Exhibit 99.13
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of April 30, 1998 (this
"AGREEMENT") among SONIC AUTOMOTIVE, INC., a Delaware corporation (the "BUYER"),
and ALDO B. PARET (the "SELLER"), and CASA FORD OF HOUSTON, INC., a Texas
corporation (the "CORPORATION").
WITNESSETH:
WHEREAS, the Seller owns in the aggregate 6,125 shares of common stock,
par value $1.00 per share (the "SHARES"), of the Corporation, which shares
represent all of the issued and outstanding shares of capital stock of the
Corporation and are owned of record and beneficially by the Seller; and
WHEREAS, the Buyer desires to purchase the Shares from the Seller, and
the Seller is willing to sell the Shares to the Buyer, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and representations hereinafter stated, and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 AGREEMENT OF PURCHASE AND SALE. On the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties of the parties herein, at the closing referred to in Article 2 hereof
(the "CLOSING"), the Seller shall sell, transfer, convey and deliver to the
Buyer, and the Buyer shall purchase from the Seller, the Shares.
1.2 PURCHASE PRICE.
(a) INITIAL PURCHASE PRICE. As the initial purchase price to be
paid by the Buyer for the Shares, the Buyer shall pay to the Seller the sum of
(i) $11,250,000 less (ii) the aggregate total of the Affiliate Payables and
Excluded Indebtedness (each as defined in Section 1.2(c) below) both outstanding
as of the Closing Date (as defined in Article 2 below) as well as paid after the
Effective Closing Date (as defined in Section 1.2(c) below), subject to
adjustment as provided in Section 1.2(c) below (as so adjusted, the "INITIAL
PURCHASE PRICE").
(b) PAYMENT OF INITIAL PURCHASE PRICE. The Initial Purchase Price
shall be paid as follows:
(1) At the Closing, the Seller shall deliver to the Buyer a
certificate signed by the Seller setting forth the aggregate total of the
Affiliate Payables and Excluded Indebtedness both outstanding as of the Closing
Date as well as paid after the Effective Closing Date. At the Closing, the sum
of $8,937,000, minus the amount of any Affiliate Payables and
1
Excluded Indebtedness both outstanding as of the Closing Date as well as paid
after the Effective Closing Date, shall be payable by the Buyer to the Seller by
wire transfer of immediately available funds to the account or accounts of the
Seller, which shall be designated by the Seller in writing at least one full
Business Day prior to the Closing Date. For purposes of this Agreement, a
"BUSINESS DAY" is a day other than a Saturday, a Sunday or a day on which banks
are required to be closed in the State of North Carolina.
(2) (A) At the Closing, the Buyer shall issue to the Seller
2,313 shares of the Buyer's Class A Convertible Preferred Stock, Series III (the
"PREFERRED STOCK"). The Preferred Stock will be convertible into shares of the
Buyer's Class A Common Stock as provided in the Statement of Rights and
Preferences attached as Exhibit A hereto. At the Closing, 1,813 shares of the
Preferred Stock will be delivered to the Seller and 500 shares of the Preferred
Stock (the "ESCROW SHARES") shall be placed in escrow with NationsBank of Texas,
N.A. or another entity mutually acceptable to the Buyer and the Seller (the
"ESCROW AGENT") by the Buyer in accordance with the escrow agreement in the form
of Exhibit B hereto, with such other changes thereto as the Escrow Agent shall
reasonably request (the "ESCROW AGREEMENT").
(B) The term of the Escrow Agreement shall be until
February 1, 1999 (or such longer period of time as shall be necessary to
complete the determination of Net Current Assets pursuant to Section 1.2(c)
below). If, as of February 1, 1999 (or such later date as shall be necessary to
complete the determination of the Net Current Assets), the Buyer shall have made
no claims in respect of any Net Current Assets Shortfall (as defined in Section
1.2(c) below) or for indemnification pursuant to the terms of this Agreement,
the Buyer will execute a joint instruction pursuant to the Escrow Agreement to
instruct the Escrow Agent to deliver all of the Escrow Shares to the Seller
pursuant to the terms of the Escrow Agreement.
(C) At the Seller's option, exercisable by written notice
to the Buyer by the Seller, at or prior to the Closing (the "REGISTRATION
NOTICE"), the Buyer shall be obligated to use its reasonable best efforts to
register under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on
or before December 31, 1998, the shares (the "COMMON SHARES") of the Buyer's
Class A Common Stock which are issuable upon conversion of the Preferred Stock.
(D) If requested by the managing or lead managing
underwriter for any such registered offering of the Common Shares which is an
underwritten public offering, the Seller shall execute and deliver such
underwriting agreement with the managing or lead managing underwriter in such
form as is customarily used by such underwriter with any modifications as the
parties thereto shall agree. In connection with any such registration, the
Seller shall supply to the Buyer such information as may be reasonably requested
by the Buyer in connection with the preparation and filing of a registration
statement with the Securities and Exchange Commission. The Seller shall not
supply any information to the Buyer for inclusion in such registration statement
that will, taken as a whole, at the time the registration statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. Provided that the Buyer shall have
timely completed such registration of the Common Shares, the Seller shall
promptly convert the Preferred Stock into the Common Shares.
2
(E) In the event that the Buyer fails to timely complete
such registration of the Common Shares, the Seller may, at his option
exercisable by written notice to the Buyer not later than January 31, 1999,
require the Buyer to purchase up to all of the Preferred Stock held by the
Seller at the price of $1,000 per share. Such notice to the Buyer shall specify
the number of shares of Preferred Stock held by the Seller required to be
purchased and a closing date for such purchase which shall be not sooner than
fifteen (15) days and not longer than thirty (30) days from the date of delivery
of such notice. At the closing of such purchase, the Buyer shall deliver to the
Seller the applicable purchase price in the same manner that the cash portion of
the Purchase Price paid at Closing was paid against delivery by the Seller of
(i) the certificates for the shares of Preferred Stock of the Seller being
purchased, duly endorsed for transfer to the Buyer, and (ii) a certificate
signed by the Seller to the effect that such Preferred Stock of the Seller is
being sold free and clear of all encumbrances and claims of third persons. The
foregoing "put" right of the Seller shall also apply to the shares of the
Preferred Stock which are included in the Escrow Shares; PROVIDED, HOWEVER, the
obligation of the Buyer to purchase such shares of Preferred Stock shall arise
only if, as and when such shares of the Preferred Stock are delivered to the
Seller pursuant to the Escrow Agreement.
(F) In the event the Seller does not timely deliver a
Registration Notice, the Buyer shall have no obligation to register the Common
Shares. Thereafter, the Buyer's sole obligation with respect to the Preferred
Stock and the Common Shares, other than to honor any "put" by the Seller under
Paragraph (E) immediately above, shall be to use its reasonable best efforts to
make available current public information with respect to the Buyer within the
meaning of Subsection (c)(1) of Securities and Exchange Commission Rule 144
("RULE 144") to the extent necessary to facilitate public resales by the Seller
of the Common Shares pursuant to Rule 144.
(c) ADJUSTMENT PROCEDURES.
(1) As used in this Agreement, the term "NET CURRENT
ASSETS" shall mean (i) all of the assets of the Corporation as of the Effective
Closing Date which would, in conformity with generally accepted accounting
principles consequently applied ("GAAP"), be included under current assets on a
balance sheet as of such Date, MINUS (ii) all of the liabilities of the
Corporation as of the Effective Closing Date which would, in conformity with
GAAP, be included under current liabilities on a balance sheet as of such Date.
Not later than 60 days after the Closing Date, the Buyer will prepare and
deliver to the Seller an unaudited balance sheet (the "CLOSING BALANCE SHEET")
of the Corporation as of the close of business on April 30, 1998 (the "EFFECTIVE
CLOSING DATE") consisting of computations of (A) the Net Current Assets and (B)
the net book value of the other tangible assets and liabilities of the
Corporation as of the Effective Closing Date, all as determined in accordance
with GAAP; PROVIDED, HOWEVER, that (A) used vehicle inventories shall be valued
as mutually agreed by the Buyer and the Seller, based upon a physical inventory
to be conducted by them not later than the Business Day immediately preceding
the Effective Closing Date, with any used vehicles as to which the Buyer and the
Seller cannot reach agreement as to value being valued by a mutually acceptable
third party engaged in the business of appraising and valuing inventories for
automobile dealerships not later than the Business Day immediately preceding the
Effective Closing Date, (B) parts inventories shall include only Ford returnable
parts, which shall be valued based on the value of
3
such returnable parts under applicable returnable parts plans with Ford, and
salable non-Ford parts shall be valued at net book value, (C) no amounts owing
to the Corporation from the Seller or any Affiliate (as hereinafter defined)
thereof, or from any of the Corporation's officers or employees, shall be
included, (D) no amounts payable to the Seller or to any officers and directors
or other Affiliates (as hereinafter defined) of the Corporation (all the
foregoing amounts payable being, collectively, "AFFILIATE PAYABLES") shall be
included, (E) no liabilities or obligations (including, without limitation,
principal, interest, penalties, fees or other expenses) under lines of credit
(including, without limitation the Corporation's working capital line with Ford
Motor Credit) and other long and short term indebtedness to financial
institutions and other similar financings (all the foregoing liabilities and
obligations being, collectively, "EXCLUDED INDEBTEDNESS") shall be included,
except for new, used and rental vehicle "floor planning" lines, which shall be
included, and (F) there shall be included appropriate write-offs for doubtful
accounts receivable and bad debts and for damaged, spoiled, obsolete or
slow-moving inventory. For purposes of this Agreement, the term "AFFILIATE"
shall mean any entity directly or indirectly controlling, controlled by or under
common control with the specified person, whether by stock ownership, agreement
or otherwise, or any parent, child or sibling of such specified person and the
concept of "CONTROL" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
(2) If within 30 days following delivery of the Closing
Balance Sheet (or the next Business Day if such 30th day is not a Business Day),
the Seller has not given the Buyer notice of the Seller's objection to the
computation of the Net Current Assets as set forth in the Closing Balance Sheet
(such notice to contain a statement in reasonable detail of the nature of the
Seller's objection), then the Net Current Assets reflected in the Closing
Balance Sheet will be deemed mutually agreed by the Buyer and the Seller. If the
Seller shall have given such notice of objection in a timely manner, then the
issues in dispute will be submitted to a "Big Six" accounting firm mutually
acceptable to the Buyer and the Seller (the "ACCOUNTANTS") for resolution. If
issues in dispute are submitted to the Accountants for resolution: (A) each
party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to the party or its subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the determination with
the Accountants; (B) the Accountants will be instructed to determine the Net
Current Assets based upon their resolution of the issues in dispute; (C) such
determination by the Accountants of the Net Current Assets, as set forth in a
notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (D) the Buyer and the Seller shall each bear 50%
of the fees and expenses of the Accountants for such determination.
(3) To the extent that Net Current Assets, as deemed
mutually agreed by the parties or as determined by the Accountants, as
aforesaid, equals or exceeds $1,800,000 (any such excess being called the "NET
CURRENT ASSETS EXCESS"), the Buyer shall be obligated to (A) execute and deliver
to the Escrow Agent a joint instruction to deliver the Escrow Shares to the
Seller pursuant to the Escrow Agreement (except to the extent of any pending
indemnification claim by the Buyer pursuant to this Agreement), and (B) pay any
Net Current Assets Excess promptly to the Seller, together with interest on the
amount of the Net Current Assets Excess at the Buyer's floor plan financing rate
from time to time in effect (the "INTEREST
4
RATE") from the Closing Date to the date of such payment. To the extent that the
Net Current Assets, as deemed mutually agreed by the parties or as determined by
the Accountants, as aforesaid, is less than $1,800,000 (the "NET CURRENT ASSETS
SHORTFALL"), the Seller shall be obligated to pay the amount of the Net Current
Assets Shortfall promptly to the Buyer. In furtherance of such obligation of the
Seller, the parties shall execute and deliver to the Escrow Agent a joint
instruction to deliver up to all of the Escrow Shares to the Buyer at the rate
of one Escrow Share for each $1,000 of Net Current Assets Shortfall. To
facilitate administration of the Escrow Shares, no fractional shares of the
Preferred Stock shall be delivered. To the extent that the Net Current Assets
Shortfall exceeds the value (at $1,000 per share) of the Escrow Shares so
delivered to the Buyer, the Seller shall be obligated to pay the amount of such
excess promptly to the Buyer, together with interest on the amount of such
excess at the Interest Rate from the Closing Date to the date of such payment.
(d) CONTINGENT PURCHASE PRICE.
(1) As used in this Agreement, (i) the term "CONTINGENT
PURCHASE PRICE" shall mean an amount equal to the amounts payable pursuant to
paragraph (2) below; (ii) the term "FIRST CALCULATION PERIOD " shall mean
calendar year 1998; (iii) the term "SECOND CALCULATION PERIOD" shall mean
calendar year 1999; (iv) the term "SUBJECT BUSINESS" shall mean the business of
the Corporation acquired by the Buyer pursuant to this Agreement; (v) the term
"EARNINGS BEFORE TAXES" shall mean the earnings before taxes of the Subject
Business for the First Calculation Period or the Second Calculation Period, as
the case may be, as more fully provided in paragraph (3) below; (vi) the term
"PRO FORMA EARNINGS BEFORE TAXES" shall mean Earnings Before Taxes for the First
Calculation Period subject to the following adjustments to reflect compensation
to Aldo B. Paret pursuant to the Employment Agreement in the form of Exhibit E
hereto as if such Employment Agreement were the sole source and basis for any
and all payments to him from January 1, 1998; and (vii) the term "MARKET PRICE"
shall mean the average closing price per share of the Buyer's Class A Common
Stock on the New York Stock Exchange for the twenty (20) consecutive trading
days immediately preceding the date of determination.
