or stock dividend of Group 1 Common Stock effected
prior to the Closing Date. The "Designated Value of Group 1 Common Stock"
shall mean the average closing price of Group 1 Common Stock on the New York
Stock Exchange for the five full trading days immediately preceding the date
specified. No fractional shares of Group 1 Common Stock shall be issued, but
in lieu thereof, Seller shall receive cash for any fractional shares at the
Designated Value of Group 1 Common Stock.
2.4 Employees.
(a) Continued Employment. Except as Newco has otherwise
heretofore disclosed to Seller, Newco will offer to employ, beginning
on the Closing Date, all of those persons who are employed by Seller
on a full-time basis with respect to the Acquired Dealership on the
Closing Date, upon total compensation and benefit terms substantially
commensurate with the total compensation and benefit terms of the
employee's employment with Seller. Newco further agrees that with
respect to any such employee who presently is employed by Seller
pursuant to a written employment contract, Newco's offer of employment
to such employee shall be expressly conditioned upon the execution and
delivery by such employee of a written release relieving and
discharging Seller from any obligation or liability following the
Closing Date under such employment contract and Newco shall deliver a
written copy of any such offer to Seller. Seller agrees to cooperate
with Newco by permitting Newco throughout the period prior to the
Closing Date (i) to inspect such employees' medical and other
employment records maintained by Seller, (ii) to meet with the
employees of Seller at such times as shall be approved by a
representative of Seller (which approval will not be unreasonably
withheld) and (iii) to distribute to such employees such forms and
other documents relating to employment by Newco after the Closing as
Newco shall reasonably request.
(b) Benefits, Workers' Compensation. Seller agrees that,
with respect to claims for workers' compensation and all claims under
Seller's employee benefit programs by persons working for Seller with
respect to the Acquired Dealership arising out of events occurring
prior to the Closing Date, whether insured or otherwise (including,
but not limited to, workers' compensation, life insurance, medical and
disability programs), Seller will, at its own expense, honor or cause
its insurance carriers to honor such claims in accordance with the
terms and conditions of such programs or applicable workers'
compensation statutes without interruption as a result of the
employment by Newco of any such employees on or after the Closing
Date.
(c) 401(k) Matters. Newco shall assume at Closing the Ken
and Cindy Johns Automotive Group 401(k) Profit Sharing Plan (the
"Seller's 401(k) Plan").
(d) Vacation Pay. Seller shall accrue in the Seller 1997
Balance Sheet a liability for the amount due for vacation pay with
respect to employees of Seller for vacation due but not taken. Newco
will thereafter assume responsibility under Newco's vacation program
for such vacation due but not taken.
(e) Severance Pay. Seller will promptly reimburse Newco
and otherwise hold Newco harmless from and against all direct and
indirect costs, expenses and liabilities of any sort whatsoever
arising from or relating to any claims by or on behalf of present or
former
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employees of Seller in respect of severance pay and similar
obligations relating to the termination of such employee's employment
on or prior to the Closing Date.
(f) Purchaser's Plans. Effective as of the Closing Date
until January 1, 1999 Purchaser shall continue the same health plans
currently provided by Seller to its employees with respect to each
employee of Seller who is hired by Newco pursuant to Section 2.4(a)
("Transferring Employees"), and after January 1, 1999, Purchaser shall
cause each Transferring Employee to be provided with benefits on a
basis substantially similar to Purchaser's normal practice.
Purchaser shall cause each Transferring Employee to be covered under a
group health plan that (i) provides medical and dental benefits to the
Transferring Employee, (ii) credits such Transferring Employee, for
the year during which such coverage under such group health plan
begins, with any deductibles and copayments already incurred during
such year under the group health plan maintained by Seller listed on
Schedule 3.13(a), and (iii) waives any preexisting condition
restrictions to the extent necessary to provide immediate coverage and
to the extent such restrictions did not apply under the group health
plan maintained by Seller. Purchaser shall cause the employee benefit
plans and programs maintained after the Closing by Purchaser to
recognize each Transferring Employee's years of service and level of
seniority prior to the Closing Date with Seller and its affiliates for
purposes of terms of employment and eligibility, vesting and benefit
determination under such plans and programs (other than benefit
accruals under any defined benefit pension plan).
2.5 Closing. The Closing of the purchase and sale of the Assets
as contemplated by this Agreement shall take place at the offices of Sutin
Thayer & Browne, Two Park Square, 6565 Americas Parkway, Albuquerque, New
Mexico 87110, on a date mutually established by the parties following the
satisfaction or waiver of the conditions set forth in Article VIII or at such
other time and place and on such other date as Purchaser and Seller 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."
(a) Delivery by Seller. At the Closing, Seller will
deliver to Newco (unless delivered previously), the following:
(i) a duly executed Bill of Sale substantially in
the form of Exhibit A hereto;
(ii) the Instruments of Assignment and Other
Instruments, in form and substance satisfactory to
Newco, pursuant to Section 2.1(a)(ii);
(iii) true copies of any consents referred to in
Section 3.2 hereof;
(iv) the opinion of counsel referred to in Section
8.2(l) hereof;
(v) all the books and records of Seller pertaining
to the Assets;
(vi) executed copies of the Leases referred to in
Sections 6.14 and 7.6 hereto;
(vii) executed copies of the Employment Agreements;
and
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(viii) all other documents, instruments and writings
required to be delivered by Seller at or prior to the
Closing pursuant to this Agreement or otherwise
required in connection herewith.
(b) Delivery by Newco. At the Closing, Newco will
deliver to Seller (unless previously delivered), the following:
(i) the certified or bank cashier's check referred
to in Section 2.1(b) hereof;
(ii) the certificates representing Group 1 Common
Stock pursuant to Section 2.1(b) hereof;
(iii) the Undertaking referred to in Section 2.1(c)
hereof;
(iv) the opinion referred to in Section 8.3(b)
hereof;
(v) executed copies of the Leases referred to in
Sections 6.14 and 7.6 hereto;
(vi) executed copies of the Employment Agreements;
and
(vii) all other documents, instruments and writings
required to be delivered by Newco at or prior to the
Closing pursuant to this Agreement or otherwise
required in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
The Seller and the Stockholders, jointly and severally, represent and
warrant to Group 1 as follows:
3.1 Approval and Authority; Title to Assets. The Seller has the
full right, power and authority to enter into this Agreement and to perform all
of its obligations under this Agreement, and the execution and delivery of this
Agreement and the performance by Seller of its obligations under this Agreement
require no further action or approval of any other person in order to
constitute this Agreement as a binding and enforceable obligation of Seller.
Except as disclosed in Schedule 3.1, Seller has good and indefeasible title to
the Assets, free and clear of any claim, pledge, lien, charge, encumbrance,
mortgage or other adverse claim.
3.2 Authorization of Agreement - No Violation - No Consents. The
Seller has full power and authority to enter into this Agreement and the other
documents delivered pursuant to this Agreement (collectively, the "Documents").
Except as disclosed in Schedule 3.2, neither the execution and delivery by
Seller and the Stockholders of the Documents, nor the performance by Seller and
the Stockholders of their obligations under the Documents will (assuming
receipt of all consents, approvals, authorizations, permits, certificates and
orders disclosed as requisite in Schedule 3.2) (a) violate or breach the terms
of or cause a default under (i) any applicable Law, (ii) any applicable Order
or any
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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 Seller or (v)
any contract or agreement to which Seller or the Stockholders are a party or by
which they, or any of the Assets, are bound; or (b) result in the creation or
imposition of any Lien on any of the Assets; 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. Except for the
applicable requirements, if any, of the HSR Act and as expressly contemplated
by the Documents, no consent, action, approval or authorization of, or
registration, declaration or filing with, any Court, Governmental Authority or
any other person or entity is required to authorize, or is otherwise required
in connection with, the execution and delivery of the Documents by any Seller,
performance of the terms of the Documents or the validity or enforceability of
the Documents. This Agreement and each Document delivered pursuant hereto
constitutes the legal, valid and binding obligation of Seller and the
Stockholders enforceable against each such Person in accordance with its terms.
3.3 Subsidiaries; Equity Investments. Seller 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.
3.4 Financial Statements. Included in Schedule 3.4 are true and
complete copies of the financial statements of Seller consisting of an
unaudited balance sheet of Seller as of December 31, 1997 (the "Interim Balance
Sheet") and the related unaudited statement of income for the twelve-month
period then ended (collectively, the "Seller Interim Financial Statements").
