EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 6th day of
April, 1999 by and among SONIC AUTOMOTIVE, INC., a Delaware corporation
("BUYER"), L.O.R., INC., a Maryland corporation ("L.O.R."), WALDORF AUTOMOTIVE,
INC., a Maryland corporation ("WALDORF"), MANHATTAN IMPORTED CARS, INC., a
Maryland corporation ("MIC"), and the shareholders of L.O.R., MIC and Waldorf
(individually, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS"). L.O.R.,
MIC and Waldorf may be referred to herein individually as a "SELLER" and
collectively as the "SELLERS."
W I T N E S S E T H:
WHEREAS, L.O.R. is engaged in a Lexus automobile dealership business (the
"LOR BUSINESS") located at 15501 Frederick Road, Rockville, Maryland 20855,
Waldorf is engaged in a Nissan Jeep automobile dealership business (the "WALDORF
BUSINESS") located at 2950 Crane Highway, Waldorf, Maryland 20601, and MIC is
engaged in, among other businesses, a Porsche and Audi automobile dealership
business (collectively, the "MIC BUSINESS") located at 15515 Frederick Road,
Rockville, Maryland 20855 (such businesses to be referred to individually as a
"BUSINESS" and collectively as the "BUSINESSES"); and
WHEREAS, Sellers desire to sell and Buyer desires to buy, or to cause one
or more subsidiaries or affiliates of Buyer to buy, certain assets pertaining to
the Businesses, subject to the terms and conditions of this Agreement; and
WHEREAS, contemporaneously with the execution of this Agreement, Buyer has
entered into an Agreement and Plan of Merger (the "MERGER AGREEMENT") with
Manhattan Auto, Inc., and the shareholders of Manhattan Auto, Inc., with respect
to the acquisition by Buyer of certain automobile dealership properties; and
WHEREAS, contemporaneously with the execution of this Agreement, Buyer has
entered into a Contract to Purchase and Sell Property (the "REAL PROPERTY
PURCHASE AGREEMENT") with WAI Limited Partnership and its general partners (the
"WALDORF OWNER"), whereby Buyer has agreed to buy and the Waldorf Owner has
agreed to sell the real property at which Waldorf conducts the Nissan Jeep
automobile dealership business (the "WALDORF PROPERTY"); and
WHEREAS, although the consummation of the transactions contemplated hereby
are not subject to the consummation of the transactions contemplated by the
Merger Agreement, the parties hereto nonetheless fully intend to and, to the
extent practicable, will coordinate the consummation of the
transactions contemplated hereby with the consummation of the transactions
contemplated by the Merger Agreement in such a manner as to close both
transactions on the same date.
WHEREAS, at the closing of the transactions contemplated by this Agreement,
MIC will assign to Buyer the Existing Lease (as defined below) of the real
property at which L.O.R. conducts the LOR Business and MIC conducts the MIC
Business (the "ROCKVILLE PROPERTY"; and
WHEREAS, at the closing of the transactions contemplated by this Agreement,
Buyer and Air Beach LP will enter into the Air Beach Lease (as defined in
Section 10.19) whereby Buyer will lease from Air Beach certain condominium units
at which MIC operates (and sublets to certain of its Affiliates from time to
time) a paint and body shop (the "AIR BEACH PROPERTY"); and
WHEREAS, the consummation of the transactions contemplated by this
Agreement is, to the extent described in Sections 8.16 and 9.7, subject to the
consummation of the transactions contemplated by the Real Property Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 "AGGREGATE CONSIDERATION" shall mean Twenty-Four Million Dollars
($24,000,000) plus the Purchase Price paid at Closing.
1.2 "ASSETS" shall mean: the New Vehicles (as defined in Section 3.1); the
Demonstrators (as defined in Section 3.2); the Used Vehicles (as defined in
Section 3.5), if any; the Parts (as defined in Section 4.3); the Miscellaneous
Inventories (as defined in Section 5.1); the Work in Progress (as defined in
Section 5.3); the Fixtures and Equipment (as defined in Section 5.4); the
Miscellaneous Assets (as defined in Section 5.5); the goodwill of each of the
Businesses; and any other assets of the Sellers which are expressly transferred
to Buyer hereunder. Assets shall not include any cash, notes receivable,
accounts receivable, deposits made by Sellers and items in categories defined in
Sections 3.1 through 3.5 and 4.1 through 4.3 and 5.1 through 5.5 which are not
purchased by Buyer.
1.3 "CLOSING DATE" shall mean the date of the closing of the purchase and
sale of the Assets (the "CLOSING") which shall be a date designated by the
Buyer, which date shall be as soon as reasonably practicable after: (a) the
receipt by Buyer of the approvals of the Manufacturers contemplated in Section
8.13; (b) the satisfaction of the conditions set forth in
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Sections 8.8 and 8.18; and (c) the completion of the audited financial
statements contemplated in Section 8.21. The Closing Date shall not be later
than the Closing Date Deadline. The Closing shall be held at the offices of
Seller's counsel in Washington, D.C. at 9:30 a.m. on the Closing Date.
1.4 "CLOSING DATE DEADLINE" shall mean the date that is the sixtieth (60th)
day after the date hereof; provided, however, if, as of the Closing Date
Deadline: (a) the Buyer shall not have obtained such approvals under Section
8.13, (b) the conditions set forth in Sections 8.8 and 8.18 shall not have been
satisfied; and/or (c) such audited financial statements shall not have been
completed, either Sellers or Buyer may elect to extend the Closing Date Deadline
for up to an additional sixty (60) days.
1.5 "EXISTING LEASE" shall mean the lease between Manhattan Porsche Audi,
Inc. (predecessor in interest to MIC) and Royco, Inc. dated June 26, 1985 as
modified by the Lease Modification Agreement dated August 2, 1985 and as further
modified by the Second Amendment to Lease dated as of July 31, 1996.
1.6 "INVENTORY DATE" shall mean the close of business on the date of
completion of the Inventory (as defined in Section 4.1), which date shall not be
more than three (3) days prior to the Closing Date, or such later date prior to
the Closing as is mutually agreed by Sellers and Buyer.
1.7 "LIABILITIES" of a Seller shall mean: (a) all obligations of such
Seller arising in the ordinary course of business after the Closing Date, and
not as a result of any breach or default, under (i) each contract and lease of
such Seller that is set forth on Annex A of Schedule 2.4 attached hereto but
only if Buyer has agreed to assume such contract or lease pursuant to an
Assumption Agreement, (ii) the Existing Lease, and (iii) all other contracts and
leases of such Seller that are entered into in connection with the Business of
such Seller in the ordinary course of business at any time after the date hereof
and on or prior to the Closing Date, but only if Buyer has agreed to assume such
other contracts or leases pursuant to an Assumption Agreement (as defined in
Section 2.4 below); and (b) the Inducement Fee as provided in Section 2.7 below.
"LIABILITIES" may also describe the aggregate Liabilities of any or all of the
Sellers, if the context so admits or provides.
1.8 "MANUFACTURER" shall mean any, and "MANUFACTURERS" shall mean all, of:
the Lexus Division of Toyota Motor Sales U.S.A., Inc. ("LEXUS"); Nissan North
America, Inc. ("NISSAN"); Chrysler Corp. ("CHRYSLER"); Porsche Cars North
America, Inc. ("PORSCHE"); and Audi of America, Inc. ("AUDI").
1.9 "REAL PROPERTY" shall mean the Waldorf Property, the Rockville Property
and the Air Beach Property.
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ARTICLE II
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SALE AND PURCHASE OF THE ASSETS
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2.1 SALE AND PURCHASE. Upon the terms and subject to the conditions
hereinafter set forth, at the Closing, Sellers will sell, transfer and convey
the Assets to Buyer and Buyer will purchase the Assets from Sellers for the
consideration set forth in this Agreement. The sale, transfer and conveyance of
the Assets will be made by execution and delivery at the Closing of a bill of
sale from each Seller in a form reasonably satisfactory to Buyer's counsel (the
"BILLS OF SALE") and Articles of Transfer and such other instruments of
assignment, transfer and conveyance as Buyer shall reasonably request. Except to
the extent specifically included within the Assets, Sellers will not sell, and
Buyer will not purchase, any other tangible or intangible assets of Sellers.
2.2 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE PRICE") to
be paid for the Assets shall consist of Twenty-three Million Six Hundred
Sixty-six Thousand Dollars ($23,666,000), as the purchase price for the
Businesses and intangible assets included in the Assets (the "BUSINESS AND
INTANGIBLE ASSETS PURCHASE PRICE"), which shall be allocated among the Sellers
in accordance with Part I of Schedule 2.2 hereto, plus the amounts paid by Buyer
pursuant to Section 2.3(c), plus the sum of: (a) the New Vehicle Purchase Price
(as defined in Section 3.1); (b) the Demonstrator Purchase Price (as defined in
Section 3.2); (c) the Used Vehicle Purchase Price (as defined in Section 3.5),
if applicable; (d) the Parts Purchase Price (as defined in Section 4.4); (e) the
Miscellaneous Inventories Purchase Price (as defined in Section 5.1); (f) the
Work in Progress Purchase Price (as defined in Section 5.3); and (g) the
Fixtures and Equipment Purchase Price (as defined in Section 5.4). Each of the
components of the Purchase Price, other than the Business and Intangible Assets
Purchase Price, shall be allocated among the Sellers in accordance with their
respective Assets upon which such components are based, as reflected in a
revised Part I of Schedule 2.2, to be completed by Buyer and Sellers at least
three (3) days prior to the Closing Date. The parties acknowledge that the New
Vehicle Purchase Price, the Parts Purchase Price and the Miscellaneous
Inventories Purchase Price will be based upon information contained in Schedule
3.1 and the Inventory (as defined in Section 4.1), both of which are to be
delivered prior to the Closing Date. The parties also acknowledge that
adjustments to those categories of Assets will have to be made to reflect
ordinary course increases or decreases in those assets between the time of
delivery of such Schedule 3.1 and the Inventory and the Closing Date, and that
the related components of the Purchase Price will have to be adjusted to reflect
any such adjustments to those Assets. All of the foregoing adjustments (with
appropriate payments in cash or wire transfer by the parties) will be made as
promptly as possible after the Closing. Each party will use the Purchase Price
and Liabilities allocation described in Part II of Schedule 2.2 hereto, as
finally adjusted, in all reporting to, and tax returns filed with, the Internal
Revenue Service and other state and local taxing authorities.
2.3 PAYMENT. Upon the terms and subject to the conditions hereinafter set
forth, at the Closing:
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(a) The Buyer shall issue and deliver to the Sellers at Closing, pro
rata in accordance with the Sellers' respective allocation of the Purchase Price
in accordance with Schedule 2.2, (i) such whole number of Registered Common
Shares (as defined below) OR (ii) such whole number (but not less than zero) of
Restricted Common Shares (as defined below), in either case with an aggregate
Market Price, determined as of the Closing Date, equal to (A) forty percent
(40%) of the Aggregate Consideration less (B) $22,000,000 (such Market Price
amount being referred to herein as the "ASSET AGREEMENT STOCK CONSIDERATION").
(b) Buyer shall deliver to Sellers, by bank or cashier's check or a
wire transfer to an account designated by Sellers, an amount equal to the
Purchase Price less (i) the aggregate Market Price, as of the Closing Date, of
such shares as are issued and delivered in accordance with Section 2.3(a) and
(ii) the amount paid pursuant to Section 2.3(c) below;
(c) Buyer shall pay by wire transfer to the respective holders
thereof, pursuant to payoff letters to be provided by such holders as of the
Closing Date, the principal of and accrued interest as of the Closing Date, not
to exceed an aggregate total of $2,800,000, of the obligations of all the
Sellers that are owed to one or more of the Sellers, shareholders of Sellers,
Marco LP or any entity controlled by any shareholder of Sellers as described on
Schedule 2.3(c); and
(d) Buyer shall assume the Liabilities in accordance with Section 2.4.
2.4 ASSIGNMENT AND ASSUMPTION. At the Closing, each Seller will assign to
Buyer its Liabilities, and Buyer will assume and agree to perform and discharge
the Liabilities of each Seller, pursuant to an assignment and assumption
agreement with each Seller in the form attached hereto as Exhibit 2.4
(collectively, the "ASSUMPTION AGREEMENTS"). Notwithstanding anything herein to
the contrary, except as expressly provided in this Section 2.4 and in the
Assumption Agreements, Buyer does not and will not assume or become liable for
any obligations or liabilities of any Seller, of any kind whatsoever, fixed or
contingent, known or unknown (collectively, the "RETAINED LIABILITIES"), as a
result of the transactions contemplated in this Agreement. Each Seller shall
retain and agrees to satisfy and discharge all of its Retained Liabilities,
including the Retained Liabilities set forth with respect to such Seller on Part
II of Schedule 2.4.
2.5 NON-COMPETITION AGREEMENT. At the Closing: (a) L.O.R. and Bernard Mills
shall enter into a non-competition agreement with Buyer substantially in the
form of Exhibit 2.5(a) attached hereto and (b) Waldorf and John Birch shall
enter into a non-competition agreement with Buyer substantially in the form of
Exhibit 2.5(b) attached hereto (collectively, the "NON-COMPETITION AGREEMENTS").
2.6 EMPLOYMENT AGREEMENT. At the Closing, Buyer and John Jaffe shall enter
into an employment agreement substantially in the form of Exhibit 2.6 attached
hereto (the "EMPLOYMENT AGREEMENT").