(2) Subject to the provisions of Section 9.7 below, not
later than 90 days after the end of the First Calculation Period or the Second
Calculation Period, as the case may be, the Buyer shall pay to the Seller an
installment of the Contingent Purchase Price calculated as follows:
(i) The installment of the Contingent Purchase Price
for the First Calculation Period shall be an amount equal to five (5) times the
excess, if any, of Pro Forma Earnings Before Taxes in excess of $2,500,000; and
(ii) The installment of the Contingent Purchase Price
for the Second Calculation Period shall be an amount equal to five (5) times the
excess, if any, of Earnings Before Taxes for the Second Calculation Period in
excess of the greater of (A) $2,500,000, or (B) the Pro Forma Earnings Before
Taxes.
An amount equal to 100% of each installment of the Contingent Purchase
Price, up to $2,500,000, shall be paid to the Seller by the issuance and
delivery to the Seller of shares of
5
Preferred Stock at the rate of one share of Preferred Stock for every $1,000 of
such Contingent Purchase Price or, at the sole discretion of Buyer, registered
shares of the Buyer's Class A Common Stock having an aggregate Market Price on
the date of payment of $2,500,000. Payment of each installment of the Contingent
Purchase Price in excess of $2,500,000 will be paid to the Seller 65% in cash
and 35% in shares of Preferred Stock at the rate of one share of Preferred Stock
for every $1,000 of such Contingent Purchase Price, or, at the sole discretion
of Buyer shares of such registered Class A Common Stock of the Buyer having an
aggregate Market Price on the date of payment equal to the applicable number of
shares of Preferred Stock (valued at $1,000 per share of such Preferred Stock).
Fractional shares of Preferred Stock may be issued in connection with the
payment of the Contingent Purchase Price; HOWEVER, no fractional shares of the
Buyer's Class A Common Stock shall be issued upon conversion of the Preferred
Stock.
(3) Earnings Before Taxes shall be calculated by the Buyer
in accordance with GAAP and subject to the following special rules:
(i) No deduction shall be taken for federal and state
income taxes, or for state franchise taxes based on corporate income, owed by
the Corporation;
(ii) No deduction shall be taken for any interest
expenses (including acquisition debt) of the Corporation other than floor plan
financing interest attributable to the Subject Business and other interest
expenses directly attributable to the operations of the Subject Business;
(iii) Earnings Before Taxes shall be determined before
any expense chargeable with respect to the Non-Competition Agreement (as defined
in Section 1.4(a) below) or any management fee expense allocation from the Buyer
in respect of management fees payable to the Buyer;
(iv) No deduction shall be taken for any amortization
of goodwill included in the Initial Purchase Price;
(v) Overhead expenses or other expenses which have been
incurred by the Corporation which are allocated to the Corporation but do not
directly relate to the operation of the Subject Business, or that portion so
allocated which is not reasonably related to the operation of the Subject
Business, shall not be deducted in determining Earnings Before Taxes;
(vi) Earnings Before Taxes shall be determined prior to
calculation of the Contingent Purchase Price; and
(vii) Income on warranty and insurance products shall
not be deducted in determining Earnings Before Taxes.
At the time of the making of the payment of an installment of the
Contingent Purchase Price, the Buyer shall deliver to the Seller a statement in
writing setting forth in reasonable detail the manner in which the respective
installment of Contingent Purchase Price was determined.
6
1.3 DELIVERY OF THE SHARES.
(a) At the Closing, the Seller shall deliver to the Buyer a
certificate or certificates representing the Shares, duly endorsed in blank or
with a fully executed stock power attached, all in proper form for transfer with
all transfer taxes, if any, paid by the Seller.
(b) The Shares shall be delivered to the Buyer free and clear of
all liens, pledges, encumbrances, claims, security interests, charges, voting
trusts, voting agreements, other agreements, rights, options, warrants or
restrictions or claims of any kind, nature or description (collectively,
"ENCUMBRANCES").
1.4 NON-COMPETITION AGREEMENT; EMPLOYMENT AGREEMENT.
(a) NON-COMPETITION AGREEMENT. At the Closing, the Seller will
enter into a non-competition agreement with the Buyer and the Corporation
substantially in the form of Exhibit C hereto (the "NON-COMPETITION AGREEMENT").
(b) EMPLOYMENT AGREEMENT. At the Closing, the Seller and the
Corporation will enter into an employment agreement substantially in the form of
Exhibit D hereto (the "EMPLOYMENT AGREEMENT").
ARTICLE 2
CLOSING
The Closing shall take place at the offices of Parker, Poe, Adams &
Bernstein, L.L.P., 201 S. College Street, Suite 2500, Charlotte, North Carolina,
at 9:30 a.m., local time, on the Closing Date. The Closing Date shall be the
fifth (5th) Business Day, or such shorter period as the Buyer may choose,
following the date the Buyer gives notice of the Closing to the Seller, but in
no event later than July 1, 1998 (the "CLOSING DATE DEADLINE"); PROVIDED,
HOWEVER, if as of the Closing Date Deadline, the consents or approvals of all
applicable automobile manufacturers and distributors contemplated in Section
7.10 shall not have been obtained and/or the audited financial statements
contemplated in Section 7.14 shall not have been completed, the Buyer may, so
long as it is using its reasonable best efforts to obtain such consents or
approvals and/or complete such financial statements, elect to extend the Closing
Date Deadline for up to an additional 60 days. The date upon which the Closing
shall take place is hereinafter called the "CLOSING DATE."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
3.1 OWNERSHIP OF SHARES. The Seller owns of record and beneficially all
of the Shares. The Seller has, and will have at the time of the Closing, good
and valid title to the Shares, free and clear of all Encumbrances.
7
3.2 SELLER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS.
(a) The Seller has full capacity, right, power and authority to
execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Seller in connection herewith,
to consummate the transactions contemplated hereby and thereby and to perform
his obligations hereunder and thereunder.
(b) Except as set forth on Schedule 3.2(b) hereto, no
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party, is required in
connection with the execution and delivery by the Seller of this Agreement and
the other agreements, documents and instruments to be executed and delivered by
the Seller in connection herewith, the consummation of the transactions
contemplated hereby and thereby and the performance by the Seller of his
obligations hereunder and thereunder.
3.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other
agreements, documents and instruments to be executed by the Seller in connection
herewith, and the consummation by the Seller of the transactions contemplated
hereby and thereby, have been duly authorized, executed and delivered by the
Seller and constitute, and the other agreements, documents and instruments
contemplated hereby, when executed and delivered by the Seller, shall
constitute, the legal, valid and binding obligations of the Seller, enforceable
against the Seller in accordance with their respective terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally.
3.4 LITIGATION REGARDING SELLER. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the Seller's knowledge, threatened or probable of assertion, against the
Seller relating to the Shares, this Agreement or the transactions contemplated
hereby before any court, governmental or administrative agency or other body.
The Seller does not know of any basis for the institution of any such suit or
proceeding. No judgment, order, writ, injunction, decree or other similar
command of any court or governmental or administrative agency or other body has
been entered against or served upon the Seller relating to the Shares, this
Agreement or the transactions contemplated hereby.
3.5 INTEREST IN COMPETITORS AND RELATED ENTITIES; CERTAIN TRANSACTIONS.
(a) Except as set forth on Schedule 3.5 hereto, neither the Seller
nor any Affiliate of the Seller (i) has any direct or indirect interest in any
person or entity engaged or involved in any business which is competitive with
the business of the Corporation, (ii) has any direct or indirect interest in any
person or entity which is a lessor of assets or properties to, material supplier
of, or provider of services to, the Corporation, or (iii) has a beneficial
interest in any contract or agreement to which the Corporation is a party;
PROVIDED, HOWEVER, that the foregoing representation and warranty shall not
apply to any person or entity, or any interest or agreement with any person or
entity, which is a publicly held corporation in which the Seller individually
owns less than 3% of the issued and outstanding voting stock.
(b) Except as set forth in Schedule 3.5 hereto, there are no
transactions between the Corporation and the Seller (including the Seller's
Affiliates), or any of the directors, officers
8
or salaried employees of the Corporation, or the family members or Affiliates of
any of the above (other than for services as employees, officers and directors),
including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from, the
Seller, or any such officer, director or salaried employee, family member, or
Affiliate or any corporation, partnership, trust or other entity in which such
family member, Affiliate, officer, director or employee has a substantial
interest or is a shareholder, officer, director, trustee or partner.
3.6 SELLER NOT FOREIGN PERSON. The Seller is a "United States person"
as that term is defined in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended (the "CODE"), and the regulations promulgated thereunder.
3.7 ORGANIZATION; GOOD STANDING; QUALIFICATIONS; AND POWER. The
Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Corporation is qualified to do business as a foreign
corporation and is in good standing in each of the jurisdictions listed on
Schedule 3.7 hereto, which are the only jurisdictions where the nature of its
business and assets requires such qualification.
3.8 CAPITALIZATION. The authorized capital stock of the Corporation
consists of 6,125 shares of common stock, par value $1.00 per share, of which
6,125 are issued and outstanding and constitute the Shares. All of the Shares
are duly authorized, validly issued, fully paid and non-assessable and are held
by the Seller. Except as set forth on Schedule 3.8 hereto, there are no
preemptive rights, whether at law or otherwise, to purchase any of the
securities of the Corporation and there are no outstanding options, warrants,
"phantom" stock plans, subscriptions, agreements, plans or other commitments
pursuant to which the Corporation is or may become obligated to sell or issue
any shares of its capital stock or any other debt or equity security, and there
are no outstanding securities convertible into shares of such capital stock or
any other debt or equity security.
3.9 SUBSIDIARIES AND INVESTMENTS. The Corporation does not own or
maintain, directly or indirectly, any capital stock of or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity and does not have any
commitment to contribute to the capital of, make loans to, or share in the
losses of, any such entity.
3.10 NO VIOLATION; CONFLICTS. Except as set forth on Schedule 3.10
hereto, the execution and delivery by the Seller of this Agreement and the other
agreements, documents and instruments to be executed and delivered by the Seller
in connection herewith, the consummation by the Seller of the transactions
contemplated hereby and thereby and the performance by the Seller of his
obligations hereunder and thereunder do not and will not (a) conflict with or
violate any of the terms of the Articles of Incorporation or By-Laws of the
Corporation, (b) violate or conflict with any law, ordinance, rule or
regulation, or any judgment, order, writ, injunction, decree or similar command
of any court, administrative or governmental agency or other body,
9
applicable to the Corporation, (c) violate or conflict with the terms of, or
result in the acceleration of, any indebtedness or obligation of the Corporation
under, or violate or conflict with or result in a breach of, or constitute a
default under, any indenture, mortgage, deed of trust, agreement or instrument
to which the Corporation is a party or by which the Corporation or any of its
assets or properties is bound or affected, (d) result in the creation or
imposition of any Encumbrance of any nature upon any of the assets or properties
of the Corporation, (e) constitute an event permitting termination of any
agreement, license or other right of the Corporation, or (f) require any
authorization, approval or consent of, or any notice to or filing or
registration with, any governmental agency or body, or any other third party,
applicable to the Corporation or any of its properties or assets.
3.11 TITLE TO ASSETS; RELATED MATTERS. The Corporation has good and
valid title to all assets, rights, interests and other properties, real,
personal and mixed, tangible and intangible, owned by it (collectively, the
"ASSETS"), free and clear of all Encumbrances, except those specified on
Schedule 3.11 and liens for taxes not yet due and payable. The Assets (a)
include all properties and assets (real, personal and mixed, tangible and
intangible) owned by the Corporation; (b) do not include (i) any contracts for
future services, prepaid items or deferred charges the full value or benefit of
which will not be usable by or transferable to the Buyer, or (ii) any goodwill,
organizational expense or other similar intangible asset.
3.12 POSSESSION. The tangible assets included within the Assets are in
the possession or control of the Corporation and no other person or entity has a
right to possession or claims possession of all or any part of such Assets,
except the rights of lessors of Leased Equipment and Leased Premises (each as
defined in Section 3.16 hereof) under their respective contracts and leases.
3.13 FINANCIAL STATEMENTS.
(a) The Seller has delivered to the Buyer prior to the date hereof
the financial statements listed on Schedule 3.13 hereto (hereinafter
collectively referred to as the "FINANCIAL STATEMENTS");
(b) The Financial Statements (i) are in accordance with the books
and records of the Corporation, which books and records are true, correct and
complete, (ii) fully and fairly present the financial position of the
Corporation as of the dates indicated and the results of operation,
stockholders' equity and changes in cash flows of the Corporation for the
periods indicated, and (iii) except as set forth in Schedule 3.13, have been
prepared in accordance with GAAP on an FIFO basis.