Except as provided in Schedule 3.4, the Seller Interim Financial Statements
present fairly the financial position of Seller 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. Except as provided in
Schedule 3.4, the Seller Interim 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 Seller reflected in the
Seller Interim Financial Statements and as incurred since December 31, 1997
represent sales made in the ordinary course of business, are collectible (net
of any reserves for doubtful accounts or applicable chargebacks shown in the
Seller Interim Financial Statements) in the ordinary course of business and,
except as disclosed in Schedule 3.4, are not in dispute or subject to
counterclaim, set-off or renegotiation. Schedule 3.4 contains an aged schedule
of accounts receivable included in the Interim Balance Sheet.
3.5 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet or
as disclosed in Schedule 3.5, Seller 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.
3.6 Certain Agreements. Except as disclosed in Schedule 3.6,
neither Seller 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 Seller or any of its officers or directors, the scope of the business
or operations of Seller or any of its officers or directors, geographically or
otherwise.
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3.7 Contracts and Commitments. Seller has delivered to Purchaser
a report which includes (i) a list of all contracts to which Seller 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 Seller,
taken as a whole ("Material Contracts"); (ii) a list of all real or personal
property leases to which Seller is a lessee 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
Seller is a party ("Guarantees") and (iv) a list of all contracts or other
formal or informal understandings between Seller and any of their 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. All of the Material Contracts, Material Leases, Guarantees and
Related Party Agreements are valid, binding and in full force and effect and
are enforceable by the Seller in accordance with their terms. The Seller has
performed all material obligations required to be performed by it to date under
the Material Contracts, Material Leases, Guarantees and Related Party
Agreements and Seller is not (with or without the lapse of time or the giving
of notice, or both) in breach or default in any material respect thereunder
and, to the knowledge of Seller or Stockholders, no other party to any of the
Material Contracts, Material Leases, Guarantees or Related Party Agreements
(with or without the lapse of time or the giving of notice, or both) is in
breach or default in any material respect thereunder.
3.8 Absence of Changes. Except as disclosed in Schedule 3.8,
there has not been, since December 31, 1997, any material adverse change with
respect to the business, assets, results of operations, prospects or condition
(financial or otherwise) of Seller. Except as disclosed in Schedule 3.8, since
December 31, 1997, Seller 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, Seller
makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since December 31,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
3.9 Tax Matters.
(a) Except for filings and payments of assessments the
failure of which to file or pay will not materially adversely affect
the Assets, (i) all Tax Returns which are required to be filed on or
before the Closing Date by or with respect to Seller 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 Seller 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) No Tax Returns of or with respect to Seller for tax
years subsequent to 1992 (other than a luxury tax audit) have been
audited by the applicable Governmental Authority. The applicable
statute of limitations has expired for all periods up to and including
the periods set forth in Schedule 3.9(b).
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(c) There is no claim against Seller 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 Seller other than
those disclosed (and to which are attached true and complete copies of
all audit or similar reports) in Schedule 3.9(c).
(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 Seller or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of or with respect to Seller.
(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, whether or not assessed or disputed,
which are, or are hereafter found to be, or to have been, due by or
with respect to Seller up to and through the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
Seller shall be terminated prior to the Closing Date and no payments
shall be due or will become due by Seller on or after the Closing Date
pursuant to any such agreement or arrangement.
(g) Seller 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.
(h) Seller 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) From the end of its most recent tax year through the
Closing Date, (a) Seller continuously has been and will be an S
Corporation within the meaning of section 1361 of the Code, and (b)
each holder of Seller common stock 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.
3.10 Litigation.
(a) Except as disclosed in Schedule 3.10(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of Seller or Stockholders, threatened
against or specifically affecting the Assets, Seller before or by any
Court or Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent disclosed in Schedule 3.10(b), Seller has performed all
obligations required to be performed by it to date and is not in
default under, and, to the knowledge of Seller and the Stockholders,
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 Seller is a party or by which it or any of the
Assets are bound or under any applicable Order of any Court or
Governmental Authority.
3.11 Compliance with Law. Except as disclosed in Schedule 3.11,
Seller 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.
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3.12 Permits. Except as disclosed in Schedule 3.12, Seller owns or
holds all franchises, licenses, permits, consents, approvals and authorizations
of all Governmental Authorities necessary for the operation of the Acquired
Dealership. A listing of all such items owned or held by Seller, with their
expiration dates, is included in Schedule 3.12. Each franchise, license,
permit, consent, approval and authorization so owned or held is in full force
and effect, and Seller 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.
3.13 Employee Benefit Plans and Policies.
(a) Schedule 3.13(a) provides a description of each of
the following which is sponsored, maintained or contributed to by
Seller for the benefit of its employees, or has been so sponsored,
maintained or contributed to within six years prior to the Closing
Date:
(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 disclosed in Section 3.13(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) Seller's 401(k) Plan satisfies in form the
requirements of Section 401 of the Code, except to the extent
amendments are not required by law to be made until a date after the
Closing Date, and has not been operated in a way that would adversely
affect its qualified status.
(c) There has been no termination or partial termination
of Seller's 401(k) Plan within the meaning of Section 411(d)(3) of the
Code.
(d) There are no actions, suits or claims pending (other
than routine claims for benefits) or threatened against, or with
respect to, Seller's 401(k) Plan or its assets.
(e) There is no matter pending with respect to Seller's
401(k) Plan before the IRS, the Department of Labor or other
Governmental Authority.
(f) All contributions required to be made to Seller's
401(k) Plan pursuant to its terms and the provisions of ERISA, the
Code, or any other applicable Law have been timely made."
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(g) Schedule 3.13(g) sets forth by name and job
description of the employees of Seller with respect to the Acquired
Dealership as of the date of this Agreement. None of said employees
are subject to union or collective bargaining agreements. Seller has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.14 Properties.
(a) Seller owns, and will retain as Excluded Assets, the
real properties described in Schedule 3.14(a)(1) (the "Owned
Properties"). Seller does not lease any real property or any interest
therein except as disclosed in Schedule 3.14(a)(2) (the "Leased
Properties"), which sets forth the location and size of, principal
improvements and buildings on, and Liens on the Leased Properties.
True and correct copies of all Liens are attached to Schedule
3.14(a)(2) or have been delivered to Purchaser. Except as disclosed
in Schedule 3.14(a)(2), with respect to each such parcel of Leased
Property:
(i) Seller has a good, valid and enforceable
leasehold interest 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
Seller or 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 disclosed in Schedule 3.14(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 ownership 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 disclosed in Schedule
3.14(a)(v);
(vi) there are no outstanding options or rights of
first refusal to purchase the Owned Properties or any
leasehold interest in the Leased Properties, or any portion
thereof or interest therein;
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(vii) there are no parties (other than Seller) in
possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.14(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;
(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
3.14(a)(xi);
(xii) the affiliates of Seller or any Stockholder
which have leased real property to Seller as part of the
Leased Properties have good and valid title to such
properties, free and clear of any Lien other than Permitted
Encumbrances; and
(xiii) Seller has good and valid title to the Owned
Properties, free and clear of any Lien other than Permitted
Encumbrances.
(b) Except as disclosed in Schedule 3.14(b), Seller has
good and marketable title to all of the Assets, free and clear of any
Liens or restrictions on use. The Fixed Assets currently in use for
the business and operations of Seller are in good operating condition,
normal wear and tear excepted and have been maintained in accordance
with sound industry practices.
3.15 Insurance. Schedule 3.15 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Acquired Dealership (true and complete copies of which have been furnished to
Group 1). Such insurance policies are in full force and effect. Seller is
presently insured, and since the inception of operations by Seller 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. Seller 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 disclosed in Schedule 3.15, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. Seller 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.
3.16 Affiliate Interests. Except as disclosed in Schedule 3.16, no
employee, officer or director, or former employee, officer or director, of
Seller 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 Seller, except for the normal rights of employees and
stockholders.
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3.17 Environmental Matters. Except as disclosed in Schedule 3.17,
to the best knowledge of Seller and the Stockholders:
(a) Seller 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. Seller is not
currently liable for any penalties, fines or forfeitures for failure
to comply with any Environmental Laws. Seller 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.