2.7 INDUCEMENT FEE. 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
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investigation and preparing to satisfy its obligations at the Closing, Sellers
hereby agree, jointly and severally, to pay to Buyer not later than nine (9)
months after the date hereof, the sum of $1,500,000 (the "INDUCEMENT FEE"). The
Inducement Fee will be included in the Liabilities and will become an obligation
of Buyer. In addition, the Inducement Fee will become an obligation of any other
person or entity (including any holder of a right of first refusal, preemptive
right or other similar right, with respect to any of the Assets) who purchases
the Assets, or any portion thereof, as a result of the execution and delivery by
Sellers of this Agreement. This Section 2.7 shall survive the termination hereof
except that the Inducement Fee will be canceled if this Agreement is terminated
for any reason other than the exercise by all Manufacturers of their respective
rights of first refusal, preemptive rights or other similar rights as provided
under Section 10.13(a).
2.8 EXISTING LEASE. At Closing, MIC shall assign the Existing Lease to
Buyer through the execution and delivery of an Assumption Agreement to Buyer.
L.O.R. and MIC shall have executed and delivered to Buyer a termination
agreement (the "SUBLEASE TERMINATION AGREEMENT"), in recordable form, of the
Agreement of Sublease dated June 26, 1989 between MIC and L.O.R. The Sellers
will record, at their expense, the Sublease Termination Agreement where
appropriate promptly after Closing.
2.9 ISSUANCE OF STOCK. The Buyer will use its best reasonable efforts to
deliver to the Sellers prior to the Closing a prospectus (a "PROSPECTUS") with
respect to the Buyer's offer and sale to the Sellers of the Registered Common
Stock to the Sellers no later than the thirtieth (30th) Business Day prior to
the Closing Date. The Sellers shall provide Buyer with a notice (the "SELLERS'
NOTICE") not sooner than twenty (20) Business Days after the receipt by the
Sellers from the Buyer of the Prospectus, and not later than five (5) Business
Days before the Closing Date. The Sellers' Notice shall indicate whether the
Sellers desire to receive Registered Common Stock (as defined below) or
Restricted Common Stock (as defined below). In the event that the Sellers'
Notice provides for the issuance of Registered Common Stock, the Buyer shall
issue and deliver to the Sellers at the Closing, in the respective percentages
set forth below their names on Schedule 2.2, that number of whole shares (the
"REGISTERED COMMON STOCK") of Buyer's Class A Common Stock, par value $.01 per
share (the "COMMON STOCK"), with an aggregate Market Price (as of the Closing
Date) equal to the Asset Agreement Stock Consideration. As used herein, the term
"MARKET PRICE" shall mean the average of the daily closing prices on the New
York Stock Exchange for one share of Common Stock for the twenty (20)
consecutive trading days ending on the last trading day immediately prior to the
date of determination. In lieu of the issuance of any fractional share of Common
Stock under this Section, the Buyer shall pay to the Sellers in cash or by bank
or cashier's check an amount equal to the Market Price of such share as of the
date payment is due multiplied by the fraction of such share.
2.10 ALTERNATIVE ISSUANCE OF STOCK. In the event that: (i) Buyer shall
fail, for any reason, to satisfy its "best reasonable efforts" obligation to
deliver timely to the Sellers the Prospectus in accordance with Section 2.9,
(ii) if the Seller's Notice indicates the Sellers' preference for the issuance
and delivery of Registered Common Stock and Buyer shall for any reason fail to
deliver the Registered Common Stock to the Sellers at the Closing, or (iii) if
the Seller's Notice indicates the Seller's preference for the issuance and
delivery of Restricted Common Stock then, in any such
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case, notwithstanding anything contained in Section 2.9 to the contrary, the
Buyer shall issue and deliver to the Sellers at the Closing, in the respective
percentages set forth below their names on Schedule 2.2, that number of whole
shares (the "RESTRICTED COMMON STOCK") of Common Stock with an aggregate Market
Price (as of the Closing Date) equal to the Asset Agreement Stock Consideration.
Subject to the terms and conditions hereof, the issuance and delivery of such
shares shall satisfy in full all of Buyer's obligations under Section 2.9. In
lieu of the issuance of any fractional share of Common Stock under this Section,
the Buyer shall pay to the Sellers in cash or by bank or cashier's check an
amount equal to the Market Price of such share as of the date payment is due
multiplied by the fraction of such share.
2.11 MARKET PROTECTION FOR SONIC COMMON SHARES.
(a) As used herein, the term "CLOSING DATE MARKET PRICE" shall mean
the Market Price as of the Closing Date. As used herein, the term "RESTRICTIVE
PERIOD MARKET PRICE" shall mean the Market Price, as determined as of the later
of (i) the first trading day after the date of the expiration of the Restrictive
Period and (ii) the first trading day after the date on which Sellers are first
able to utilize a prospectus supplement to the Acquisition Shelf Registration
Statement or the S-3 Registration Statement for resales.
(b) In the event that the Restrictive Period Market Price is less than
the Closing Date Market Price, then Buyer shall pay to the Sellers, in the
respective percentages set forth below their names on Schedule 2.2, no later
than the third Business Day after the date the Restrictive Period Market Price
may be determined, an amount equal to the number of Sonic Common Shares issued
hereunder and then held by them multiplied by the difference between the
Restrictive Period Market Price and Closing Date Market Price. If Registered
Common Shares were issued to the Sellers at the Closing and if the Acquisition
Shelf Registration Statement is then current and effective in accordance with
Section 2.12 (including Section 2.12(a)(ii)), such payment shall be made through
the issuance and delivery of additional whole shares of Common Stock with an
aggregate Restrictive Period Market Price equal to the amount due under this
Section 2.11(b), and the offer and resale of such shares of Common Stock shall
be registered under the Acquisition Shelf Registration Statement in accordance
with Section 2.12. Such shares shall be considered Registered Common Stock under
the terms hereof. If the Acquisition Shelf Registration Statement is not then
current and effective in accordance with Section 2.12 (including Section
2.12(a)(ii)), such payment shall be made in immediately available funds by bank
or cashier's check or wire transfer. Any fractional share amount shall be paid
by bank or cashier's check or wire transfer. Notwithstanding anything contained
in this Section 2.11(b) to the contrary, in the event that Sonic Common Shares
are redeemed pursuant to Section 2.11(d), no payment shall be made under this
Section 2.11(b).
(c) In the event that the Restrictive Period Market Price exceeds the
Closing Date Market Price, then the Sellers shall return to Buyer, no later than
the third Business Day after the date the Restrictive Period Market Price may be
determined, pro rata according to their respective amounts set forth below their
names on Schedule 2.2 hereto, an aggregate amount of whole Sonic Common Shares
with an aggregate Restrictive Period Market Price equal to the number of Sonic
Common Shares issued hereunder and then held by the Sellers, multiplied by the
difference between
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the Closing Date Market Price and the Restrictive Period Market Price. Any
fractional share amount shall be paid by bank or cashier's check or wire
transfer. Notwithstanding anything contained in this Section 2.11(c) to the
contrary, in the event that Sonic Common Shares are redeemed pursuant to Section
1.2(d), no payment shall be made under this Section 2.11(c).
(d) Notwithstanding any other provision of this Agreement, if on or
prior to the ninetieth (90th) day after the Restrictive Period Expiration Date
all steps on the part of Buyer necessary to register the resale of all Sonic
Common Shares held by Sellers shall not have been taken (including, without
limitation the filing of the Acquisition Shelf Registration Statement and/or the
S-3 Registration Statement together with the appropriate S-3 Resale Prospectus
and/or the Resale Prospectus (as hereinafter defined)), the Buyer shall, as and
to the extent permitted by the Delaware General Corporation Law, immediately
redeem all of the Sonic Common Shares issued hereunder and then held by the
Sellers and deliver to the Sellers therefor, in immediately available funds by
bank or cashier's check or wire transfer, an amount equal to the aggregate
Market Price, as of the Closing Date, of all such Sonic Common Shares, together
with any accrued and unpaid interest thereon required under Section 2.12(b)(i).
Any such payment shall be made to the Sellers in the respective percentages set
forth below their names on Schedule 2.2. In such an event, Sellers shall deliver
to Buyer certificates representing such Sonic Common Shares, duly endorsed for
transfer to Buyer or accompanied by appropriate stock power and vesting unto
Buyer good and marketable title to all of such shares, free and clear of any and
all Encumbrances.
2.12 ADDITIONAL TERMS RELATING TO THE ISSUANCE OF COMMON STOCK.
(a) ISSUANCE OF REGISTERED COMMON STOCK. In the event that Buyer
issues and delivers Registered Common Stock to the Sellers hereunder, the
parties agree as follows:
(i) ACQUISITION SHELF REGISTRATION STATEMENT. The offer and sale
of the Registered Common Stock by the Buyer shall be registered under an
effective registration statement on Form S-4 (the "ACQUISITION SHELF
REGISTRATION STATEMENT") filed by the Buyer with the Securities and Exchange
Commission (the "SEC").
(ii) PROSPECTUS SUPPLEMENT. To the extent required by law, the
Buyer shall prepare as soon as reasonably practicable after the issuance of such
shares a prospectus supplement or post-effective amendment to the Acquisition
Shelf Registration Statement that would permit the offer and resale of the
Registered Common Stock from time to time by the Sellers after the Restrictive
Period. Promptly after Buyer has prepared such supplement or amendment, Buyer
will provide the Sellers with notice thereof.
(iii) LISTING. The Buyer shall cause the Registered Common Stock
to be listed for trading on the New York Stock Exchange prior to the termination
of the Restrictive Period.
(iv) CURRENCY OF SHELF. The Buyer shall maintain the
effectiveness of the Acquisition Shelf Registration Statement for the resale of
the Registered Common Stock and maintain a current resale prospectus to permit
the resale of the Registered Common Stock until all
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of the shares of Registered Common Stock that remain unsold may be sold by the
Sellers without restriction pursuant to clause (k) of Rule 144 ("RULE 144"), or
any successor regulation thereto, promulgated by the SEC under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), or pursuant to clause (d) of
Rule 145, or any successor regulation thereto ("RULE 145"), promulgated by the
SEC under the Securities Act . So long as the Acquisition Shelf Registration
Statement is effective, the Sellers agree that they shall effect each resale of
Registered Common Stock only as permitted by Rules 144 and 145, as applicable,
or pursuant to a current prospectus or supplements thereto that is a part of the
Acquisition Shelf Registration Statement (the "RESALE PROSPECTUS") with respect
to which the Buyer, for each such resale, has granted its prior consent to the
use thereof.
(b) ISSUANCE OF RESTRICTED COMMON STOCK. In the event that Buyer
issues and delivers Restricted Common Stock to the Sellers hereunder, the
parties agree as follows:
(i) S-3 REGISTRATION STATEMENT. The Buyer shall use its best
reasonable efforts to register the resale of the Restricted Common Stock
pursuant to a registration statement on Form S-3 (the "S-3 REGISTRATION
STATEMENT") effective as of the first Business Day after the expiration of the
Restrictive Period (the "RESTRICTIVE PERIOD EXPIRATION DATE") or as soon
thereafter as reasonably practicable. Promptly after the S-3 Registration
Statement becomes effective, Buyer shall notify the Sellers thereof. In the
event that the S-3 Registration Statement shall not be effective as of the
Restrictive Period Expiration Date, the Buyer shall be obligated to pay to the
Sellers, during the period commencing upon the Restrictive Period Expiration
Date and ending upon the date the S-3 Registration Statement becomes effective
and an S-3 Resale Prospectus (as hereinafter defined) is current and effective,
interest in the amount of the Interest Rate upon the aggregate Market Price,
determined as of the Closing Date, of the Sonic Common Shares issued hereunder
and then held by the Sellers. Any such interest payments shall be made to the
Sellers in the respective percentages set forth below their names on Schedule
2.2. Any such interest payments shall be made monthly in arrears and shall be
paid, with respect to any calendar month, no later than the fifth Business Day
of the following calendar month.
(ii) LISTING. The Buyer shall cause the Restricted Common Stock
to be listed for trading on the New York Stock Exchange prior to the termination
of the Restrictive Period.
(iii) CURRENCY OF S-3 REGISTRATION STATEMENT. The Buyer shall
maintain the effectiveness of the S-3 Registration Statement for the resale of
the Restricted Common Stock and maintain a current resale prospectus to permit
the resale of the Restricted Common Stock until all of the Restricted Common
Stock that remains unsold may be sold by the Sellers without restriction
pursuant to clause (d) of Rule 145 or clause (k) of Rule 144, as applicable, or
any successor regulation thereto. So long as the S-3 Registration Statement is
effective, the Sellers agree that they shall effect each resale of Restricted
Common Stock only as permitted by Rule 144 or pursuant to a current prospectus
or supplements thereto that is a part of the S-3 Registration Statement (the
"S-3 RESALE PROSPECTUS") with respect to which the Buyer, for each such resale,
has granted its prior consent to the use thereof.