3.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Corporation
are collectible at the aggregate recorded amounts thereof, subject to the
reserve for doubtful accounts maintained by the Corporation in the ordinary
course of business, and are not subject to any known counterclaims or setoffs.
An adequate reserve for doubtful accounts for the Corporation has been
established and such reserve is consistent with both the operation of the
Corporation in the ordinary course of business and past practice.
10
3.15 INVENTORIES. All inventories of the Corporation consist of items
of a quality and quantity usable and saleable in the ordinary course of business
of the Corporation, and the levels of inventories are consistent with the levels
maintained by the Corporation in the ordinary course consistent with past
practice and the Corporation's obligations under its agreements with all
applicable vehicle manufacturers and distributors. The values at which such
inventories are carried are based on the FIFO method and are stated in
accordance with generally accepted accounting principles consistently applied by
the Seller at the lower of historic cost or market. An adequate reserve has been
established by the Corporation for damaged, spoiled, obsolete, defective, or
slow-moving goods and such reserve is consistent with both the operation of the
Corporation in the ordinary course of business and past practice.
3.16 LEASED PREMISES; MACHINERY AND EQUIPMENT.
(a) OWNED REAL PROPERTY. The Corporation does not own any real
property of any kind.
(b) LEASED PREMISES. Schedule 3.16(b) hereto contains a complete
list and description (including buildings and other structures thereon) of all
real property of which the Corporation is a tenant (herein collectively referred
to as the "LEASED PREMISES" and sometimes collectively referred to as the "REAL
PROPERTY"). True, correct and complete copies of all leases of all Leased
Premises (the "LEASES") have been delivered to the Buyer. The Leased Premises
are in good physical condition and, with respect to each Lease, no event or
condition currently exists which would give rise to a material repair or
restoration obligation if such Lease were to terminate. The Seller has no
knowledge of any event or condition which currently exists which would create a
legal or other impediment to the use of the Leased Premises as currently used,
or would increase the additional charges or other sums payable by the tenant
under any of the Leases (including, without limitation, any pending tax
reassessment or other special assessment affecting the Leased Premises). The
improvements and building systems which comprise a part of the Leased Premises
as to which the Corporation is responsible for the maintenance and repair
thereof are in good condition, maintenance and repair.
(c) CLAIMS. There has been no work performed, services rendered or
materials furnished in connection with repairs, improvements, construction,
alteration, demolition or similar activities with respect to the Real Property
for at least ninety (90) days before the date hereof; there are no outstanding
claims or persons entitled to any claim or right to a claim for a mechanics' or
materialman's lien against the Real Property; and there is no person or entity
other than the Corporation in or entitled to possession of the Real Property.
(d) EASEMENTS, ETC. The Corporation has all easements and rights,
including, but not limited to, easements for power lines, water lines, sewers,
roadways and other means of ingress and egress, necessary to conduct the
business the Corporation now conducts, all such easements and rights are
perpetual, unconditional appurtenant rights to the Real Property, and none of
such easements or rights are subject to any forfeiture or divestiture rights.
(e) CONDEMNATION. Neither the whole nor any portion of any of the
Real Property has been condemned, expropriated, ordered to be sold or otherwise
taken by any public
11
authority, with or without payment or compensation therefor, and the Seller does
not know of any such condemnation, expropriation, sale or taking, or have any
grounds to anticipate that any such condemnation, expropriation, sale or taking
is threatened or contemplated. The Seller has no knowledge of any pending
assessments which would affect the Real Property.
(f) ZONING, ETC. None of the Real Property is in violation of any
public or private restriction or any law or any building, zoning, health,
safety, fire or other law, ordinance, code or regulation, and no notice from any
governmental body has been served upon the Corporation or upon any of the Real
Property claiming any violation of any such law, ordinance, code or regulation
or requiring or calling to the attention of the Corporation the need for any
work, repair, construction, alterations or installation on or in connection with
said properties which has not been complied with. All improvements which
comprise a part of the Real Property are located within the record lines of the
Real Property and none of the improvements located on the Real Property encroach
upon any adjoining property or any easements or rights of way and no
improvements located on any adjoining property encroach upon any of the Real
Property or any easements or rights of way servicing the Real Property.
(g) OWNED EQUIPMENT. Schedule 3.16(g) hereto sets forth a list of
all material machinery, equipment, motor vehicles, furniture and fixtures owned
by the Corporation (collectively, the "OWNED EQUIPMENT").
(h) LEASED EQUIPMENT. Schedule 3.16(h) hereto contains a list of
all leases or other agreements, whether written or oral, under which the
Corporation is lessee of or holds or operates any items of machinery, equipment,
motor vehicles, furniture and fixtures or other property (other than real
property) owned by any third party (collectively, the "LEASED EQUIPMENT").
(i) MAINTENANCE OF EQUIPMENT. The Owned Equipment and the Leased
Equipment are in good operating condition, maintenance and repair in accordance
with industry standards taking into account the age thereof.
3.17 PATENTS; TRADEMARKS; TRADE NAMES; COPYRIGHTS; LICENSES, ETC.
(a) Except as set forth on Schedule 3.17 hereto, there are no
patents, trademarks, trade names, service marks, service names and copyrights,
and there are no applications therefor or licenses thereof, inventions, trade
secrets, computer software, logos, slogans, proprietary processes and formulae
and all other proprietary information, know-how and intellectual property
rights, whether patentable or unpatentable, that are owned or leased by the
Corporation or used in the conduct of the Corporation's business. The
Corporation is not a party to, nor pays a royalty to anyone under, any license
or similar agreement. There is no existing claim, or, to the knowledge of the
Seller, any basis for any claim, against the Corporation that any of its
operations, activities or products infringe the patents, trademarks, trade
names, copyrights or other property rights of others or that the Corporation is
wrongfully or otherwise using the property rights of others.
12
(b) The Corporation has the right to use the names "Casa Ford"
and/or "Casa Ford of Houston" in the Houston, Texas Metropolitan Statistical
Area (as defined by the Office of Management and Budget) and, to the knowledge
of the Seller, no person uses, or has the right to use, in such Area, such name
or any derivation thereof in connection with the manufacture, sale, marketing or
distribution of products or services commonly associated with an automobile
dealership.
3.18 CERTAIN LIABILITIES.
(a) All accounts payable by the Corporation to third parties as of
the date hereof arose in the ordinary course of business and none are delinquent
or past-due.
(b) Schedule 3.18 hereto sets forth a list of all indebtedness of
the Corporation, other than accounts payable, as of the close of business on the
day preceding the date hereof, including, without limitation, money borrowed,
indebtedness of the Corporation owed to stockholders and former stockholders,
the deferred purchase price of assets, letters of credit and capitalized leases,
indicating, in each case, the name or names of the lender, the date of maturity,
the rate of interest, any prepayment penalties or premiums and the unpaid
principal amount of such indebtedness as of such date.
3.19 NO UNDISCLOSED LIABILITIES. The Corporation does not have any
material liabilities or obligations of any nature, known or unknown, fixed or
contingent, matured or unmatured, other than those (a) reflected in the
Financial Statements, (b) incurred in the ordinary course of business since the
date of the Financial Statements and of the type and kind reflected in the
Financial Statements, or (c) disclosed specifically on Schedule 3.19 hereto.
3.20 ABSENCE OF CHANGES. Since December 31, 1997, the business of the
Corporation has been operated in the ordinary course, consistent with past
practices and, except as set forth on Schedule 3.20 hereto, there has not been
incurred, nor has there occurred:
(a) Any damage, destruction or loss (whether or not covered by
insurance), adversely affecting the business or assets of the Corporation in
excess of $50,000; (b) Any strikes, work stoppages or other labor disputes
involving the employees of the Corporation; (c) Any sale, transfer, pledge or
other disposition of any of the Assets of the Corporation having an aggregate
book value of $50,000 or more (except sales of vehicles and parts inventory in
the ordinary course of business); (d) Any declaration or payment of any dividend
or other distribution in respect of its capital stock or any redemption,
repurchase or other acquisition of its capital stock, (e) any amendment,
termination, waiver or cancellation of any Material Agreement (as defined in
Section 3.29 hereof) or any termination, amendment, waiver or cancellation of
any material right or claim of the Corporation under any Material Agreement
(except in each case in the ordinary course of business and consistent with past
practice); (f) Any (1) general uniform increase in the compensation of the
employees of the Corporation (including, without limitation, any increase
pursuant to any bonus, pension, profit-sharing, deferred compensation or other
plan or commitment), (2) increase in any such compensation payable to any
individual officer, director, consultant or agent thereof, or (3) loan or
commitment therefor made by the Corporation to any officer, director,
stockholder, employee, consultant or agent of the Corporation; (g) Any change in
the accounting methods, procedures
13
or practices followed by the Corporation or any change in depreciation or
amortization policies or rates theretofore adopted by the Corporation; (h) Any
material change in policies, operations or practices of the Corporation with
respect to business operations followed by the Corporation, including, without
limitation, with respect to selling methods, returns, discounts or other terms
of sale, or with respect to the policies, operations or practices of the
Corporation concerning the employees of the Corporation; (i) Any capital
appropriation or expenditure or commitment therefor on behalf of the Corporation
in excess of $50,000 individually or $100,000 in the aggregate; (j) Any
write-down or write-up of the value of any inventory or equipment of the
Corporation or any increase in inventory levels in excess of historical levels
for comparable periods; (k) Any account receivable in excess of $50,000 or note
receivable in excess of $50,000 owing to the Corporation which (1) has been
written off as uncollectible, in whole or in part, (2) has had asserted against
it any claim, refusal or right of setoff, or (3) the account or note debtor has
refused to, or threatened not to, pay for any reason, or such account or note
debtor has become insolvent or bankrupt; (l) Any other change in the condition
(financial or otherwise), business operations, assets, earnings, business or
prospects of the Corporation which, in the judgment of the Seller, has, or could
reasonably be expected to have, a material adverse effect on the assets,
business or operations of the Corporation; or (m) Any agreement, whether in
writing or otherwise, for the Corporation to take any of the actions enumerated
in this Section 3.20.
3.21 TAX MATTERS.
(a) All federal, state and local tax returns and tax reports
required as of the date hereof to be filed by the Corporation for taxable
periods ending prior to the date hereof have been duly and timely filed prior to
the due date thereof (as such due date may have been lawfully extended) by the
Corporation with the appropriate governmental agencies, and all such returns and
reports are true, correct and complete.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("TAXES"), payable by, or due from, the Corporation for
all periods prior to the date hereof have been fully paid or adequately reserved
for by the Corporation or, with respect to Taxes required to be accrued, the
Corporation has properly accrued or will properly accrue such Taxes in the
ordinary course of business consistent with past practice of the Corporation.
(c) Set forth on Schedule 3.21 hereto are the tax years for which
the federal income tax returns of the Corporation have been examined by the
Internal Revenue Service ("IRS") and accepted. Except as set forth on Schedule
3.21 hereto, the Corporation has not received any notice of any assessed or
proposed claim or deficiency against it in respect of, or of any present dispute
between it and any governmental agency concerning, any Taxes. Except as set
forth on Schedule 3.21 hereto, no examination or audit of any tax return or
report of the Corporation by any applicable taxing authority is currently in
progress and there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return or report of the
Corporation. Copies of all federal, state and local tax returns and reports
required to be filed by the Corporation since the date of its incorporation
(i.e., for the years ended 1997, 1996, 1995 and 1994), together with all
schedules and attachments thereto, have been delivered by the Seller to the
Buyer.
14
(d) The Corporation is not now, and has never been, a member of a
consolidated group for federal income tax purposes or a consolidated, combined
or similar group for state tax purposes. No consent under Code Section 341 has
been made affecting the Corporation. The Corporation is not a party to any
agreement or arrangement that would result in the payment of any "excess
parachute payments" under Code Section 280G. The Corporation is not required to
make any adjustment under Code Section 481(a). No power of attorney relating to
Taxes is currently in effect affecting the Corporation.
3.22 COMPLIANCE WITH LAWS, ETC. The Corporation has conducted its
operations and business in compliance with, and all of the Assets (including all
of the Real Property) comply with, (i) all applicable laws, rules, regulations
and codes (including, without limitation, any laws, rules, regulations and codes
relating to anticompetitive practices, contracts, discrimination, employee
benefits, employment, health, safety, fire, building and zoning, but excluding
Environmental Laws which are the subject of Section 3.36 hereof) and (ii) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances.
The Corporation has not received any notification of any asserted present or
past failure by it to comply with such laws, rules or regulations, or such
orders, writs, judgments, injunctions, decrees or ordinances. Set forth on
Schedule 3.22 hereto are all orders, writs, judgments, injunctions, decrees and
other awards of any court or governmental agency applicable to the Corporation
or its business or operations. The Seller has delivered to the Buyer copies of
all reports, if any, of the Corporation required to be submitted under the
Federal Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations. The deficiencies, if
any, noted on such reports have been corrected by the Corporation and any
deficiencies noted by inspection through the Closing Date will have been
corrected by the Corporation by the Closing Date.