(b) Seller 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
its 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 3.17(b)), and Seller 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, to the knowledge of Seller or Stockholders,
threatened by any Governmental Authority or third parties against
Seller or its business, operations, properties, or assets, which
question the validity or entitlement of Seller to any License required
by the Environmental Laws for the ownership of each of the respective
properties and assets of Seller and the operation of its business.
(c) Seller has not received nor is 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 Seller
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 their business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) Seller 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) Seller 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,
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treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. Seller 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.
(f) Seller 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) Seller has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor has it 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 Seller that it has proposed or is proposing to place on
the National Priorities List or its state equivalent. Seller has not
received notice or have knowledge of any facts which could give rise
to any notice, that Seller 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. Seller
has not submitted nor was 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, Seller. Seller has not received any written
nor, to the knowledge of Seller or 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 Seller has transported, transferred or disposed of
other Wastes. Seller has no been required to nor has 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.
Seller has no liability under any Environmental Laws for personal
injury, property damage, natural resource damage, or clean up
obligations.
(h) Seller has no Aboveground Storage Tanks or
Underground Storage Tanks, except as disclosed in Schedule 3.17(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 Seller or
Stockholders are aware undertaken by Seller or Stockholders, or by any
Governmental Authority, or by any third party, relating to Seller or
any of the Owned Properties or the Leased Properties; (ii) the results
of which Seller or Stockholders are aware of any ground, water, soil,
air or asbestos monitoring undertaken by Seller, or by any
Governmental Authority, or by any third party, relating to Seller, or
any of the Owned Properties or the Leased Properties; (iii) all
written communications between Seller and any Governmental Authority
arising under or related to Environmental, Laws; and (iv) all
citations issued under OSHA, or similar state or
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local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings, or decrees, relating to or affecting Seller or any of the
Owned Properties or the Leased Properties.
(j) Schedule 3.17(j) contains a list of the assets of
Seller which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
disclosed in Schedule 3.17(j), Seller has operated and continues 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 disclosed in Schedule
3.17(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, directly affecting or, to the knowledge of Seller
or Stockholders, threatened against Seller 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 its
assets and operations.
(k) Any references in this Section 3.17 to the "Owned
Properties" or the "Leased Properties" are deemed to also refer to any
properties previously owned or leased by Seller.
3.18 Intellectual Property. Except with respect to the Excluded
Assets and as set forth in Schedule 3.18, Seller 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 Seller as currently conducted.
To the knowledge of Seller or Stockholders, (a) the use of the Intellectual
Property by Seller does not infringe on the rights of any Person, and (b) no
Person is infringing on any right of Seller with respect to any Intellectual
Property. No claims are pending or, to the knowledge of Seller or
Stockholders, threatened that Seller is infringing or otherwise adversely
affecting the rights of any Person with regard to any Intellectual Property.
To the knowledge of the Seller, no Person is infringing the rights of Seller
with respect to any Intellectual Property. All of the Intellectual Property
that is owned by Seller is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by Seller 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.
3.19 Bank Accounts. Schedule 3.19 includes the names and locations
of all banks in which Seller has an account or safe deposit box and the names
of all Persons authorized to draw thereon or to have access thereto.
3.20 Brokers. Except as disclosed in Schedule 3.20, 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 Seller.
3.21 Disclosure. Seller has 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 Seller.
No representation or warranty to Group 1 by Seller or Stockholders contained in
this Agreement, and no statement contained in the Schedules attached hereto,
any certificate, list or other writing furnished to Group 1 by Seller or
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
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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 Seller for all purposes of this Agreement.
3.22 Assumed Liabilities. There are no Assumed Liabilities except
as described in Annex IV. Except as disclosed on Schedule 3.22, Seller is not,
and but for a requirement that notice be given or a period of time elapse or
both would not be, in default under any agreements, or documents delivered in
connection therewith, relating to the Assumed Liabilities, including any
mortgages or security interests securing the debt created thereunder. Except
as disclosed on Schedule 3.22, since December 31, 1997, neither Seller's funds
nor any Assumed Liability has been directly or indirectly used or incurred, as
the case may be, in connection with any Excluded Asset or to reduce any
liability that is not an Assumed Liability. Without limiting the generality of
the foregoing, except as disclosed on Schedule 3.22, since December 31, 1997,
Seller's funds and Assumed Liabilities have been used or incurred, as the case
may be, solely in the conduct, and for the benefit, of the Acquired Dealership.
3.23 Accounts Receivable. All accounts and notes receivable of
Seller in excess of $5,000 arose in the ordinary and usual course of its
business, represent valid obligations due, and either have been collected or
there is no legal impediment to their collection (subject only to bankruptcy
stays sought by account debtors) in the ordinary and usual course of business
in the net aggregate recorded amounts as reflected in the books of account of
Seller in accordance with their terms.
3.24 Inventory. The inventories of Seller included in the Assets
consist in all respects of items of a quality, condition and a quantity usable
or saleable in the normal course of the business of Seller, other than for
normal obsolescence; and the amount at which all such items are carried or
reflected in the Interim Financial Statements does not exceed the market or
realizable value thereof.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE STOCKHOLDERS
The Seller and each Stockholder hereby, severally and not jointly,
represent and warrant to Group 1 that:
4.1 Investment Intent. The Seller intends to distribute some or
all of the Closing Payment to its stockholders on or shortly after the Closing
Date. The Seller and each Stockholder makes the following representations
relating to his, her or 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 Acquisition 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 (except by way of gift to a
charitable foundation, provided that such foundation executes a customary
investor representation letter with respect to exemptions from the Securities
Act and any applicable state blue sky laws); (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,
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(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 acquisitions, 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 Acquisition 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 Acquisition for a period of one
year from the Closing Date; (vii) such Stockholder, if a corporation,
partnership, trust or other entity, acknowledges that it was not formed for the
specific 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 (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, (2) the Stockholder has
notified Group 1 of the proposed disposition, disposition is made through
Merrill, Lynch, Pierce, Fenner & Smith Incorporated or Goldman, Sachs & Co.,
Inc., or any of their successors or affiliates, subject to SEC Rule 144 and
such disposition is made in compliance with any other requirements of the
Securities Act, or (3) such disposition is made by gift to a charitable
foundation in compliance with any applicable requirements of the Securities Act
and any applicable state blue sky laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Each of Group 1 and Newco hereby represent and warrant, severally and
not jointly, to Seller that:
5.1 Corporate Organization. Each of Group 1 and Newco is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation 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
Newco of this Agreement, the performance by Purchaser of its obligations
pursuant to this Agreement, and the execution, delivery and performance of each
instrument required hereby to be executed and delivered by Purchaser at the
Closing have been duly and validly authorized by all requisite corporate action
on the part of Purchaser. This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by Purchaser
at, or prior to, the Closing will then be, duly executed and delivered by
Purchaser. This Agreement constitutes, and, to the extent it purports to
obligate Purchaser, 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 Purchaser, enforceable
against it in accordance with its terms.
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5.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or 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
Purchaser, to execute, deliver or consummate the transactions contemplated by
this Agreement or any instrument required hereby to be executed and delivered
by Purchaser at or prior to the Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Purchaser of this Agreement or any instrument required hereby to be executed by
it at or prior to the Closing nor the performance by Purchaser 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 Purchaser or (iv)
any contract or agreement to which Purchaser 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 Purchaser or any of its
subsidiaries (other than any Lien created by Seller or any of its
Subsidiaries), 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 Purchaser 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 Acquisition 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).
ARTICLE VI
COVENANTS OF THE SELLER AND THE STOCKHOLDERS
6.1 Acquisition Proposals. Prior to the Closing Date, neither
Seller, 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
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of the assets of, or a substantial equity interest in, Seller, other than the
transactions with Group 1 contemplated by this Agreement.
6.2 Access. The Seller and the Stockholders 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 their properties, books, contracts,
commitments and records related to the Dealerships and, during such period,
Seller and the Stockholders shall furnish promptly to Group 1 any information
concerning their business, properties and personnel related to the Acquired
Dealership 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 Seller or the Stockholders
pursuant to this Agreement.