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(c) ADDITIONAL SELLERS' OBLIGATIONS. The Sellers agree and
acknowledge, with regard to the offer or resale by any of them of any shares of
Common Stock issued to them hereunder (as used herein the term "SONIC COMMON
SHARES" shall refer to such shares), that:
(i) any offering of any of the Sonic Common Shares under the
Resale Prospectus or under the S-3 Resale Prospectus by a Seller will be
effected in an orderly manner through one or more of three (3) reputable
securities dealers (including, unless otherwise indicated by Buyer, Merrill
Lynch & Co., BancBoston Robertson Stephens, and Stephens, Inc.), acting as
broker or dealer, selected by the Buyer in its sole discretion (each a
"DESIGNATED BROKER");
(ii) if requested by the Buyer, in connection with a resale of
Sonic Common Shares under the Acquisition Shelf Registration Statement or the
S-3 Registration Statement, the Sellers will enter into one or more custody
agreements with one or more banks with respect to such Sonic Common Shares so
that all such Sonic Common Shares are held in the custody of such bank or banks
provided however that any Sonic Common Shares not sold pursuant to the
Acquisition Shelf Registration Statement or the S-3 Registration Statement shall
be released from custody on request of the Sellers;
(iii) each Seller will make resales of Registered Common Stock
only by one or more methods described in the Resale Prospectus (including
resales pursuant to Rule 144, or any successor regulation thereto), as
appropriately supplemented or amended when required; and each Seller will make
resales of Restricted Common Stock only by one or more methods described in the
S-3 Resale Prospectus (including resales pursuant to Rule 144, or any successor
regulations thereto), as appropriately supplemented or amended when required;
(iv) since the Sonic Common Shares may be subject to restrictions
on resale under Rules 144 or 145, as applicable, the certificates representing
the Sonic Common Shares will be issued by the Buyer to the Sellers with such
legends as the Buyer may reasonably require until such Sonic Common Shares are
offered pursuant to the foregoing terms under the Resale Prospectus, the S-3
Resale Prospectus or pursuant to Rules 144 or 145, as applicable, at which time
such certificates shall be tendered to the Buyer by the Sellers and a new
certificate or certificates without legends shall be issued by the Buyer to the
Designated Broker in order to settle any resales by the Sellers;
(v) the Sellers shall provide the Buyer, in writing, with all
information concerning the Sellers and their resale of the Sonic Common Shares
as may be reasonably requested by the Buyer in order to comply with the
Securities Act, and the Sellers shall indemnify the Buyer for any liabilities
(the "SELLERS' LIABILITIES") arising under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or any state securities
or blue sky laws resulting from any material misstatements in, or omissions of
material information from, such information provided by the Sellers to the Buyer
pursuant to this clause (v); and
(vi) the Sellers shall pay the commissions or fees of the
Designated Brokers in connection with the resale of the Sonic Common Shares, and
Buyer shall pay all fees
10
related to the registration, listing and maintaining the registered status of
the Sonic Common Shares and the fees and expenses of the custodial bank or banks
holding such Sonic Common Shares, if applicable.
(d) ADDITIONAL BUYER OBLIGATIONS. The Buyer agrees that:
(i) the Buyer shall pay all expenses, including legal and
accounting fees, in connection with the preparation, filing and maintenance of,
as applicable, the Acquisition Shelf Registration Statement, the S-3
Registration Statement (including any amendments to either Registration
Statement), the Resale Prospectus, the S-3 Resale Prospectus (including any
supplements to either Prospectus), the issuance of certificates representing the
Sonic Common Shares and other expenses incurred by the Buyer in meeting its
obligations set forth in Sections 2.9 through 2.12, inclusive; and
(ii) the Buyer shall indemnify the Sellers for any liabilities
arising under the Securities Act, the Exchange Act, or any state securities or
blue sky laws resulting from any material misstatements in, or omissions of
material information from, the Resale Prospectus, the S-3 Resale Prospectus, the
Acquisition Shelf Registration Statement and the S-3 Registration Statement,
including the information incorporated by reference therein, except for the
Sellers' Liabilities.
(e) NO INJUNCTION. Notwithstanding any provision of this Agreement to
the contrary, the Sellers and the Stockholders shall not have any right to take
any action (and the Sellers and the Stockholders hereby agree that none of them
shall take any action) to restrain, enjoin or otherwise delay any registration
as a result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement. Nothing contained in this
Section 2.12(e) shall prevent the Sellers from making a claim for monetary
relief.
(f) RESTRICTIVE PERIOD. The Sellers shall not offer, sell or otherwise
dispose of, or contract to sell or dispose of, any of the Sonic Common Shares
for a period of one hundred eighty (180) days after the Closing Date (the
"RESTRICTIVE PERIOD"); provided, however, that each Seller may transfer his or
her Sonic Common Shares during the Restrictive Period: (A) to his or her spouse
or issue or to a trust for the benefit of his or her spouse or issue or (B) in
connection with his or her death; provided, further, that in the event of any
such transfer contemplated by clause (A) or (B) above, such Sonic Common Shares
shall remain subject to the restrictions on transfer in this Section 2.12(f).
ARTICLE III
NEW VEHICLES; DEMONSTRATORS AND USED VEHICLES
3.1 NEW VEHICLES. At the Closing, Buyer shall purchase all of each Seller's
untitled new 1999 and 1998 motor vehicles in the respective Seller's stock and
unsold by the respective Sellers as of the Closing Date and which are listed on
Schedule 3.1 hereto, which schedule Sellers shall
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deliver to Buyer not more than three (3) days prior to the Closing (all such
vehicles are collectively referred to hereinafter as the "NEW VEHICLES" of such
Seller, or of the Sellers collectively if the context so admits or provides).
The purchase price to be paid by Buyer for each New Vehicle shall be the price
at which the New Vehicle was invoiced to the respective Seller by the applicable
Manufacturer, as adjusted pursuant to this Article III (the sum of all such
amounts to be paid for New Vehicles as determined by this Article III is herein
referred to as the "NEW VEHICLE PURCHASE PRICE"). Schedule 3.1 shall set forth
the model, invoice cost, and all other information necessary to calculate the
New Vehicle Purchase Price with respect to each New Vehicle listed in such
Schedule 3.1. At the Closing, each Seller shall assign to Buyer, without any
additional consideration therefor, by appropriate documents reasonably
satisfactory to Buyer, all unfilled retail orders and deposits made thereon. Any
profits or proceeds derived from such unfilled retail orders shall belong to
Buyer.
3.2 DEMONSTRATORS. At the Closing, Buyer shall purchase all of each
Seller's untitled 1999 and 1998 motor vehicles in such Seller's stock and unsold
by such Seller as of the Closing Date which are used in the ordinary course of
business for the purpose of demonstration and that are listed on Schedule 3.2,
which schedule Sellers shall deliver to Buyer no more than three (3) days prior
to the Closing (all such vehicles are collectively referred to herein as the
"DEMONSTRATORS"of such Seller, or of the Sellers collectively if the context so
admits or provides). For purposes of this Agreement, any motor vehicle with more
than 6,000 miles on its odometer shall be deemed to be "used" rather than a
"Demonstrator." The purchase price to be paid by Buyer for each Demonstrator
shall be the price at which the Demonstrator was invoiced to the Seller by the
applicable Manufacturer, as adjusted pursuant to this Article III, and as
reduced by an amount equal to ten cents ($.10) multiplied by the total mileage
on such odometer (the sum of all such amounts to be paid for Demonstrators
hereunder is herein referred to as the "DEMONSTRATOR PURCHASE PRICE"). Schedule
3.2 shall set forth each Demonstrator's model, invoice cost, odometer reading
and all other information necessary to calculate the Demonstrator Purchase Price
with respect to such Demonstrator.
3.3 ADJUSTMENT OF NEW VEHICLE AND DEMONSTRATOR PURCHASE PRICE. The purchase
price paid for each New Vehicle and each Demonstrator purchased under this
Article III shall be: (a) increased by the dealer cost of any equipment and
accessories which have been installed in such vehicles; and (b) decreased by (i)
the dealer cost of any equipment and accessories which have been removed from
such vehicles, (ii) all paid or unpaid rebates, discounts, holdback for dealer
account and other factory incentives to the extent not already deducted from
dealer cost (including without limitation rebates applied for and paid but not
earned, incentive monies claimed on pre-reported units and carryover allowances
on 1998 models), and (iii) refundable advertising allowances, if any.
3.4 DAMAGED OR REPAIRED NEW VEHICLES AND DEMONSTRATORS. If any New Vehicles
or Demonstrators shall have suffered any damage prior to the Closing Date which
is not reflected on Schedule 3.1 or Schedule 3.2, the applicable Seller shall
notify Buyer in writing on or prior to the Closing Date. In such case, the
applicable Seller and Buyer will attempt to agree on the cost to cover
reasonably required repairs prior to sale, which amount shall be deducted from
the price to be paid for such New Vehicle or Demonstrator to the extent not
repaired prior to Closing. In the
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event Buyer and the applicable Seller cannot agree on the cost of repairs or the
amount of reduction, Buyer shall have no obligation to purchase any such damaged
New Vehicle or Demonstrator and such Seller shall have no obligation to sell
such damaged New Vehicle or Demonstrator. With respect to any New Vehicle or
Demonstrator which shall have been damaged and repaired prior to the Closing
Date, the applicable Seller and Buyer will attempt to agree on an adjustment to
the price to reflect the decrease, if any, in the wholesale value of such New
Vehicle or Demonstrator resulting from such damage and repair, which amount
shall be deducted from the price to be paid for such New Vehicle or
Demonstrator. In the event Buyer and such Seller cannot agree on such
adjustment, Buyer shall have no obligation to purchase such New Vehicle or
Demonstrator and such Seller shall have no obligation to sell such New Vehicle
or Demonstrator.
3.5 USED VEHICLES. Buyer shall have no obligation to purchase any vehicle
from any Seller other than its obligation hereunder to purchase the New Vehicles
and the Demonstrators. Sellers and Buyer shall perform an inventory of each
Seller's motor vehicles that are not New Vehicles or Demonstrators as of the
Inventory Date and, in connection with such inventory, the applicable Seller and
Buyer shall attempt to assign a mutually agreed price to each such vehicle owned
by such Seller as of the Closing Date. Any such vehicles as to which such Seller
and Buyer are unable to agree upon a price shall not be purchased by Buyer in
connection herewith. Any such vehicles as to which such Seller and Buyer shall
agree upon a price are collectively referred to herein as the "USED VEHICLES" of
such Seller, or of the Sellers collectively if the context so admits or
provides, and shall be purchased by the Buyer at the Closing. The aggregate sum
of all prices assigned to such Used Vehicles to be purchased by Buyer pursuant
to the terms of this Section 3.5 shall be referred to herein as the "USED
VEHICLE PURCHASE PRICE."
ARTICLE IV
PARTS/ACCESSORIES
4.1 THE INVENTORY. Buyer and Sellers shall engage a mutually acceptable
third party engaged in the business of appraising, valuing and preparing
inventories for automobile dealerships (hereinafter referred to as the
"INVENTORY SERVICE") to prepare an inventory list (the "INVENTORY") of the parts
and accessories, as well as of the Miscellaneous Inventory, owned by and either
used or held for use by the respective Sellers in the Businesses. The Inventory
(insofar as it relates to parts and accessories) shall be posted to each
Manufacturer's approved system of inventory control. The cost of the Inventory
shall be borne 50% by Buyer and 50% by Sellers. Buyer shall have the right to
deduct Sellers' portion of such expense from the consideration to be paid to
Sellers under the terms of this Agreement and to remit such sums directly to the
Inventory Service. The Inventory shall be completed by the Inventory Date. The
Inventory shall identify each part and accessory and its purchase price.
4.2 RETURNABLE AND NON-RETURNABLE PARTS AND ACCESSORIES. The Inventory
shall classify parts and accessories as "returnable" or "nonreturnable." For
purposes of this Agreement, the terms "returnable parts" and "returnable
accessories" shall describe and include only those new
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parts and new accessories for vehicles which are listed (coded) in the latest
current Master Parts Price List Suggested List Prices and Dealer Prices, or
other applicable similar price lists, of the applicable Manufacturer, with
supplements or the equivalent in effect as of the Inventory Date (the "MASTER
PRICE LIST"), as returnable to the applicable Manufacturer at not less than the
purchase price reflected in the Master Price List or in the most recent
applicable price list. The purchase price for each "returnable part" and
"returnable accessory" will be the price listed in the Master Price List. All
parts and accessories listed (coded) in the Master Price List as non-returnable
to the applicable Manufacturer shall be classified as "nonreturnable." The
purchase price for each "nonreturnable" part and accessory, of which type the
applicable Seller has made no sales during the ninety (90) day period prior to
the Inventory Date, shall be sixty percent (60%) of the price listed therefor in
the Master Price List. The purchase price for each "nonreturnable" part and
accessory, of which type the applicable Seller has made retail sales to one or
more customers during the ninety (90) day period prior to the Inventory Date,
shall be one hundred percent (100%) of the price therefor listed in the Master
Price List. The purchase price for all "Jobber" and/or "NPN" parts shall be
equal to the applicable Seller's original cost of such parts. The purchase price
for all nuts, bolts and any other parts not addressed in this Section 4.2 shall
equal the value thereof as determined by the Inventory Service.
4.3 PARTS. At the Closing, Buyer shall purchase all parts and accessories
owned by each Seller at the Closing Date and listed on the Inventory (the
"PARTS"of such Seller, or of the Sellers collectively if the context so admits
or provides) provided, however, that Buyer shall not be obligated to purchase
any damaged parts or accessories, parts and accessories with component parts
missing, superseded or obsolete parts or accessories, or used parts or
accessories. Sellers agree that if parts and accessories that Buyer is not
obligated to purchase hereunder are not removed from the Real Property within
thirty (30) days after the Closing Date, they shall become the property of Buyer
without the payment of any consideration in addition to the consideration
otherwise provided herein. Buyer agrees to provide access to Sellers for the
purpose of removing such property during such thirty (30) day period.
4.4 PARTS PURCHASE PRICE. The purchase price for the Parts will equal the
value of such items shown on the Inventory, subject to the provisions of Section
4.2 above (the "PARTS PURCHASE PRICE").
