STOCK PURCHASE AGREEMENT
DATED JULY 25, 1997
AMONG
UNITED AUTO GROUP, INC.,
UAG WEST TEXAS, INC.,
ALL AMERICAN CHEVROLET, INC.,
LYNN ALEXANDER, INC.,
JO-VENA AUTOMOTIVE, INC.,
LYNN RICH MANAGEMENT COMPANY
AND
R. LYNN ALEXANDER
TABLE OF CONTENTS
Page
----
ARTICLE 1. PURCHASE AND SALE OF SHARES.................................1
1.1. Certain Definitions.........................................1
1.2. Purchase and Sale of the Shares.............................2
1.3. Net Worth Adjustment........................................4
1.4. Post-Closing Adjustment.....................................6
1.5. Additional Purchase Price...................................6
1.6. Effective Date..............................................7
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND
THE STOCKHOLDER ..........................................7
2.1. Organization and Good Standing..............................7
2.2. Subsidiaries................................................7
2.3. Capitalization..............................................8
2.4. Authority; Approvals and Consents...........................8
2.5. Financial Statements........................................9
2.6. Absence of Undisclosed Liabilities..........................10
2.7. Absence of Material Adverse Effect; Conduct of Business.....10
2.8. Taxes.......................................................11
2.9. Legal Matters...............................................12
2.10. Property....................................................13
2.11. Environmental Matters.......................................14
2.12. Inventories.................................................16
2.13. Accounts Receivable.........................................16
2.14. Insurance...................................................17
2.15. Contracts, etc..............................................17
2.16. Labor Relations.............................................18
2.17. Employee Benefit Plans......................................19
2.18. Other Benefit and Compensation Plans or Arrangements........21
2.19. Transactions with Insiders..................................22
2.20. Propriety of Past Payments..................................22
2.21. Interest in Competitors.....................................23
2.22. Brokers.....................................................23
2.23. Accounts....................................................23
2.24. Disclosure..................................................23
2.25. Net Worth...................................................24
2.26. Working Capital.............................................24
2.27. Extended Warranty...........................................24
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ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER...........24
3.1. Ownership of Shares; Title..................................24
3.2. Authority...................................................24
3.3. Real Property and Improvements..............................25
3.4. Qualification of Stockholder................................26
3.5. Fiduciary Duties............................................26
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG.......................26
4.1. Organization and Good Standing..............................26
4.2. Sub.........................................................27
4.3. Authority; Approvals and Consents...........................27
4.4. Disclosure..................................................28
ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS.........................28
5.1. Access; Confidentiality.....................................28
5.2. Furnishing Information; Announcements.......................29
5.3. Antitrust Improvements Act Compliance.......................29
5.4. Certain Changes and Conduct of Business.....................30
5.5. No Intercompany Payables or Receivables.....................33
5.6. Negotiations................................................33
5.7. Consents; Cooperation.......................................33
5.8. Additional Agreements.......................................34
5.9. Interim Financial Statements................................34
5.10. Notification of Certain Matters.............................34
5.11. Assurance by the Stockholder................................35
5.12. Section 338(h)(10) Election.................................35
5.13. Non-Interference............................................35
5.14. Right of First Refusal......................................36
5.15. Working Capital.............................................36
5.16. Fiesta Dodge Chrysler Plymouth Jeep Eagle, Inc..............36
5.17. Loan Payoffs................................................36
5.18. Broker's Fees...............................................37
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO
EFFECT THE CLOSING .......................................37
6.1. Representations and Warranties; Agreements; Covenants.......37
6.2. Authorization; Consents.....................................37
6.3. Opinions of the Companies' and the Stockholder' Counsel.....37
6.4. Absence of Litigation.......................................38
6.5. No Material Adverse Effect..................................38
6.6. Working Capital.............................................38
6.7. Completion of Due Diligence.................................38
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6.8. Board Approval..............................................39
6.9. Certificates................................................39
6.10. Legal Matters...............................................39
6.11. Approval of Manufacturers and Distributors..................39
6.12. Nondisturbance Agreements/Estoppel Certificates.............39
6.13. Title Insurance.............................................39
6.14. Schedules...................................................40
6.15. Memoranda of Lease..........................................40
6.16. Employment Agreement........................................40
6.17. Leases......................................................40
6.18. Resignation of the Companies' Directors.....................40
ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES AND
THE STOCKHOLDER TO EFFECT THE CLOSING ....................40
7.1. Representations and Warranties; Agreements..................40
7.2. Authorization of the Agreement, Consents....................41
7.3. Opinions of UAG's and Sub's Counsel.........................41
7.4. Absence of Litigation.......................................41
7.5. Certificates................................................41
7.6. Legal Matters...............................................42
7.7. Employment Agreement........................................42
7.8. Leases......................................................42
ARTICLE 8. TERMINATION.................................................42
8.1. Termination.................................................42
8.2. Effect of Termination.......................................43
ARTICLE 9. INDEMNIFICATION.............................................43
9.1. Indemnification by the Stockholder..........................43
9.2. Indemnification by UAG......................................44
9.3. Procedures..................................................44
9.4. Offset......................................................45
9.5. Remedies....................................................45
9.6. Definitions.................................................45
ARTICLE 10. MISCELLANEOUS...............................................46
10.1. Survival of Provisions......................................46
10.2. Fees and Expenses...........................................46
10.3. Headings....................................................46
10.4. Notices.....................................................46
10.5. Assignment..................................................48
10.6. Entire Agreement............................................48
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10.7. Waiver and Amendments.......................................48
10.8. Counterparts................................................49
10.9. Accounting Terms............................................49
10.10. Schedules...................................................49
10.11. Severability................................................49
10.12. Remedies....................................................49
10.13. Governing Law...............................................50
10.14. Time is of the Essence......................................50
iv
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated July 25, 1997, is by and among
United Auto Group, Inc., a Delaware corporation ("UAG"), UAG West Texas, Inc.,
a Delaware corporation ("UAG West Texas" or "Sub"), All American Chevrolet,
Inc., a Texas corporation ("AAC"), Lynn Alexander, Inc., a Texas Corporation
("LA"), Lynn Rich Management Company, a Texas corporation ("LRM"), Jo-Vena
Automotive, Inc., a Texas Corporation ("Jo-Vena" and, together with AAC, LA and
LRM, the "Companies") and R. Lynn Alexander, an individual resident of the
state of Texas ("Mr. Alexander" or the "Stockholder").
W I T N E S S E T H:
WHEREAS, UAG West Texas is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate automobile dealerships and related
businesses in San Angelo, Texas;
WHEREAS, Jo-Vena owns 100% of the issued and outstanding stock of LA;
WHEREAS, the Stockholder owns or has the irrevocable right to acquire
all of the issued and outstanding shares of Jo-Vena and AAC (the "Shares");
WHEREAS, Sub desires to purchase all of the Shares from the
Stockholder, and the Stockholder desires to sell the Shares to Sub (in each
case upon the terms and subject to the conditions set forth in this Agreement),
such that immediately after giving effect to such purchase and sale, Sub will
own one hundred percent (100%) of the issued and outstanding shares of the
capital stock of the Companies;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF SHARES
1.1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, Page his or her spouse,
issue, parents, siblings, estate, any Affiliate of such person and any trust
for the benefit of his or her spouse and/or issue.
(b) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(c) "Closing Date" shall have the meaning ascribed to it in Section
1.2(b).
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States from time to time as applied on a consistent
basis.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior assignments, conditional
and installment sale agreements, encumbrances or charges of any kind.
(f) "Material Adverse Effect" shall mean, with respect to the
Companies, any change in, or effect on, any of the Companies (including the
respective businesses thereof) which is, or might be, materially adverse to the
business, operations, assets, condition (financial or otherwise) or prospects
of such Company; and, with respect to UAG, any change in, or effect on, UAG
(including the businesses thereof) which is, or might be, materially adverse to
the business, operations, assets, condition (financial or otherwise) or
prospects of UAG.
(g) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(h) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
1.2. PURCHASE AND SALE OF THE SHARES.
(a) Purchase and Sale. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, the Shares for an aggregate purchase price (the
"Purchase Price") equal to (i) Ten Million Five Hundred Sixty-Two Thousand Five
Hundred Dollars ($10,562,500) in cash (the "Base Price"), which Base Price is
subject to adjustment after the Closing as provided in Section 1.3 below; and
(ii) a promissory note (the "Note") in a form mutually acceptable to the
parties for the principal amount of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000) with interest payable quarterly at 6% per annum and with
the principal maturing on March 31, 2000; provided, however, that the principal
amount of the Note is subject to adjustment after Closing pursuant to the
provisions of Section 1.4 hereof. At the Closing referred to in Section 1.2(b)
hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to
UAG the Shares representing 100% of the issued and outstanding capital
stock of AAC and Jo-Vena and deliver the certificates representing such
Shares accompanied by stock powers duly executed in blank; and
2
(ii) Sub shall accept and purchase the Shares from the
Stockholder and in payment therefor shall (A) deliver to the Stockholder
immediately available funds in an aggregate amount equal to the Base Price
by wire transfer to an account designated in writing by the Stockholder or
by certified funds; and (B) deliver to the Stockholder the Note.
(iii) Mr. Alexander, the Companies and Sub shall enter into an
employment agreement in a form mutually acceptable to Mr. Alexander and Sub
(the "Employment Agreement"). The Employment Agreement shall be for a
five-year term and shall provide that Mr. Alexander shall be employed as
Chief Operating Officer of Sub and the Companies. Mr. Alexander's initial
annual salary shall be Two Hundred Forty Thousand Dollars ($240,000) (the
"Base Salary") and the Base Salary shall be reviewed and adjusted annually
thereafter by the Chief Executive Officer of UAG; provided, however, that
the Base Salary shall not be less than Two Hundred Forty Thousand Dollars
($240,000) for any year of the term.
(iv) Each of the Companies and L&B Land and Cattle Company, Inc.
(the "Landlord") shall enter into a lease for the real property on which
the Companies operate in a form mutually acceptable to the parties (each a
"Lease" and, collectively, the "Leases"), such form to be agreed to by the
parties within twenty (20) Business Days of the date of this Agreement.
Each Lease shall be for a twenty (20) year term commencing on the Closing
Date and the lessee shall have the option to renew the Lease for two
additional five year terms (with the lease rate adjusted to fair market
value at the time each such period commences). Each Lease shall be a triple
net lease. The initial aggregate annual lease rate for the Leases shall be
Five Hundred Seventy Thousand Dollars ($570,000) (the "Initial Lease
Rate"); provided, however, that UAG shall have the option to obtain, at its
expense, an appraisal of the fair market lease rate for such properties
and, if such appraisal determines that the Initial Lease Rate exceeds the
fair market lease rate, then the Landlord may elect to reduce the Initial
Lease Rate with a corresponding adjustment to the purchase price to reflect
the increased earnings the Companies could be expected to achieve as a
result of the lower lease rate. On the second anniversary of the Closing
Date and every two years thereafter, the lease rate for each Lease shall
increase to an amount equal to the lease rate then in effect plus an amount
equal to a percentage of the lease rate then in effect, which percentage
shall be equal to the percentage increase in the Consumer Price Index
published from time to time by the United States Department of Labor
("CPI") for the area in which such Company operates for the calendar year
immediately preceding the adjustment date. UAG shall guarantee the
performance of the obligations of the Companies under the Leases.