3.23 LITIGATION REGARDING THE CORPORATION. Except as set forth on
Schedule 3.23 hereto, there are no actions, suits, claims, investigations or
legal, administrative or arbitration proceedings pending, or, to the Seller's
knowledge, threatened or probable of assertion, against the Corporation or
relating to its assets, business or operations or the transactions contemplated
by this Agreement, and the Seller does not know of any basis for the institution
of any such suit or proceeding. No order, writ, judgment, injunction, decree or
similar command of any court or any governmental or administrative agency or
other body has been entered against or served upon the Corporation relating to
the Corporation or its assets, business or operations.
3.24 PERMITS, ETC. Set forth on Schedule 3.24 hereto is a list of all
governmental licenses, permits, approvals, certificates of inspection and other
authorizations, filings and registrations that are necessary for the Corporation
to own and operate its business as presently conducted (collectively, the
"PERMITS"). All such Permits have been duly and lawfully secured or made by the
Corporation and are in full force and effect. There is no proceeding pending,
or, to the Seller's knowledge, threatened or probable of assertion, to revoke or
limit any such Permit. None of the transactions contemplated by this Agreement
will terminate, violate or limit the effectiveness of any such Permit.
3.25 EMPLOYEES; LABOR RELATIONS. As of the date hereof, the Corporation
employed a total of approximately 110 employees. As of the date hereof, (a) the
Corporation is not delinquent in the payment (i) to or on behalf of its past or
present employees of any wages, salaries, commissions, bonuses, benefit plan
contributions or other compensation for all periods
15
prior to the date hereof, or (ii) of any amount which is due and payable to any
state or state fund pursuant to any workers' compensation statute, rule or
regulation or any amount which is due and payable to any workers' compensation
claimant; (b) there are no collective bargaining agreements currently in effect
between the Corporation and labor unions or organizations representing any
employees of the Corporation; (c) no collective bargaining agreement is
currently being negotiated by the Corporation; (d) to the knowledge of the
Seller, there are no union organizational drives in progress and there has been
no formal or informal request to the Corporation for collective bargaining or
for an employee election from any union or from the National Labor Relations
Board; and (e) no dispute exists between the Corporation and any of its sales
representatives or, to the knowledge of the Seller, between any such sales
representatives with respect to territory, commissions, products or any other
terms of their representation.
3.26 COMPENSATION. Schedule 3.26 contains a schedule of all employees
(including sales representatives) and consultants of the Corporation whose
individual cash compensation for the year ended December 31, 1997, is in excess
of $100,000, together with the amount of total compensation paid to each such
person for the twelve month period ended December 31, 1997 and the current
aggregate base salary or hourly rate (including any bonus or commission) for
each such person.
3.27 EMPLOYEE BENEFITS.
(a) The Seller has listed on Schedule 3.27 and has delivered to
the Buyer true and complete copies of all Employee Plans (as defined below) and
related documents, established, maintained or contributed to by the Corporation
(which shall include for this purpose and for the purpose of all of the
representations in this Section 3.27, the Seller and all employers, whether or
not incorporated, that are treated together with the Corporation as a single
employer with the meaning of Section 414 of the Code). The term "EMPLOYEE PLAN"
shall include all plans described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and also shall include,
without limitation, any deferred compensation, stock, employee or retiree
pension benefit, welfare benefit or other similar fringe or employee benefit
plan, program, policy, contract or arrangement, written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, covering employees or
former employees of the Corporation and maintained or contributed to by the
Corporation.
(b) Where applicable, each Employee Plan (i) has been administered
in material compliance with the terms of such Employee Plan and the requirements
of ERISA and the Code; and (ii) is in material compliance with the reporting and
disclosure requirements of ERISA and the Code. The Corporation does not maintain
or contribute to, and has never maintained or contributed to, an Employee Plan
subject to Title IV of ERISA or a "multiemployer plan." There are no facts
relating to any Employee Plan that (i) have resulted in a "prohibited
transaction" of a material nature or have resulted or is reasonably likely to
result in the imposition of a material excise tax, penalty or liability pursuant
to Section 4975 of the Code, (ii) have resulted in a material breach of
fiduciary duty or violation of Part 4 of Title I of ERISA, or (iii) have
resulted or could result in any material liability (whether or not asserted as
of the date hereof) of the Corporation or any ERISA affiliate pursuant to
Section 412 of the Code arising under or related to any event, act or omission
occurring on or prior to the date hereof. Each Employee Plan that is intended to
qualify under Section 401(a) or to be exempt under Section
16
501(c)(g) of the Code is so qualified or exempt as of the date hereof in each
case as such Employee Plan has received favorable determination letters from the
Internal Revenue Service with respect thereto. To the knowledge of the Seller,
the amendments to and operation of any Employee Plan subsequent to the issuance
of such determination letters do not adversely affect the qualified status of
any such Employee Plan. No Employee Plan has an "accumulated funding deficiency"
as of the date hereof, whether or not waived, and no waiver has been applied
for. The Corporation has made no promises or incurred any liability under any
Employee Plan or otherwise to provide health or other welfare benefits to former
employees of the Corporation, except as specifically required by law. There are
no pending or, to the best knowledge of the Seller, threatened claims (other
than routine claims for benefit) or lawsuits with respect to any of the
Corporation's Employee Plans. As used in this Section 3.27, all technical terms
enclosed in quotation marks shall have the meaning set forth in ERISA.
3.28 POWERS OF ATTORNEY. There are no persons, firms, associations,
corporations or business organizations or entities holding general or special
powers of attorney from the Corporation.
3.29 MATERIAL AGREEMENTS.
(a) LIST OF MATERIAL AGREEMENTS. Set forth on Schedule 3.29(a)
hereto is a list or, where indicated, a brief description of all leases and all
other contracts, agreements, documents, instruments, guarantees, plans,
understandings or arrangements, written or oral, which are material to the
Corporation or its business or assets (collectively, the "MATERIAL AGREEMENTS").
True copies of all written Material Agreements and written summaries of all oral
Material Agreements described or required to be described on Schedule 3.29(a)
have been furnished to the Buyer.
(b) PERFORMANCE, DEFAULTS, ENFORCEABILITY. The Corporation has in
all material respects performed all of its obligations required to be performed
by it to the date hereof, and is not in default or alleged to be in default in
any material respect, under any Material Agreement, and there exists no event,
condition or occurrence which, after notice or lapse of time or both, would
constitute such a default. To the knowledge of the Seller, no other party to any
Material Agreement is in default in any respect of any of its obligations
thereunder. Each of the Material Agreements is valid and in full force and
effect and enforceable against the parties thereto in accordance with their
respective terms, and, except as set forth in Schedule 3.29(b) hereto, the
consummation of the transactions contemplated by this Agreement will not (i)
require the consent of any party thereto or (ii) constitute an event permitting
termination thereof.
3.30 BROKERS' OR FINDERS' FEES, ETC. No agent, broker, investment
banker, person or firm acting on behalf of the Corporation or the Seller or any
person, firm or corporation affiliated with the Seller or under his authority is
or will be entitled to any brokers' or finders' fee or any other commission or
similar fee directly or indirectly from any of the parties hereto in connection
with the sale of the Shares contemplated hereby, other than the fee or
commission, to be paid solely by the Seller, to NCM Associates, Inc.
17
3.31 BANK ACCOUNTS, CREDIT CARDS, SAFE DEPOSIT BOXES AND CELLULAR
TELEPHONES. Schedule 3.31 hereto lists all bank accounts, credit cards and safe
deposit boxes in the name of, or controlled by, the Corporation, and all
cellular telephones provided and/or paid for by the Corporation, and details
about the persons having access to or authority over such accounts, credit
cards, safe deposit boxes and cellular telephones.
3.32 INSURANCE.
(a) Schedule 3.32(a) hereto contains a list of all policies of
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Corporation on its properties, operations, inventories, assets,
business or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000 thereunder).
Each such insurance policy identified therein is and shall remain in full force
and effect on and as of the Closing Date and the Corporation is not in default
with respect to any provision contained in any such insurance policy and has not
failed to give any notice or present any claim under any such insurance policy
in a due and timely fashion. The insurance maintained by, or on behalf of, the
Corporation is adequate in accordance with the standards of business of
comparable size in the industry in which the Corporation operates and no notice
of cancellation or termination has been received with respect to any such
policy. The Corporation has not, during the last three (3) fiscal years, been
denied or had revoked or rescinded any policy of insurance.
(b) Set forth on Schedule 3.32(b) hereto is a summary of
information pertaining to material property damage and personal injury claims in
excess of $5,000 against the Corporation during the past five (5) years, all of
which are fully satisfied or are being defended by the insurance carrier and
involve no exposure to the Corporation.
3.33 WARRANTIES. Set forth on Schedule 3.33 hereto are descriptions or
copies of the forms of all express warranties and disclaimers of warranty made
by the Corporation (separate and distinct from any applicable manufacturers',
suppliers' or other third-parties' warranties or disclaimers of warranties)
during the past five (5) years to customers or users of the vehicles, parts,
products or services of the Corporation. There have been no breach of warranty
or breach of representation claims against the Corporation during the past five
(5) years which have resulted in any cost, expenditure or exposure to the
Corporation of more than $100,000 individually or in the aggregate.
3.34 DIRECTORS AND OFFICERS. Set forth on Schedule 3.34 hereto is a
true and correct list of the names and titles of each director and officer of
the Corporation.
3.35 SUPPLIERS AND CUSTOMERS. The Corporation is not required to
provide bonding or any other security arrangements in connection with any
transactions with any of its respective customers and suppliers. To the
knowledge of the Seller, no such supplier, customer or creditor intends or has
threatened, or reasonably could be expected, to terminate or modify any of its
relationships with the Corporation.
18
3.36 ENVIRONMENTAL MATTERS.
(a) For purposes of this Section 3.36, the following terms shall
have the following meaning: (i) "ENVIRONMENTAL LAW" means all present and future
federal, state and local laws, statutes, regulations, rules, ordinances and
common law, and all judgments, decrees, orders, agreements, or permits, issued,
promulgated, approved or entered thereunder by any government authority relating
to pollution, Hazardous Materials, worker safety or protection of human health
or the environment. (ii) "HAZARDOUS MATERIALS" means any waste, pollutant,
chemical, hazardous material, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste, petroleum or petroleum-derived substance or
waste (regardless of specific gravity), or any constituent or decomposition
product of any such pollutant, material, substance or waste, including, but not
limited to, any hazardous substance or constituent contained within any waste
and any other pollutant, material, substance or waste regulated under or as
defined by any Environmental Law.
(b) The Corporation has obtained all permits, licenses and other
authorizations or approvals required under Environmental Laws for the conduct
and operation of the Assets and the business of the Corporation ("ENVIRONMENTAL
PERMITS"). All such Environmental Permits are in good standing, the Corporation
is and has been in compliance with the terms and conditions of all such
Environmental Permits, and no appeal or any other action is pending or
threatened to revoke any such Environmental Permit.
(c) The Corporation and its business, operations and assets are
and have been in compliance with all Environmental Laws.
(d) Neither the Corporation nor the Seller has received any
written or oral order, notice, complaint, request for information, claim, demand
or other communication from any government authority or other person, whether
based in contract, tort, implied or express warranty, strict liability, or any
other common law theory, or any criminal or civil statute, arising from or with
respect to (i) the presence, release or threatened release of any Hazardous
Material or any other environmental condition on, in or under the Real Property
or any other property formerly owned, used or leased by the Corporation, (ii)
any other circumstances forming the basis of any actual or alleged violation by
the Corporation or the Seller of any Environmental Law or any liability of the
Corporation or the Seller under any Environmental Law, (iii) any remedial or
removal action required to be taken by the Corporation or the Seller under any
Environmental Law, or (iv) any harm, injury or damage to real or personal
property, natural resources, the environment or any person alleged to have
resulted from the foregoing, nor is the Seller aware of any facts which might
reasonably give rise to such notice or communication. Neither the Corporation
nor the Seller has entered into any agreements concerning any removal or
remediation of Hazardous Materials.
(e) No lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions are
pending or threatened under any Environmental Law with respect to the
Corporation, the Seller or the Real Property.
(f) No Hazardous Materials are or have been released, discharged,
spilled or disposed of onto, or migrated onto, the Real Property or any other
property previously owned,
19
operated or leased by the Corporation, and no environmental condition exists
(including, without limitation, the presence, release, threatened release or
disposal of Hazardous Materials) related to the Real Property, to any property
previously owned, operated or leased by the Corporation, or to the Corporation's
past or present operations, which would constitute a violation of any
Environmental Law or otherwise give rise to costs, liabilities or obligations
under any Environmental Law.
(g) Neither the Corporation nor the Seller, nor any of their
respective predecessors in interest, has transported or disposed of, or arranged
for the transportation or disposal of, any Hazardous Materials to any location
(i) which is listed on the National Priorities List, the CERCLIS list under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar federal, state or local list, (ii) which is the subject
of any federal, state or local enforcement action or other investigation, or
(iii) about which either the Corporation or the Seller has received or has
reason to expect to receive a potentially responsible party notice or other
notice under any Environmental Law.
(h) No environmental lien has attached or is threatened to be
attached to the Real Property.
(i) No employee of the Corporation in the course of his or her
employment with the Corporation has been exposed to any Hazardous Materials or
other substance, generated, produced or used by the Corporation which could give
rise to any claim (whether or not such claim has been asserted) against the
Corporation.