4.5 PARTS RETURN PRIVILEGES. Each Seller shall assign to Buyer at Closing
any net parts return privileges under the respective Manufacturer's Parts Return
Plans that may have accrued to such Seller prior to the Closing (and any other
special parts return authorizations which may have been granted to such Seller
by a Manufacturer).
ARTICLE V
MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES
AND EQUIPMENT
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5.1 MISCELLANEOUS INVENTORIES. At the Closing, Buyer shall purchase all
useable gas, oil and grease, all undercoat material and body materials in
unopened cans and such other miscellaneous useable and saleable articles in
unbroken lots (including office supplies) which (i) are on any Seller's
dealership premises and used in its Business, (ii) are owned by such Seller on
the Closing Date, (iii) do not represent more than a sixty (60) day supply of
any particular item(s), and (iv) are identified in the Inventory taken by the
Inventory Service on the Inventory Date (collectively referred to herein as the
"MISCELLANEOUS INVENTORIES"of such Seller, or of the Sellers collectively if the
context so admits or provides). The purchase price for the Miscellaneous
Inventories shall be equal to the replacement cost of the Miscellaneous
Inventories as determined by the Inventory Service and set forth on the
Inventory (the sum of all prices of the Miscellaneous Inventories pursuant to
the terms of this Section 5.1 shall be referred to herein as the "MISCELLANEOUS
INVENTORIES PURCHASE PRICE").
5.2 MISCELLANEOUS ITEMS NOT INCLUDED IN THE INVENTORY. Buyer shall have no
obligation to purchase any such miscellaneous items that are not included in the
Miscellaneous Inventories. Sellers agree that any miscellaneous items that are
not included in the Miscellaneous Inventories and are not removed from the Real
Property within thirty (30) days after the Closing Date shall become the
property of Buyer without the payment of any consideration in addition to the
consideration otherwise provided herein. Buyer agrees to provide access to
Sellers for the purpose of removing such property during such thirty (30) day
period.
5.3 WORK IN PROGRESS. At the Closing, Buyer shall buy at the applicable
Seller's actual cost for parts and labor such shop labor and sublet repairs as
such Seller shall have caused to be performed on any repair orders in connection
with their respective Businesses which are in process at the close of business
on the Closing Date for which there are adequate credit arrangements (the "WORK
IN PROGRESS"of such Seller, or of the Sellers collectively if the context so
admits or provides) (the aggregate sum of all costs of Sellers for the Work in
Progress pursuant to the terms of this Section 5.3 shall be referred to herein
as the "WORK IN PROGRESS PURCHASE PRICE"). Buyer shall complete such repair work
and shall be entitled to the entire proceeds to be collected for such services.
5.4 FIXTURES AND EQUIPMENT. At the Closing, Buyer shall purchase all
fixtures, machinery, equipment (including special tools and shop equipment),
furniture, leasehold improvements and all signs and office equipment owned by
each Seller and used or held for use in connection with the respective
Businesses, including the items listed on Schedule 5.4 hereto, which schedule
Sellers shall deliver to Buyer not later than five (5) days prior to the Closing
(collectively referred to herein as the "FIXTURES AND EQUIPMENT"of a Seller, or
of the Sellers collectively if the context so admits or provides). The purchase
price for the Fixtures and Equipment shall be the depreciated book value thereof
as reflected in said Schedule 5.4 hereto (the "FIXTURES AND EQUIPMENT PURCHASE
PRICE").
5.5 MISCELLANEOUS ASSETS. At the Closing, and without payment of any
additional consideration, Buyer shall purchase all of the following assets that
are used or held for use in connection with or relate to the Sellers' respective
Businesses (i) unused shop repair orders, parts
15
sales tickets, accounting forms, binders, office and shop supplies and such shop
reference manuals, parts reference catalogs, non-accounting file copies for all
sales of such Seller for the three (3) years preceding the Closing Date, (ii)
copies of new and used car sales records and specifically wholesale parts sales
records, new and used parts sales records, and service sales records for the
three (3) years preceding the Closing Date, (iii) product sales training
material and reference books on hand as of the Closing Date, (iv) customer and
registration lists pertaining to the sale of motor vehicles, service files,
repair orders, owner follow-up lists and similar records, (v) telephone numbers
and listings used by such Seller, (vi) names and addresses of each Seller's
service customers and prospective purchasers, (vii) all lawfully transferrable
licenses and permits, (viii) all rights and claims under or arising out of the
contracts and leases included in the Liabilities, and (ix) Sellers' respective
rights to the tradenames "Lexus of Rockville," "Nissan Jeep of Waldorf,"
"Rockville Porsche Audi" and any other tradename used by any Seller, as listed
on Schedule 5.5 hereto, and any similar variations thereof (all the foregoing
items collectively referred to herein as the "MISCELLANEOUS ASSETS"of a Seller,
or of the Sellers collectively if the context so admits or provides).
5.6 CERTAIN RECORDS OF SELLER; ACCESS BY SELLER. Each Seller may retain all
corporate records, financial records and correspondence which are not necessary
for the continued operation of such Seller's Business by Buyer. For a period of
two (2) years following the Closing Date, Buyer and Sellers will allow the
Sellers and Buyer, respectively, and their respective authorized agents and
representatives access, upon reasonable notice during business hours, to the
books and records regarding post-Closing adjustments arising during the three
day period prior to Closing.
5.7 WARRANTY OBLIGATIONS OF SELLER. To the extent that a Seller may have
issued warranties on the vehicles sold by such Seller on or prior to the Closing
Date and to the extent such warranties are not included in the Work in Progress,
Buyer shall have no responsibility to perform any services required under such
warranties, unless authorized in writing by the applicable Seller accompanied by
arrangements in writing satisfactory to Buyer to assure Buyer of payment for all
work performed by Buyer, and, if so authorized by a Seller, such Seller shall
reimburse Buyer for all of Buyer's costs for parts and labor in connection
therewith at established internal rates for parts and labor. At the Closing
Date, each Seller shall supply Buyer with a list to which such warranties and
guaranties, if any, are applicable, which list shall include the names of the
purchasers, the make and year model of the vehicles purchased and the date of
purchase. Each Seller shall also supply to Buyer at or prior to the Closing Date
an address for and a designation of the person who will be responsible for
authorizing Buyer to perform any services under such warranties, if any, issued
by such Seller on vehicles sold by it on or prior to the Closing Date. The
applicable Seller shall reimburse Buyer promptly upon demand for all sums due or
payable by such Seller to Buyer hereunder.
5.8 ACCOUNTS RECEIVABLE. Each Seller shall retain all accounts receivable
arising out of the operation of its Business on or prior to the Closing Date and
Buyer shall retain all accounts receivable arising out of sales and/or services
of the respective Businesses after the Closing Date. After the Closing Date,
Buyer shall cooperate with Sellers and shall use reasonable and ordinary
efforts, including providing Sellers access to the Buyer's books, records and
employees (at Sellers' expense) to assist Sellers in their efforts to collect
their respective accounts receivable for a period
16
of six (6) months after the Closing. Buyer shall accept payment of each Seller's
accounts receivable at no charge to Sellers for a period of six (6) months after
the Closing, and shall forward to Sellers, promptly upon receipt, all the money
so received on said accounts. Notwithstanding anything to the contrary, Buyer
shall have no responsibility to actually collect any Sellers' accounts
receivable.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers and the Stockholders as follows:
6.1 ORGANIZATION; POWER AND AUTHORITY; AUTHORIZATION. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business makes such
qualification necessary and has full corporate power and authority to own or use
the properties it purports to own and use and to carry on its business as now
being conducted. The Board of Directors of Buyer has, or prior to the Closing
will have, duly approved this Agreement, all other agreements, certificates and
documents executed or to be executed by Buyer in connection herewith, and the
transactions contemplated hereby and thereby. Buyer has full corporate power and
authority to execute and deliver this Agreement and all other agreements,
certificates and documents executed or to be executed by Buyer in connection
herewith, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. This Agreement, and all other
agreements, certificates and documents executed or to be executed by Buyer in
connection herewith, constitute or, when executed and delivered, will constitute
legal, valid and binding agreements of Buyer enforceable against Buyer in
accordance with their respective terms.
6.2 NON-VIOLATION; CONSENTS. Except as set forth on Schedule 6.2 attached
hereto, the execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
hereof do not and will not: (a) conflict with or violate any of the provisions
of Buyer's restated Certificate of Incorporation or By-laws, each as amended, or
any resolution of the Board of Directors or the stockholders of Buyer, (b)
violate any law, ordinance, rule or regulation or any judgment, order, writ,
injunction or decree or similar command of any court, administrative or
governmental agency or other body applicable to Buyer, (c) violate or conflict
with or result in a breach of, or constitute a default under, any material
instrument, agreement or indenture or any mortgage, deed of trust or similar
contract to which Buyer is a party or by which Buyer is bound or affected, or
(d) require the consent, authorization or approval of, or notice to, or filing
or registration with, any governmental body or authority, or any other third
party.
6.3 LITIGATION. There are no actions, suits or proceedings pending, or, to
the knowledge of Buyer, threatened against or affecting Buyer which might
adversely affect the power or authority of Buyer to carry out the transactions
to be performed by it hereunder.
17
6.4 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 consummation of
the transactions contemplated hereby.
6.5 DISCLOSURE MATERIAL. Sellers acknowledge that Buyer has delivered to
them copies of (i) the Prospectus dated November 10, 1997 (the "1997
PROSPECTUS"), (ii) the Buyer's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, (iii) the Buyer's Quarterly Reports on Form 10-Q for
the three-month periods ended March 31, 1998, June 30, 1998 and September 30,
1998 and (iv) all Current Reports on Form 8-K, filed in 1998 or 1999, each in
the form (excluding exhibits) filed with the SEC (collectively, such Form 10-K,
10-Q and 8-K being hereinafter referred to as its "REPORTS"). Neither the 1997
Prospectus nor any of the Reports contained, at the time of filing thereof with
the SEC, any untrue statement of any material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading.
6.6 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made by
Buyer in this Agreement, and no statement contained in any agreement,
instrument, certificate or schedule furnished or to be furnished by Buyer
pursuant hereto, 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 or warranty or such statement not misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE STOCKHOLDERS
Sellers and the Stockholders, jointly and severally, represent and warrant
to Buyer, as follows:
7.1 ORGANIZATION; POWER AND AUTHORITY; AUTHORIZATION. Each Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland, is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business makes such
qualification necessary and has full corporate power and authority to own or use
the properties it purports to own and use and to carry on its business as now
being conducted. Schedule 7.1 sets forth each person or entity which has an
ownership interest in any Seller and the extent and nature of such ownership
interest held by each such owner. Each Seller has full corporate power and
authority to execute and deliver this Agreement and all other agreements,
certificates and documents executed or to be executed by such Seller in
connection herewith, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. Each of the
Stockholders has full capacity, power and authority to execute and deliver this
Agreement and all other agreements, certificates and documents executed or to be
executed by such Stockholder in connection herewith, to consummate the
transactions contemplated hereby and thereby and to perform his or her
obligations hereunder and thereunder. This Agreement, and all
18
other agreements, certificates and documents executed or to be executed by any
Seller in connection herewith, have been duly authorized by all necessary
corporate action and constitute or, when executed and delivered, will constitute
legal, valid and binding agreements of such Seller enforceable against such
Seller in accordance with their respective terms. This Agreement, and all other
agreements, certificates and documents executed or to be executed by a
Stockholder in connection herewith, constitute or, when executed and delivered,
will constitute legal, valid and binding agreements of such Stockholder
enforceable against him or her in accordance with their respective terms. No
Seller has ever operated its Business under any tradenames other than the
tradenames listed or referred to in Section 5.5, except that MIC's corporate
name is "Manhattan Imported Cars" (although it has not operated under the
tradename "Manhattan Imported Cars" during the last fifteen (15) years) and
Waldorf has operated under the tradename of Nissan Jeep Eagle of Waldorf.
7.2 NO VIOLATION; CONSENTS. Except as set forth in Schedule 7.2 attached
hereto, the execution and delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
hereof do not and will not: (a) conflict with or violate any of the provisions
of any Seller's Articles of Incorporation, as amended, or any resolution of the
Board of Directors of any Seller, (b) violate any law, ordinance, rule or
regulation or any judgment, order, writ, injunction or decree or similar command
of any court, administrative or governmental agency or other body applicable to
any Seller, any Assets, any Business or any Liabilities, (c) provided that the
transactions contemplated hereby and (to the extent described in Sections 8.16
and 9.7) the Real Property Purchase Agreement are consummated, violate or
conflict with or result in a breach of, or constitute a default under, or an
event giving rise to a right of termination of, any Contract (as defined in
Section 7.10), any material instrument, agreement or indenture or any mortgage,
deed of trust or similar contract to which any of the Sellers or any of the
Stockholders is a party or by which any of the Sellers, any of the Stockholders
or any of the Assets are bound or affected, (d) result in the creation or
imposition of any Encumbrance upon any of the Assets, or (e) except for the
Articles of Transfer or as otherwise specifically contemplated by this
Agreement, require the consent, authorization or approval of, or notice to, or
filing or registration with, any governmental body or authority, or any other
third party.