6.3 Conduct of Business by Seller Pending the Acquisition. Seller
and 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 Seller shall be conducted only in,
and Seller shall not take any action except in, the ordinary course of
business and consistent with past practice. In connection therewith,
the parties agree that Seller may dealer trade vehicles for similar
models, but Seller shall not liquidate or otherwise dispose of any of
its new vehicles other than in the ordinary course of business to
retail buyers. Seller agrees to maintain its advertising expenditures
and activities commensurate with prior business practices. Seller
shall not advertise a "Going Out of Business" sale;
(b) Seller 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 Seller
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, (ii) amend or propose to amend the articles of incorporation
or bylaws (or other organizational documents) of Seller, (iii) split,
combine or reclassify any outstanding capital stock of Seller, or
declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to the capital stock of Seller
whether now or hereafter outstanding, (iv) redeem, purchase or acquire
or offer to acquire any of the capital stock of Seller, (v) create,
incur, assume, guarantee or otherwise 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) Seller shall use its best efforts (i) to preserve
intact the business organization of Seller, (ii) to maintain in effect
any franchises, authorizations or similar rights of Seller, (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
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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) Seller shall not make or agree to make any single
capital expenditure or enter into any purchase commitments in excess
of $150,000, provided, however, that expenditures related to new and
used vehicle inventory made consistent with past practice and in the
ordinary course of business shall not be deemed a violation of this
Section 6.3(d);
(e) Seller 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 Seller in good faith may
dispute;
(f) Seller shall not increase the salary, benefits, stock
options, bonus or other compensation of any officer, director or
employee of Seller or its Subsidiaries, except in the ordinary course
of business consistent with past practice; 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) Seller 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 Acquisition set forth in Article VIII not being
satisfied;
(h) Seller 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, 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) Seller 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;
(j) Seller shall not directly or indirectly use Seller's
funds or incur any Assumed Liability in connection with any Excluded
Asset or to reduce any liability that is not an Assumed Liability.
Without limiting the generality of the foregoing, Seller's funds and
Assumed Liabilities will be used or incurred, as the case may be,
solely for the benefit of the Acquired Dealership; and
(k) Notwithstanding anything to the contrary, no
dividends or other form of distribution to the Stockholders shall be
made after the date of the Interim Balance Sheet which will cause
Seller to be in violation of manufacturer working capital or equity
guidelines or requirements.
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6.4 Confidentiality. Seller agrees to cause its officers,
directors, employees, representatives and consultants, to hold in confidence,
and not to disclose, and the Stockholders shall hold 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 Seller as necessary in
connection with the transactions contemplated hereby; and (iii) for information
which becomes publicly available other than through the actions of Seller or
the Stockholders. In the event the Acquisition is not consummated, Seller 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 Supplemental Disclosure. Seller shall have the continuing
obligation until the Closing promptly to supplement or amend the Schedules
hereto with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in such Schedules; provided, however, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended Schedule shall not be deemed to have been disclosed as
of the date of this Agreement for purposes of determining whether any Closing
conditions have been satisfied, unless so agreed in writing by Purchaser.
6.6 Consents. Subject to the terms and conditions of this
Agreement, Seller shall (i) cooperate with Purchaser in obtaining all consents,
waivers, approvals (including all applicable automobile manufacturers
approvals, and such approvals shall not contain any unreasonably burdensome
restrictions on Purchaser), authorizations and orders required in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Acquisition; 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 Closing, Seller and the
Stockholders agree to cooperate and use reasonable efforts to defend against
and respond thereto.
6.8 Stockholders' Agreements Not to Sell. Except as otherwise
contemplated by this Agreement, each of the Stockholders hereby covenants and
agrees not to sell, pledge, transfer or dispose of or encumber any shares of
Seller common stock currently owned, either beneficially or of record, by such
Stockholder.
6.9 Intellectual Property Matters. Seller 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.
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6.10 Removal of Related Party Guarantees. Seller 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 Seller ("Related Guarantees") of
indebtedness or other obligations of any of Seller's officers, directors,
shareholders or employees or their affiliates; except for those Related
Guarantees that are disclosed in Schedule 6.10 as guarantees that shall not be
subject to this Section 6.10. All Related Guarantees are disclosed in Schedule
6.10.
6.11 Termination of Related Party Agreements. Seller 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. Seller and the Stockholders agree
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.
6.13 Release.
(a) AS OF THE CLOSING, SELLER AND EACH OF THE STOCKHOLDERS DOES
HEREBY FOR HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL
REPRESENTATIVES REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE PURCHASER AND THE
ACQUIRED DEALERSHIP 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 INDIVIDUALS NOW HAS, OWNS OR HOLDS OR
HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST PURCHASER OR THE ACQUIRED
DEALERSHIP INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF
THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF SELLER OR THE ACQUIRED
DEALERSHIP OR THEIR AFFILIATES, 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) SELLER AND 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. SELLER AND 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. SELLER AND
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. Seller and the Stockholders agree to cause Seller,
United Constructors Limited Company and United Properties Limited Company to
enter into lease agreements with Newco on the
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basic terms, and covering the real properties and improvements, described on
Exhibit C and to enter into subleases with Newco with respect to leases from
other parties on the same terms as the leases entered into by Seller.
Furthermore, Group 1 will use commercially reasonable efforts within the
parameters of such lease agreements to structure a lease with Seller, United
Constructors Limited Company and United Properties Limited Company that will
not prevent the transfer of the related real estate to a real estate investment
trust should the applicable landlord so request.
6.15 Employment Agreements. Mr. Kenneth E. Johns and Mrs. Cynthia
C. Johns agree to enter into employment agreements (the "Employment
Agreements") with Group 1 and Newco in form and substance substantially similar
to Exhibit D attached hereto.
6.16 Audit of Seller Operations. Seller agrees to cause Peltier,
Gustafson & Miller, P.A. to conduct an audit of the operations of Seller for
its year ended December 31, 1997, and to cooperate with Arthur Andersen &
Company to produce an audited balance sheet of Seller as of December 31, 1997
(the "Seller 1997 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) prepared in accordance with GAAP (collectively,
the "Seller 1997 Financial Statements," and together with the Seller Interim
Financial Statements, the "Seller Financial Statements"). Seller further
agrees to complete and provide to Group 1 the Seller 1997 Financial Statements
as soon as reasonably practicable. Seller covenants that the financial
position and results of operations of Seller set forth in the Seller 1997
Financial Statements will not be materially different from the financial
position and results of operations of Seller set forth in the Interim Financial
Statements, except for the amount required to record the charge back reserve
liability. Fees incurred by Peltier, Gustafson & Miller, P.A. will be paid by
Seller, and fees incurred by Arthur Andersen & Company will be paid by Group 1.
6.17 Allocation of Purchase Price. The parties hereto agree that
the Purchase Price is allocated for the purposes of Section 1060 of the Code,
in accordance with the value set forth for each class of Asset, listed on the
attached Annex V ("Allocation of Purchase Price"). Prior to Closing the
parties will agree on the value of the Group 1 Common Stock as part of the
Closing Payment for purposes of determining the purchase price of the Assets.
The parties hereto agree that each of them will timely file with the Internal
Revenue Service Form 8594 and that all tax returns or other tax information any
party hereto files or cause to be filed with any governmental agency including
the Internal Revenue Service, will be prepared in a manner that is consistent
with this Section 6.17.
6.18 Record Retention. For a period of six years after the
Closing, Seller and the Stockholders agree that prior to the destruction or
disposition of any such books or records pertaining to Seller's business which
relate to the Assets, Seller and the Stockholders shall provide not less than
60 days prior written notice to Purchaser of any such proposed destruction or
disposal. If Purchaser desires to obtain any of such documents, it may do so
by notifying Seller in writing at any time prior to the scheduled date for such
destruction or disposal. Such notice must specify the documents which the
Purchaser wishes to obtain. The parties shall then promptly arrange for the
delivery of such documents. All out-of-pocket costs associated with the
delivery of the requested documents shall be paid by Purchaser.
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ARTICLE VII
COVENANTS OF PURCHASER
7.1 Confidentiality. Purchaser agrees, and Purchaser 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 Purchaser as necessary in connection with the transactions contemplated
hereby or as necessary to the operation of Purchaser's business; and (iii) for
information which becomes publicly available other than through the actions of
Purchaser. In the event the Acquisition is not consummated, Purchaser will
return all non-public documents and other material obtained from Seller or its
representatives in connection with the transactions contemplated hereby or
certify to Seller 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 Acquisition.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Purchaser 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
Acquisition; 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 Closing, Purchaser agrees
to cooperate and use reasonable efforts to defend against and respond thereto.