(b) Closing. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place as soon as practicable following the date on which all
conditions to the obligations of the parties hereunder (other than those
requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived, but no
3
later than September 30, 1997. The date on which the Closing occurs is herein
referred to as the "Closing Date".
(c) Deliveries at the Closing. Subject to the conditions set forth in
this Agreement, at the Closing:
(i) the Stockholder shall deliver to Sub certificates
representing the Shares bearing the restrictive legend customarily placed
on securities that have not been registered under applicable federal and
state securities laws and accompanied by stock powers as required by
Section 1.2(a)(i) hereof, and any other documents that are necessary to
transfer to Sub good title to all the Shares, and (B) all opinions,
certificates and other instruments and documents required to be delivered
by the Companies and the Stockholder at or prior to the Closing or
otherwise required in connection herewith;
(ii) Sub shall (A) pay to the Stockholder funds as required by
Section 1.2(a)(ii) hereof; (B) deliver to Mr. Alexander the Note; and (C)
deliver to the Stockholder all opinions, certificates and other instruments
and documents required to be delivered by UAG or Sub at or prior to the
Closing or otherwise required in connection herewith.
1.3. NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable thereafter (but no
later than 15 days after the Closing Date), the Stockholder shall deliver to
UAG a consolidated balance sheet of the Companies dated as of the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared in accordance
with GAAP (and shall include adjustments consistent with the adjustments set
forth on the combined balance sheet of the Companies attached hereto as
Schedule 1.3 (the "May 31 Combined Balance Sheet"). In connection with the
preparation of the Closing Date Balance Sheet, the Stockholder and the
Companies shall permit the Reviewer (as defined below) and other
representatives of UAG to conduct a physical inventory at each location where
inventory is held by the Companies.
(b) Within ninety (90) days after delivery of the Closing Date Balance
Sheet, (i) Coopers & Lybrand or such other accounting firm (the "Reviewer") as
may be selected by UAG shall audit or otherwise review the Closing Date Balance
Sheet in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG
shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet") to the
Stockholder. The Reviewed Balance Sheet (i) shall be prepared in accordance
with GAAP (and shall include adjustments consistent with the adjustments set
forth on the May 31 Combined Balance Sheet) and (ii) shall include a schedule
showing the computation of the Final Net Worth (as defined in Section 1.3(g)(i)
hereof), computed in accordance with the definition of Net Worth set forth in
Section 1.3(g)(ii) hereof. UAG and the Reviewer shall have the opportunity to
consult with the Stockholder, the Companies and each of the accountants and
other representatives of the Stockholder and the Companies and to examine the
work papers, schedules and other documents prepared by the
4
Stockholder, the Companies and each of such accountants and other
representatives during the preparation of the Closing Date Balance Sheet.
(c) The Stockholder shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheet to present in writing to UAG all
objections the Stockholder may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such 45-day period, the Reviewed Balance Sheet
shall be deemed accepted and approved by the Stockholder and a supplemental
closing (the "Supplemental Closing") shall take place within five (5) Business
Days following the expiration of such 45-day period, or on such other date as
may be mutually agreed upon in writing by UAG and the Stockholder.
(d) If the Stockholder shall raise any objection within such 45-day
period, UAG and the Stockholder shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Stockholder
within sixty (60) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a firm of independent
public accountants mutually acceptable to UAG and the Stockholder, which firm
shall make a final and binding determination as to such matter or matters. Such
accounting firm shall send its written determination to UAG and the Stockholder
and the Supplemental Closing, if any, shall take place five (5) Business Days
following the receipt of such determination by UAG and the Stockholder. The
fees and expenses of the accounting firm referred to in this Section 1.3(e)
shall be paid one-half by UAG and one-half by the Stockholder.
(f) UAG and the Stockholder agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected
by UAG and the Stockholder pursuant to Section 1.3(e) hereof in order that any
and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of Sections 1.3 (a) through (e) hereof
(such amount being referred to herein as the "Final Net Worth") shall be less
than the Net Worth on the May 31 Combined Balance Sheet (the "Agreed Net
Worth") (the amount of any such deficiency being referred to herein as the "Net
Worth Deficiency"), the Stockholder shall pay to UAG at the Supplemental
Closing, by wire transfer of immediately available funds to an account
designated in writing by UAG at least two (2) Business Days prior to the date
of the Supplemental Closing, an amount equal to the Net Worth Deficiency,
together with interest on such amount from the Closing Date to the date of the
Supplemental Closing at the prime rate or its equivalent (as announced from
time to time by Citibank, N.A.).
(ii) "Net Worth" computed in connection with the Closing Date Balance
Sheet and the Reviewed Balance Sheet shall mean the amount by which the total
assets (not including intangible assets) exceed the total liabilities
reflected, in each case, on the balance sheets of
5
Companies comprising the Closing Date Balance Sheet or the Reviewed Balance
Sheet, as the case may be; provided, however, that for purposes of determining
the Final Net Worth, the Net Worth on the Closing Date Balance Sheet and the
Reviewed Balance Sheet shall be reduced by an amount equal to the net income of
the Companies for the period beginning on the first day of the calendar month
during which the Closing occurs and ending on the Closing Date.
1.4. POST-CLOSING ADJUSTMENT.
If the Companies, on a combined basis, have Pre-Tax Earnings for the
two-year period commencing on January 1, 1998 and ending on December 31, 1999
("1998-1999 Earnings") of less than Five Million One Hundred Thousand Dollars
($5,100,000) (the amount of any such deficiency being referred to herein as the
"Earnings Deficiency"), then the principal amount of the Note shall be reduced
by an amount equal to three and three-fourths (3.75) times the Earnings
Deficiency. If there is a dispute as to the amount of the 1998-1999 Earnings,
then, to the extent that the amount of any interest or principal payment to be
made under the Note is contingent upon the resolution of such dispute, Sub
shall have no obligation to make such payment until the amount of the 1998-1999
Earnings is agreed to by the parties or is finally determined by an independent
certified public accounting firm, mutually agreed upon by Sub and the
Stockholder. The costs and fees of any such accounting firm shall be paid
one-half by Sub and one-half by the Stockholder. For purposes of determining
Pre-Tax Earnings in connection with this Section, (i) management fees paid to
UAG or UAG West Texas and overhead expenses attributable to UAG or UAG West
Texas shall not be considered as expenses of the Companies; and (ii) warranty
income shall be accounted for as set forth on Schedule 1.4 hereof.
1.5. ADDITIONAL PURCHASE PRICE.
If the Companies, on a combined basis, have Pre-Tax Earnings for the
two-year period commencing on January 1, 1998 and ending on December 31, 1999
(the "1998-1999 Earnings") that exceed Six Million Nine Hundred Thousand
Dollars ($6,900,000), then, in consideration for the sale of the Shares by the
Stockholder to Sub, Sub will make an additional payment to the Stockholder in
the aggregate amount equal to [(1998-1999 Earnings - $6,900,000) X 3.75]. If
Sub is required to make an additional payment pursuant to the provisions of
this Section 1.5, then Sub shall make such payment no later than March 31,
2000. If there is a dispute as to the amount of the 1998-1999 Earnings, then,
to the extent that the amount of any additional payment is contingent upon the
resolution of such dispute, Sub shall have no obligation to make such payment
until the amount of the 1998-1999 Earnings is agreed to by the parties or is
finally determined by an independent certified public accounting firm, mutually
agreed upon by Sub and the Stockholder. The costs and fees of any such
accounting firm shall be paid one-half by Sub and one-half by the Stockholder.
For purposes of determining Pre-Tax Earnings in connection with this Section,
(i) management fees paid to UAG or UAG West Texas and overhead expenses
attributable to UAG or UAG West Texas shall not be considered as expenses of
the Companies; and (ii) warranty income shall be accounted as set forth on
Schedule 1.4 hereof.
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1.6. EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect
until the date earlier of: (i) the date on which the parties have notified each
of the Companies' manufacturers (the "Effective Date") or (ii) July 30, 1997.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDER
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 2 are to be delivered by the Companies
and the Stockholder no later than ten (10) Business Days after the date hereof,
the Companies and the Stockholder hereby jointly and severally represent and
warrant to UAG as follows:
2.1. ORGANIZATION AND GOOD STANDING.
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has the
corporate power and authority to own, lease and operate the properties used in
its businesses and to carry on its business as now being conducted. The
Companies are duly qualified to do business and are in good standing as a
foreign corporation in each state and jurisdiction where qualification as a
foreign corporation is required, except for such failures to be qualified and
in good standing, if any, which when taken together with all other such
failures of the Companies would not, or could not reasonably be expected to, in
the aggregate have a Material Adverse Effect. Schedule 2.1 hereto lists (i) the
states and other jurisdictions where the Companies are so qualified and (ii)
the assumed names under which the Companies conduct business. Attached to
Schedule 2.1(b) hereto are complete and correct copies of the Companies'
Articles of Incorporation and Bylaws (including comparable governing
instruments with different names), as amended and presently in effect.
2.2. SUBSIDIARIES.
The Companies do not have any interest or investment in any Person,
except that Jo-Vena owns 100% of the issued and outstanding shares of LA free
and clear of any Liens, claims or encumbrances.
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2.3. CAPITALIZATION.
The authorized stock of each of the Companies, the number of shares of
capital stock which are issued and outstanding and the record owner of all such
shares are set forth on Schedule 2.3 hereto. The shares listed on Schedule 2.3
hereto constitute all the issued and outstanding shares of capital stock of the
Companies and have been validly authorized and issued, are fully paid and
nonassessable, have not been issued in violation of any preemptive rights or of
any federal or state securities law and no personal liability attaches to the
ownership thereof. Except as set forth on Schedule 2.3 hereof, there is no
security, option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of the Companies or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Companies, or (ii)
obligates the Companies to grant, offer or enter into any of the foregoing, or
(iii) relates to the voting or control of such capital stock, securities or
rights, except as set forth on Schedule 2.3 hereto. The Companies have not
agreed to register any securities under the Securities Act of 1933, as amended
(the "Securities Act").
2.4. AUTHORITY; APPROVALS AND CONSENTS.
The Companies have the corporate power and authority to enter into
this Agreement and the documents referred to herein (the "Documents") to which
they are a party and to perform their obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Documents to
which they are a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by the Board of
Directors of each of the Companies and no other corporate proceedings on the
part of the Companies are necessary to authorize and approve this Agreement and
the Documents and the transactions contemplated hereby and thereby. This
Agreement has been, and on the Closing Date the Documents will be, duly
executed and delivered by, and constitute valid and binding obligations of,
each of the Companies, enforceable against the Companies in accordance with
their respective terms. The execution, delivery and performance by each of the
Companies and the Stockholder of this Agreement and the Documents to which it
or he is a party and the consummation of the transactions contemplated hereby
and thereby do not and will not:
(i) contravene any provisions of the Articles of Incorporation or
Bylaws (including any comparable governing instrument with a different
name) of any of the Companies;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement (as
defined in Section 2.15) or, except as set forth on Schedule 2.4 hereto,
require any consent or waiver of any party to any Company Agreement;
8
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of any of the Companies (other than the rights of UAG to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in Section 2.9 hereof) applicable to any of the Companies or any of their
respective businesses or properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act (as defined in
Section 5.3).