7.3 LITIGATION. There are no actions, suits or proceedings pending
(excluding any actions, suits or proceedings for which process has not been
served) or, to the knowledge of Sellers and the Stockholders, threatened against
any Seller or any of the Stockholders which might adversely affect the power or
authority of any of them to carry out the transactions to be performed by any
such party hereunder. There are no actions, suits or proceedings pending
(excluding any actions, suits or proceedings for which process has not been
served) or, to the knowledge of Sellers and the Stockholders, threatened against
or affecting any Seller, other than those adequately covered by insurance, and
those disclosed on Schedule 7.3 attached hereto, and none of the actions, suits
or proceedings described on Schedule 7.3, if determined adversely to such
Seller, will have, or could reasonably be expected to have, a material adverse
effect upon the Assets or the Liabilities of any Seller or the business,
prospects, properties, earnings, results of operations or condition (financial
or otherwise) of any Business.
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7.4 TITLE TO ASSETS; ENCUMBRANCES. Except as disclosed on Schedule 7.4
attached hereto, each Seller has good title to its Assets, free and clear of all
liens (including tax liens), security interests, encumbrances, actions, claims,
payments or demands of any kind and character (collectively, "ENCUMBRANCES"),
except Encumbrances disclosed on Schedule 7.4 hereto and Encumbrances for ad
valorem personal property taxes not yet due and payable. All of the Assets to be
transferred hereunder conform, as to condition and character, to the
descriptions of such Assets contained herein and will be transferred at the
Closing free and clear of all Encumbrances, except Encumbrances for ad valorem
personal property taxes not yet due and payable. To the knowledge of Sellers and
the Stockholder, the ownership and use of the Assets, and the operation of the
respective Businesses, do not infringe upon the intellectual property rights of
any other person or entity.
7.5 PERMITS AND APPROVALS. Except as disclosed on Schedule 7.5 attached
hereto, there are no permits or approvals used or obtained for use by any Seller
which are required under applicable law in connection with the ownership or
operation of the respective Businesses.
7.6 FINANCIAL STATEMENTS.
(a) Each Seller has delivered to Buyer the financial statements of
such Seller listed in Schedule 7.6 attached hereto (the "FINANCIAL STATEMENTS").
Except as set forth on Schedule 7.6, the Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently
applied. Each balance sheet included in the Financial Statements fairly presents
the financial condition of such Seller as of the date thereof and all debts and
liabilities of such Seller, fixed or contingent, as of the date thereof, and
each related statement of income included in the Financial Statements fairly
presents the results of the operations of such Seller and the changes in its
financial position for the period indicated, all in accordance with generally
accepted accounting principles consistently applied. The Financial Statements
are in accord with the books and records of such Seller, which books and records
are true, correct and complete.
(b) No Seller has any outstanding material claims, liabilities,
obligations or indebtedness of any nature, fixed or contingent, except as set
forth in its Financial Statements, or in the Schedules to this Agreement, and
except for liabilities incurred in the ordinary course of business and of the
kind and type reflected in the Financial Statements.
7.7 BROKERS AND FINDERS. None of the Sellers, and none of the Stockholders,
has engaged any broker or any other person or entity who would be entitled to
any brokerage commission or finder's fee in respect of the execution of this
Agreement and/or the consummation of the transactions contemplated hereby, other
than such fee or commission the entire cost of which will be borne by Sellers.
7.8 COMPLIANCE WITH LAWS.
(a) Except as set forth on Schedule 7.8(a) attached hereto, the Assets
comply in all material respects with, and the Businesses have been conducted in
all material respects in
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compliance with, all laws, rules and regulations (including all worker safety
and all Environmental Laws (as hereinafter defined)) applicable zoning and other
laws, ordinances, regulations and building codes, and none of the Sellers, and
none of the Stockholders, has received any notice of any violation thereof which
has not been remedied.
(b) Except as set forth on Schedule 7.8(b) attached hereto, (i) no
Seller has at any time generated, used, treated or stored Hazardous Materials
(as hereinafter defined) on, or transported Hazardous Materials to or from, the
Real Property or any property adjoining or adjacent to the Real Property and, to
the knowledge of Sellers and the Stockholders, no party has taken such actions
on or with respect to the Real Property, provided, however, certain petroleum
products are stored and handled by Sellers in the ordinary course of business in
compliance in all material respects with all Environmental Laws, (ii) no Seller
has at any time released or disposed of Hazardous Materials on the Real Property
or any property adjoining or adjacent to the Real Property, and, to the
knowledge of Sellers and the Stockholders, no party has taken any such actions
on the Real Property, (iii) each Seller has at all times been in compliance with
all Environmental Laws and the requirements of any permits issued under such
Environmental Laws with respect to the Real Property, the Assets and the
operation of its Business, except where failure to comply has not had, and could
not reasonably be expected to have, a material adverse effect on such Seller's
Assets or Liabilities or the prospects, properties, earnings, results of
operations or condition (financial or otherwise) of its Business, (iv) there are
no past, pending or, to the knowledge of Sellers and the Stockholders,
threatened environmental claims against any Seller, any Real Property, any of
the Assets or any Business, (v) to the knowledge of Sellers and the
Stockholders, there are no facts or circumstances, conditions or occurrences
regarding any Seller, any Real Property, any of the Assets or any Business that
could reasonably be anticipated to form the basis of an environmental claim
against any Seller, any Real Property, any of the Assets or any Business or to
cause such Real Property, Assets or Business to be subject to any restrictions
on its ownership, occupancy, use or transferability under any environmental law,
(vi) there are not now and, to the knowledge of Sellers and the Stockholders,
never have been any underground storage tanks located on any Real Property,
(vii) no Seller has transported or arranged for the transportation of any
Hazardous Materials to any site other than the Real Property and (viii) except
as set forth on Schedule 7.8(b), none of the Sellers, and none of the
Stockholders, has operated any Business at any location other than the
applicable Real Property. As used herein, the term "ENVIRONMENTAL LAWS" shall
mean 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 governmental authority relating to pollution or Hazardous
Materials or protection of human health or the environment, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), as amended. As used herein, the term "HAZARDOUS MATERIALS" means
any waste, pollutant, chemical, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste petroleum or petroleum-derived substance or
waste, or any constituent or decomposition product of any such pollutant,
material, substance or waste, regulated under or as defined by any Environmental
Law.
(c) None of the Sellers, nor any Stockholder, director, officer, agent
or employee of such Seller or, to the knowledge of Sellers and the Stockholders,
any other person or entity
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associated with or acting for or on behalf of such Seller, has, directly or
indirectly, made any unlawful contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity,
regardless of form, whether in money, property or services: (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of such Seller.
7.9 FIXTURES AND EQUIPMENT. The Fixtures and Equipment constitute in the
aggregate all of the fixtures, machinery, equipment, furniture, leasehold
improvements, signs and office equipment used by Sellers in the Businesses and,
to the extent such are currently actively used in the operation of the
Businesses, are in good operating condition, normal wear and tear excepted. All
Demonstrators have been operated in the ordinary course of business, are
operated with dealer tags and have not had certificates of title issued with
respect to them. The structures and building systems included in the Real
Property are in good condition, maintenance and repair, normal wear and tear
excepted.
7.10 CONTRACTS. All contracts and leases to which a Seller is a party or to
which a Seller or any of the Assets are bound that relate to the Businesses are
set forth on Part I of Schedule 2.4 (collectively, the "CONTRACTS"). Each Seller
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 of the material Contracts. 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 Sellers and the
Stockholders, no other party to any Contract is in default in any respect of any
of its obligations thereunder. Each of the Contracts is valid and in full force
and effect and enforceable against the applicable Seller in accordance with its
terms, and, to the knowledge of Sellers and the Stockholders, enforceable
against the other parties thereto in accordance with its respective terms.
Except as set forth in Schedule 7.2 hereto, each Contract is assignable to Buyer
without the consent of the other party(ies) thereto.
7.11 ADEQUACY OF ASSETS. With respect to each Seller, except for such
Seller's cash and accounts receivable and rights under its dealership agreements
with the applicable Manufacturer, the Assets of such Seller, together with the
Real Property and the Contracts (including all equipment leased pursuant to the
equipment leases included in the Contracts) of such Seller, comprise all of the
assets, properties, contracts, leases and rights necessary for Buyer to operate
the Business of such Seller substantially in the manner operated by such Seller
prior to the Closing. The failure by any Seller to satisfy and discharge in full
any of its Retained Liabilities will not have, and could not reasonably be
expected to have, a material adverse effect upon any of the Assets or
Liabilities of such Seller or the prospects, properties, earnings, results of
operations or condition (financial or otherwise) of its Business.
7.12 TAXES. Each Seller has filed all federal, state and local governmental
tax returns required to be filed by it in accordance with the provisions of law
pertaining thereto and has paid all taxes and assessments (including, without
limitation of the foregoing, income, excise, unemployment, social security,
occupation, franchise, property and import taxes, duties or charges
22
and all penalties and interest in respect thereof) required by such tax returns
or otherwise to have been paid to date.
7.13 EMPLOYEES. Schedule 7.13 attached hereto discloses, as of the date
hereof, all of each Seller's employees, as well as each employee's compensation
(including, separately, base pay and any incentive or commission pay), title,
length of employment, employment contract, if any, and accrued vacation time.
Except as disclosed on Schedule 7.13, none of the Sellers have any "employee
benefit plan" ("EMPLOYEE BENEFIT PLAN") (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including without limitation, any bonus, deferred compensation, pension,
profit-sharing, stock option, employee stock purchase, secrecy agreement or
covenant not to compete with any employee. None of the Sellers are currently,
nor has any ever been, a party to any collective bargaining agreement or other
labor contract, and there has not been nor is there pending or, to the knowledge
of Sellers and the Stockholders, threatened any union organizational drive or
application for certification of a collective bargaining agent with respect to
such Seller's employees. Each Seller has been and is now in material compliance
with the "COBRA" health care continuation coverage requirements of Section 4980B
of the Internal Revenue Code of 1986, as amended, and Sections 601-608 of ERISA
and any applicable state health care continuation coverage requirements. No
Seller has made any promises nor incurred any liability, pursuant to an Employee
Benefit Plan or otherwise, to provide medical or other welfare benefits to
retired or former employees of such Seller (other than COBRA or state mandated
continuation coverage, where applicable). Except as disclosed on Schedule 7.13,
none of any Seller's employees or former employees has elected COBRA
continuation coverage or has incurred a COBRA qualifying event since January 1,
1997.
7.14 YEAR 2000. Sellers have (i) initiated a review and assessment of all
areas within the Businesses and operations (including those affected by the
Manufacturers, suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by a Seller may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999), (ii) developed a plan and time line as described on Schedule
7.14 for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan and timetable, except as set forth in said Schedule 7.14.
7.15 RESTRICTED COMMON STOCK MATTERS.
(a) Each of the Sellers and the Stockholders understand that the
Restricted Common Stock, if any, will not be registered, except for resales as
expressly contemplated hereby, under the Securities Act or applicable state
securities laws on the basis that the sale provided for in this Agreement and
the issuance of such Restricted Common Stock hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
the Buyer's reliance on such exemption is predicated on the representations and
warranties of such Seller and such Stockholder.
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(b) The Restricted Common Stock, if any, is being acquired for the
account of each Seller and each Stockholder for the purposes of investment and
not with a view to the distribution thereof, as those terms are used in the
Securities Act and the rules and regulations promulgated thereunder.
(c) Each of the Sellers and the Stockholders is an "accredited
investor" within the meaning of Rule 501(a) of Regulation D promulgated under
the Securities Act; and each of the Sellers and the Stockholders has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of acquiring the Restricted Common Stock;
each of the Sellers and Stockholders has delivered to the Buyer an Investor
Qualification Questionnaire with respect to such Seller's and/or Stockholder's
status as an "accredited investor".
(d) Each of the Sellers and the Stockholders has received copies of:
(i) the Prospectus dated November 10, 1997; (ii) the Form 10-K filing of Buyer
for the year ended December 31, 1997 (without exhibits); (iii) the Form 10-Q
filings of Buyer for the first, second and third quarters of 1998 (without
exhibits); and (iv) the Form 8-K filings of Buyer filed March 24, 1998 and July
9, 1998 (without exhibits); and has been furnished such other information, and
has had an opportunity to ask such questions and have them answered by the
Buyer, as it, he or she has deemed necessary in order to make an informed
investment decision with respect to the acquisition of the Restricted Common
Stock.
(e) Each of the Sellers and the Stockholders understands, and has the
financial capability of assuming, the economic risk of an investment in the
Restricted Common Stock for an indefinite period of time.
(f) Each of the Sellers and the Stockholders has been advised that
such Seller and/or Stockholder will not be able to sell, pledge or otherwise
dispose of the Restricted Common Stock, or any interest therein, without first
complying with the relevant provisions of the Securities Act and any applicable
state securities laws, and that the provisions of Rule 144 permitting routine
sales of securities of certain issuers subject to the terms and conditions
thereof, may not currently be available to such Seller and/or Stockholder with
respect to the Restricted Common Stock.
(g) Each of the Sellers and the Stockholders has, to the extent such
Seller and/or Stockholder has deemed necessary, consulted with its, his or her
own investment advisors, legal counsel and tax advisors regarding an investment
in the Restricted Common Stock.
(h) Each of the Sellers and the Stockholders acknowledges that, except
as set forth in this Agreement, the Buyer is not under any obligation (i) to
register the Restricted Common Stock, or (ii) to furnish any information or to
take any other action to assist the Sellers or the Stockholders in complying
with the terms and conditions of any exemption which might be available under
the Securities Act or any state securities laws with respect to sales of the
Restricted Common Stock by the undersigned in the future.
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7.16 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty made by
any Seller or any Stockholder in this Agreement, and no statement contained in
any agreement, instrument, certificate or schedule furnished or to be furnished
by any Seller or any
Stockholder pursuant hereto,
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 or warranty or such statement not misleading.