(j) Except as set forth on Schedule 3.36 hereto, the Real Property
does not contain any: (i) septic tanks into which process wastewater or any
Hazardous Materials have been disposed; (ii) asbestos; (iii) polychlorinated
biphenyls (PCBs); (iv) underground injection or monitoring wells; or (v)
underground storage tanks.
(k) Except as set forth on Schedule 3.36, there have been no
environmental studies or reports made relating to the Real Property or any other
property or facility previously owned, operated or leased by the Corporation.
(l) The Corporation has not agreed to assume, defend, undertake,
guarantee, or provide indemnification for, any liability, including, without
limitation, any obligation for corrective or remedial action, of any other
person under any Environmental Law for environmental matters or conditions.
3.37 BUSINESS GENERALLY. The Seller is not aware of the existence of
any conditions, including, without limitation, any actual or potential
competitive factors in the markets in which the Corporation participates, which
have not been disclosed in writing to the Buyer and which could reasonably be
expected to have an adverse effect on the business and operations of the
Corporation, other than general business and economic conditions generally
affecting the industry and markets in which the Corporation participates.
3.38 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the
Seller contained in this Agreement, and no statement contained in any
certificate or Schedule furnished
20
or to be furnished by the Seller to the Buyer in connection with this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make such
representation and warranty or such statement not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware.
4.2 BUYER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS.
(a) The Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Buyer in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder.
(b) Except as set forth in Schedule 4.2(b) hereto, no
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party, is required in
connection with the execution and delivery by the Buyer of this Agreement and
the other agreements, documents and instruments to be executed by the Buyer in
connection herewith, the consummation by the Buyer of the transactions
contemplated hereby or thereby or the performance by the Buyer of its
obligations hereunder and thereunder.
4.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other
agreements, documents and instruments to be executed and delivered by the Buyer
in connection herewith, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, have been duly and validly authorized, executed
and delivered by all necessary corporate action on the part of the Buyer and
this Agreement constitutes, and the other agreements, documents and instruments
to be executed and delivered by the Buyer in connection herewith, when executed
and delivered by the Buyer, shall constitute the legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in accordance with their
respective terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally and general equity principles.
4.4 LITIGATION REGARDING BUYER. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the Buyer's knowledge, threatened or probable of assertion against the Buyer
relating to this Agreement or the transactions contemplated hereby before any
court, governmental or administrative agency or other body, and no judgment,
order, writ, injunction, decree or other similar command of any court or
governmental or administrative agency or other body has been entered against or
served upon the Buyer relating to this Agreement or the transactions
contemplated hereby.
21
4.5 NO VIOLATION; CONFLICTS. The execution and delivery by the Buyer of
this Agreement and the other agreements, documents and instruments to be
executed and delivered by the Buyer in connection herewith, the consummation by
the Buyer of the transactions contemplated hereby and thereby and the
performance by the Buyer of its obligations hereunder and thereunder do not and
will not (a) conflict with or violate any of the terms of the Certificate of
Incorporation or By-Laws of the Buyer, or (b) violate or conflict with any
domestic law, ordinance, rule or regulation, or any judgement, order, writ,
injunction or decree of any court, administrative or governmental agency or
other body, material to the Buyer.
4.6 BROKERS' OR FINDERS' FEES, ETC. No agent, broker, investment
banker, person or firm acting on behalf of the Buyer or any person, firm or
corporation affiliated with the Buyer or under its authority is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with the
sale of the Shares contemplated hereby.
4.7 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the
Buyer contained in this Agreement, and no statement contained in any certificate
or Schedule furnished or to be furnished by the Buyer to the Seller in
connection with this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make such representation and warranty or such statement not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS OF THE SELLER
The Seller hereby covenants and agrees that, from and after the date
hereof until the Closing:
5.1 PROVIDE ACCESS TO INFORMATION; COOPERATION WITH BUYER.
(a) ACCESS. The Seller shall afford, and cause the Corporation to
afford, to the Buyer, its attorneys, accountants, and representatives, free and
full access at all reasonable times, and upon reasonable prior notice, to the
properties, books and records of the Corporation, and to interview personnel,
suppliers and customers of the Corporation, in order that the Buyer may have a
full opportunity to make such investigation (including the Environmental Audit
contemplated by Section 5.11 below) as it shall reasonably desire of the assets,
business and operations of the Corporation (including, without limitation, any
appraisals or inspections thereof), and provide to the Buyer and its
representatives such additional financial and operating data and other
information as to the business and properties of the Corporation as the Buyer
shall from time to time reasonably request.
(b) COOPERATION IN OBTAINING CONSENTS. The Seller shall use
reasonable best efforts in cooperating with the Buyer in the preparation of and
delivery to all applicable automobile manufacturers or distributors, as soon as
practicable after the date hereof, of an application and other information
necessary to obtain such automobile manufacturer's or distributor's consent to
or the approval of the transactions contemplated by this Agreement.
22
5.2 OPERATION OF BUSINESS OF THE CORPORATION. The Seller shall cause
the Corporation to (a) maintain its corporate existence in good standing, (b)
operate its business substantially as presently operated and only in the
ordinary course and consistent with past operations and its obligations under
any existing agreements with all applicable automobile manufacturers or
distributors, (c) use its best efforts to preserve intact its present business
organizations and employees and its relationships with persons having business
dealings with them, including, but not limited to, all applicable automobile
manufacturers or distributors and any floor plan financing creditors, (d) comply
in all respects with all applicable laws, rules and regulations, (e) maintain
its insurance coverages, (f) pay all Taxes, charges and assessments when due,
subject to any valid objection or contest of such amounts asserted in good faith
and adequately reserved against, (g) make all debt service payments when
contractually due and payable, (h) pay all accounts payable and other current
liabilities when due, (i) maintain the Employee Plans and each plan, agreement
and arrangement listed on Schedule 3.27, and (j) maintain its property, plant
and equipment in good operating condition in accordance with industry standards
taking into account the age thereof.
5.3 BOOKS OF ACCOUNT. The Seller shall cause the Corporation to
maintain its books and records of account in the usual, regular and ordinary
manner.
5.4 EMPLOYEES. The Seller shall (i) use his reasonable best efforts to
encourage such personnel of the Corporation as the Buyer may designate in
writing to remain employees of the Corporation after the date of the Closing,
and (ii) not take any action, or permit the Corporation to take any action, to
encourage any of the personnel of the Corporation to leave their positions with
the Corporation.
5.5 CERTAIN PROHIBITIONS. The Seller shall not permit the Corporation
to (i) issue any equity or debt security or any options or warrants, (ii) enter
into any subscriptions, agreements, plans or other commitments pursuant to which
the Corporation is or may become obligated to issue any of its debt or equity
securities, (iii) otherwise change or modify its capital structure, (iv) engage
in any reorganization or similar transaction, (v) sell or otherwise dispose of
any of its assets, other than sales of inventory in the ordinary course of
business, (vi) declare or make payment of any dividend or other distribution in
respect of its capital stock or redeem, repurchase or otherwise acquire any of
its capital stock, or (vii) agree to take any of the foregoing actions.
5.6 OTHER CHANGES. The Seller shall not permit the Corporation to take,
cause, agree to take or cause to occur any of the actions or events set forth in
Section 3.20 of this Agreement.
5.7 ADDITIONAL INFORMATION. The Seller shall furnish and cause the
Corporation to furnish to the Buyer such additional information with respect to
any matters or events arising or discovered subsequent to the date hereof which,
if existing or known on the date hereof, would have rendered any representation
or warranty made by the Seller or any information contained in any Schedule
hereto or in other information supplied in connection herewith then inaccurate
or incomplete. The receipt of such additional information by the Buyer shall not
operate as a waiver by the Buyer of the obligations of the Seller to satisfy the
conditions to Closing set forth in Section 7.1 hereof.
23
5.8 PUBLICITY. Except as may be required by law or the applicable rules
or regulations of any securities exchange, the Seller shall not (i) make or
permit the Corporation to make any press release or other public announcement
relating to this Agreement or the transactions contemplated hereby, without the
prior written approval of the Buyer, and (ii) otherwise disclose the existence
and nature of their discussions or negotiations regarding the transactions
contemplated hereby to any person or entity other than their accountants,
attorneys and similar professionals, all of whom shall be subject to this
nondisclosure obligation as agents of the Seller, as the case may be. The Seller
shall cooperate with the Buyer in the preparation and dissemination of any
public announcements of the transactions contemplated by this Agreement.
5.9 OTHER NEGOTIATIONS. The Seller shall not pursue, initiate,
encourage or engage in, nor shall any of their respective Affiliates or agents
pursue, initiate, encourage or engage in, and the Seller shall cause the
Corporation and its Affiliates, directors, officers and agents not to pursue,
initiate, encourage or engage in, any negotiations or discussions with, or
provide any information to, any other person or entity (other than the Buyer and
its representatives and Affiliates) regarding the sale of the assets or capital
stock of the Corporation or any merger or similar transaction involving the
Corporation.
5.10 CLOSING CONDITIONS. The Seller shall use all reasonable best
efforts to satisfy promptly the conditions to Closing set forth in Article 7
hereof required herein to be satisfied by the Seller prior to the Closing.
5.11 ENVIRONMENTAL AUDIT. The Seller shall cause the Corporation to
allow an environmental consulting firm selected by the Buyer (the "ENVIRONMENTAL
AUDITOR") to have prompt access to the Real Property in order to conduct an
environmental investigation, satisfactory to the Buyer in scope (such scope
being sufficient to result in a Phase I environmental audit report and a Phase
II environmental audit report, if desired by the Buyer), of, and to prepare a
report with respect to, the Real Property (the "ENVIRONMENTAL AUDIT"). The
Seller shall cause the Corporation to provide to the Environmental Auditor: (i)
reasonable access to all its existing records concerning the matters which are
the subject of the Environmental Audit; and (ii) reasonable access to the
employees of the Corporation and the last known addresses of former employees of
the Corporation who are most familiar with the matters which are the subject of
the Environmental Audit (the Seller agreeing to use reasonable efforts to have
such former employees respond to any reasonable requests or inquiries by the
Environmental Auditor). The Seller shall otherwise cooperate and cause the
Corporation to cooperate with the Environmental Auditor in connection with the
Environmental Audit. The Buyer and the Seller shall each bear 50% of the costs,
fees and expenses incurred in connection with the preparation of the
Environmental Audit.
5.12 AUDITED FINANCIAL STATEMENTS. The Seller shall allow, cooperate
with and assist Buyer's accountants, and shall instruct the Corporation's
accountants to cooperate, in the preparation of audited financial statements of
the Corporation as necessary for any required filings by the Buyer with the
Securities and Exchange Commission or with the Buyer's lenders; PROVIDED that
the expense of such audit shall be borne by the Buyer.
24
5.13 HART-SCOTT-RODINO. Subject to the determination by the Buyer that
any of the following actions is not required, the Seller shall promptly prepare
and file Notification and Report Forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "ANTITRUST DIVISION"), and respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation.
ARTICLE 6
PRE-CLOSING COVENANTS OF BUYER
The Buyer hereby covenants and agrees that, from and after the date
hereof until the Closing:
6.1 PUBLICITY. Except as may be required by law or by the rules of the
New York Stock Exchange, or as necessary in connection with the transactions
contemplated hereby, the Buyer shall not (i) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior written approval of the Seller, or (ii) otherwise
disclose the existence and nature of its discussions or negotiations regarding
the transactions contemplated hereby to any person or entity other than its
accountants, attorneys and similar professionals, all of whom shall be subject
to this nondisclosure obligation as agents of the Buyer.
6.2 CLOSING CONDITIONS. The Buyer shall use all reasonable best efforts
to satisfy promptly the conditions to Closing set forth in Article 8 hereof
required herein to be satisfied by the Buyer prior to the Closing.
6.3 APPLICATION TO AUTOMOBILE MANUFACTURERS AND DISTRIBUTORS. Subject
to the reasonable cooperation of the Seller, the Buyer shall provide to all
applicable automobile manufacturers and distributors as promptly as practicable
after the execution and delivery of this Agreement any application or other
information with respect to such application necessary in connection with the
seeking of the consents of such manufacturers and distributors to the
transactions contemplated by this Agreement.
6.4 HART-SCOTT-RODINO. Subject to the determination by the Buyer that
any of the following actions is not required, the Buyer shall promptly prepare
and file Notification and Report Forms under the HSR Act with the FTC and the
Antitrust Division, respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division for additional information or
documentation, and the Buyer shall pay all filing fees in connection therewith.
6.5 ACCESS. The Buyer shall afford to the Seller, his attorneys,
accountants, and representatives, free and full access at all reasonable times,
and upon reasonable prior notice, to the properties, books and records of the
Buyer, and to interview personnel, suppliers and customers of the Buyer, in
order that the Seller may have a full opportunity to make such investigation as
he shall reasonably desire of the assets, business and operations of the Buyer.
25
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING
The obligations of the Buyer to perform this Agreement at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Buyer:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Seller in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
7.2 PERFORMANCE OF OBLIGATIONS OF THE SELLER. The Seller shall have
performed all obligations required to be performed by the Seller under this
Agreement, and complied with all covenants for which compliance by the Seller is
required under this Agreement, prior to or at the Closing, including, without
limitation, delivery of the stock certificates and stock powers for the Shares
described in Section 1.3 hereof.