7.5 New Limited Partnership Relationship.
(a) Newco shall form a limited partnership relationship
with Premier Auto Finance L.P. ("Premier") similar to the current
relationship among Seller, Premier and Fiesta Family Partners, Ltd.
("Fiesta"). Benefits flowing from business written with Premier
through Fiesta prior to the formation of the new partnership will
constitute Excluded Assets. Benefits from the new partnership will
accrue to the benefit of Newco.
(b) All benefits from sales of credit life, accident,
health and service contract products consummated by the Acquired
Dealership will accrue to the benefit of Newco. Until December 31,
1998, Newco will conduct business with parties mutually acceptable to
Seller and Newco.
7.6 Leases. Newco agrees, and Group 1 agrees to cause Newco, to
enter into lease agreements with United Constructors Limited Company, United
Properties Limited Company and Holiday Bowl, Inc. on the basic terms, and
covering the real properties and improvements, described on Exhibit C.
Furthermore, Group 1 and Newco will use commercially reasonable efforts within
the
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parameters of such lease agreements to structure a lease that will not prevent
the transfer of the related real estate to a real estate investment trust
should the applicable landlord so request.
7.7 Employment Agreements. Group 1 and Newco agree to enter into
Employment Agreements with Mr. Kenneth E. Johns and Mrs. Cynthia C. Johns in
form and substance substantially similar to Exhibit D attached hereto.
7.8 Allocation of Purchase Price. Purchaser and Seller agree that
the Purchase Price is allocated for the purposes of Section 1060 of the Code,
in accordance with the value set forth for each class of Asset, as listed on
the attached Annex V ("Allocation of Purchase Price"). Prior to Closing the
parties will agree on the value of the Group 1 Common Stock as part of the
Closing Payment for purposes of determining the purchase price of the Assets.
The parties hereto agree that each of them will timely file with the Internal
Revenue Service Form 8594 and that all tax returns or other tax information any
party hereto files or cause to be filed with any governmental agency including
the Internal Revenue Service, will be prepared in a manner that is consistent
with this Section 7.8.
7.9 Security for Newco Loans. Purchaser shall not require Seller
or any Stockholder to serve as obligors under any floor plan or credit
facilities to which Newco is a party.
7.10 Guaranteed Price. If Seller or a Stockholder, or any family
foundation to which a Stockholder or Seller has transferred shares of Group 1
Common Stock, sells any of the Group 1 Common Stock received by such Stockholder
or Seller pursuant to this Agreement at the Closing as part of the Closing
Payment for a per share price of less than twelve dollars ($12.00), subject to
adjustment for stock splits and stock dividends, Group 1 shall pay, within 30
days after such sale, in cash the difference between the purchase price for
shares sold and the price such Stockholder, Seller or family foundation, as the
case may be, would have received if the shares were sold at $12.00 per share,
subject to adjustment for stock splits and stock dividends; provided, that this
Section 7.10 shall only apply to sales (i) occurring after the expiration of the
Restricted Period and (ii) made in the public market; and provided, further that
this Section 7.10 shall terminate on the date 10 years after the Closing Date.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition 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
Acquisition;
(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 Acquisition; and
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(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
8.2 Additional Conditions Precedent to Obligations of Purchaser.
The obligation of Purchaser to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Seller
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, and all of the terms, covenants
and conditions of this Agreement to be complied with and performed by
Seller and Stockholders on or before the Closing Date shall have been
duly complied with and performed in all respects, in each case except
for breaches as to matters that, in the aggregate, are not reasonably
likely to result in Indemnifiable Damages (as defined in Section
9.1(a) below) in excess of $100,000. A certificate to the foregoing
effect dated the Closing Date and signed by the chief executive
officer of Seller and each of the Stockholders 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 Acquisition and the transactions
contemplated thereby will be in compliance with applicable laws;
(c) Purchaser shall have received all requisite
manufacturer's approvals of the Acquisition and the transactions
contemplated thereby;
(d) Purchaser shall have received evidence, satisfactory
to Purchaser, 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) Purchaser shall have received executed
representations from Seller and each Stockholder stating that such
Seller or Stockholder (with respect to shares owned beneficially or of
record by him, her or it) has no current plan or intention to sell or
otherwise dispose of the Group 1 Common Stock to be received by him,
her or it in the Acquisition, except as provided in Section 4.1
herein;
(f) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of Seller shall have occurred, and Seller
shall not have suffered any damage, destruction or loss (whether or
not covered by insurance) materially adversely affecting the
properties or business of Seller, and Group 1 shall have received a
certificate signed by the chief executive officer of Seller dated the
Closing Date to such effect;
(g) Receipt by Group 1 of current or updated Phase I
Environmental Surveys, at Seller's expense, prepared by a firm
approved in writing by Group 1, showing no environmental problems or
recommended actions, which will be performed at the discretion of
Group 1;
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(h) Receipt by Group 1, at Sellers's expense, of a title
commitment, issued by a title company, approved by Group 1, subject
only to the exceptions described in Schedule 8.2(h) ("Permitted Title
Exceptions");
(i) Receipt by Group 1, at Seller's expense, of a current
ALTA survey of the Leased Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1;
(j) Receipt by Group 1 of the Lease Agreements executed
by United Constructors Limited Company, United Properties Limited
Company and Holiday Bowl, Inc. in accordance with Section 6.14 herein;
(k) Receipt by Group 1 of Employment Agreements executed
by the Stockholders in accordance with Section 6.15 herein;
(l) Group 1 and Newco shall have received a favorable
opinion of Sutin Thayer & Browne A Professional Corporation, counsel
to Seller, dated the Closing Date, with respect to the matters set
forth in Exhibit E hereto;
(m) Receipt by Group 1 of the Seller 1997 Financial
Statements, provided further, that the Seller 1997 Financial
Statements shall not reflect any material adverse change from the
Seller Interim Financial Statements;
(n) Satisfaction or waiver of the conditions set forth in
Article VIII of the Other Agreement and the simultaneous closing of
the Other Acquisition; and
(o) The Board of Directors of Group 1 shall have approved
the Acquisition.
8.3 Additional Conditions Precedent to Obligations of Seller and
the Stockholders. The obligation of the Stockholders to effect the Acquisition
is also subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(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; and 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 Seller.
(b) Seller shall have received a favorable opinion of
Vinson & Elkins L.L.P., Counsel to Purchaser, dated the Closing Date,
with respect to the matters set forth in Exhibit F hereto.
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(c) Seller shall have received from Purchaser a
Non-Taxable Transaction Certificate relating to Newco's acquisition of
Seller's parts inventory for resale.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by Seller and the Stockholders to Indemnify. Seller
and each Stockholder agree jointly and severally to indemnify, defend and hold
Purchaser 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 losses
incurred or suffered by Purchaser, on a pre-tax consolidated basis to
the extent (i) resulting from any breach of a representation or
warranty made by Seller or the Stockholders in or pursuant to this
Agreement (provided, however, that for purposes of this
indemnification, the representation and warranty contained in Section
3.17 of this Agreement shall be deemed to have been made without the
qualification of knowledge), (ii) resulting from any breach of the
covenants or agreements made by Seller or the Stockholders pursuant to
this Agreement, or (iii) resulting from any inaccuracy in any
certificate or environmental report delivered by Seller or the
Stockholders pursuant to this Agreement. For purposes of this
Agreement, the term "loss" shall mean any and all direct or indirect
payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred, or
diminutions in value of any kind or character (whether known or
unknown, conditional or unconditional, choate or inchoate, liquidated
or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise) that have occurred, including without limitation
penalties, interest on any amount payable to a third party as a result
of the foregoing and any legal or other expenses reasonably incurred
in connection with investigating or defending any demands, claims,
actions or causes of action that, if adversely determined, would
likely result in losses, and all amounts paid in settlement of claims
or actions.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Purchaser
shall have the right to be put in the same pre-tax consolidated
financial position as Purchaser would have been in had each of the
representations and warranties of Seller and the Stockholders
hereunder been true and correct and had the covenants and agreements
of Seller and the Stockholders hereunder been performed in full.