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer to perform this Agreement at Closing are subject
to the following conditions precedent which shall be fully satisfied at or
before the Closing, unless waived in writing by Buyer.
8.1 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of Sellers and the Stockholders herein contained shall be true and
correct in all material respects on and as of the Closing Date as if made on and
as of the Closing Date, and Buyer shall have received a certificate from the
Stockholders and a duly authorized officer of each Seller, dated the Closing
Date, to such effect.
8.2 COMPLIANCE WITH AGREEMENTS. Each of the agreements or obligations
required by this Agreement to be performed or complied with by any Seller or any
Stockholder at or before the Closing shall have been duly performed or complied
with in all material respects, and Buyer shall have received a certificate from
the Stockholders and a duly authorized officer of each Seller, dated the Closing
Date, to such effect.
8.3 NO LITIGATION. No action, suit or proceeding shall have been instituted
by a governmental agency or any other third party to prohibit or restrain the
sale contemplated by this Agreement or otherwise challenge the power and
authority of the parties to enter into this Agreement or to carry out their
obligations hereunder or the legality or validity of the sale contemplated by
this Agreement.
8.4 INVENTORY. The Inventory shall have been completed to the reasonable
satisfaction of Buyer.
8.5 CORPORATE ORGANIZATION; ENCUMBRANCES. Each Seller shall have furnished
to Buyer: (a) a certificate of good standing of such Seller issued by the
Secretary of State of the State of Maryland dated as of a recent date prior to
the Closing Date; (b) a copy of the Articles of Incorporation of such Seller
certified by the Secretary of State of the State of Maryland dated as of a
recent date prior to the Closing Date; (c) a certificate of such Seller, dated
the Closing Date, in form and substance reasonably satisfactory to Buyer,
certifying as to (i) no amendments to the Articles of Incorporation of such
Seller since the date of the certificate delivered in accordance with
25
Section 8.5(b); (ii) the Bylaws of such Seller; and (iii) the incumbency and
signatures of the officers of such Seller executing this Agreement and any other
agreements, instruments or documents to be executed by such Seller in connection
herewith; and (d) UCC-11 search reports or other evidence reasonably
satisfactory to Buyer and its counsel that the Assets are free and clear of all
Encumbrances.
8.6 BOARD RESOLUTIONS. Each Seller shall have furnished to Buyer a copy of
the resolutions duly adopted by the directors and the Stockholders of such
Seller authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, certified by an authorized
officer of such Seller as of the Closing Date.
8.7 NO DAMAGE. There shall have been no material adverse change or
development in any of the Assets or the Liabilities of any Seller or in the
prospects, properties, earnings, results of operations or condition (financial
or otherwise) of either of the Businesses, and no event shall have occurred or
circumstance exist that may, or could reasonably be expected to, result in such
a material adverse change. Excepted from this provision are the general business
and economic conditions generally effecting the industry and markets in which
the Sellers participate.
8.8 MOTOR VEHICLE LICENSES. Buyer shall have been licensed as a Motor
Vehicle Dealer under applicable Maryland motor vehicle dealer registration laws
and shall have obtained all other authorizations, consents, licenses and permits
from applicable governmental agencies having or asserting jurisdiction, which
Buyer deems necessary or appropriate to conduct business as an automobile dealer
at each dealership location included in the Real Property.
8.9 CONSENTS AND APPROVALS. Each Seller shall have obtained all other
authorizations, consents and approvals from third persons and entities as are
(a) required to assign those material contracts and leases that Buyer is to
assume at Closing or (b) otherwise required of any Seller to consummate the
transactions contemplated hereby.
8.10 CERTIFICATES OF ORIGIN; ETC. Each Seller shall have transferred to
Buyer certificates of title or origin for all New Vehicles, Demonstrators and,
if applicable, Used Vehicles and all of its registration lists, owner follow-up
lists and service files on hand as of the Closing Date with respect to its
Business.
8.11 TERMINATION OF SELLERS' AGREEMENTS WITH MANUFACTURERS. Each Seller
shall have terminated in writing contingent upon Closing hereunder such Seller's
dealer agreement and any other applicable sales and service agreements with the
applicable Manufacturer.
8.12 BILLS OF SALE; ETC. Each of the Sellers and the Stockholders shall
have executed, as appropriate, and delivered to Buyer a Bill of Sale, Articles
of Transfer, other documents of transfer of title contemplated hereby and any
and all other documents necessary or desirable in connection with the transfer
of the Assets, which documents shall warrant title to Buyer consistent with this
Agreement and shall in all respects be in such form as may be reasonably
required by Buyer and its counsel.
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8.13 MANUFACTURER APPROVAL. Excluding each Manufacturer as to which this
Agreement has been partially terminated with respect to the Assets and
Liabilities relating to such Manufacturer's dealership franchise, each of the
Manufacturers shall have approved Buyer or Buyer's affiliate as an authorized
dealer and O. Bruton Smith or O. Bruton Smith's designee, as the authorized
dealer operator, and each such Manufacturer shall have executed a dealer
agreement, and any other applicable sales and service agreements, on terms
reasonably satisfactory to Buyer.
8.14 CONSENTS, ETC. All consents, approvals, notices, filings and/or
registrations set forth on Schedule 7.2 hereto shall have been obtained or made
and Sellers shall have delivered to Buyer evidence thereof reasonably
satisfactory to Buyer.
8.15 EXISTING LEASE. The owner of the Rockville Property shall have
approved the assignment of the Existing Lease from MIC to Buyer and executed and
delivered to Buyer an estoppel, in form and substance reasonably acceptable to
Buyer. MIC shall have assigned the Existing Lease to Buyer. L.O.R. and MIC shall
have executed and delivered to Buyer the Sublease Termination Agreement.
8.16 OTHER BASIC AGREEMENTS. With respect only to the consummation of the
transactions contemplated hereby in respect of the acquisition of the Assets and
Liabilities relating to the Nissan and Jeep dealership franchise, (a) all
conditions to the obligations of Buyer or its affiliates under the Real Property
Purchase Agreement shall have been satisfied or fulfilled unless waived in
writing by such party and (b) the closing under the Real Property Purchase
Agreement shall have occurred or shall be occurring contemporaneously with the
Closing of the transactions contemplated by this Agreement.
8.17 CHANGE OF NAME. Each Seller, except MIC, shall have delivered to Buyer
all documents, including, without limitation, Articles of Amendment, resolutions
of the directors and the Stockholders of such Seller, necessary to effect a
change of name of such Seller after the Closing to names other than the
corporate name and trade names referred to in Section 5.5 or any variation
thereof.
8.18 HSR. All applicable waiting periods under the HSR Act (as defined in
Section 10.15) shall have expired without any indication by the Antitrust
Division (as defined in Section 10.15) or the FTC (as defined in Section 10.15)
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.
8.19 NON-COMPETITION AGREEMENTS. L.O.R., Waldorf, Bernard Mills and John
Birch shall have executed and delivered to Buyer the Non-Competition Agreements
in accordance with Section 2.5.
8.20 EMPLOYMENT AGREEMENT. John Jaffe shall have executed and delivered
to Buyer the Employment Agreement.
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8.21 AUDITED FINANCIAL STATEMENTS OF BUYER. Buyer shall have completed
preparation of such audited financial statements of each Seller as may be
required by applicable regulations of the Securities and Exchange Commission or
by Buyer's lenders.
8.22 OPINION OF COUNSEL. Buyer shall have received an opinion of Whiteford,
Taylor & Preston, L.L.P., counsel to Sellers and the Stockholders, dated the
Closing Date, in substantially the form of Exhibit 8.22 attached hereto.
8.23 AIR BEACH LEASE. Air Beach shall have executed and delivered to
Buyer the Air Beach Lease.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS AND THE STOCKHOLDERS
The obligations of Sellers and the Stockholders to perform this Agreement
at Closing are subject to the following conditions precedent which shall be
fully satisfied at or before the Closing, unless waived in writing by Sellers:
9.1 REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of Buyer herein contained shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date,
and Sellers shall have received a certificate from a duly authorized officer of
Buyer, dated the Closing Date, to such effect.
9.2 COMPLIANCE WITH AGREEMENTS. Each of the agreements or obligations
required by this Agreement to be performed or complied with by Buyer at or
before the Closing shall have been duly performed or complied with in all
material respects, and Sellers shall have received a certificate from a duly
authorized officer of Buyer, dated the Closing Date, to such effect.
9.3 NO LITIGATION. No action, suit or proceeding shall have been instituted
by a governmental agency or any third party to prohibit or restrain the sale
contemplated by this Agreement or otherwise challenge the power and authority of
the parties to enter into this Agreement or to carry out their obligations
hereunder or the legality or validity of the sale contemplated by this
Agreement.
9.4 INVENTORY. The Inventory shall have been completed to the reasonable
satisfaction of Sellers.
9.5 CORPORATE ORGANIZATION; BOARD RESOLUTIONS. Buyer shall have furnished
to Sellers: (a) a certificate of good standing of Buyer issued by the Secretary
of State of the State of Delaware dated as of a recent date prior to the Closing
Date; and (b) a certificate of Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to Seller, certifying as to (i) the
Certificate of Incorporation of Buyer; (ii) the By-laws of Buyer; (iii) the
resolutions of the Board
28
of Directors of Buyer authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and (iv) the
incumbency and signatures of the officers of Buyer executing this Agreement and
any other agreements, instruments or documents to be executed by Buyer in
connection herewith.
9.6 PAYMENT OF PURCHASE PRICE; ASSUMPTION AGREEMENTS; ARTICLES OF TRANSFER.
Buyer shall have tendered to Sellers the Purchase Price and shall have executed
and delivered the Assumption Agreement and the Articles of Transfer.
9.7 OTHER BASIC AGREEMENTS. With respect only to the consummation of the
transactions contemplated hereby in respect of the acquisition of the Assets and
Liabilities relating to the Nissan and Jeep dealership franchises, (a) all
conditions to the Seller's (as defined in the Real Property Purchase Agreement)
obligations under the Real Property Purchase Agreement shall have been satisfied
or fulfilled, unless waived in writing by such party (b) and the closing under
the Real Property Purchase Agreement shall have occurred or shall be occurring
contemporaneously with the Closing of the transactions contemplated hereby.
9.8 HSR. All applicable waiting periods under the HSR Act shall have
expired without any indication of the Antitrust Division or the FTC 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.
9.9 EMPLOYMENT AGREEMENT. Buyer shall have executed and delivered to
John Jaffe the Employment Agreement.
9.10 OPINION OF COUNSEL. Sellers shall have received an opinion of Parker,
Poe, Adams & Bernstein L.L.P., counsel to Buyer, dated the Closing Date, in
substantially the form attached hereto as Exhibit 9.10.
9.11 GUARANTY. Buyer shall have entered into an agreement with the Existing
Lease landlord to guarantee the payments under the Existing Lease.
9.12 AIR BEACH LEASE. Buyer shall have executed and delivered to the
Sellers the Air Beach Lease.
ARTICLE X
COVENANTS AND AGREEMENTS
10.1 BULK SALES. Each Seller shall comply with the notification
requirements of the Maryland Uniform Commercial Code--Bulk Transfer Law with
respect to the transactions contemplated hereby.
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10.2 FURTHER ASSURANCES. Sellers and the Stockholders agree that they will,
at any time and from time to time, after the Closing, upon request of Buyer, do,
execute, acknowledge and deliver all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances, in a form reasonably
satisfactory to Buyer's counsel, as may be reasonably required to convey and
transfer to and vest in Buyer, and protect its rights, title and interest in and
enjoyment of, all the Assets.
10.3 SATISFACTION OF CLOSING CONDITIONS. The parties hereto shall use their
reasonable best efforts to satisfy the conditions contemplated by Articles VIII
and IX, and to obtain, and to cooperate with each other in obtaining, all
authorizations, approvals, licenses, permits and other consents contemplated by
Articles VIII and IX.
10.4 NO MATERIAL ADVERSE CHANGES. During the period from the date of this
Agreement through the Closing Date, each Seller will operate its Business only
in the ordinary course of business and in accordance with past practices.
Sellers shall promptly notify Buyer of any material adverse change or
development in any of the Assets or the Liabilities of any Seller or in the
prospects, properties, earnings, results of operations or condition (financial
or otherwise) of either Business, and of the occurrence of any event or
circumstance that will, or could reasonably be expected to, result in such a
material adverse change. Excepted from this provision are general economic or
business conditions generally effecting the industry and markets in which the
respective Sellers participate.
10.5 ACCESS. Until Closing, Sellers shall afford to Buyer, its attorneys,
accountants and such other representatives of Buyer as Buyer shall designate to
Sellers, free and full access at all reasonable times, and upon reasonable prior
notice, to the Assets and the properties, books and records of each Seller, and
to interview personnel, suppliers and customers of each Seller, in order that
Buyer may have full opportunity to make such further investigation as it shall
reasonably desire of the Assets, the Liabilities and the Businesses. Sellers and
the Stockholders have furnished to Buyer the due diligence materials set forth
in Schedule 10.5 hereto, and shall provide to Buyer such additional information
as Buyer may reasonably request. Buyer's representatives shall coordinate all
visits to the Real Property or the Sellers' business locations and conversations
with employees of each Seller with the Stockholders or their designee and shall
use reasonable efforts to minimize any disruption of Sellers' businesses in
performing such visits or investigations. Buyer shall bear the costs, fees and
expenses in connection with any financial audit.