7.3 CLOSING DOCUMENTATION. The Buyer shall have received the following
documents, agreements and instruments from the Seller:
(a) a certificate signed by the Seller and dated the date of the
Closing certifying as to the satisfaction of the conditions set forth in
Sections 7.1 and 7.2 hereof;
(b) such duly signed resignations of directors and officers of the
Corporation as the Buyer shall have previously requested;
(c) an opinion of Daniel C. Pappas, P.C., counsel for the Seller,
dated the date of the Closing and addressed to the Buyer, in form and substance
reasonably acceptable to the Buyer and its counsel;
(d) copies of all authorizations, approvals, consents, notices,
registrations and filings referred to in Schedules 3.2(b), 3.10 and 3.29(b)
hereof including, without limitation, any required consents of the landlords
under the Leases necessary to enable the Corporation to continue as the tenant
thereunder at the same lease rentals and on the same terms as existed prior to
the Closing;
(e) a certificate dated as of a recent date from (i) the Secretary
of State of the State of Texas to the effect that the Corporation is duly
incorporated and in good standing in such state and stating that the Corporation
owes no franchise taxes in such state and listing all documents of the
Corporation on file with said Secretary of State, and (ii) one or more
certificates of officials from the jurisdictions listed on Schedule 3.7 hereto
to the effect that the Corporation is duly qualified as a foreign corporation
and is in good standing in such jurisdictions;
(f) a copy of the Corporation's Articles of Incorporation,
including all amendments thereto, certified as of a recent date by the Secretary
of State of the State of Texas;
26
(g) evidence, reasonably satisfactory to the Buyer, of the
authority and incumbency of the persons acting on behalf of the Corporation in
connection with the execution of any document delivered in connection with this
Agreement;
(h) Uniform Commercial Code Search Reports on Form UCC-11 with
respect to the Corporation from the states and local jurisdictions where the
principal places of business of the Corporation and its assets are located;
(i) a certificate of the Seller as to the Seller's non-foreign
status in appropriate form;
(j) the corporate minute books and stock record books of the
Corporation, and all other books and records of, or pertaining to, the business
and operations of the Corporation;
(k) estoppel letter[s] of lender[s] to the Corporation, in form
and substance reasonably satisfactory to the Buyer, with respect to amounts
owing by the Corporation as of the Closing; and
(l) such other instruments and documents as the Buyer shall
reasonably request not inconsistent with the provisions hereof.
7.4 APPROVAL OF LEGAL MATTERS. The form of all instruments,
certificates and documents to be executed and delivered by the Seller to the
Buyer pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Buyer and its counsel, none of whose approval shall be unreasonably withheld or
delayed.
7.5 NO LITIGATION. No action, suit or other proceeding shall be
pending or threatened before any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain damages in
respect thereof, or involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction, and no order, decree or ruling of any
governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement or
the transactions contemplated hereby, or prohibiting, restraining or otherwise
preventing the consummation of the transactions contemplated hereby.
7.6 NO MATERIAL ADVERSE CHANGE OR UNDISCLOSED LIABILITY. There shall
have been no material adverse change or development in the business, prospects,
properties, earnings, results of operations or financial condition of the
Corporation, or any of its assets.
7.7 NO ADVERSE LAWS. There shall not have been enacted, adopted or
promulgated any statute, rule, regulation or order which materially adversely
affects the business or assets of the Corporation.
27
7.8 AFFILIATE AND OTHER TRANSACTIONS. All amounts owing to the
Corporation from the Seller or any Affiliate thereof or from any of the
Corporation's officers and employees shall have either been paid in full or
written off by the Corporation, in either case, prior to the Effective Closing
Date.
7.9 ESCROW AGREEMENT. The Seller and the Escrow Agent shall have duly
executed and delivered to the Buyer the Escrow Agreement.
7.10 FORD MOTOR COMPANY APPROVALS. Ford Motor Company shall have given
any required approval of the transfer of the Shares to the Buyer and shall have
given any required approval of O. Bruton Smith or his designee as the authorized
dealer operator of the Corporation's Ford dealership franchise, and Ford Motor
Company shall have executed any required dealer agreements and/or amendments or
supplements thereto in connection with the foregoing.
7.11 NON-COMPETITION AGREEMENT. The Seller shall have duly executed and
delivered to the Buyer and the Corporation the Non-Competition Agreement.
7.12 EMPLOYMENT AGREEMENT. The Seller shall have duly executed and
delivered to the Buyer the Employment Agreement.
7.13 CANCELLATION OF STOCK OPTIONS. All outstanding options, warrants,
"phantom" stock options and other plans, agreements or arrangements of the
Corporation with respect to the purchase, or the issuance of, any capital stock
or other securities of the Corporation shall have been canceled and terminated
prior to the Closing at no expense to the Buyer, and the Buyer shall have
received reasonably satisfactory evidence thereof.
7.14 AUDITED FINANCIAL STATEMENTS. The Buyer shall have completed
preparation of such audited financial statements of the Corporation as may be
required by applicable regulations of the Securities and Exchange Commission or
by any of the Buyer's lenders.
7.15 HART-SCOTT-RODINO WAITING PERIOD. All applicable waiting periods
under the HSR Act shall have expired without any indication by the Antitrust
Division or the Federal Trade Commission that either of them intends to
challenge the transactions contemplated hereby or, if any such challenge or
investigation is made or commenced, the conclusion of such challenge or
investigation permits the transactions contemplated hereby in all material
respects.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING
The obligation of the Seller to perform this Agreement at the Closing
is subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Seller:
28
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
8.2 PERFORMANCE OF OBLIGATIONS OF THE BUYER. The Buyer shall have
performed all obligations required to be performed by it under this Agreement,
and complied with all covenants for which compliance by it is required under
this Agreement, prior to or at the Closing, including, without limitation,
payment of the Initial Purchase Price pursuant to Section 1.2(b) hereof.
8.3 CLOSING DOCUMENTATION. The Seller shall have received the following
documents, agreements and instruments from the Buyer:
(a) a certificate signed by a duly authorized signatory of the
Buyer and dated as of the Closing Date certifying as to the satisfaction of the
conditions set forth in Sections 8.1 and 8.2 hereof;
(b) an opinion of Parker, Poe, Adams & Bernstein L.L.P., counsel
for the Buyer, dated as of the Closing Date and addressed to the Seller, in form
and substance reasonably satisfactory to the Seller and his counsel;
(c) such resolutions of the Buyer, as sole shareholder of the
Corporation, and the directors of the Corporation electing directors and
appointing officers, respectively, of the Corporation, effective upon the
Closing;
(d) certificates dated as of a recent date from the Secretary of
State of the State of Delaware to the effect that the Buyer is duly incorporated
and in good standing in such state;
(e) a copy of the Buyer's Certificate of Incorporation, including
all amendments thereto, certified by the Secretary of State of the State of
Delaware;
(f) evidence, reasonably satisfactory to the Seller, of the
authority and incumbency of the persons acting on behalf of the Buyer in
connection with the execution of any document delivered in connection with this
Agreement; and
(g) such other instruments and documents as the Seller shall
reasonably request not inconsistent with the provisions hereof.
8.4 APPROVAL OF LEGAL MATTERS. The form of all certificates,
instruments and documents to be executed or delivered by the Buyer to the Seller
pursuant to this Agreement and all legal matters in respect of the transactions
as herein contemplated shall be reasonably satisfactory to the Seller and his
counsel, none of whose approval shall be unreasonably withheld or delayed.
29
8.5 NO LITIGATION. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction, and no order, decree or ruling of any
governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement or
the transactions contemplated hereby, or prohibiting, restraining or otherwise
preventing the consummation of the transactions contemplated hereby.
8.6 ESCROW AGREEMENT. The Buyer and the Escrow Agent shall have duly
executed and delivered to the Seller the Escrow Agreement.
8.7 EMPLOYMENT AGREEMENT. The Corporation shall have duly executed and
delivered to the Seller the Employment Agreement.
8.8 HART-SCOTT-RODINO WAITING PERIOD. All applicable waiting periods
under the HSR Act shall have expired without any indication of the Antitrust
Division or the Federal Trade Commission that either of them intends to
challenge the transactions contemplated hereby, or, if any such challenge or
investigation is made or commenced, the conclusion of such challenge or
investigation permits the transactions contemplated hereby in all material
respects.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
9.1 SURVIVAL. All statements contained in any Schedule or certificate
delivered hereunder or in connection herewith by or on behalf of any of the
parties pursuant to this Agreement shall be deemed representations and
warranties by the respective parties hereunder unless otherwise expressly
provided herein. The representations and warranties of the Seller or the Buyer
contained in this Agreement, including those contained in any Schedule or
certificate delivered hereunder or in connection herewith, shall survive the
Closing for a period of three years with the exception of (i) the
representations and warranties of the Seller contained in Section 3.21, which
shall survive the Closing until the expiration of the applicable tax statutes of
limitation plus a period of sixty (60) days, and (ii) the representations and
warranties of the Seller contained in Sections 3.11, 3.19 and 3.36, which shall
survive the Closing indefinitely. As to each representation and warranty of the
parties hereto, the date to which such representation and warranty shall survive
is hereinafter referred to as the "SURVIVAL DATE".
9.2 AGREEMENT TO INDEMNIFY BY SELLER. Subject to the terms and
conditions of Sections 9.4 and 9.5 hereof, the Seller hereby agrees to indemnify
and save the Buyer, the Corporation and their respective shareholders, officers,
directors, employees, successors and assigns (each, a "BUYER INDEMNITEE")
harmless from and against, for and in respect of, any and all damages, losses,
obligations, liabilities, demands, judgments, injuries, penalties, claims,
actions or causes of action, encumbrances, costs, and expenses (including,
without limitation, reasonable attorneys' fees and expert witness fees),
suffered, sustained, incurred or required to
30
be paid by any Buyer Indemnitee (collectively, "BUYER'S DAMAGES") arising out
of, based upon, in connection with, or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Seller contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith, excluding any breach of representation and warranty contained in
Section 3.19 or in the certificate of the Seller (regarding Affiliate Payables
and Excluded Indebtedness contemplated by Section 1.2(b)(1) hereof); PROVIDED,
HOWEVER, that with respect to the foregoing indemnification obligation of the
Seller contained in this paragraph (a), the Seller shall not have any
indemnification obligation until (and only to the extent that) Buyer's Damages
in respect of all claims for indemnity pursuant to this paragraph (a) shall
exceed a cumulative aggregate total of $50,000;
(b) the untruth, inaccuracy or breach of any representation and
warranty of the Seller contained in or made pursuant to Section 3.19, including
in any Schedule or certificate delivered hereunder in connection therewith;
(c) the Affiliate Payables and/or the Excluded Indebtedness;
(d) the breach or nonfulfillment of any covenant or agreement of
the Seller contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;
(e) any loss of life, injury to persons or property, or damage to
natural resources caused by the actual, alleged, or threatened release, storage,
transportation, treatment or generation, of Hazardous Materials generated,
stored, used, disposed of, treated, handled or shipped by the Corporation on or
before the Closing Date;
(f) any cleanup of Hazardous Materials released, disposed of or
discharged: (i) on, beneath or adjacent to the Real Property prior to or on the
date of the Closing; or (ii) at any other location if such substances were
generated, used, stored, treated, transported or released by the Corporation
prior to or on the Closing Date;
(g) all known or unknown environmental liabilities and claims of
the Corporation or arising out of the ownership the Shares prior to the Closing,
including, without limitation, the presence, release or threatened release of
Hazardous Materials and any liabilities or obligations arising under any
Environmental Law, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), as amended; or
(h) any and all costs of installing pollution control equipment or
other equipment to bring any of the Real Property into compliance with any
Environmental Law if such equipment is installed because any of the Real
Property was not in compliance with any Environmental Laws as of the date of the
Closing.
With respect to the Seller's obligations to pay Buyer's Damages
pursuant to Section 9.2 of this Agreement, the Buyer shall be entitled (but
shall not be obligated) to make
31
demand for payment under the Escrow Agreement and/or to postpone, offset and
reduce the Contingent Purchase Price as provided in Section 9.7 below.
9.3 AGREEMENT TO INDEMNIFY BY BUYER. Subject to the terms and
conditions of Sections 9.4 and 9.5 hereof, the Buyer hereby agrees to indemnify
and save the Seller and his successors and assigns (each, a "SELLER INDEMNITEE")
harmless from or against, for and in respect of, any and all damages, losses,
obligations, liabilities, demands, judgments, injuries, penalties, claims,
actions or causes of action, encumbrances, costs, and expenses (including,
without limitation, reasonable attorneys' fees and expert witness fees)
suffered, sustained, incurred or required to be paid by any Seller Indemnitee
arising out of, based upon or in connection with or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Buyer contained in or made pursuant to this Agreement, including
in any Schedule or certificate delivered hereunder or in connection herewith; or
(b) the breach or nonfulfillment of any covenant or agreement of
the Buyer contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto.