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by the Companies to enable the Companies to continue to
conduct their respective businesses and operations and use their respective
properties after the Closing in a manner which is in all material respects
consistent with that in which they are presently conducted.
2.5. FINANCIAL STATEMENTS.
Attached as Schedule 2.5 are true and complete copies of:
(i) (A) the compiled consolidated balance sheet of the Companies
as of December 31, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal year ended December 31,
1996, together with the notes thereto and (B) the compiled consolidated
balance sheet of the Companies as of December 31, 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for
the fiscal year ended December 31, 1995, together with the notes thereto,
in each case accompanied by the report of independent certified public
accountants; and
(ii) the monthly and year-to-date financial statements provided
to each of the manufacturers for the months ended June 30, 1997 and May 31,
1997 (each a "Company Factory Statement and, collectively, the "Company
Factory Statements");
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Company Financial Statements"). The
Company Financial Statements are consistent with and in accordance with the
books and records of the Companies, fairly present the financial position,
results of operations, stockholders' equity and changes in financial position
of the Companies as of the dates and for the periods indicated in conformity
with GAAP consistently applied (except as otherwise indicated on Schedule 2.5
hereof) during such periods, and can be legitimately reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by the Companies for federal income tax purposes, and the
unaudited financial statements included in the Company Financial
9
Statements include all adjustments, which consist of only normal recurring
accruals, necessary for such fair presentations. The statements of income
included in the Company Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified therein, and the
balance sheets included in the Company Financial Statements do not reflect any
write-up or revaluation increasing the book value of any assets. The books and
accounts of the Companies are complete and correct in all material respects and
fairly reflect all of the transactions, items of income and expense and all
assets and liabilities of the businesses of the Companies.
2.6. ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liabilities of any nature whatsoever
(whether due or to become due, accrued, absolute, contingent or otherwise),
including, without limitation, any unfunded obligation under employee benefit
plans or arrangements as described in Section 2.17 and 2.18 hereof or
liabilities for Taxes (as defined in Section 2.8 hereof), except for (i)
liabilities reflected or reserved against on the most recent Company Financial
Statements, (ii) current liabilities incurred in the ordinary course of
business and consistent with past practice after June 30, 1997 which,
individually and in the aggregate, do not have, and cannot reasonably be
expected to have, a Material Adverse Effect, and (iii) liabilities disclosed on
Schedule 2.6 hereto. None of the Companies is a party to any Company Agreement,
or subject to any charter or bylaw provision, any other corporate limitation or
any Legal Requirement, which has, or can reasonably be expected to have, a
Material Adverse Effect.
2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1996, each Company has operated in the ordinary
course of business consistent with past practice, except as set forth on
Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of any
of the Companies, and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have a
Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of any of the Companies, whether or not
covered by insurance;
(iii) any change in any method of accounting or accounting
practice of any of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, office manager, controller or any equivalent employee of
any of the Companies.
(b) Since December 31, 1996, except as set forth in Schedule 2.7(b)
hereto, the Companies have not:
10
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics liens and liens for taxes
not yet due and payable;
(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected
in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees (other than increases in accordance with past practice not
exceeding 10%) or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$50,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any products or
product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to do any
of the foregoing.
2.8. TAXES.
LRM has made a valid election pursuant to Section 1362(a) of the
Internal Revenue Code, as amended (the "Code"), to be on "S Corporation" within
the meaning of Section 1361(a)(1) of the Code and has continued to qualify as
such for all taxable years since
11
its formation and will continue to so qualify through the closing date. The
Companies and, for any period during all or part of which the tax liability of
any other corporation was determined on a combined or consolidated basis with
the Companies, any such other corporation, have filed timely all federal,
state, local and foreign tax returns, reports and declarations required to be
filed (or have obtained or timely applied for an extension with respect to such
filing) correctly reflecting the Taxes (as defined below) and all other
information required to be reported thereon and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by the Companies or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments, including but not limited to income, excise, property,
sales, franchise, withholding, social security and unemployment taxes imposed
by the United States, any state, county, local or foreign government, or any
subdivision or agency thereof or taxing authority therein, and any interest,
penalties or additions to tax relating to such taxes, charges, fees, levies or
other assessments. Copies of all tax returns for the fiscal years ended since
December 31, 1992 have been furnished or made available to UAG or its
representatives and such copies are accurate and complete as of the date
hereof. The Companies have also furnished to UAG correct and complete copies of
all notices and correspondence sent or received since December 31, 1992 by the
Companies to or from any federal, state or local tax authorities. The Companies
have adequately reserved for the payment of all Taxes with respect to periods
ended on or prior to the Closing Date for which tax returns have not yet been
filed. In the ordinary course, the Companies make adequate provision on their
books for the payment of all Taxes (including for the current fiscal period)
owed by the Companies. Except to the extent reserves therefor are reflected on
the Company Financial Statements, or will be reflected on the Closing Date
Balance Sheet, the Companies are not liable, or will not become liable, for any
Taxes for any period ending on or prior to the Closing Date. Except as set
forth on Schedule 2.8 hereto, the Companies have not been subject to a federal
or state tax audit of any kind since December 31, 1992, and no adjustment has
been proposed by the Internal Revenue Service ("IRS") with respect to any
return for any prior or subsequent year. With respect to the audits referred to
on Schedule 2.8 hereto and except as indicated thereon, no such audit has
resulted in an adjustment in excess of $25,000. Neither the Companies nor the
Stockholder know of any basis for an assertion of a deficiency for Taxes
against the Companies. The Stockholder will cooperate, and will cause his
Affiliates to cooperate, with the Companies in the filing of any returns and in
any audit or refund claim proceedings involving Taxes for which the Companies
may be liable or with respect to which the Companies may be entitled to a
refund.
2.9. LEGAL MATTERS.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Companies
or the Stockholder, threatened against or affecting, the Companies, any ERISA
Plan (as defined in Section 2.17(a) hereof) or any of their properties or
rights before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, domestic or foreign, nor is any basis known
to the Stockholder or the Companies for any such Claims, and (ii) the Companies
are not subject to any judgment, decree, writ, injunction, ruling or order
(collectively, "Judgments") of any
12
governmental, administrative or judicial authority, domestic or foreign.
Schedule 2.9(a) hereto identifies each Claim and Judgment disclosed thereon
which is fully covered by an insurance policy.
(b) The business of the Companies is being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Companies or their
business or properties. The Companies hold, and are in compliance with, all
franchises, licenses, permits, registrations, certificates, consents, approvals
or authorizations (collectively, "Permits") required by all applicable Legal
Requirements. A list of all such permits is set forth on Schedule 2.9(b)
hereof.
(c) The Companies own or hold all Permits material to the conduct of
their business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination
of any Permit.
2.10. PROPERTY.
Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies, including all real property
owned or leased by the Stockholder or other Affiliates (directly or indirectly)
and used in the businesses of the Companies and of all options or other
contracts to acquire any such interest (collectively, the "Real Property").
With respect to any leased Real Property, there are no defaults by either party
under such leases and no state of facts exist which with the giving of notice
or the passage of time, or both, would constitute a default under such leases.
True and correct copies of all leases relating to the Real Property, together
with any amendments and modifications thereto, are attached as Schedule
2.10(b). All improvements to the Real Property ("Improvements") and all
machinery, equipment and other tangible property owned or used by or leased to
the Companies are fit for the particular purposes for which they are used by
the Companies. Such tangible properties and all Improvements owned or leased by
the Companies conform in all material respects with all applicable laws,
ordinances, rules and regulations and other Legal Requirements and, to the
knowledge of the Stockholder and the Companies, such Improvements do not
encroach in any respect on property of others. There are no latent defects with
respect to the Improvements. The Real Property is currently zoned to permit the
conduct of the respective businesses of the Companies as presently conducted.
Certificates of Occupancy have been issued with respect to the Improvements
without special conditions or restrictions. All utilities servicing the Real
Property and the Improvements are provided by publicly-dedicated utility lines
and are located within public rights-of-way and do not cross or encumber any
private land. No written notice (and, to the knowledge of the Stockholder and
the Companies, no oral notice) of any pending, threatened or contemplated
action by any governmental authority or agency having the power of eminent
domain has been given to the Companies or the Stockholder with respect to the
Real Property.
13
2.11. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Companies are in compliance with all Environmental Laws (as
defined below), (ii) the Companies have obtained all Environmental Permits (as
defined below), (iii) such Environmental Permits are in full force and effect,
and (iv) the Companies are in compliance with all terms and conditions of such
Environmental Permits. As used herein, "Environmental Laws" shall mean all
applicable requirements of environmental, public or employee health and safety,
public or community right-to-know, ecological or natural resource laws or
regulations or controls, including all applicable requirements imposed by any
law (including without limitation common law), rule, order, or regulations of
any federal, state, or local executive, legislative, judicial, regulatory, or
administrative agency, board, or authority, or any applicable private agreement
(such as covenants, conditions and restrictions), which relate to, (i) noise,
(ii) pollution or protection of the air, surface water, groundwater, or soil,
(iii) solid, gaseous, or liquid waste generation, treatment, storage, release,
presence, disposal, or transportation, (iv) exposure to Hazardous Materials (as
defined below), or (v) regulation of the manufacture, processing, distribution
and commerce, use, or storage of Hazardous Materials, as amended and as in
effect from time to time (including without limitation the following statutes
and all regulations thereunder as amended and in effect from time to time: the
Comprehensive Environmental Response Compensation and Liability Act of 1980 (42
U.S.C. 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and
Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. e 6901 et seq.) ("RCRA"), the
Occupational Safety and Health Act of 1970 (29 U.S.C. e 651 et seq.) ("OSHA"),
and the Hazardous Materials Transportation Act, 49 U.S.C. e 1801 et seq.
("HMTA")). As used herein, "Environmental Permits" shall mean all permits,
licenses, approvals, authorizations, consents or registrations required under
applicable Environmental Laws in connection with the ownership, use and/or
operation of the Companies' business or the Real Property or Improvements.