(c) Each of the representations and warranties made by
Seller and the Stockholders in this Agreement or pursuant hereto shall
survive for a period of three years after the Closing Date except (i)
the representations and warranties of Seller and the Stockholders
contained in Section 2.4(c)(i), Section 3.13 and Section 3.17 shall
survive for five years, (ii) the representations and warranties of
Seller and the Stockholders contained in Section 3.9 shall survive
until all applicable limitations periods have expired and (iii) the
representations and warranties of Seller and the Stockholders
contained in Sections 3.1, 3.2, 3.3, 3.14(a)(i), 3.14(a)(xii) and 4.1
shall not expire, but shall continue indefinitely. No claim for the
recovery of Indemnifiable Damages may be asserted by Purchaser against
Seller or 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
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investigation (and whether or not such party was negligent in
connection with any such 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 Purchaser believes it is entitled to a claim for
any Indemnifiable Damages hereunder, Purchaser shall promptly give
written notice to Seller and to the Stockholders of such claim and do
the amount or the estimated amount of such claim, and the basis for
such claim. If Seller or the Stockholders do not pay the amount of
the claim for Indemnifiable Damages to Purchaser within 10 days, then
Purchaser 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, Seller's and the Stockholders' liability for
Indemnifiable Damages shall be limited as follows:
(1) Purchaser shall have no claim for
Indemnifiable Damages unless and until all
Indemnifiable Damages incurred by Purchaser
exceed an aggregate of $55,000 (the "Basket
Amount"), in which event Seller and the
Stockholders shall be liable for only such
Indemnifiable Damages in excess of the Basket
Amount; provided, however, that (A) the
Basket Amount shall be reduced by the amount
of any Indemnifiable Damages attributable to
any matter set forth in any supplement or
amendment to any Schedule, any breach of
representation or warranty or any failure to
comply with or perform any covenant, and (B)
Purchaser shall have no obligation to close
the transaction if such Indemnifiable Damages
exceed $55,000. For example, (x) if the
aggregate amount of such Indemnifiable
Damages set forth in any supplement or
amendment, or attributable to any breach of
representation or warranty or failure to
comply with or perform any covenant were
$50,000, Purchaser would be obligated to
close the transaction (assuming all closing
conditions of Purchaser (other than Section
8.2(a) relating to representations and
warranties) have been satisfied or waived)
and the Basket Amount after the Closing would
be $5,000; and (y) if such Indemnifiable
Damages amounted to $200,000, Purchaser would
not be obligated to close the transaction;
but if it chooses to close the transaction,
the Basket Amount after the closing would be
$0, and Seller and the Stockholders would
have an indemnification obligation to
Purchaser of $145,000.
(2) The total amount of Indemnifiable Damages for
which Seller and the Stockholders shall be
liable to Group 1 shall not exceed the value
of the consideration received in the
Acquisition, of which the stock portion shall
be valued as provided in Section 2.3 herein.
9.2 Agreement by Purchaser to indemnify. Purchaser agrees to
indemnify, defend and hold Seller harmless from and against the aggregate of
all Seller Indemnifiable Damages (as defined below).
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(a) For purposes of this Agreement, "Seller Indemnifiable
Damages" means, without duplication, the aggregate of all losses
incurred or suffered by Seller, on a pre-tax consolidated basis, to
the extent (i) resulting from any breach of a representation or
warranty made by Purchaser in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by
Purchaser in or pursuant to this Agreement, or (iii) resulting from
any inaccuracy in any certificate delivered by Purchaser pursuant to
this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Seller Indemnifiable Damages,
Seller has the right to be put in the same pre-tax consolidated
financial position as it would have been in had each of the
representations and warranties of Purchaser hereunder been true and
correct and had the covenants and agreements of Purchaser hereunder
been performed in full.
(c) Each of the representations and warranties made by
Purchaser in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date. No claim for the
recovery of Seller Indemnifiable Damages may be asserted by Seller
against Purchaser after such representations and warranties shall thus
expire, provided, however, that claims for Seller 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 (and whether
or not such party was negligent in connection with any such
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 Seller believes it is entitled to a
claim for any Seller Indemnifiable Damages hereunder, Seller shall
promptly give written notice to Purchaser of such claim and the amount
or the estimated amount of such claim, and the basis for such claim.
9.3 Conditions of Indemnification. The obligations and
liabilities of Seller, the Stockholders and Purchaser 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 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 Purchaser, then Purchaser shall have the right to control the
defense of the Claim;
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(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.
9.4 Applicability. THE PROVISIONS OF THIS ARTICLE IX SHALL APPLY
NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OF THE INDEMNIFIED PARTY. IF BOTH THE INDEMNIFIED PARTY AND THE
INDEMNIFYING PARTY ARE NEGLIGENT OR OTHERWISE AT FAULT OR STRICTLY LIABLE
WITHOUT FAULT, THE CONTRACTUAL OBLIGATIONS OF INDEMNIFICATION UNDER THIS
ARTICLE IX SHALL CONTINUE, BUT THE INDEMNIFYING PARTY SHALL INDEMNIFY THE
INDEMNIFIED PARTY ONLY FOR THE PERCENTAGE OF RESPONSIBILITY FOR THE DAMAGE OR
INJURIES ATTRIBUTABLE TO THE INDEMNIFYING PARTY.
9.5 Statutory Requirement. If a court of competent jurisdiction
determines that the provisions of Section 56-7-1 NMSA 1978, as amended, are
applicable to this Agreement or any claim arising under this Agreement, then
any agreement to indemnify in connection with this Agreement will not extend to
liability, claims, damages, losses or expenses, including attorney fees,
arising out of (1) the preparation or approval of maps, drawings, opinions,
reports, surveys, change orders, designs or specifications by the indemnitee,
or the agents or employees of the indemnitee, or (2) the giving of or the
failure to give directions or instructions by the indemnitee, or the agents or
employees of the indemnitee, where such giving or failure to give directions or
instructions is the primary cause of bodily injury to persons or damage to
property.
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. The Schedules to this Agreement,
contain all disclosure required to be made by Seller and the Stockholders under
the various terms and provisions of this Agreement.
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10.2 Certain Post-Closing Payments.
(a) As soon as reasonably practicable after completion of
the audited Group 1 consolidated financial statement for the year
ending December 31, 1998, but in no event later than April 30, 1999,
Seller shall receive from Newco a Post-Closing Payment calculated as
follows: (i) the annualized income before income taxes of the
Acquired Dealerships from Closing through December 31, 1998 will be
determined based on the statements of operations of Newco and Other
Newco included in the 1998 audited Group 1 consolidated financial
statements (such statement of operations to be based upon the books
and records of Newco and Other Newco); (ii) from this amount
$4,425,000 will be deducted; and (iii) the result will be multiplied
by 3.3. For purposes of this calculation, finance earnings will
include earnings as reported in the December 31, 1998, Premier Auto
Finance L.P. report of Newco's participation in the limited
partnership (before the deferral relating to FASB #125) and will
include income earned from Resource Group (or similar providing entity
mutually agreeable to the parties) with respect to 1998 credit life,
accident and health insurance and extended service contract operations
of Newco and Other Newco. Prior to December 31, 1998, (i) the
programs for finance, service and insurance income will not be changed
without Seller's consent, (ii) Group 1 will not require Newco to
change to more costly or less efficient providers than those used
prior to Closing without Seller's consent, and (iii) any Group 1
allocations of indirect costs, indirect overhead or goodwill
amortization will not be included in income before income taxes for
purposes of the computation. The amount of this Post-Closing Payment
will be paid in cash up to an amount of $3,445,000. Any amount
payable up to and including this initial cash amount of $3,445,000
will be escalated at 8% per annum from the Closing Date. Any amounts
due over $3,445,000 (as escalated) will be paid 50% in cash and 50% in
Group 1 Common Stock at the Designated Value of Group 1 Common Stock
as of the date of payment (such date to be fixed at least two weeks in
advance of the payment, i.e. no later than April 16, 1999) and in
accordance with the procedures, including the dispute resolution
procedures, set forth for the payment of the Closing Payment. The
parties hereto acknowledge that this Section 10.2(a) and Section
10.2(a) of the Other Agreement each require only one calculation and
payment. Annualized income before income taxes of each Acquired
Dealership shall equal (i) pre-tax income as previously described and
included in the 1998 operations of Group 1, (ii) divided by the number
of months the Acquired Dealership is included in the 1998 operations
of Group 1, and (iii) which quotient shall be multiplied by 12. This
same method of annualization shall be used with respect to the
Additional Dealerships, if annualization is required by Section
10.2(b)(ii).