9.4 CLAIMS FOR INDEMNIFICATION. No claim for indemnification with
respect to a breach of a representation and warranty shall be made under this
Agreement after the applicable Survival Date unless prior to such Survival Date
the Buyer Indemnitee or the Seller Indemnitee, as the case may be, shall have
given the Seller or the Buyer, as the case may be, written notice of such claim
for indemnification based upon actual loss sustained, or potential loss
anticipated, as a result of the existence of any claim, demand, suit, or cause
of action against such Buyer Indemnitee or Seller Indemnitee, as the case may
be.
9.5 PROCEDURES REGARDING THIRD PARTY CLAIMS. The procedures to be
followed by the Buyer and the Seller with respect to indemnification hereunder
regarding claims by third persons which could give rise to an indemnification
obligation hereunder shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action or
proceeding (including, without limitation, any notice relating to a tax audit)
or the assertion of any claim by a third person which the person receiving such
notice has reason to believe may result in a claim by it for indemnity pursuant
to this Agreement, such person (the "INDEMNIFIED PARTY") shall give a written
notice of such action, proceeding or claim to the party against whom
indemnification pursuant hereto is sought (the "INDEMNIFYING PARTY"), setting
forth in reasonable detail the nature of such action, proceeding or claim,
including copies of any documents and written correspondence from such third
person to such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at its own expense,
to participate in the defense of such action, proceeding or claim, and, if (i)
the action, proceeding or claim involved seeks (and continues to seek) solely
monetary damages, (ii) the Indemnifying Party confirms, in writing, its
obligation hereunder to indemnify and hold harmless the Indemnified
32
Party with respect to such damages in their entirety pursuant to Sections 9.2 or
9.3 hereof, as the case may be, and (iii) the Indemnifying Party shall have made
provision which, in the reasonable judgment of the Indemnified Party, is
adequate to satisfy any adverse judgment as a result of its indemnification
obligation with respect to such action, proceeding or claim, then the
Indemnifying Party shall be entitled to assume and control such defense with
counsel chosen by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld or delayed. The Indemnified
Party shall be entitled to participate therein after such assumption, the costs
of such participation following such assumption to be at its own expense. Upon
assuming such defense, the Indemnifying Party shall have full rights to enter
into any monetary compromise or settlement which is dispositive of the matters
involved; PROVIDED, that such settlement is paid in full by the Indemnifying
Party and will not have any direct or indirect continuing material adverse
effect upon the Indemnified Party.
(c) With respect to any action, proceeding or claim as to which
(i) the Indemnifying Party does not have the right to assume the defense or (ii)
the Indemnifying Party shall not have exercised its right to assume the defense,
the Indemnified Party shall assume and control the defense of and contest such
action, proceeding or claim with counsel chosen by it and approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. The
Indemnifying Party shall be entitled to participate in the defense of such
action, proceeding or claim, the cost of such participation to be at its own
expense. The Indemnifying Party shall be obligated to pay the reasonable
attorneys' fees and expenses of the Indemnified Party to the extent that such
fees and expenses relate to claims as to which indemnification is due under
Sections 9.2 or 9.3 hereof, as the case may be. The Indemnified Party shall have
full rights to dispose of such action, proceeding or claim and enter into any
monetary compromise or settlement; PROVIDED, HOWEVER, in the event that the
Indemnified Party shall settle or compromise any action, proceeding or claim for
which indemnification is due under Sections 9.2 or 9.3 hereof, as the case may
be, it shall act reasonably and in good faith in doing so.
(d) Both the Indemnifying Party and the Indemnified Party shall
cooperate fully with one another in connection with the defense, compromise or
settlement of any such action, proceeding or claim, including, without
limitation, by making available to the other all pertinent information and
witnesses within its control.
9.6 EFFECTIVENESS. The provisions of this Article 9 shall be effective
upon consummation of the Closing, and prior to the Closing, shall have no force
and effect.
9.7 POSTPONEMENT, OFFSET AND REDUCTION OF CONTINGENT PURCHASE PRICE.
If, as of the date of the payment of an installment of the Contingent Purchase
Price (hereinafter called a "CONTINGENT PAYMENT DATE"), any Buyer Indemnitee
shall have previously made a claim or claims for Buyer's Damages and such claim
or claims shall not have been resolved prior to such Contingent Payment Date,
either by mutual written agreement between the Seller and the Buyer or by a
decision of the arbitrators pursuant to Section 12.13 below, then the amount of
such installment of Contingent Purchase Price shall only be paid to the extent
that such amount (together with the amount of any prior installment of
Contingent Purchase Price which has been postponed pursuant to this Section 9.7)
exceeds the aggregate total of Buyer's Damages as to which claims for
indemnification shall have been made on or prior to such Contingent Payment Date
and not resolved on or prior thereto, and payment of the remainder of the
Contingent
33
Purchase Price which would otherwise be payable on or before such Contingent
Payment Date shall be postponed until the resolution of all such claims for
indemnification. The Seller hereby acknowledges and agrees that the Buyer shall
be entitled to set off against and to reduce the amount of the Contingent
Purchase Price by the amount of Buyer's Damages which is either agreed to in
writing by the Seller and the Buyer or determined pursuant to a decision of the
arbitrators referred to in Section 12.13 below. To the extent that such
arbitrators shall determine that the postponement of any portion of the
Contingent Purchase Price by the Buyer was not warranted, the Buyer shall
promptly pay such portion to the Seller, together with interest thereon at the
Interest Rate (as defined in Section 1.2(c) above) from the applicable
Contingent Payment Date. Any amount of postponement, setoff and reduction of the
Contingent Purchase Price contemplated by this Section 9.7 shall be allocated
first to the cash portion of such Contingent Purchase Price and second to the
Preferred Stock (or Common Stock) portion of such Contingent Purchase Price.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision herein contained
to the contrary, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by the written mutual consent of the Buyer and the Seller;
(b) At any time after the Closing Date Deadline (as the same may
have been extended pursuant to Article 2 hereof), by written notice by the Buyer
or the Seller to the other party hereto if the Closing shall not have been
completed on or before the Closing Date Deadline (as the same may have been
extended pursuant to Article 2 hereof); PROVIDED, HOWEVER, no party may
terminate this Agreement pursuant to this Section 10.1(b) if such party is in
breach of any material representation, warranty or covenant of such party
contained in this Agreement;
(c) By the Buyer if, after any initial HSR Act filing, the FTC
makes a "second request" for information, or the FTC or the Antitrust Division
challenges the transactions contemplated hereby; PROVIDED, that the Buyer
delivers a written notice to the Seller of its termination hereunder within 30
days of the Buyer's receipt of such second request or of notice of such
challenge;
(d) By the Buyer, by written notice to the Seller, in the event
that approval by any applicable automobile manufacturer or distributor of the
transactions contemplated by this Agreement is not received by the Closing Date
Deadline (as the same may have been extended pursuant to Article 2 hereof);
(e) By the Buyer, by written notice to the Seller, in the event
that any applicable automobile manufacturer or distributor (or any person
claiming by, through or under it) shall exercise any right of first refusal,
preemptive right or other similar right, with respect to the dealership business
of the Corporation; or
34
(f) By the Buyer, on written notice to the Seller within 30 days
after the date hereof, if, and only if, the Buyer is not satisfied, in its
discretion, with the results of the Buyer's due diligence investigation
contemplated by Section 5.1(a) hereof.
10.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination
of this Agreement pursuant to Section 10.1, this Agreement shall be of no
further force or effect; PROVIDED, HOWEVER, that any termination pursuant to
Section 10.1 shall not relieve (i) the Buyer of any liability under Section 10.3
below, (ii) the Seller of any liability under Section 10.4 below, (iii) the
Buyer or the Seller of any liability or obligation under Section 12.14 below,
(iv) the Corporation of any liability under Section 10.6 below, or (v) any party
hereto of any liability for breach of any representation and warranty, covenant
or agreement hereunder occurring prior to such termination. In addition, in the
event of any such termination, all filings, applications and other submissions
made pursuant to this Agreement or prior to the execution of this Agreement in
contemplation thereof shall, to the extent practicable, be withdrawn from the
agency or other entity to which made.
10.3 PAYMENT OF BUYER'S TERMINATION FEE . If this Agreement is
terminated by the Seller pursuant to Section 10.1(b) above and the failure to
complete the Closing on or before the Closing Date Deadline shall have been due
to the Buyer's breach of its material representations and warranties or its
material covenants or obligations under this Agreement, then the Buyer shall,
upon demand of the Seller, promptly pay to the Seller in immediately available
funds, as liquidated damages for the loss of the transaction, a termination fee
of $150,000 (the "BUYER'S TERMINATION FEE").
10.4 PAYMENT OF SELLER'S TERMINATION FEE. If this Agreement is
terminated by the Buyer pursuant to Section 10.1(b) above and the failure to
complete the Closing on or before the Closing Date Deadline shall have been due
to the Seller's breach of any of their material representations and warranties
or any of their material covenants or obligations under this Agreement, then the
Seller shall, upon demand of the Buyer, promptly pay to the Buyer in immediately
available funds, as liquidated damages for the loss of the transaction, a
termination fee of $150,000 (the "SELLER'S TERMINATION FEE").
10.5 TERMINATION FEES EXCLUSIVE REMEDIES FOR DAMAGES. The respective
rights of the parties to terminate this Agreement under Section 10.1(b) and to
be paid the Seller's Termination Fee or the Buyer's Termination Fee, as the case
may be, shall be the respective parties' sole and exclusive remedies for
damages; in the event of such termination by either party, such party shall have
no right to equitable relief for any breach or alleged breach of this Agreement,
other than for specific performance for the payment of the Seller's Termination
Fee or the Buyer's Termination Fee, as the case may be. Nothing contained in
this Agreement shall prevent any party from electing not to exercise any right
it may have to terminate this Agreement and, instead, seeking any equitable
relief to which it would otherwise be entitled in the event of breach by any
other party hereto.
10.6 SPECIAL TERMINATION PAYMENT. As an inducement to the Buyer to
negotiate and enter into this Agreement and to undertake the further cost and
expense of conducting its due diligence investigation and preparing to satisfy
its obligations at the Closing, the Corporation
35
hereby agrees to pay to the Buyer the sum of $150,000 in the event that this
Agreement is terminated by the Buyer pursuant to Section 10.1(e) above. Such
payment shall be made promptly upon demand by the Buyer therefor in immediately
available funds. The Corporation is a party to this Agreement solely for the
purpose of this Section 10.6.
ARTICLE 11
CERTAIN TAXES AND EXPENSES
11.1 CERTAIN TAXES AND EXPENSES.
(a) All sales, use, transfer, intangible, excise, documentary
stamp, recording, gross income, gross receipts and other similar taxes or fees
which may be due or payable in connection with the consummation of the
transactions contemplated hereby shall be paid by the Seller.
(b) Except as otherwise herein provided, the Seller and the Buyer
shall be responsible for the payment of their respective fees, costs and
expenses incurred in connection with the negotiation and consummation of the
transactions contemplated hereby and shall not be liable to the other party or
parties for the payment of any such fees, costs and expenses.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN TAX RETURNS. The Seller shall cooperate with and provide
assistance to the Buyer and the Corporation in connection with the preparation
and filing of all federal, state, local and foreign income tax returns which
relate to the Corporation and to periods prior to Closing but which are not
required to be filed until after the Closing.
12.2 PARTIES IN INTEREST; NO THIRD-PARTY BENEFICIARIES. Subject to
Section 12.4 hereof, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the respective successors and assigns of the parties
hereto. Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any employee of the Corporation or the
Buyer, or any other person, firm, corporation or legal entity, other than the
parties hereto and their successors and assigns, any rights, remedies or other
benefits under or by reason of this Agreement.
12.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including all
Exhibits and Schedules hereto) and the other writings referred to herein or
delivered pursuant hereto contain the entire understanding of the parties hereto
with respect to its subject matter. There are no representations, promises,
warranties, covenants or undertakings other than as expressly set forth herein
or therein. This Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to its subject matter. This Agreement
may be amended or modified only by a written instrument duly executed by the
parties hereto.
12.4 ASSIGNMENT. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties; PROVIDED,
HOWEVER, the Buyer may assign its rights
36
and obligations hereunder to any Affiliate of the Buyer presently existing or
hereafter formed and to any person or entity that shall acquire all or
substantially all of the assets of the Buyer or the Corporation (including any
such acquisition by merger or consolidation); PROVIDED, FURTHER, that no such
assignment shall release the Buyer from its obligations hereunder without the
consent of the Seller. Nothing contained in this Agreement shall prohibit its
assignment by the Buyer as collateral security and the Seller hereby agrees to
execute any acknowledgment of such assignment by the Buyer as may be required by
any lender to the Buyer.
12.5 REMEDIES. Except as expressly provided in this Agreement to the
contrary, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to, specific performance.
12.6 HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by a nationally recognized overnight courier, postage
prepaid, and shall be deemed to have been duly given when so delivered
personally or one (1) business day after the date of deposit with such
nationally recognized overnight courier. All such notices, claims, certificates,
requests, demands and other communications shall be addressed to the respective
parties at the addresses set forth below or to such other address as the person
to whom notice is to be given may have furnished to the others in writing in
accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Attention: Theodore M. Wright, Chief Financial Officer
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Attention: Edward W. Wellman, Jr., Esq.