As used herein, "Hazardous Materials" shall mean, collectively, (i)
those substances included within the definitions of or identified as "hazardous
chemicals," "hazardous waste," "hazardous substances," "hazardous materials,"
"toxic substances", "extremely hazardous substances", "toxic pollutants",
"contaminants", "pollutants" or similar terms in or pursuant to, without
limitation, CERCLA, RCRA, OSHA, HMTA, and in the regulations promulgated
pursuant to such laws, all as amended, (ii) those substances listed in the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or by the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR part 302 and amendments thereto), (iii) any
material, waste or substance which is or contains (A) petroleum, including
crude oil or any fraction thereof, natural gas, or synthetic gas usable for
fuel or any mixture thereof, (B) asbestos, (C) lead-based paint (D)
polychlorinated biphenyls, (E) designated as a "hazardous substance" pursuant
to Section 311 of the Clean Water Act, 33 U.S.C. e 1251 et seq. (33 U.S.C. e
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. e
1317), (F) flammable explosives, (G) radioactive materials, and (iv) such other
substances, materials and wastes which are or
14
become regulated or classified as hazardous, toxic or as "special wastes" under
any Environmental Laws.
(b) The Companies and the Stockholder have not violated, done or
suffered any act which could give rise to liability under, and are not
otherwise exposed to liability under, any Environmental Law. No event has
occurred with respect to the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies, which, with the passage of
time or the giving of notice, or both, would constitute a violation of or
non-compliance with any applicable Environmental Law. The Companies have no
contingent liability under any Environmental Law. There are no liens under any
Environmental Law on the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) neither the
Companies, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Companies, nor, to the
knowledge of the Companies or the Stockholder, any property adjacent to the
Real Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site and there has been no
spill, release or migration of any Hazardous Materials on or under the Real
Property (provided, however, that certain petroleum products are stored and
handled on the Real Property in the ordinary course of the Companies' business
in full compliance with all Environmental Laws including the existing
regulations of the United States Environmental Protection Agency requiring
spill protection, overfill protection and corrosion protection by December 22,
1998 and all secondary containment requirements with respect to above ground
storage tanks), (ii) none of the Real Property or any portion thereof, the
Improvements or any property formerly owned, occupied or leased by the
Companies has been subject to investigation by any governmental authority
evaluating the need to investigate or undertake Remedial Action (as defined
below) at such property, and (iii) none of the Real Property, the Improvements
or any property formerly owned, occupied or leased by the Companies, or, to the
knowledge of the Companies or the Stockholder, any site or location where the
Companies sent waste of any kind, is identified on the current or proposed (A)
National Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive
Environmental Response Compensation and Liability Inventory System list, or (C)
any list arising from any statute analogous to CERCLA. As used herein,
"Remedial Action" shall mean any action required to (i) clean up, remove or
treat Hazardous Materials, (ii) prevent a release or threat of release of any
Hazardous Material, (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care, (iv) cure a violation of Environmental Law
or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of
RCRA or analogous state law.
(d) Except as set forth on Schedule 2.11(d) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers, or (iv) wetlands (as defined
under any Environmental Law) located within any portion of the Real Property,
nor have any Liens been placed upon any portion of the Real Property, the
Improvements or any property formerly
15
owned, occupied or leased by the Companies in connection with any actual or
alleged liability under any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or known
prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving the Companies, the Real Property, the Improvements,
any property formerly owned, leased or occupied by the Companies, any offsite
contamination affecting the business of the Companies or any operations
conducted at the Real Property, (ii) there are no ongoing negotiations with or
agreements with any governmental authority relating to any Remedial Action or
other environmentally related claim, (iii) the Companies have not submitted
notice pursuant to Section 103 of CERCLA or analogous statute or notice under
any other applicable Environmental Law reporting a release of a Hazardous
Material into the environment, and (iv) the Companies have not received any
notice, claim, demand, suit or request for information from any governmental or
private entity with respect to any liability or alleged liability under any
Environmental Law, nor to the knowledge of the Stockholder and the Companies,
has any other entity whose liability therefor, in whole or in part, may be
attributed to the Companies, received such notice, claim, demand, suit or
request for information.
(f) The Stockholder and the Companies have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Companies and any property formerly
owned, occupied or leased by the Companies, and have permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, and any property formerly owned, occupied or leased by the
Companies, by UAG or UAG's agents or experts as they have or shall have deemed
necessary or appropriate to confirm the condition of such properties.
2.12. INVENTORIES.
The values at which inventories are carried on the Company Financial
Statements and the values at which inventories will be carried on the Closing
Date Balance Sheet reflect, or will reflect, the normal inventory valuation
policies of the Companies, and such values are, or in the case of the Closing
Date Balance Sheet will be, in conformity with GAAP consistently applied
(except that no adjustment shall be made to the LIFO reserve for 1997 through
the Closing Date). All inventories reflected on the Company Financial
Statements will be currently marketable and will reasonably be anticipated to
be sold at normal mark-ups within sixty (60) days after the Closing Date in the
ordinary course of business, except for spare parts inventory which inventory
is carried at the lower of cost or market (with market being equal to the
amount of any refund, if any, that would be paid by the applicable manufacturer
if the parts are returned to such manufacturer).
2.13. ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Financial Statements
are, and all accounts receivable that will be or will have been reflected on
the Closing Date Balance
16
Sheet will be, good, and have been or will have been collected or are
collectible, without resort to litigation, within 90 days of the Closing Date,
and are subject to no defenses, setoffs or counterclaims other than normal cash
discounts accrued in the ordinary course of business.
2.14. INSURANCE.
All material properties and assets of the Companies which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Companies are engaged and customary
for companies engaged in similar businesses or owning similar assets. Set forth
on Schedule 2.14 hereto is a list and brief description (including the name of
the insurer, the type of coverage provided, the amount of the annual premium
for the current policy period, the amount of remaining coverage and deductibles
and the coverage period) of all policies for such insurance and the Companies
have made or will make available to UAG true and complete copies of all such
policies. All such policies are in full force and effect, are underwritten by
financially secure insurers, are sufficient for all applicable requirements of
law and will not in any way be affected by or terminated or lapsed by reason of
the consummation of the transactions contemplated by this Agreement. No notice
of cancellation or non-renewal with respect to, or disallowance of any claim
under, any such policy has been received by the Companies.
2.15. CONTRACTS, ETC.
As used in this Agreement, the term "Company Agreements" shall mean
all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on Schedule 2.10 hereto)
to which any of the Companies is a party or by which any of the Companies or
any of their assets or properties (including the Real Property and the
Improvements) may be bound or affected, including all amendments,
modifications, extensions or renewals of any of the foregoing. Set forth on
Schedule 2.15 hereto is a complete and accurate list of each Company Agreement
which is material to the business, operations, assets, condition (financial or
otherwise) or prospects of any of the Companies. True and complete copies of
all written Company Agreements referred to on Schedule 2.15 and Schedule 2.10
hereto, exclusive of individual vehicle titles and/or manufacturer's
certificates of origin and floor plan liens applicable to individual vehicles,
have been or will be delivered or made available to UAG, and the Companies have
provided UAG with accurate and complete written summaries of all such Company
Agreements which are unwritten. Except as set forth on Schedule 2.15, the
Companies are not, nor, to the knowledge of the Companies and the Stockholder
is any other party thereto, in breach of or default under any Company
Agreement, and no event has occurred which (after notice or lapse of time or
both) would become a breach or default under, or would permit modification,
cancellation, acceleration or termination of, any Company Agreement or result
in the creation of any Lien upon, or any Person obtaining any right to acquire,
any properties, assets or rights of the Companies. There are no material
unresolved disputes involving the Companies under any Company Agreement.
17
2.16. LABOR RELATIONS.
(a) The Companies have paid or made provision for the payment of all
salaries and accrued wages and have complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and have withheld and paid to the appropriate
governmental authority, or are holding for payment not yet due to such
authority, all amounts required by law or agreement to be withheld from the
wages or salaries of their employees.
(b) Except as set forth on Schedule 2.16(b) hereto, none of the
Companies is a party to any (i) outstanding employment agreements or contracts
with officers or employees that are not terminable at will, or that provide for
payment of any bonus or commission, (ii) agreement, policy or practice that
requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law), (iii) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Companies, nor do the Stockholder or the Companies know of any activities or
proceedings of any labor union to organize any such employees. The Companies
have furnished to UAG complete and correct copies of all such agreements
("Employment and Labor Agreements"). The Companies have not breached or
otherwise failed to comply with any provisions of any Employment or Labor
Agreement.
(c) Except as set forth in Schedule 2.16(c) hereto, (i) there is no
unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholder's or
the Companies' knowledge, threatened, against or affecting the Companies, and
the Companies have not experienced any strike, material slow down or material
work stoppage, lockout or other collective labor action by or with respect to
employees of the Companies, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Companies,
(iv) there are no charges with respect to or relating to the Companies pending
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment practices,
(v) the Companies have not received formal notice from any federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws of an intention to conduct an investigation of the Companies and, to the
knowledge of the Companies, no such investigation is in progress and (vi) the
consents of the unions that are parties to any Employment and Labor Agreements
are not required to complete the transactions contemplated by this Agreement
and the Documents.
(d) The Companies have never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. ee 2101-2109, and the regulations
promulgated therein.
18
2.17. EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Companies or to which the Companies are required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(1) of ERISA, maintained by the Companies or to which the Companies are
required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare Benefit Plans
(collectively, "ERISA Plans") have been delivered to or made available to UAG
together with, as applicable with respect to each such ERISA Plan, trust
agreements, summary plan descriptions, all IRS determination letters or
applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(a) of the Code, and valuation or actuarial
reports, accountant's opinions, financial statements, IRS Form 5500s (or 5500-C
or 5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on Schedule
2.17(b):
(i) there is no ERISA Plan which is a "multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Companies
or the Stockholder) is threatened or about to occur which would constitute
a prohibited transaction under Section 406 of ERISA or under Section 4975
of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which would adversely affect its
qualified status; and
19
(iii) is not currently under investigation, audit or review by
the IRS or (to the knowledge of the Companies and the Stockholder) no such
action is contemplated or under consideration and the IRS has not asserted
that any Pension Benefit Plan is not qualified under Section 401(a) of the
Code or that any trust established under a Pension Benefit Plan is not
exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of Section
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Companies since the effective date of ERISA and all premiums due and owing
to the PBGC have been timely paid;
(ii) the PBGC has not notified the Companies or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of ERISA
to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Companies or the Stockholder) is
threatened or about to occur which would constitute a reportable event
within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code); and
(v) if any of such Pension Benefit Plans were to be terminated on
the Closing Date (A) no liability under Title IV of ERISA would be incurred
by the Companies and (B) all benefits accrued to the day prior to the
Closing Date (whether or not vested) would be fully funded in accordance
with the actuarial assumptions and method utilized by such plan for
valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
(f) The approximate aggregate of the amounts of contributions by the
Companies to be paid or accrued under ERISA Plans for the current fiscal year
is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"), and the
Aggregate ERISA Contributions are not expected to exceed the total amount set
forth on Schedule 2.17(f). To the extent required in accordance with GAAP, the
Company Financial Statements reflect in the
20
aggregate an accrual of all amounts of employer contributions accrued but
unpaid by the Companies under the ERISA Plans as of the date of the Company
Financial Statements.