10.6 INDEMNIFICATION BY SELLERS AND THE STOCKHOLDERS.
(a) All representations and warranties of Sellers and the Stockholders
contained herein, or in any agreement, certificate or document executed by any
Seller or any of the Stockholders in connection herewith, shall survive the
Closing for a period of two (2) years with the exception of (i) the
representations and warranties of Sellers and the Stockholders contained in
Section 7.12, which shall survive the Closing for seven years except that, in
the case of fraud, such representations and warranties shall survive
indefinitely; (ii) the representations and warranties of Sellers and the
Stockholders contained in Section 7.8, which shall survive the Closing for a
period
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of three (3) years; and (iii) the representations and warranties of Sellers and
the Stockholders contained in Section 7.4, which shall survive the Closing
indefinitely. As to each representation and warranty of the parties to this
Agreement, the date to which such representation and warranty shall survive is
hereinafter referred to as the "SURVIVAL DATE." All information contained in any
Schedule furnished hereunder by any Seller shall be deemed a representation and
warranty by Sellers and the Stockholders of such Seller made in this Agreement
as to the accuracy of such information.
(b) Subject to Section 10.18, Sellers and the Stockholders, jointly
and severally, agree to indemnify and hold harmless Buyer and its stockholders,
officers, directors, employees and agents, and their respective successors and
assignees (collectively, the "BUYER INDEMNITEES"), from and against any and all
losses, damages, liabilities, obligations, assessments, suits, actions,
proceedings, claims or demands, including costs, expenses and fees (including
reasonable attorneys' fees and expert witness fees incurred in connection
therewith) ("LOSSES"), suffered by any of them or asserted against any of them
or any of the Assets, arising out of or based upon (i) the breach or failure of
any representation or warranty of any Seller or any Stockholder contained
herein, or in any agreement, certificate or document executed by any Seller or
any Stockholder in connection herewith, to be true and correct; provided,
however, that the Sellers and the Stockholders shall not have any
indemnification obligation under this Section 10.6(b)(i) until (and only to the
extent that) the Losses in respect of all claims for indemnity pursuant to this
Section 10.6(b)(i) shall exceed a cumulative aggregate total of $150,000, (ii)
the breach of any covenant or agreement of any Seller or any Stockholder
contained in this Agreement, (iii) the Retained Liabilities or any liability or
obligation of any Stockholder, (iv) any arrangements or agreements made or
alleged to have been made by any Seller or any Stockholder with any broker,
finder or other agent in connection with the transactions contemplated hereby,
or (v) any matter, item, circumstance or condition listed, contained or
otherwise referred to on Schedules 7.8(a), and 7.8(b).
(c) No claim for indemnification with respect to a breach of a
representation and warranty shall be made by a Buyer Indemnitee after the
applicable Survival Date unless prior to such Survival Date the Buyer Indemnitee
shall have given an indemnifying party 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.
10.7 INDEMNIFICATION BY BUYER.
(a) All representations and warranties of Buyer contained herein, or
in any agreement, certificate or document executed by Buyer in connection
herewith, shall survive the Closing for a period of two (2) years. All
information contained in any Schedule furnished hereunder by Buyer shall be
deemed a representation and warranty by Buyer made in this Agreement as to the
accuracy of such information.
(b) Subject to Section 10.18, Buyer agrees to indemnify and hold
harmless Sellers and their respective stockholders, officers, employees, agents,
successors and assigns (the "SELLER INDEMNITEES"), from and against any and all
Losses incurred in connection with, suffered by any of them, or asserted against
any of them, arising out of or based upon (i) the breach or failure of any
31
representation or warranty of Buyer contained herein, or in any agreement,
certificate or document executed by Buyer in connection herewith, to be true and
correct, (ii) the breach of any covenant or agreement of Buyer contained in this
Agreement, (iii) Buyer's failure to discharge the Liabilities, (iv) any
arrangements or agreements made or alleged to have been made by Buyer with any
broker, finder or other agent in connection with the transactions contemplated
hereby, or (v) any event or action by Buyer or failure to act by Buyer,
occurring with respect to the Assets or the Businesses subsequent to the Closing
Date but only to the extent that Buyer is not entitled to indemnification from
any of the persons or entities referred to in Section 7.8 of the Merger
Agreement with respect to such event, action or failure to act.
(c) No claim for indemnification with respect to a breach of a
representation and warranty shall be made by any Seller Indemnitee under this
Agreement after the applicable Survival Date unless prior to such Survival Date
the Seller Indemnitee shall have given Buyer 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 Seller Indemnitee.
10.8 CERTAIN TAXES. Personal property, use and intangible taxes and
assessments and utility charges with respect to the Assets shall be prorated on
a per diem basis and apportioned between Sellers, on the one hand, and Buyer, on
the other hand, as of the date of the Closing. Sellers shall be liable for that
portion of such taxes and assessments relating to, or arising in respect of,
periods on or prior to the Closing Date, and Buyer shall be liable for that
portion of such taxes and assessments relating to, or arising in respect of, any
period after the Closing Date. Any taxes attributable to the sale or transfer of
the Assets to Buyer hereunder shall be paid by Sellers.
10.9 NO PUBLICITY. Except as may be required by law or the rules of the New
York Stock Exchange or as necessary in connection with the transactions
contemplated hereby, no party hereto shall (a) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior approval of the other parties hereto or (b) otherwise
disclose the existence and nature of the transactions contemplated hereby to any
person or entity other than such party's accountants, attorneys, agents,
representatives and employees of Sellers, as appropriate, all of whom shall be
subject to this nondisclosure obligation as agents of such party. The parties
shall cooperate with each other in the preparation and dissemination of any
public announcements of the transactions contemplated by this Agreement. Buyer
approves of Sellers making their employees aware of this Agreement upon the
execution thereof. Buyer recognizes that the presence of its representatives at
the Sellers' dealership location will cause speculation by the Sellers'
respective employees concerning the transactions contemplated hereby and that
Sellers have no control over such speculation.
10.10 NO NEGOTIATIONS OR DISCUSSIONS. None of the Sellers, and none of the
Stockholders, shall, directly or indirectly, at any time on or prior to the
Closing Date, pursue, initiate, encourage or engage in, any negotiations or
discussions with, or provide any information to, any person or entity (other
than Buyer and its representatives and affiliates) regarding the sale or
possible sale to
32
any such person or entity of any of the Assets of any Seller or capital stock of
any Seller or any merger or consolidation or similar transaction involving any
Seller.
10.11 REGARDING THE MANUFACTURERS. Each Seller shall promptly notify the
applicable Manufacturers regarding the transactions contemplated by this
Agreement. Buyer shall promptly apply to the respective Manufacturers for, or
cause an affiliate of Buyer to apply to the respective Manufacturers for, the
issuance of franchises to operate automobile dealerships upon the Real Property.
Effective as of the Closing, each Seller shall terminate its Dealer Sales and
Service Agreements with the applicable Manufacturer. Each Seller shall fully
cooperate with Buyer, and take all reasonable steps to assist Buyer, in Buyer's
efforts to obtain its own similar Dealer Sales and Service Agreements with the
applicable Manufacturer. The parties acknowledge that Buyer's Dealer Agreements
are subject to the approval of the respective Manufacturers and that Buyer would
be unable to obtain its own, similar Dealer Sales and Service Agreements absent
Sellers' termination of their respective agreements.
10.12 SELLERS' EMPLOYEES. Buyer shall have the right, but not the
obligation, to employ any or all of Sellers' respective employees. If permitted
by law and applicable regulations, each Seller shall, in consideration for the
sale of substantially all of such Seller's assets in bulk, assign and transfer
to Buyer, without additional charge therefor, the amount of reserve in such
Seller's State Unemployment Compensation Fund with respect to its Business and
the corresponding experience rate.
10.13 TERMINATION.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement shall automatically terminate, without any action taken
by the parties hereto, in the event that all Manufacturers exercise their rights
of first refusal, preemptive rights or other similar rights under their
respective dealer agreements with the Sellers. Notwithstanding any other
provision herein contained to the contrary, this Agreement may be terminated at
any time prior to the Closing:
(i) by the written mutual consent of the parties hereto prior
to the Closing Date Deadline;
(ii) by Buyer prior to the Closing Date Deadline in the event of
any material breach by any Seller or any of the Stockholders of any of their
respective representations, warranties, covenants or agreements contained
herein;
(iii) by Sellers, jointly, prior to the Closing Date Deadline in
the event of any material breach by Buyer of any of Buyer's representations,
warranties, covenants or agreements contained herein;
(iv) at any time after the Closing Date Deadline, by written
notice by Buyer or Sellers (subject to the other party's option to elect to
extend the Closing Date Deadline in accordance with Section 1.4) to the other
parties hereto if the Closing shall not have occurred on or
33
before the Closing Date Deadline (as the same may have been extended in
accordance with Section 1.4);
(v) by Buyer (by written notice to the Sellers) or by the Sellers
(by written notice to Buyer) if either or both of the following occur:
(A) two or more of the following occur (other than in
connection with any exercise of any rights of first refusal, preemptive rights
or other similar rights) (I) Lexus shall fail to grant such approvals and
execute such documents as contemplated by Section 8.13 on or before the Closing
Date Deadline, (II) Nissan shall fail to grant such approvals and execute such
documents as contemplated by Section 8.13 on or before the Closing Date
Deadline, (III) Chrysler shall fail to grant such approvals and execute such
documents as contemplated by Section 8.13 on or before the Closing Date
Deadline, (IV) either (1) BMW of North America, Inc. shall fail to grant such
approvals and execute such documents as contemplated by Section 7.10 of the
Merger Agreement on or before the Closing Date Deadline or (2) the Merger
Agreement is terminated prior to the Closing; or (V) a Partial Termination shall
occur with respect to the Waldorf Business as a result of the termination of the
Real Property Purchase Agreement pursuant to Section 10.13(f);
(B) (I) Porsche and/or Audi shall fail to grant such
approvals and execute such documents as contemplated by Section 8.13 on or
before the Closing Date Deadline (other than in connection with any exercise of
any rights of first refusal, preemptive rights or other similar rights) AND (II)
either (a) one or more of Lexus, Nissan, Chrysler and BMW of North America, Inc.
shall fail to grant such approvals and execute such documents as contemplated
by, as appropriate, Section 8.13 and Section 7.10 of the Merger Agreement on or
before the Closing Date Deadline (other than in connection with any exercise of
any rights of first refusal, preemptive rights or other similar rights), (b) the
Merger Agreement is terminated prior to the Closing or (c) a Partial Termination
shall occur with respect to the Waldorf Business as a result of the termination
of the Real Property Purchase Agreement pursuant to Section 10.13(f); or
(vi) by Buyer, by written notice to Sellers if, after any initial
HSR Act filing, the FTC makes a "second request" for information, or if the FTC
or the Antitrust Division challenges the transactions contemplated hereby;
provided, however, no party may terminate this Agreement pursuant to clauses
(ii), (iii) or (iv) above if such party is in material breach of any of its
representations, warranties, covenants or agreements contained herein.
(b) In the event of termination of this Agreement pursuant to Section
10.13(a), this Agreement shall, subject to Section 2.7, be of no further force
or effect; provided, however, that any termination pursuant to Section 10.13(a)
shall not relieve: (i) Buyer of any liability under Section 10.13(c) below; (ii)
Sellers and the Stockholders of any liability under Section 10.13(d) below; or
(iii) subject to Section 10.13(e) below, any party hereto of any liability for
breach of any representation, warranty, covenant or agreement hereunder
occurring prior to such termination.
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(c) If this Agreement is terminated by Sellers pursuant to Section
10.13(a)(iv) and the failure to complete the Closing on or before the Closing
Date Deadline (as the same may have been extended pursuant to Section 1.4) shall
have been due to Buyer's material breach of its representations, warranties,
covenants or agreements under this Agreement, then Buyer shall, upon demand of
Sellers, promptly pay to Sellers in immediately available funds, as liquidated
damages for the loss of the transaction, an aggregate termination fee of
$1,000,000 (the "BUYER TERMINATION FEE"); PROVIDED, HOWEVER, that if the Sellers
are paid the Buyer's Termination Fee (as defined in the Merger Agreement)
pursuant to the Merger Agreement, then the Sellers shall not be entitled to
payment of the Buyer Termination Fee hereunder.
(d) If this Agreement is terminated by Buyer pursuant to Section
10.13(a)(iv) and the failure to complete the Closing on or before the Closing
Date Deadline (as the same may have been extended pursuant to Section 1.4) shall
have been due to a material breach by any of the Stockholders or any Seller of a
representation, warranty, covenant or agreement of such party under this
Agreement, then Sellers and the Stockholders, jointly and severally, shall, upon
demand of Buyer, promptly pay to Buyer in immediately available funds, as
liquidated damages for the loss of the transaction, a termination fee of
$1,000,000 (the "SELLER TERMINATION FEE"); PROVIDED, HOWEVER, that if the Buyer
is paid the Sellers' Termination Fee (as defined in the Merger Agreement)
pursuant to the Merger Agreement, then the Buyer shall not be entitled to
payment of the Seller Termination Fee hereunder.
(e) In the case of termination of this Agreement pursuant to Section
10.13(a)(iv), the rights of the terminating party to be paid the Seller
Termination Fee or the Buyer Termination Fee, as the case may be, shall be such
party's sole and exclusive remedy 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 Termination Fee or the Buyer 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 (including specific performance) to
which it would otherwise be entitled in the event of breach of any other party
hereto.