37
If to the Seller or the Corporation, to:
Aldo B. Paret
Casa Ford of Houston, Inc.
c/o Daniel C. Pappas, P.C.
4615 Southwest Freeway, Suite 600
Houston, Texas 77027
Attn: Monte S. Donaldson, Esq.
12.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
12.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina, without giving
effect to its rules governing conflict of laws.
12.10 WAIVERS. Any party to this Agreement may, by written notice to
the other parties hereto, waive any provision of this Agreement from which such
party is entitled to receive a benefit. The waiver by any party hereto of a
breach by another party of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach by such other party of such
provision or any other provision of this Agreement.
12.11 SEVERABILITY. In the event that any provision, or part thereof,
in this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions, or parts
thereof, shall not in any way be affected or impaired thereby.
12.12 KNOWLEDGE. Whenever any representation or warranty of the Seller
contained herein (other than the representations and warranties set forth in
Sections 3.1 through 3.6 hereof) or in any other document executed and delivered
in connection herewith is based upon the knowledge of the Seller, such knowledge
shall be deemed to include (i) the best actual knowledge, information and belief
of the Seller and (ii) any information which the Seller would reasonably be
expected to be aware of in the prudent discharge of his duties in the ordinary
course of business (including consultation with legal counsel) on behalf of the
Corporation.
12.13 JURISDICTION; ARBITRATION.
(a) Subject to the other provisions of this Section 12.13, any
judicial proceeding brought with respect to this Agreement must be brought in
any court of competent jurisdiction in the State of North Carolina, and, by
execution and delivery of this Agreement, each party hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, and (ii) irrevocably waives
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such court or that such court is an inconvenient
forum.
38
(b) Any dispute, claim or controversy arising out of or relating
to this Agreement (except for accounting matters provided for in Section 1.2(c)
hereto), or the interpretation or breach hereof (including, without limitation,
any of the foregoing based upon a claim to any termination fee hereunder), shall
be resolved by binding arbitration under the commercial arbitration rules of the
American Arbitration Association (the "AAA RULES") to the extent such AAA Rules
are not inconsistent with this Agreement. Judgment upon the award of the
arbitrators may be entered in any court having jurisdiction thereof or such
court may be asked to judicially confirm the award and order its enforcement, as
the case may be. The demand for arbitration shall be made by any party hereto
within a reasonable time after the claim, dispute or other matter in question
has arisen, and in any event shall not be made after the date when institution
of legal proceedings, based on such claim, dispute or other matter in question,
would be barred by the applicable statute of limitations. The arbitration panel
shall consist of three (3) arbitrators, one of whom shall be appointed by each
party hereto within thirty (30) days after any request for arbitration
hereunder. The two arbitrators thus appointed shall choose the third arbitrator
within thirty (30) days after their appointment; PROVIDED, HOWEVER, that if the
two arbitrators are unable to agree on the appointment of the third arbitrator
within 30 days after their appointment, either arbitrator may petition the
American Arbitration Association to make the appointment. The place of
arbitration shall be Charlotte, North Carolina. The arbitrators shall be
instructed to render their decision within sixty (60) days after their selection
and to allocate all costs and expenses of such arbitration (including legal and
accounting fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits (including the
successful assertion of any defenses).
(c) Nothing contained in this Section 12.13 shall prevent any
party hereto from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
12.14 CONFIDENTIALITY.
(a) The Buyer agrees that it will keep confidential and not
disclose without the prior written consent of the Seller, and will not use for
any reason other than the conduct of its due diligence investigation
contemplated by Section 5.1 of this Agreement, all information regarding the
Corporation and its business received from the Seller or the Corporation. The
foregoing prohibition shall not apply to information which (i) is generally
available to the public other than due to an act or omission of the Buyer, (ii)
is available to the Buyer on a non- confidential basis from a source other than
the Seller or the Corporation, provided that such source is not bound by a
confidentiality agreement with, or other duty of non-disclosure to, the Seller
or the Corporation, or (iii) was already known by the Buyer at the time of the
receipt thereof. The provisions of this Section 12.14(a) shall survive the
termination of this Agreement.
(b) The Seller agrees that it will keep confidential and not
disclose without the prior written consent of the Buyer, and will not use for
any reason other than the conduct of its due diligence investigation
contemplated by Section 6.5 of this Agreement, all information regarding the
Buyer and its business received from the Buyer. The foregoing prohibition shall
not apply to information which (i) is generally available to the public other
than due to an act or omission of the Seller, (ii) is available to the Seller on
a non-confidential basis from a source other than the Buyer, provided that such
source is not bound by a confidentiality agreement with,
39
or other duty of non-disclosure to, the Buyer, or (iii) was already known by the
Seller at the time of the receipt thereof. The provisions of this Section
12.14(b) shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
SONIC AUTOMOTIVE, INC.
By: /s/ O. Bruton Smith
------------------------------------
Name: O. Bruton Smith
Title: Chief Executive Officer
/s/ Aldo B. Paret
------------------------------------
Aldo B. Paret
CASA FORD OF HOUSTON, INC.
(solely for purposes of Section 10.6)
By: /s/ Aldo B. Paret
------------------------------------
Name: Aldo B. Paret
Title: President
40
EXHIBITS
Exhibit A - Statement of Rights and Preferences of Preferred Stock
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Non-Competition Agreement
Exhibit D - Form of Employment Agreement
41
SCHEDULES
Schedule 3.2(b) Consents and Approvals for the Seller
Schedule 3.5 Interest in other Entities
Schedule 3.7 Qualification
Schedule 3.8 Capitalization
Schedule 3.10 No Violation; Conflicts
Schedule 3.11 Encumbrances
Schedule 3.13 Financial Statements
Schedule 3.16(b) Leased Premises
Schedule 3.16(g) Owned Equipment
Schedule 3.16(h) Leased Equipment
Schedule 3.17 Intellectual Property
Schedule 3.18 Certain Liabilities
Schedule 3.19 No Undisclosed Liabilities
Schedule 3.20 Absence of Changes
Schedule 3.21 Tax Matters
Schedule 3.22 Compliance with Laws
Schedule 3.23 Litigation Regarding Corporation
Schedule 3.24 Permits, Etc.
Schedule 3.26 Compensation
Schedule 3.27 Employee Benefits
Schedule 3.29(a) Material Agreements
Schedule 3.29(b) Required Consents for Transfers of Material Agreements
Schedule 3.31 Bank Accounts, Credit Cards and Safe Deposit Boxes
Schedule 3.32(a) Insurance Policies
Schedule 3.32(b) Property Damage and Personal Injury Claims
Schedule 3.33 Warranties
Schedule 3.34 Directors and Officers
Schedule 3.36 Environmental Matters
Schedule 4.2(b) Consents and Approvals for the Buyer
42
STOCK PURCHASE AGREEMENT
AMONG
SONIC AUTOMOTIVE, INC.
AND
CASA FORD OF HOUSTON, INC.
AND
ALDO B. PARET
DATED AS OF APRIL 30, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE............................................................................1
1.1 Agreement of Purchase and Sale..........................................................1
1.2 Purchase Price..........................................................................1
1.3 Delivery of the Shares..................................................................7
1.4 Non-Competition Agreement; Employment Agreement.........................................7
ARTICLE 2 CLOSING......................................................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER.................................................8
3.1 Ownership of Shares.....................................................................8
3.2 Seller's Power and Authority; Consents and Approvals....................................8
3.3 Execution and Enforceability............................................................8
3.4 Litigation Regarding Seller.............................................................8
3.5 Interest in Competitors and Related Entities; Certain Transactions......................8
3.6 Seller Not Foreign Person...............................................................9
3.7 Organization; Good Standing; Qualifications; and Power..................................9
3.8 Capitalization..........................................................................9
3.9 Subsidiaries and Investments............................................................9
3.10 No Violation; Conflicts................................................................10
3.11 Title to Assets; Related Matters.......................................................10
3.12 Possession.............................................................................10
3.13 Financial Statements...................................................................10
3.14 Accounts Receivable....................................................................11
3.15 Inventories............................................................................11
3.16 Leased Premises; Machinery and Equipment...............................................11
3.17 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc............................12
3.18 Certain Liabilities....................................................................13
3.19 No Undisclosed Liabilities.............................................................13
3.20 Absence of Changes.....................................................................13
3.21 Tax Matters............................................................................14
3.22 Compliance with Laws, Etc..............................................................15
3.23 Litigation Regarding the Corporation...................................................15
3.24 Permits, Etc...........................................................................15
3.25 Employees; Labor Relations.............................................................16
3.26 Compensation...........................................................................16
3.27 Employee Benefits......................................................................16
3.28 Powers of Attorney.....................................................................17
3.29 Material Agreements....................................................................17
3.30 Brokers' or Finders' Fees, Etc.........................................................18
3.31 Bank Accounts, Credit Cards, Safe Deposit Boxes and Cellular
Telephones ............................................................................18
3.32 Insurance..............................................................................18
3.33 Warranties.............................................................................18
3.34 Directors and Officers.................................................................18
3.35 Suppliers and Customers................................................................19
3.36 Environmental Matters..................................................................19
3.37 Business Generally.....................................................................20
3.38 Misstatements and Omissions............................................................21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER.................................................21
4.1 Organization and Good Standing.........................................................21
4.2 Buyer's Power and Authority; Consents and Approvals....................................21
4.3 Execution and Enforceability...........................................................21
4.4 Litigation Regarding Buyer.............................................................21
4.5 No Violation; Conflicts................................................................22
4.6 Brokers' or Finders' Fees, Etc.........................................................22
4.7 Misstatements and Omissions............................................................22
ARTICLE 5 PRE-CLOSING COVENANTS OF THE SELLER.........................................................22
5.1 Provide Access to Information; Cooperation with Buyer..................................22
5.2 Operation of Business of the Corporation...............................................23
5.3 Books of Account.......................................................................23
5.4 Employees..............................................................................23
5.5 Certain Prohibitions...................................................................23
5.6 Other Changes..........................................................................23
5.7 Additional Information.................................................................23
5.8 Publicity..............................................................................24
5.9 Other Negotiations.....................................................................24
5.10 Closing Conditions.....................................................................24
5.11 Environmental Audit....................................................................24
5.12 Audited Financial Statements...........................................................25
5.13 Hart-Scott-Rodino......................................................................25
ARTICLE 6 PRE-CLOSING COVENANTS OF BUYER..............................................................25
6.1 Publicity..............................................................................25
6.2 Closing Conditions.....................................................................25
6.3 Application to Automobile Manufacturers and Distributors...............................25
6.4 Hart-Scott-Rodino......................................................................25
6.5 Access.................................................................................26
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING.......................................26
7.1 Representations and Warranties.........................................................26
7.2 Performance of Obligations of the Seller...............................................26
7.3 Closing Documentation..................................................................26
7.4 Approval of Legal Matters..............................................................27
7.5 No Litigation..........................................................................27
7.6 No Material Adverse Change or Undisclosed Liability....................................28
7.7 No Adverse Laws........................................................................28
7.8 Affiliate and Other Transactions.......................................................28
7.9 Escrow Agreement.......................................................................28
7.10 Ford Motor Company Approvals. ........................................................28
7.11 Non-Competition Agreement..............................................................28
7.12 Employment Agreement...................................................................28
7.13 Cancellation of Stock Options..........................................................28
7.14 Audited Financial Statements...........................................................28
7.15 Hart-Scott-Rodino Waiting Period.......................................................28
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING......................................29
8.1 Representations and Warranties.........................................................29
8.2 Performance of Obligations of the Buyer................................................29
8.3 Closing Documentation..................................................................29
8.4 Approval of Legal Matters..............................................................30
8.5 No Litigation..........................................................................30
8.6 Escrow Agreement.......................................................................30
8.7 Employment Agreement...................................................................30
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION,
ETC...................................................................................................30
9.1 Survival...............................................................................30
9.2 Agreement to Indemnify by Seller.......................................................31
9.3 Agreement to Indemnify by Buyer........................................................32
9.4 Claims for Indemnification.............................................................32
9.5 Procedures Regarding Third Party Claims................................................32
9.6 Effectiveness..........................................................................33
ARTICLE 10 TERMINATION................................................................................34
10.1 Termination............................................................................34
10.2 Procedure and Effect of Termination....................................................35
10.3 Payment of Buyer's Termination Fee ....................................................35
10.4 Payment of Seller's Termination Fee....................................................35
10.5 Termination Fees Exclusive Remedies for Damages........................................35
10.6 Special Termination Payment. .........................................................36
ARTICLE 11 CERTAIN TAXES AND EXPENSES.................................................................36
11.1 Certain Taxes and Expenses.............................................................36
ARTICLE 12 MISCELLANEOUS..............................................................................36
12.1 Certain Tax Returns....................................................................36
12.2 Parties in Interest; No Third-Party Beneficiaries......................................36
12.3 Entire Agreement; Amendments...........................................................36
12.4 Assignment.............................................................................37
12.5 Remedies...............................................................................37
12.6 Headings...............................................................................37
12.7 Notices................................................................................37
12.8 Counterparts...........................................................................38
12.9 Governing Law..........................................................................38
12.10 Waivers................................................................................38
12.11 Severability...........................................................................38
12.12 Knowledge..............................................................................38
12.13 Jurisdiction; Arbitration..............................................................38