(g) With respect to any Multiemployer Plan (1) the Companies have not,
since their formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (2) there is no withdrawal liability of the Companies under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had
occurred under each such Plan as of December 31, 1996; and (3) the Companies
have not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined
in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Companies under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18. OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on Schedule 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option, employee
stock ownership, deferred compensation, performance, bonus, incentive,
vacation pay, holiday pay, insurance, severance, retirement, excess benefit
or other plan, trust or arrangement which is not an ERISA Plan whether
written or oral, which the Companies maintain or are required to make
contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Companies pursuant to which
payments may be required to be made at any time following the date hereof
(including, without limitation, any employment, deferred compensation,
severance, supplemental pension, termination or consulting agreement or
arrangement); and
(iii) each employee of the Companies whose aggregate compensation
for the fiscal year ended December 31, 1996 exceeded $75,000. True and
complete copies of all of the written plans, arrangements and agreements
referred to on Schedule 2.18(a) ("Compensation Commitments") have been or
will be provided or made available to UAG together with, where prepared by
or for the Companies, any valuation, actuarial or accountant's opinion or
other financial reports with respect to each Compensation Commitment for
the last three years. An accurate and complete written summary has been
provided to UAG with respect to any Compensation Commitment which is
unwritten.
21
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by the
IRS or any other federal or state agency and (to the knowledge of the
Companies or the Stockholder) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance with
the reporting and disclosure requirements imposed under ERISA and the Code.
2.19. TRANSACTIONS WITH INSIDERS.
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Companies or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since January 1, 1996. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any director
or officer of any of the Companies, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(ii) the term "Associate" used to indicate a relationship with
any person means (A) any corporation, partnership, joint venture or other
entity of which such person is an officer or partner or is, directly or
indirectly, through one or more intermediaries, the beneficial owner of 30%
or more of (1) any class or type of equity securities or other profits
interest or (2) the combined voting power of interests ordinarily entitled
to vote for management or otherwise, and (B) any trust or other estate in
which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
2.20. PROPRIETY OF PAST PAYMENTS.
No funds or assets of the Companies have been used for illegal
purposes; no unrecorded funds or assets of the Companies have been established
for any purpose; no accumulation or use of the Companies' corporate funds or
assets has been made without being
22
properly accounted for in the respective books and records of the Companies;
all payments by or on behalf of the Companies have been duly and properly
recorded and accounted for in their respective books and records; no false or
artificial entry has been made in the books and records of the Companies for
any reason; no payment has been made by or on behalf of the Companies with the
understanding that any part of such payment is to be used for any purpose other
than that described in the documents supporting such payment; and the Companies
have not made, directly or indirectly, any illegal contributions to any
political party or candidate, either domestic or foreign. Neither the IRS nor
any other federal, state, local or foreign government agency or entity has
initiated or threatened any investigation of any payment made by the Companies
of, or alleged to be of, the type described in this Section 2.20.
2.21. INTEREST IN COMPETITORS.
Except as set forth on Schedule 2.21, neither the Companies nor the
Stockholder, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2% of
the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or otherwise,
directly or indirectly, in any Person other than the Companies that is engaged
in the retail sale of automobiles or light duty trucks.
2.22. BROKERS.
Neither the Companies, nor any director, officer or employee thereof,
nor the Stockholder or any representative of the Stockholder, have employed any
broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement or the Documents; except that Mr.
Alexander has agreed to pay Ben Hicks & Associates (the "Broker") upon the
closing and funding of the transactions contemplated hereby an amount equal to
One Hundred Twenty-Five Thousand Dollars ($125,000) in full satisfaction of any
obligations of the Stockholder or the Companies relating to the services of
Broker.
2.23. ACCOUNTS.
Schedule 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Companies and the name of each person
with any power or authority to act with respect thereto.
2.24. DISCLOSURE.
Neither the Companies nor the Stockholder have made any material
misrepresentation to UAG relating to the Companies or the Shares or the Real
Property or Improvements and neither the Companies nor the Stockholder have
omitted to state to UAG any material fact relating to the Companies or the
Shares or the Real Property or Improvements which is necessary in order to make
the information given by or on behalf of the Companies or the Stockholder to
UAG not misleading. To the knowledge of the Companies and the Stockholder, no
fact, event, condition or contingency exists or has
23
occurred which has, or in the future can reasonably be expected to have, a
Material Adverse Effect, which has not been disclosed in the Company Financial
Statements or the Schedules to this Agreement.
2.25. NET WORTH.
On the Closing Date, the Net Worth of the Companies will be equal to
or greater than the Agreed Net Worth.
2.26. WORKING CAPITAL.
On the Closing Date, the working capital of each Company will be
sufficient to operate the business of such Company consistent with past
practice.
2.27. EXTENDED WARRANTY.
The Companies shall have no liability for any extended warranty sold
prior to the Closing Date.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 3 are to be delivered by the Stockholder
no later than ten (10) Business Days after the date hereof, the Stockholder
hereby represents and warrants to UAG as follows:
3.1. OWNERSHIP OF SHARES; TITLE.
The Stockholder is, or on the Closing Date will be, the owner of
record and beneficially of the Shares as set forth on Schedule 3.1 hereof and
has, or on the Closing Date will have and shall transfer to Sub at the Closing,
good and marketable title to the Shares, free and clear of any and all security
interests, pledge agreements, Liens, proxies and voting or other agreements
except restrictions on transfer imposed by applicable federal and state
securities laws. Jo-Vena is the owner of record and beneficially of 100% of the
issued and outstanding capital stock of LA and has good and marketable title to
such capital stock, free and clear of any and all security interests, pledge
agreements, Liens, proxies and voting or other agreements.
3.2. AUTHORITY.
The Stockholder has all requisite power and authority and has full
legal capacity and are competent to execute, deliver and perform this Agreement
and the Documents to which they are a party and to consummate the transactions
contemplated hereby and thereby (including the disposition of the Shares to Sub
as contemplated by this Agreement). This Agreement has been duly executed and
delivered by each Stockholder and constitutes, and the
24
Documents to which each Stockholder is a party when executed and delivered by
such Stockholder will constitute, a valid and binding obligation of such
Stockholder, enforceable against him or it in accordance with its terms. Except
as set forth on Schedule 3.2, the execution, delivery and performance of this
Agreement and the Documents by the Stockholder and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any material contract, agreement,
commitment, understanding, arrangement or restriction to which the
Stockholder is a party or to which the Stockholder or any of his property
is subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Stockholder or any of the Stockholder's businesses or properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act (as
defined in Section 5.3 hereof); or
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by the Companies to enable the Companies to continue to
conduct their respective businesses and operations and use their respective
properties after the Closing in a manner which is in all material respects
consistent with that in which they are presently conducted.
3.3. REAL PROPERTY AND IMPROVEMENTS.
The Real Property and Improvements owned by Landlord are owned in fee
simple, free and clear of all Liens, claims and encumbrances, except those
disclosed in Schedule 3.3(a), none of which currently or, to the knowledge of
Landlord or the Stockholder, in the future will materially affect the use of
such Real Property or such Improvements for the conduct of the respective
businesses of the Companies as presently conducted. No assessments have been
made against any portion of the Real Property which are unpaid (except ad
valorem taxes for the current year that are not yet due and payable), whether
or not they have become Liens. There are no disputes concerning the location of
the lines and corners of the Real Property. No one has been granted any right
to purchase or lease such Real Property or Improvements other than the existing
leases in favor of the Companies, which are to be terminated at the Closing by
agreement between the parties and pursuant to which the owners shall
acknowledge that there are no defaults under any such leases and that the
Companies have no liability arising out of or relating to such leases. Attached
as Schedule 3.3(b) are all surveys, title binders, title policies and copies of
any exceptions to title relating to such Real Property or Improvements.
25
3.4. QUALIFICATION OF STOCKHOLDER.
Mr. Alexander (i) is an "accredited investor" within the meaning of
Regulation D of the Securities Act, and Mr. Alexander is acquiring the Note to
be issued pursuant to the terms of this Agreement for his own account and not
with a view to, or for resale in connection with, any distribution thereof;
(ii) Mr. Alexander understands and acknowledges that the Note has not been
registered under the Securities Act or any state securities laws by reason of
certain exemptions from the registration provisions thereof which depend upon,
among other things, the bona fide nature of the Stockholder's investment intent
as expressed herein; (iii) Mr. Alexander is able to bear the economic risk of
such Note and has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of the Note; (iv)
Mr. Alexander acknowledges that the Note was not offered to him by means of
publicly disseminated advertisements or sales literature, or as part of a
general solicitation; (v) Mr. Alexander acknowledges that in deciding to
proceed with the transaction set forth herein he has relied solely on his own
independent investigation of UAG; and (vi) Mr. Alexander understands and
acknowledges that the Note will bear a legend restricting transfer.
3.5. FIDUCIARY DUTIES.
Mr. Alexander has satisfied any and all fiduciary (or other) duties
that he may have as a director, officer or stockholder of All American
Chevrolet, Inc. to Nancy S. Scholz and Ms. Scholz has been advised of Mr.
Alexander's intention to enter into this Stock Purchase Agreement and the
material terms hereof.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 4 are to be delivered by UAG and Sub no
later than ten (10) Business Days after the date hereof, UAG and Sub hereby
jointly and severally represent and warrant to the Companies and the
Stockholder as follows:
4.1. ORGANIZATION AND GOOD STANDING.
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. UAG is duly qualified to do
business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and the Sub would not, or
could not reasonably be expected to, in the aggregate have a Material Adverse
Effect on UAG. UAG has made available to the Stockholder complete and correct
copies of its charter and bylaws, as amended and presently in effect.
26
4.2. SUB.
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has the corporate power and
authority to own, lease and operate the properties and assets used in its
business and to carry on its business as now being conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and its subsidiaries would
not, or could not reasonably be expected to, in the aggregate have a Material
Adverse Effect. All of the outstanding shares of capital stock of the Sub have
been validly authorized and issued, are fully paid and non-assessable, have not
been issued in violation of any preemptive rights or of any federal or state
securities law.
4.3. AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and the Documents to which they are a party and to perform their
obligations hereunder and thereunder. At the time of the Closing, the
execution, delivery and performance of this Agreement and the Documents to
which they are a party and the consummation of the transactions contemplated
hereby and thereby will have been duly authorized and approved by the Board of
Directors of UAG and Sub and no other corporate proceedings on the part of UAG
or Sub will be necessary to authorize and approve this Agreement and the
Documents and the transactions contemplated hereby and thereby. This Agreement
has been, and on the Closing Date the Documents will be, duly executed and
delivered by, and constitute a valid and binding obligation of, UAG and Sub,
enforceable against UAG and Sub in accordance with their respective terms.
Except as set forth on Schedule 4.5 hereto, the execution, delivery and
performance by UAG and Sub of this Agreement and the Documents to which they
are a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation
or Bylaws of UAG or Sub;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any UAG Agreement (as defined
below) or require any consent or waiver of any party to any UAG Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of UAG;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or its respective businesses or properties that would or could
reasonably be expected to have a Material Adverse Effect on UAG and the UAG
Subsidiaries, taken as a whole; or
27
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act (as defined in
Section 5.3 hereof).