(b) As additional consideration for the Assets, Seller
and Stockholders are required to participate in Group 1's acquisition
of Additional Dealerships (as defined below) following the Closing and
to assume, with the mutual consent of Group 1 and Stockholders,
managerial responsibility for such Additional Dealerships. As partial
consideration for such participation, Group 1 will pay Seller as
follows: (i) the income before income taxes of each Additional
Dealership will be determined for the applicable Calculation Year and
multiplied by 5.5, (ii) from this amount the Group 1 investment in the
applicable Additional Dealership will be deducted, and (iii) the
difference will be paid to Seller 50% in Group 1 Common Stock and 50%
in cash.
For purposes of this Section 10.2(b), (i) Additional
Dealerships shall mean any dealerships acquired from the Closing Date
through December 31, 2000, and those acquisitions
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which are in progress at such date and are consummated on or before
June 30, 2001, which become part of the executive management
responsibility of Stockholders and Seller; (ii) Calculation Year shall
mean, with respect to each Additional Dealership, the first full
calendar year following Group 1's completed acquisition of such
Additional Dealership (except that the Calculation Year for any
Additional Dealership acquired by Group 1 in the first quarter of a
calendar year shall be that year, and income before income taxes for
such dealership earned post-acquisition shall be annualized); (iii) in
calculating the stock portion of any payment due to Sellers hereunder,
Designated Value of Group 1 Common Stock will be used; (iv) Group 1
Investment shall be the purchase price paid by Group 1 with respect to
each acquisition, costs of moving franchises to alternate facilities,
costs of modification of facilities to accommodate expanded operations
or any other investment in the operation required by Group 1 with
respect to the Calculation Year; and (v) income before income taxes
will be calculated in accordance with Section 10.2(a) herein. Any
payments due to Seller under this Section 10.2(b) will be paid by
Group 1 no later than April 30 of the calendar year immediately
following the Calculation Year (with two weeks advance notice required
to calculate the Designated Value of the Group 1 Common Stock to be
paid).
(c) The payments due to Seller under paragraphs (a) and
(b) of this Section 10.2 (the "Post-Closing Payments," and together
with the Closing Payment, as adjusted pursuant to Section 2.2, the
"Purchase Price") are additional consideration for the Assets, and the
parties hereto agree to report such amounts on such basis for income
tax purposes.
(d) Any Post-Closing Payments payable to Seller may be
applied by Purchaser to offset any Indemnifiable Damages for which a
Claim has been filed pursuant to Sections 9.1 and 9.3 herein.
10.3 Certain Repurchase Rights. In the event Group 1 elects to
sell one or more of the dealerships under Stockholders' management (in a
transaction not involving the sale of Group 1 or a major portion thereof),
Stockholders shall have a right of first refusal on terms identical to the
third party offer. Stockholders' right hereunder shall expire on the tenth
anniversary of the Closing Date.
10.4 Non-Competition Obligations.
(a) As an additional inducement for Purchaser to enter
into this Agreement, the Stockholders and Purchaser agree to the
non-competition provisions of this Section 10.4. Each Stockholder
agrees that during the period of the Stockholder's non-competition
obligations hereunder, the Stockholder will not, directly or
indirectly for himself or herself or for others, within twelve miles
of or in the county of any operations sold to Purchaser under this
Agreement or operations subsequently under the executive management of
such Stockholder 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;
(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;
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(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 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.
These non-competition obligations shall apply for the period
specified in any employment agreement entered into by such Stockholder
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 (i) to any Stockholder's
operation and management of any dealership purchased in accordance
with Section 10.3 hereof and (ii) with respect to (a) Kenneth E.
Johns, such individual's passive investment in an automobile
dealership owned and managed by members of his immediate family or
affiliates of such individuals or (b) Cynthia C. Johns, such
individual's investment and management participation in an automobile
dealership owned and operated by members of her immediate family or
affiliates of such individuals, provided that Mrs. Johns continues to
devote substantially all of her business time, energy and best efforts
to the business and affairs of Group 1, its subsidiaries and
affiliates so long as she is an employee of Group 1 or any of its
subsidiaries or affiliates.
(b) During this non-competition period the Stockholders
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.
(c) The Stockholders understand that the foregoing
restrictions may limit their ability to engage in certain businesses
during the period provided for above, but acknowledge that the
Stockholders will receive sufficiently high remuneration and other
benefits under this Agreement to justify such restriction. The
Stockholders acknowledge that money damages would not be sufficient
remedy for any breach of this Section 10.4 by the Stockholders, and
Group 1 or any of its subsidiaries or affiliates shall be entitled to
enforce the provisions of this Section 10.4 by terminating any
payments then owing to the Stockholders under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach
or any threatened breach, without any requirement for the securing or
posting of any bond in connection with such remedies. Such remedies
shall not be deemed the exclusive remedies for a breach of this
Section 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, without limitation, the recovery of damages from Group 1
and the Stockholders' agents involved in such breach.
(d) It is expressly understood and agreed that Group 1
and the Stockholders consider the restrictions contained in this
Section 10.4 to be reasonably necessary to protect the legitimate
business interests of Group 1 and its subsidiaries and 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
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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
Purchaser's rights under this Section 10.4 are assignable and that
such rights shall be fully enforceable by any of Purchaser's assignees
or successors in interest.
10.5 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Purchaser and Seller;
(b) by either Purchaser or Seller if the Acquisition has
not been effected on or before March 31, 1998;
(c) by either Purchaser or Seller if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(d) by Purchaser if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of Seller; (ii) there has been a material breach
of any representation, warranty, covenant or other agreement set forth
in this Agreement by Seller or the Stockholders which breach has not
been cured within ten business days following receipt by Seller 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 normalized pre-tax income (after
addbacks) expected for Seller, on which the Purchase Price was based;
(e) by Seller if there has been a material breach of any
representation or warranty set forth in this Agreement by Purchaser
which breach has not been cured within ten business days following
receipt by Purchaser 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);
(f) 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
hereunder shall expire thirty (30) calendar days following the
execution of this Agreement; or
(g) by Purchaser if the Seller 1997 Financial Statements
reflect a material adverse change from the Seller Interim Financial
Statements, except as contemplated by this Agreement.
10.6 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.5, Seller and Purchaser 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.
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10.7 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by Purchaser shall be paid by
Purchaser and all such costs and expenses incurred by Seller and the
Stockholders shall be paid by the Sellers. Seller's expenses shall not be
included in Assumed Liabilities. Seller and Purchaser 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"), neither Seller nor any 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
such Seller or Stockholder in the Acquisition 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 this Agreement
(including, for example, engaging in put, call, short sale, straddle or similar
market transactions). Notwithstanding the foregoing, Seller may distribute
shares of Group 1 Common Stock to the Stockholders, and Seller and each such
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 Seller or 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;
(iii) transfer all of such shares to a charitable foundation, provided that
such foundation (a) agrees not to sell or otherwise dispose of any such shares
for the Restricted Period, and (b) executes a customary investor representation
letter with respect to exemptions from the Securities Act and any applicable
blue sky laws; and (iv) 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 Seller and each
Stockholder pursuant to this Agreement will bear a legend substantially in the
form set forth below and containing such other information as Group 1 may deem
necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE ASSET PURCHASE AGREEMENT 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 PERIOD ENDING ON ______________ [DATE THAT IS THE 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
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LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE.
(b) Seller and each Stockholder, severally and not jointly with
any other Person, (i) acknowledges that the shares of Group 1 Common Stock to
be delivered to Seller and that Stockholder pursuant to this Agreement have
not been and, if applicable, will not be registered under the Securities Act
and therefore may not be resold by Seller or that Stockholder without
compliance with the Securities Act and (ii) covenants that none of the shares
of Group 1 Common Stock issued to Seller or that Stockholder pursuant to this
Agreement 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 this
Agreement 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 Acquisition to Seller and each Stockholder will bear any legend
required by the securities or blue sky laws of the state in which Seller or
that Stockholder resides.
10.9 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. This Agreement may not be amended or supplemented 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 Public Statements. Seller, the Stockholders and Purchaser
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.
10.11 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.
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10.12 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:
if to Seller: United Management, Inc.