Except as set forth or referred to above, no authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any governmental administrative or judicial authority is
necessary to be obtained or made by UAG to enable UAG to continue to conduct
its business and operations and use its properties after the Closing in a
manner which is in all material respects consistent with that in which they are
presently conducted. As used in this Agreement, the term "UAG Agreement" shall
mean all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding, to
which UAG or the UAG Subsidiaries is a party or by which UAG or the UAG
Subsidiaries or any of their assets or properties may be bound or affected,
including all amendments, modifications, extensions or renewals of any of the
foregoing, and which involve receipts or payments by UAG or UAG Subsidiaries
which exceed $250,000 per year. "UAG Subsidiary" shall mean any corporation or
other entity in which UAG, directly or indirectly, owns beneficially securities
representing 50% or more of (i) the aggregate equity or profit interests or
(ii) the combined voting power of voting interests ordinarily entitled to vote
for management or otherwise.
4.4. DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Companies or the Stockholder relating to this Agreement and neither UAG nor the
Sub has omitted to state to the Companies or the Stockholder any material fact
relating to this Agreement which is necessary in order to make the information
given by or on behalf of UAG or Sub to the Companies or the Stockholder or
their representatives at or prior to Closing not misleading. No fact, event,
condition or contingency exists or has occurred which has, or in the future can
reasonably be expected to have, a Material Adverse Effect on UAG.
ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholder and the
Companies will (i) provide to the officers and other authorized representatives
of UAG and Sub full access, during normal business hours, to any and all
premises, properties, files, books, records, documents, and other information
of the Companies and will cause their officers to furnish to UAG and Sub and
their authorized representatives any and all financial, technical and operating
data and other information pertaining to the businesses and properties of the
Companies, and (ii) make available for inspection and copying by UAG and Sub
true and complete copies of any documents relating to the foregoing. UAG and
Sub will hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process
28
or, in the opinion of its counsel, by other requirements of law) all
Confidential Information (as defined below) and will not disclose the same to
any third party except in connection with obtaining financing and otherwise as
may reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review by or on behalf of UAG
and Sub. If this Agreement is terminated, UAG and Sub will promptly return to
the Companies, upon the reasonable request of the Companies, all Confidential
Information furnished by the Companies and the Stockholder and held by UAG and
Sub, including all copies thereof. As used herein, "Confidential Information"
shall mean all information concerning the Companies obtained by UAG or Sub from
the Companies in connection with the transactions contemplated by this
Agreement, except information (x) ascertainable or obtained from public
information, (y) received from a third party not employed by or otherwise
affiliated with the Companies or (z) which is or becomes known to the public,
other than through a breach by UAG or Sub of this Agreement. The Stockholder
and the Companies will hold in confidence (unless and to the extent compelled
to disclose by judicial or administrative process, or, in the opinion of their
counsel, by other requirements of law) all UAG Confidential Information (as
defined below) and will not disclose the same to any third party except as may
reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby. If this Agreement is terminated, the Stockholder will
promptly return to UAG, upon the reasonable request of UAG, all UAG
Confidential Information furnished by UAG and held by the Stockholder,
including all copies thereof. As used herein, "UAG Confidential Information"
shall mean all information concerning UAG obtained by the Stockholder and the
Companies in connection with the transactions contemplated by this Agreement,
except information (x) ascertained or obtained from public information, (y)
received from a third party not employed or otherwise affiliated with UAG or
(z) which is or becomes known to the public, other than a breach by the
Stockholder and the Companies of this Agreement.
5.2. FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Companies, on the one hand, and UAG and Sub,
on the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the Stockholder
and the Companies or UAG and Sub, respectively, required for inclusion in any
statement or application made by UAG or the Companies to any governmental or
regulatory body or in connection with obtaining any third party consent in
connection with the transactions contemplated by this Agreement. Neither the
Stockholder nor the Companies, on the one hand, nor UAG nor Sub, on the other
hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law (including federal or state securities laws) as determined by
such parties' counsel, in its sole discretion.
5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and Sub and the Stockholder and the Companies, as applicable,
shall each file or cause to be filed with the Federal Trade Commission and the
United States Department of Justice any notifications required to be filed by
the respective "ultimate parent" entities
29
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"H-S-R Act"), and the rules and regulations promulgated thereunder, with
respect to the transactions contemplated herein. The parties shall use their
best efforts to make such filings promptly, to respond to any requests for
additional information made by either of such agencies, to cause the waiting
periods under the H-S-R Act to terminate or expire at the earliest possible
date and to resist vigorously, at their respective cost and expense (including,
without limitation, the institution or defense of legal proceedings), any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; provided, however, that if UAG or the
Stockholder shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or their best interests, UAG or the
Stockholder, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in Section 8.2 hereof.
5.4. CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Companies shall, and the Stockholder shall cause the Companies to,
conduct their business solely in the ordinary course consistent with past
practices and, without the prior written consent of UAG, neither the
Stockholder nor the Companies will, except as required or permitted pursuant to
the terms hereof, permit any of the Companies to:
(i) make any material change in the conduct of its business and
operations or enter into any transaction other than in the ordinary course
of business consistent with past practices;
(ii) make any change in its Articles of Incorporation or Bylaws,
issue any additional shares of capital stock or equity securities or grant
any option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for its
capital stock or alter any term of any of its outstanding securities or
make any change in its outstanding shares of capital stock or other
ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money (except that AAC may take a loan for use by AAC not to
exceed $75,000), issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Company, or (C) issue any options
or other rights to acquire from the Company, directly or indirectly, debt
securities of the Company or any security convertible into or exchangeable
for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to
30
existing contracts set forth in Schedule 2.15 hereto and dispositions of
inventory or of worn-out or obsolete equipment for fair or reasonable value
in the ordinary course of business consistent with past practices;
(v) subject any of its assets, or any part thereof, to any Lien
or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by operation of
law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination thereof)
in respect of any shares of its capital stock (other than distributions of
net income attributable to period from May 31, 1997 through August 31,
1997) or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual capital expenditure in
excess of $50,000, or aggregate capital expenditures in excess of $150,000;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by the Company (or on behalf of
the Company) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person;
31
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required
by reason of a concurrent change in GAAP or write-down the value of any
inventory or write-off as uncollectible any accounts receivable except in
the ordinary course of business consistent with past practices;
(xv) settle, release or forgive any material claim or litigation
or waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
(xvii) take any other action that would cause any of the
representations and warranties made by the Company in this Agreement not to
remain true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholder and the Companies will cause each of the Companies to use its
reasonable best efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event the Company shall receive notice that there exists a violation of any
Environmental Law with respect to its operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy such violation in
accordance with all applicable Environmental Laws; provided, however, that
any remediation or removal shall be subject to the prior approval of UAG;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against the Company unless the validity thereof is contested in good faith
and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
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(vi) continue to conduct its business in the ordinary course
consistent with past practices.
(c) From and after the date of this Agreement and until the Closing
Date, the Stockholder shall not, except with the prior written consent of UAG
and except as required or permitted pursuant to the terms hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholder in this Agreement not
to remain true and correct; or
(iv) commit himself to do any of the foregoing.
5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES.
At the Closing there will be no intercompany payables or intercompany
receivables due and/or owing between the Stockholder and his Affiliates (other
than the Companies) on the one hand, and the Companies, on the other hand.
5.6. NEGOTIATIONS.
Until the earlier of 120 days from the date hereof or the termination
of this Agreement by UAG pursuant to Section 8.1 hereof, neither the
Stockholder, nor the Companies, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Stockholder, the Companies, or such Persons, shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations with, or
provide any information to, any Person (other than UAG or its representatives)
concerning any merger, sale of assets (other than in the ordinary course of
business), liquidation, purchase or sale of shares of capital stock or similar
transaction involving any of the Companies. The Stockholder shall promptly
communicate to UAG any inquiries or communications concerning any such
transaction (including the identity of any person making such inquiry or
communication) which the Companies or the Stockholder may receive or of which
any of such parties may become aware.
5.7. CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder and the
Companies and UAG and Sub will use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations,
33
qualifications, orders and consents of all third parties and governmental
authorities, and make all filings and registrations with governmental
authorities which are required on their respective parts for (A) the
consummation of the transactions contemplated by this Agreement, (B) the
ownership or leasing and operating after the Closing by the Companies of
all of their material properties and (C) the conduct after the Closing by
the Companies of their respective businesses as conducted by them on the
date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.8. ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
The Stockholder and the Companies agree to execute and deliver any and all
documents that the respective manufacturers typically require a selling dealer
to execute in connection with the transfer of a dealership. In case at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, the Stockholder and the proper officers of the
Companies shall take all such necessary action.
5.9. INTERIM FINANCIAL STATEMENTS.
Within twenty (20) days after the end of each calendar month after the
date of this Agreement and continuing until the Closing Date, the Companies
will deliver to UAG the most recent monthly and year-to-date financial
statements provided to their respective manufacturers. All such statements
shall fairly present the financial position, results of operations of the
Companies as of the date or for the periods indicated and shall be prepared on
a basis consistent with the Company Factory Statements.
5.10. NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other parties hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in Article 6 or
Article 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions
34
contemplated by this Agreement, and (iv) in the case of the Stockholder and the
Companies, any notice of, or other communication relating to, any default or
event which, with notice or lapse of time or both, would become a default under
any Company Agreement. The Stockholder shall (x) promptly advise UAG of any
event that has, or could in the future have, a Material Adverse Effect (y)
confer on a regular basis with one or more designated representatives of UAG to
report operational matters and to report the general status of ongoing
operations, and (z) notify UAG of any emergency or other change in the normal
course of business or in the operation of the properties of the Companies and
of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or adjudicatory proceedings
involving the Companies or any of their assets or operations, and will keep UAG
fully informed of such events and permit UAG's representatives access to all
materials prepared in connection therewith. The Stockholder shall give prompt
notice to UAG of any notice or other communication from any third person
asserting any right, title or interest in any of the Shares held by the
Stockholder (including, without limitation, any threat to commence, or notice
of the commencement of any action or other proceeding with respect to any of
the Shares) or the occurrence of any other event of which the Stockholder has
knowledge which could result in any failure to consummate the sale of the
Shares as contemplated hereby.
5.11. ASSURANCE BY THE STOCKHOLDER.
The Stockholder shall comply with the covenants set forth in this
Agreement and shall use his best efforts to cause the Companies to comply with
the covenants set forth in this Agreement.
5.12. SECTION 338(H)(10) ELECTION.
The Stockholder agrees to join with Sub, if Sub so requests, in making
a timely election with respect to any of the Companies to treat the purchase
and sale of the Shares relating to such Company pursuant to this Agreement as a
sale of all of the assets under Section 338(h)(10) of the Internal Revenue Code
of 1986, as amended (the "Code"), as permitted pursuant to Section
1.338(h)(10)-1(a) of the Treasury Regulations promulgated thereunder. The
Stockholder agrees to cooperate with UAG to cause the Companies to timely file
for federal and/or state income tax purposes any return or extension of the due
date thereof as required under the Code to effect or reflect any such election
under Section 338(h)(10) of the Code.
5.13. NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years thereafter,
the Stockholder and his Affiliates shall not knowingly interfere with or
disrupt, or attempt to interfere with or disrupt, the relationship, contractual
or otherwise, between the Companies or any customer, supplier, manufacturer,
distributor, consultant, independent contractor or employee of the Companies
and agrees not to solicit or hire any employee of the Companies unless such
employee has already terminated his or her employment with the Companies.
35
5.14. RIGHT OF FIRST REFUSAL.
During the period ending on fifth anniversary of the Closing Date, Sub
shall not sell more than 50% of the issued and outstanding capital stock of any
of the Companies to a third party (other than an Affiliate of UAG) and the
Companies shall not sell substantially all of their assets to a third party
(other than an Affiliate of UAG) (any such stock sale or asset sale being
referred to herein as a "Third Party Sale') unless, prior to closing such Third
Party Sale, Sub gives Mr. Alexander written notice (the "Offer Notice"), which
notice shall include (i) the material terms and conditions of the proposed
Third Party Sale and (ii) an offer (the "First Offer") to sell to Mr. Alexander
upon the same material terms and conditions. If Mr. Alexander accepts the First
Offer within thirty (30) days after UAG gives notice thereof, Mr. Alexander,
Sub and the applicable Companies shall enter into an agreement for the
acquisition of such Companies or their assets upon the same terms and
conditions as those provided for in the First Offer and such other terms and
conditions as may be mutually agreeable to the parties. If Mr. Alexander does
not accept the First Offer within thirty (30) days after UAG gives notice
thereof, or accepts the First Offer but does not enter into a definitive
agreement within thirty (30) days thereafter, then Sub and the applicable
Companies may close the Third Party Sale, provided that such sale shall be made
on terms not materially less favorable to UAG, Sub or the Companies than the
terms contained in the First Offer.
5.15. WORKING CAPITAL.
On the Closing Date, the Companies shall have net working capital
(computed in accordance with GAAP, together with adjustments consistent with
the adjustments on the May 31 Combined Balance Sheet) of not less than Four
Million Dollars ($4,000,000).
5.16. FIESTA DODGE CHRYSLER PLYMOUTH JEEP EAGLE, INC.
No later than two years after the Closing Date, Mr. Alexander agrees
to (i) sell, transfer or otherwise assign his ownership interest in Fiesta
Dodge Chrysler Plymouth Jeep Eagle, Inc. ("Fiesta") to a third party that is
not an Affiliate of the Stockholder or the Companies or (ii) cause Fiesta to
sell, transfer or assign all or substantially all of its assets to a third
party that is not an Affiliate of the Stockholder or the Companies.
5.17. LOAN PAYOFFS.
The parties acknowledge that as of the date hereof, the Companies have
(i) outstanding notes payable to the Stockholder in the principal amount of One
Million Five Hundred Thousand Six Hundred Sixty-Six Dollars ($1,500,666) (the
"Stockholder's Loan") and (ii) outstanding notes payable to Nancy S. Scholz in
the principal amount of Three Hundred Seventy-Five Thousand Dollars ($375,000)
(the "Scholz Loan"). Prior to the Closing Date, the Companies shall pay all
principal and interest on the Stockholder's Loan and the Scholz Loan.
36
5.18. BROKER'S FEES.
At the Closing, Sub agrees to pay Ben Hicks & Associates a broker's
fee equal to two percent (2%) of the Base Price.
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG or Sub as
provided herein except as otherwise required by applicable law:
6.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Companies and the
Stockholder contained in this Agreement shall be true and correct as of the
date hereof and (having been deemed to have been made again at and as of the
Closing) shall be true and correct as of the Closing. Each of the obligations
of the Companies and the Stockholder required by this Agreement to be performed
by them at or prior to the Closing shall have been duly performed and complied
with in all respects as of the Closing. At the Closing, UAG shall have received
a certificate, dated the Closing Date and duly executed by the Stockholder, to
the effect that the conditions set forth in the two preceding sentences have
been satisfied.
6.2. AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Companies. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
manufacturers with whom the Companies have entered into franchise agreements)
required to consummate the transactions contemplated hereby and all consents or
waivers shall have been made or obtained.
6.3. OPINIONS OF THE COMPANIES' AND THE STOCKHOLDER' COUNSEL.
UAG and Sub shall have been furnished with the opinion of counsel for
the Companies and the Stockholder, dated the Closing Date, in form and
substance satisfactory to UAG and its counsel, which opinion shall have been
rendered with respect to those matters contained in Sections 2.1, 2.2, 2.3,
2.4, 2.9, 3.1 and 3.2 hereof. In rendering the foregoing opinion, such counsel
may rely as to factual matters upon certificates or other documents
37
furnished by officers and directors of the Companies and by government
officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such counsel may specify the state
or states in which they are admitted to practice, that they are not admitted to
the Bar in any other state or experts in the law of any other state and that
such opinions are limited to the State of Texas and federal laws.
6.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of UAG or Sub effectively to
exercise full rights of ownership of the Shares. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which UAG or Sub, in good
faith and with the advice of counsel, believes makes it undesirable to proceed
with the consummation of the transactions contemplated hereby.
6.5. NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of any of
the Companies.
6.6. WORKING CAPITAL.
On the Closing Date, the Stockholder shall deliver to UAG a balance
sheet of the Companies dated as of the most recent practicable date preceding
the Closing Date, prepared in accordance with GAAP (together with adjustments
and treatment of Working Capital set forth on the May 31 Combined Balance
Sheet) (the "Estimated Closing Date Balance Sheet"). The Estimated Closing Date
Balance Sheet shall show as of the date thereof net working capital of not less
than Four Million Dollars ($4,000,000) (the "Delivered Working Capital"). The
Delivered Working Capital shall be sufficient to satisfy any working capital
requirements of the applicable manufacturers and shall be sufficient for the
Companies to continue to conduct their business in the ordinary course
consistent with past practice.
6.7. COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of
the Companies, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Companies, shall be satisfactory to UAG and Sub. UAG will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, then the expenses of performing the Phase II environmental
38
audit shall be paid one-half by UAG and one-half by the Stockholder; provided,
however, that the Stockholder may elect not to pay any costs of the Phase II
audit but, if the Stockholder elects not to pay one-half of the costs of the
Phase II audit and the results of the Phase II audit conclude that remediation
is recommended, the Stockholder shall pay the entire costs of the Phase II
audit.
6.8. BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.9. CERTIFICATES.
The Stockholder and the Companies shall have furnished UAG and Sub
with a certificate, dated as of the Closing Date, executed by the Stockholder
certifying to the fulfillment of the conditions set forth in Sections 6.4, 6.5
and 6.6 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request
to evidence compliance with the conditions set forth in this Article 6.
6.10. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholder and the
Companies under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of the Stockholder and the
Companies in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG and Sub.
6.11. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholder, UAG, Sub and the Companies shall have obtained the
consent, authorization and approval of each of the manufacturers whose consent
is required for the transfer of the Companies to Sub on terms no less favorable
to those granted to the Stockholder and the Companies immediately prior to the
execution of this Agreement.
6.12. NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect to
the Real Property and the Leases.
6.13. TITLE INSURANCE.
UAG, at its option, shall have obtained title insurance on behalf of
the Companies with respect to the leasehold estates arising out of the Leases
in form and substance satisfactory to UAG.
39
6.14. SCHEDULES.
The Companies and the Stockholder shall have delivered to UAG and Sub
all Schedules referred to in Articles 2 and 3 and such Schedules shall be
acceptable in form and substance to UAG and Sub.
6.15. MEMORANDA OF LEASE.
The appropriate parties shall have executed memoranda of lease in form
and substance satisfactory to UAG.
6.16. EMPLOYMENT AGREEMENT.
Sub, the Companies and Mr. Alexander shall have entered the Employment
Agreement.
6.17. LEASES.
The Companies and Landlord shall have entered into the Leases.
6.18. RESIGNATION OF THE COMPANIES' DIRECTORS.
Each of the persons who is a director of the Companies on the Closing
Date shall have tendered to Sub in writing his or her resignation as such in
form and substance satisfactory to UAG.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANIES AND THE STOCKHOLDER
TO EFFECT THE CLOSING
The obligations of the Companies and the Stockholder required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Companies and the Stockholder as provided herein except as
otherwise required by applicable law:
7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true and
correct as of the Closing. Each of the obligations of UAG and Sub required by
this Agreement to be performed by them at or prior to the Closing shall have
been duly performed and complied with in all material respects as of the
Closing. At the Closing, the Stockholder shall have received a certificate,
dated the Closing Date and duly executed by UAG and Sub to the effect that the
conditions set forth in the preceding two sentences have been satisfied.
40
7.2. AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG
and Sub. All filings required to be made under the H-S-R Act in connection with
the transactions contemplated hereby shall have been made and all applicable
waiting periods with respect to each such filing, including extensions thereof,
shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
manufacturers with whom the Companies have entered into franchise agreements)
required to consummate the transactions contemplated hereby and all consents or
waivers shall have been made or obtained.
7.3. OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Stockholder shall have been furnished with the opinion of Rogers &
Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance
reasonably satisfactory to the Stockholder and his counsel, which opinion shall
have been rendered with respect to those matters contained in Sections 4.1, 4.2
and 4.3 hereof. In rendering the foregoing opinions, such counsel may rely as
to factual matters upon certificates or other documents furnished by officers
and directors of UAG and the Sub and by government officials, and upon such
other documents and data as such counsel deems appropriate as a basis for its
opinion. Such opinions may be limited to federal laws and the General
Corporation Law of the State of Delaware.
7.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect that prevents or delays
the consummation of any of the transactions contemplated hereby. No action,
suit or proceeding before any court or any governmental or regulatory entity
shall be pending (or threatened by any governmental or regulatory entity), and
no investigation by any governmental or regulatory entity shall have been
commenced (and be pending), seeking to restrain or prohibit (or questioning the
validity or legality of) the consummation of the transactions contemplated by
this Agreement or seeking damages in connection therewith which the
Stockholder, in good faith and with the advice of counsel, believe makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
7.5. CERTIFICATES.
UAG and Sub shall have furnished the Stockholder with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 7 as may be reasonably requested by the
Stockholder.
41
7.6. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholder.
7.7. EMPLOYMENT AGREEMENT.
Sub and the Companies shall have entered into the Employment
Agreement.
7.8. LEASES.
The Companies shall have entered into the Leases.
ARTICLE 8.
TERMINATION
8.1. TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholder;
(ii) by either UAG or the Stockholder if the Closing shall not
have taken place on or prior to September 30, 1997, or such later date as
shall have been approved by UAG and the Stockholder;
(iii) by UAG or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in Article
6 hereof have not been met or waived by UAG and Sub at such time as such
condition is no longer capable of satisfaction;
(v) by the Stockholder if any of the conditions specified in
Article 7 hereof have not been met or waived by the Stockholder at such
time as such condition is no longer capable of satisfaction;
(vi) by either UAG or the Stockholder if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured (if curable) within ten
42
(10) Business Days following receipt by the breaching party of written
notice of such breach.