7201 Lomas Blvd. NE
Albuquerque, New Mexico 87110
Telecopy: (505) 262-8696
Attention: Kenneth E. Johns
with a copy to: Sutin Thayer & Browne
Two Park Square, Suite 1000
6565 Americas Parkway
Albuquerque, New Mexico 87710
Attention: Graham Browne
if to the Stockholders: Kenneth E. Johns and Cynthia C. Johns
1117 Salamanca St. NW
Albuquerque, New Mexico 87106
Telecopy: (505) 344-0124
James J. Burns, Trustee
4801 Loop, 289 South
Lubbock, Texas 79424
Telecopy: (806) 798-4592
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 10.12. 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
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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 Stockholders and any
notice given by such Stockholders' representative shall be deemed to be notice
given by all Stockholders.
10.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Mexico, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
10.14 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.
10.15 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.
10.16 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
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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
CASA CHEVROLET INC.
By: /s/ JOHN T. TURNER
-------------------------------------
Name: John T. Turner
Title: President
UNITED MANAGEMENT, INC.
By: /s/ KENNETH E. JOHNS
-------------------------------------
Name: Kenneth E. Johns
Title: President
STOCKHOLDERS
/s/ KENNETH E. JOHNS
-----------------------------------------
Kenneth E. Johns
/s/ CYNTHIA C. JOHNS
-----------------------------------------
Cynthia C. Johns
Johns Investment Trust
By: /s/ JAMES J. BURNS
-------------------------------------
James J. Burns, as Trustee for
Jeffrey Johns and Julie Johns
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ANNEX I
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 Asset Purchase Agreement made and entered
into as of February 20, 1998 by and among Group 1, Newco, Seller and the
Stockholders, including any amendments thereto and each Annex (including this
Annex I), Exhibit and schedule thereto (including the Schedules).
"Allocation of Purchase Price" shall have the meaning set forth in
Sections 6.18 and 7.8 herein.
"Assets" shall mean, except for the Excluded Assets set forth on Annex
III, all of the assets, properties, goodwill, and rights (contractual or
otherwise) of every kind, nature and description, real, personal or mixed,
tangible or intangible and wherever situated purportedly owned or used by
Seller relating to the business and operations of the Acquired Dealership,
including, without limitation, the sale and service of new and used
automobiles, trucks and related products, and the provision of financing and
insurance in connection therewith under the names "Casa Chevrolet," and any
derivations thereof. The Assets shall include the Assets listed on Annex II
hereto.
"Assumed Liabilities" shall mean all liabilities of Seller set forth
on Annex IV hereto (which liabilities shall include all accounts payable of
Seller attributable to the Acquired Dealership incurred in the ordinary course
of business on or after December 31, 1997 that would be required to be recorded
on its balance sheets prepared in accordance with generally accepted accounting
principles). Without limiting the generality of the foregoing, the term
"Assumed Liabilities" shall not include (a) any liabilities arising from or
relating to any Excluded Assets, or (b) any transaction expenses or other
amounts expressly provided to be paid by Seller pursuant to the provisions of
this Agreement.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.13.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.5, 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
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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 2.5.
"Closing Payment" shall have the meaning set forth in Section 2.1(b)
herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"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.
"Documents" shall have the meaning set forth in Section 3.2 herein.
"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.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Excluded Assets" shall mean those assets set forth on Annex III
attached hereto.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures included in the
Assets.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person, as defined by the independent public accountants retained by
Group.
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47
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the Seller 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.
"Guarantees" shall have the meaning set forth in Section 3.7 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 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.
"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 Properties" has the meaning set forth in Section 3.14 herein.
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48
"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.
"Material Contract" has the meaning set forth in Section 3.7 herein.
"Material Leases" shall have the meaning set forth in Section 3.7
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Owned Properties" shall have the meaning set forth in Section 3.14
herein.
"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
(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.
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49
"Phase I Environmental Surveys" shall mean the surveys being prepared
by O'Brien & Gere Engineers, Inc.
"Plan" shall have the meaning set forth in Section 3.13.
"Post-Closing Payments" shall have the meaning set forth in Section
10.2(c) herein.
"Purchase Price" shall have the meaning set forth in Section 10.2(c)
herein.
"Related Party Agreements" shall have the meaning set forth in Section
3.7 herein.
"Related Party Guarantees" shall have the meaning set forth in Section
6.10 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 or any of its Subsidiaries with any Governmental
Authority.
"Restricted Period" shall have the meaning set forth in Section 10.8
herein.
"SEC Documents" shall mean the Group 1 Automotive, Inc. Prospectus
dated October 29, 1997, Form 10-Q for the third quarter ended September 30,
1997, and Form 8-K dated December 17, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller" shall mean United Management, Inc., a New Mexico corporation,
all predecessor entities of Seller and its successors from time to time.
"Seller 1997 Balance Sheet" shall have the meaning set forth in
Section 6.16 herein.
"Seller 1997 Financial Statements" shall have the meaning set forth in
Section 6.16 herein.
"Seller Indemnifiable Damages" shall have the meaning set forth in
Section 9.2 herein.
"Seller's 401(k) Plan" shall have the meaning set forth in Section
2.4(c) 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.
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
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"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 or any of its
Subsidiaries 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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ANNEX II
ASSETS
[All to be as included in the Manufacturer Financial Statements (MS)
for Westside and Casa,
prepared as of the Closing Date, unless otherwise indicated below]
Total cash & equivalents MS
Total receivables MS
Total inventories MS
Prepaid expenses MS
Other assets & investments MS
Service equipment; company cars &
service vehicles; furniture, signs &
equipment (except as included in
EXCLUDED ASSETS) MS
Contracts Schedule 3.7
Permits Schedule 3.12
Insurance Schedule 3.15
Bank accounts Schedule 3.19
Names, reputation, intellectual property and goodwill (except as included in
EXCLUDED ASSETS) to include the following:
o Competitor information including notes of meetings, financial
analyses, valuation studies, personal notes, lists of acquisition
candidates, etc.
o Market information, including market studies, market sales
history, personal notes and list of top performing dealership
employees in market for possible future hire, etc.
o Manufacturer information including correspondence to and from
manufacturers, sales and service agreements, financial analyses
prepared by manufacturers, notes of meetings, competitor analyses,
CSI reports/comparisons, manufacturers channeling strategies,
personal notes, etc.
o Market and legal data from local and state automobile dealer
associations
o Reports received from any consultants regarding market or
competitor
o Regional and local market maps and population trends
o Architectural plans for new facilities
o Market demographics studies
o Market research on cost savings or consolidation of the market
o Organization charts for multi-dealer franchise groups
o Regional and local compensation information
o Business Plan
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ANNEX III
EXCLUDED ASSETS
All real estate
"United Management" and all derivations thereof
Personal furniture and office accessories of Kenneth E. Johns and Cynthia C.
Johns
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ANNEX IV
ASSUMED LIABILITIES
Except as indicated below, the Assumed Liabilities shall include all
liabilities of the Acquired Dealership at Closing that would be recorded on the
Seller's Closing Date balance sheet prepared consistently with Seller's past
accounting principles and practices, including accounts and notes payable,
accrued expenses, and other liabilities and obligations. The Assumed
Liabilities shall also include accounts payable, accrued expenses, and other
liabilities and obligations incurred by the Acquired Dealership prior to
Closing in the normal course of its business that may not have been reflected
on the Seller's Closing balance sheet prepared consistently with Seller's past
accounting principles and practices. Without limiting the foregoing, Assumed
Liabilities shall also include future chargebacks of finance, insurance and
service contracts commission income on prematurely terminated contracts sold by
the Acquired Dealership, the obligation to perform on limited guarantees made
to financial institutions by the Acquired Dealership to enable customers to
obtain financing for vehicles purchased from Seller, contractual obligations
referred to in Schedule 3.7(i)(b) and 3.7(ii)(a)(1), to the extent that such
contractual obligations are normal and customary contracts relating to the
normal operation of the Acquired Dealership, with no unusual, material negative
terms, and Seller's benefit plan identified on Section 2.4(c).
In addition, at the Closing Date, Purchaser will obtain substitute floor plan
financing the proceeds of which will be used to pay off any amounts outstanding
on Seller's floor plan financing and will obtain substitute line of credit
financing which will pay off any amounts outstanding on Seller's line of credit
financing, in accordance with Section 7.9.
Purchaser will not assume any obligations or liabilities arising from any of
the contracts, leases, guarantees or Related Party Agreements referred to in
Schedules 6.10, 3.7(i)(a), (ii)(b), (iii)(b), (iii)(c), (iii)(d), (iii)(e),
(iv)(a), and (iv)(c).