If UAG or the Stockholder shall terminate this Agreement pursuant to
the provisions hereof, such termination shall be effected by notice to the
other party specifying the provision hereof pursuant to which such termination
is made.
8.2. EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
(ii) for the obligations contained in Sections 5.1 and 10.2 hereof and (iii) as
set forth in Sections 9.1 and 9.2 hereof, upon the termination of this
Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith become
null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affiliates, consultants, stockholders
or principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9.
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE STOCKHOLDER.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholder indemnifies and agrees to fully defend, save and hold harmless on
an after-tax basis UAG, Sub, the Companies (after Closing), and any of their
respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "UAG Indemnified Party"), if a
UAG Indemnified Party (including the Companies after the Closing Date) shall at
any time or from time to time suffer any Costs (as defined in Section 9.6
below) arising, directly or indirectly, out of or resulting from, or shall pay
or become obligated to pay any sum on account of, (i) any and all Events of
Breach (as defined below) or (ii) any Claim before or by any court, arbitrator,
panel, agency or other governmental, administrative or judicial entity, which
Claim involves, affects or relates to any assets, properties or operations of
the Companies or the conduct of the business of the Companies prior to the
Closing Date (a "Stockholder Third Party Claim"). As used herein, "Event of
Breach" shall be and mean any one or more of the following: (i) any untruth or
inaccuracy in any representation of the Stockholder or the Companies or the
breach of any warranty of the Stockholder or the Companies contained in this
Agreement, including, without limitation, any misrepresentation in, or omission
from, any statement, certificate, schedule, exhibit, annex or other document
furnished pursuant to this Agreement by the Stockholder or the Companies (or
any representative of the Stockholder or the Companies) to UAG (or any
representative of UAG) and any misrepresentation in or omission from any
document furnished to UAG in connection with the Closing, and (ii) any failure
of the Stockholder or the Companies duly to perform or observe any term,
provision, covenant, agreement or condition on the part of the Stockholder or
the Companies to be performed or observed.
43
9.2. INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholder and the
Companies (prior to Closing) and any of their respective officers, directors,
employees, stockholders, advisors, representatives, agents and Affiliates (each
a "Stockholder Indemnified Party"), if a Stockholder Indemnified Party shall at
any time or from time to time suffer any Costs arising, directly or indirectly,
out of or resulting from, or shall pay or become obligated to pay any sum on
account of, (i) any and all UAG Events of Breach (as defined below) or (ii) any
Claim before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, which Claim involves, affects or relates to
the conduct of the business of the Companies after the Closing Date (a "UAG
Third Party Claim"). As used herein, "UAG Event of Breach" shall be and mean
any one or more of the following: (i) any untruth or inaccuracy in any
representation of UAG or Sub or the breach of any warranty of UAG or Sub
contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by UAG
(or any representative of UAG) to the Stockholder or the Companies (or any
representative of the Stockholder or the Companies) and any misrepresentation
in or omission from any document furnished to the Stockholder or the Companies
in connection with the Closing, and (ii) any failure of UAG or Sub duly to
perform or observe any term, provision, covenant, agreement or condition on the
part of UAG or Sub to be performed or observed.
9.3. PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that the Stockholder or the Companies have become obligated to a
UAG Indemnified Party pursuant to Section 9.1, or if any Stockholder Third
Party Claim is begun, made or instituted as a result of which the Stockholder
or the Companies may become obligated to a UAG Indemnified Party hereunder, or
(ii) a UAG Event of Breach occurs or is alleged and a Stockholder Indemnified
Party asserts that UAG has become obligated to a Stockholder Indemnified Party
pursuant to Section 9.2, or if any UAG Third Party Claim is begun, made or
instituted as a result of which UAG may become obligated to a Stockholder
Indemnified Party hereunder (for purposes of this Article 9, any UAG
Indemnified Party and any Stockholder Indemnified Party is sometimes referred
to as an "Indemnified Party" and UAG, Sub and the Stockholder are sometimes
referred to as an "Indemnifying Party," and any UAG Third Party Claim and any
Stockholder Third Party Claim is sometimes referred to as a "Third Party
Claim," in each case as the context so requires), such Indemnified Party shall
give written notice to the Indemnifying Party of its obligation to provide
indemnification hereunder, provided that any failure to so notify the
Indemnifying Party shall not relieve them from any liability that it may have
to the Indemnified Party under this Article 9. If such notice relates to a
Third Party Claim, each Indemnifying Party, jointly and severally, agrees to
defend, contest or otherwise protect such Indemnified Party against any such
Third Party Claim at its sole cost and expense. Such Indemnified Party shall
have the right, but not the obligation, to participate at its own expense in
the defense thereof by counsel of such Indemnified Party's choice and shall in
any event cooperate with and assist the Indemnifying
44
Party to the extent reasonably possible. If the Indemnifying Party fails timely
to defend, contest or otherwise protect against such Third Party Claim, such
Indemnified Party shall have the right to do so, including, without limitation,
the right to make any compromise or settlement thereof, and such Indemnified
Party shall be entitled to recover the entire Cost thereof from the
Indemnifying Party, including, without limitation, attorneys' fees,
disbursements and amounts paid (or of which such Indemnified Party has become
obligated to pay) as the result of such Third Party Claim. Failure by the
Indemnifying Party to notify such Indemnified Party of its or their election to
defend any such Third Party Claim within fifteen (15) days after notice thereof
shall have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its or their right to defend such Third Party Claim. If
the Indemnifying Party assumes the defense of the particular Third Party Claim,
the Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with the
written consent of such Indemnified Party. In addition, the Indemnifying Party
shall not enter into any settlement of any Third Party Claim except with the
written consent of such Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to such
Indemnified Party a full release from all liability in respect of such Third
Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to control (but shall be entitled to participate at their own expense
in the defense of), and the Indemnified Party shall be entitled to have sole
control over, the defense or settlement of any Third Party Claim to the extent
the Third Party Claim seeks an order, injunction or other equitable relief
against the Indemnified Party which, if successful, could materially interfere
with the business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party.
9.4. OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law, the parties agree that, at any
Indemnified Party's option, any or all amounts owing to such Indemnified Party
under this Article 9 or any other provision of this Agreement or any other
liability of the other parties (or any Affiliate of the other parties) to such
Indemnified Party in connection with any of the Documents, may be recovered by
the Indemnified Party by an offset against any or all amounts due to such other
parties pursuant to this Agreement or the Documents.
9.5. REMEDIES.
The rights of an Indemnified Party under this Article 9 are in
addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
9.6. DEFINITIONS.
For purposes of this Article 9 "Costs" shall mean all liabilities,
losses, costs, damages, expenses, claims, attorneys' fees, experts' fees,
consultants' fees, and disbursements of any kind or of any nature whatsoever.
For purposes of application of the indemnity provisions of this Article 9, the
amount of any Cost arising from the breach of any
45
representation, warranty, covenant or agreement shall be the entire amount of
any Cost suffered, paid or required to be paid by the respective Indemnified
Party as a result of such breach.
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF PROVISIONS.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement. In the event of a breach of any
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach available to it under the provisions of this
Agreement or otherwise, whether at law or in equity, regardless of any
disclosure to, or investigation made by or on behalf of, such party on or
before the Closing Date.
10.2. FEES AND EXPENSES.
If the Closing does not occur and Section 5.6 hereof is breached, then
the Stockholder or the Companies shall pay to UAG, within five (5) Business
Days after receipt of a request therefor, an amount equal to all of the legal
and other fees, costs and expenses incurred by UAG in connection with this
Agreement and the transactions contemplated hereby.
10.3. HEADINGS.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4. NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service for next business day delivery or
facsimile transmission (with original to follow by mail) or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Companies before the Closing Date:
R. Lynn Alexander
4310 Sherwood Way
San Angelo, Texas 76901
with a copy to:
46
W. Drew Darby, Esq.
136 West Twohig
San Angelo, Texas 76903
and
Kevin G. McMahon, C.P.A.
2230 Indiana Avenue
Lubbock, Texas 79410
If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Attn: General Counsel
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholder:
R. Lynn Alexander
4310 Sherwood Way
San Angelo, Texas 76901
with a copy to:
W. Drew Darby, Esq.
136 West Twohig
San Angelo, Texas 76903
and
Kevin G. McMahon, C.P.A.
2230 Indiana Avenue
Lubbock, Texas 79410
If to UAG or Sub:
United Auto Group, Inc.
47
375 Park Avenue
New York, New York 10152
Attn: General Counsel
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been
given as of the date so delivered or three (3) days after the date so mailed;
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5. ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, and the provisions of Article 9 hereof shall inure to
the benefit of the Indemnified Parties referred to therein; provided, however,
that neither this Agreement nor any of the rights, interests, or obligations
hereunder may be assigned by any of the parties hereto without the prior
written consent of the other parties. Notwithstanding the foregoing, UAG and
Sub shall have the unrestricted right to assign this Agreement and to delegate
all or any part of its obligations hereunder to any Affiliate of UAG or Sub,
but in such event shall UAG remain fully liable for the performance of all of
such obligations in the manner prescribed in this Agreement.
10.6. ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7. WAIVER AND AMENDMENTS.
Each of the Stockholder and the Companies, as one party, and UAG and
Sub, as the other party, may by written notice to the other parties (i) extend
the time for the performance of any of the obligations or other actions of the
other parties, (ii) waive any inaccuracies in the representations or warranties
of the other parties contained in this
48
Agreement, (iii) waive compliance with any of the covenants of the other
parties contained in this Agreement, (iv) waive performance of any of the
obligations of the other parties created under this Agreement, or (v) waive
fulfillment of any of the conditions to its own obligations under this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the parties hereto.
10.8. COUNTERPARTS.
This Agreement may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
10.9. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined or
modified in this Agreement shall have the respective meanings given to them in
accordance with GAAP.
10.10. SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement and shall not be deemed to limit any representations or
warranties made herein.
10.11. SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.12. REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in Article 8, indemnification as set
forth in Article 9, or the payment of certain fees, costs and expenses as set
forth in Section 10.2, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
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10.13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance the
laws of the State of Delaware without giving effect to any choice or conflict
of law provision or rule that would cause the laws of any other jurisdiction to
apply.
10.14. TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
---------------------------------
George G. Lowrance
Executive Vice President
UAG WEST TEXAS, INC.
By:
---------------------------------
George G. Lowrance
Vice President
ALL AMERICAN CHEVROLET, INC.
------------------------------------
By:
Its:
LYNN ALEXANDER, INC.
------------------------------------
By:
Its:
JO-VENA AUTOMOTIVE, INC.
------------------------------------
By:
Its:
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LYNN RICH MANAGEMENT COMPANY
------------------------------------
By:
Its:
------------------------------------
R. LYNN ALEXANDER, Individually
51