(f) In the event that (a) a Manufacturer shall fail to grant such
approvals and execute such documents as contemplated by Section 8.13 on or
before the Closing Date Deadline and (b) no party exercises its right, if any,
to terminate this Agreement under Section 10.13(a)(v), then Buyer may terminate
this Agreement as it relates to the Assets and Liabilities relating to such
Manufacturer's dealership franchise. In addition, in the event that a
Manufacturer shall exercise a right of first refusal, preemptive right or
similar right with respect to any of the Assets, then Buyer or the Sellers may
terminate this Agreement as it relates to the Assets and Liabilities relating to
such Manufacturer's dealership franchise. In the event that (a) Porsche or Audi
shall fail to grant such approvals and execute such documents as contemplated by
Section 8.13 on or before the Closing Date Deadline and (b) no party exercises
its right, if any, to terminate this Agreement under Section 10.13(a)(v), then
Buyer or the Sellers may terminate this Agreement as it relates to the Assets
and Liabilities relating to the Porsche and Audi dealership franchises. In
addition, in the event that Porsche or Audi shall exercise a right of first
refusal, preemptive right or similar right with respect
35
to any of the Assets, then Buyer or the Sellers may terminate this Agreement as
it relates to the Assets and Liabilities relating to the Porsche and Audi
dealership franchises. In the event that the Real Property Purchase Agreement
terminates prior to the Closing, then either Buyer or the Sellers may terminate
this Agreement as it relates to the Assets and Liabilities relating to the
Waldorf Business. Notwithstanding the foregoing, the parties expressly agree and
understand that a termination of this Agreement as it relates to certain Assets
and Liabilities as contemplated in this Section (a "PARTIAL TERMINATION") shall
not effect a termination of this Agreement as it relates to the remainder of the
Assets and Liabilities, and, despite any Partial Termination, this Agreement
shall remain, subject to the exclusion of such Assets and Liabilities, in full
force and effect.
(g) In the event that there is a Partial Termination as contemplated
by Section 10.13(f), the Business and Intangible Assets Purchase Price shall be
reduced by the applicable amount below the name of the applicable Seller on
Schedule 2.2 and the other components of the Purchase Price shall be
appropriately reduced.
10.14 CONTEMPORANEOUS CLOSINGS. The parties hereto acknowledge and agree
that the consummation of the transactions contemplated by this Agreement is, to
the extent described in Sections 8.16 and 9.7, subject to the consummation of
the transactions contemplated by the Real Property Purchase Agreement, and the
parties agree that, to the extent so required, the closings of all such
transactions shall occur contemporaneously. In addition, although the
consummation of the transactions contemplated hereby are not subject to the
consummation of the transactions contemplated by the Merger Agreement, the
parties hereto nonetheless fully intend to and, to the extent practicable, will
coordinate the consummation of the transactions contemplated hereby with the
consummation of the transactions contemplated by the Merger Agreement in such a
manner as to close such transactions on the same day.
10.15 HSR. Subject to the determination by Buyer that compliance by Sellers
and Buyer with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), is not required, Sellers and Buyer shall each prepare
and file 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. Buyer shall pay any HSR
Act filing fee.
10.16 MIC GUARANTY. Buyer shall use its best efforts to have MIC and the
Stockholders released from their respective guaranty obligations under the
Existing Lease.
10.17 BUYER'S FINANCIAL STATEMENTS. Sellers shall allow, cooperate with and
assist Buyer's accountants, and shall instruct Sellers' accountants to
cooperate, in the preparation of audited financial statements of each Seller as
necessary for any required filings by the Buyer with the Securities and Exchange
Commission or as required by Buyer's lenders; provided, however, that the
expense of such audit shall be borne by Buyer.
10.18 LIMITATIONS ON INDEMNITY. Notwithstanding any provision herein
to the contrary:
36
(a) Provided the transactions contemplated hereby are consummated, the
parties' rights under Sections 10.6 and 10.7 (as specifically limited hereby)
shall be the exclusive means (other than with respect to fraud) by which such
party shall seek money damages against another party in connection with the
transactions contemplated hereby.
(b) Indemnity obligations of the Stockholders hereunder may, at their
election, be satisfied through the payment of cash or the delivery of common
stock or preferred stock of the Buyer, or a combination thereof. For purposes of
calculating the value of Common Stock paid as contemplated under this Section
10.18(b), the value of a share of Common Stock shall be the Market Price as of
the date of Closing for indemnity obligations of the Sellers which are satisfied
during the period of "market protection" for Common Stock as provided pursuant
to Section 2.11, after which time the value shall be the Market Price as of the
date of such payment. Indemnity obligations of the Buyer shall be satisfied
through the payment of cash.
(c) Except as specifically set forth in this Agreement, no party shall
be entitled to indemnity for claims or conditions which have been waived by such
party.
(d) Upon making a claim for indemnification, the indemnifying party
shall be subrogated, to the extent of such payment, to any rights that the
indemnified party may have against any third parties with respect to the subject
matter underlying such indemnified claim.
(e) Notwithstanding the provisions of Section 10.6(b), the aggregate
amount of each Stockholder's liability for indemnification obligations under
Section 10.6(b) shall not exceed the aggregate amount equal to (i) such
Stockholder's percentage ownership, as shown on Schedule 7.1, of L.O.R.
multiplied by the amount of the Purchase Price which is allocated to L.O.R.,
(ii) such Stockholder's percentage ownership, as shown on Schedule 7.1, of
Waldorf multiplied by the amount of the Purchase Price which is allocated to
Waldorf and (iii) such Stockholder's percentage ownership, as shown on Schedule
7.1, of MIC multiplied by the amount of the Purchase Price which is allocated to
MIC. For illustrative purposes only, assume that the Purchase Price is equal to
$30,000,000 and is allocated as follows: (i) $20,000,000 to L.O.R., (ii)
$7,000,000 to Waldorf and (iii) $3,000,000 to MIC. As shown on Schedule 7.1,
Joseph Herson owns 33% of L.O.R., 33% of Waldorf and 41% of MIC. Joseph Herson's
liability for indemnification obligations under Section 10.6(b) would not exceed
the sum of (i) $20,000,000 x 33.33%, (ii) $7,000,000 x 33.33% and (iii)
$3,000,000 x 41% for a total of $10,229,999.
(f) Notwithstanding the provisions of Section 10.6(b), but subject to
Section 10.18(g), (i) Mollye Mills shall have no indemnification liability under
Section 10.6(b) with respect to any matter which arises solely with respect to
the Waldorf Business; (ii) Bernard Mills shall have no indemnification liability
under Section 10.6(b) with respect to any matter which arises solely with
respect to the Waldorf Business; (iii) Richard Mills shall have no
indemnification liability under Section 10.6(b) with respect to any matter which
arises solely with respect to the Waldorf Business or the LOR Business; and (iv)
John Birch shall have no indemnification liability under Section 10.6(b) with
respect to any matter which arises solely with respect to the MIC Business or
the LOR
37
Business. This Section 10.18(f) shall in no event limit the indemnification
liability hereunder of Joseph Herson or John Jaffe.
(g) The provisions of Section 10.18(f) shall have no force or effect
with respect to a Stockholder in the case of any breach of a representation,
warranty, covenant or agreement with respect to which such Stockholder has
actual knowledge. The Stockholders acknowledge and agree that the $150,000
limitation set forth in Section 10.6(b)(i) applies on an aggregate basis with
respect to all of the Sellers and the Stockholders and shall not be applied to
each Seller or Stockholder on an individual basis.
(h) Notwithstanding the provisions of Section 10.6(b), the aggregate
amount of MIC's liability for indemnification obligations under Section 10.6(b)
shall not exceed One Million Five Hundred Thousand Dollars ($1,500,000).
10.19 AIR BEACH LEASE. At the Closing, Buyer shall, and the Sellers shall
cause Air Beach to, enter into a lease agreement whereby Buyer shall lease the
Air Beach Property from Air Beach (the "AIR BEACH LEASE"). The Air Beach Lease:
(a) shall have an initial term of ten (10) years with two (2) renewal terms of
five (5) years each, (b) shall be a triple net lease with an annual rental of
$115,000 plus the payment of any condominium association fees or charges and (c)
shall otherwise be on substantially the terms of Exhibit 10.19 attached hereto.
Buyer and the Sellers acknowledge that such Exhibit is a form lease for a
stand-alone facility and does not contemplate the lease of condominium units as
will occur under the Air Beach Lease. The parties agree that, in preparation of
the Air Beach Lease, such Exhibit will be modified as appropriate in order to
reflect the lease of condominium units rather than a stand-alone facility.
ARTICLE XI
MISCELLANEOUS
11.1 ASSIGNMENT. Except as provided in this Section, this Agreement shall
not be assignable by any party hereto without the prior written consent of the
other parties. Buyer may assign this Agreement, without the consent of the other
parties hereto, to a corporation, partnership, limited liability company or
other entity controlled by Buyer, including a corporation, partnership, limited
liability company or other entity to be formed at any time prior to the Closing
Date, and to any person or entity who shall acquire all or substantially all of
the assets of Buyer or of such corporation, partnership, limited liability
company or other entity controlled by Buyer (including any such acquisition by
merger or consolidation); provided said assignment shall be in writing and the
assignee shall assume all obligations of Buyer hereunder, whereupon the assignee
shall be substituted in lieu of Buyer named herein for all purposes, and
provided further, that Buyer originally named herein shall continue to be liable
with respect to its obligations hereunder. Buyer may assign this Agreement,
without the consent of the other parties hereto, as collateral security, and the
other parties hereto agree to execute and deliver any acknowledgment of such
assignment by
38
Buyer as may be required by any lender to Buyer. Notwithstanding
the foregoing, Buyer may not assign its obligation to guarantee the Existing
Lease contemplated by Section 9.11.
11.2 GOVERNING LAW. The interpretation and construction of this Agreement,
and all matters relating hereto, shall be governed by the laws of the State of
Maryland.
11.3 ACCOUNTING MATTERS. All accounting matters required or contemplated by
this Agreement shall be in accordance with generally accepted accounting
principles.
11.4 FEES AND EXPENSES. Except as otherwise specifically provided in this
Agreement, each of the parties hereto shall be responsible for the payment of
such party's fees, costs and expenses incurred in connection with the
negotiation and consummation of the transactions contemplated hereby.
11.5 AMENDMENTS; MERGER CLAUSE. This Agreement, including the schedules and
exhibits hereto (which schedules and exhibits are hereby incorporated herein by
this reference), contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement may
not be amended except by a writing executed by all of the parties hereto. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter. Unless expressly stated herein to the
contrary, any reference herein to (a) a Section or Article shall refer to a
Section or Article hereof, respectively, and (b) a Schedule or Exhibit shall
refer to a Schedule or Exhibit, respectively, attached hereto.
11.6 WAIVER. To the extent permitted by applicable law, no claim or right
arising out of this Agreement or the documents referred to in this Agreement can
be discharged by a party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by all the parties hereto. Any
waiver by a party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach of such
provision or any other provision of this Agreement. Neither the failure nor any
delay by any party hereto in exercising any right or power under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right or power, and no single or partial exercise of any such right or power
will preclude any other or further exercise of such right or power or the
exercise of any other right or power.
11.7 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by facsimile or by a nationally recognized overnight courier,
postage prepaid, and shall be deemed to have been duly given when so delivered
personally or by confirmed facsimile 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.
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If to Buyer, to:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Telecopy No.: (704) 536-5116
Attention: Chief Financial Officer
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Telecopy No.: (704) 334-4706
Attention: John R. Hairr III
If to any Seller or any Stockholder, to:
Personal and Confidential
Mr. Joseph Herson
11617 Old Georgetown Road
Rockville, MD 20852
Telecopy No.: (301) 881-3038
With a copy to:
Whiteford, Taylor & Preston, L.L.P.
1025 Connecticut Avenue, N.W. #400
Washington, D.C. 20036-5405
Telecopy No.: (202)331-0573
Attention: Glenn R. Bonard
11.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts. Each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
11.9 KNOWLEDGE. Whenever any representation or warranty of Sellers or the
Stockholders contained herein or in any other document executed and delivered in
connection herewith is based upon the knowledge of Sellers or the Stockholders,
(a) such knowledge shall be deemed to include (i) the best actual knowledge,
information and belief of each Seller's directors and officers and of each
Stockholder and (ii) any information which any Stockholder 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 any
Seller, (b) the knowledge of any Seller shall be deemed to be the knowledge of
all its Stockholders, and (c) the knowledge of a Stockholder shall be deemed to
be the knowledge of each Seller in which such Stockholder owns, of record or
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beneficially, shares of capital stock and of every other Stockholder who owns,
of record or beneficially, shares of such Seller.
11.10 ARBITRATION.
(a) Except as otherwise provided herein, any dispute, claim or
controversy arising out of or relating to this Agreement or the interpretation
or breach hereof 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 Buyer and one of whom shall be appointed by
Sellers within thirty (30) days after any request for arbitration hereunder. The
two arbitrators thus appointed shall choose the third arbitrator (who shall not
be currently nor have been during the last ten years living in, or practicing
his or her profession from a base in, North Carolina) 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 thirty (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).
(b) Notwithstanding the provisions of Section 11.10(a), any dispute
relating to accounting matters shall be resolved as provided in this Section
11.10(b). The parties first shall use reasonable efforts to resolve any such
accounting dispute. In the event the dispute has not been resolved within a
reasonable amount of time, either Buyer, on the one hand, or Sellers, on the
other hand, may provide written notice to the other party that the matter will
be submitted to an accounting firm for resolution. The parties shall mutually
agree in writing on a "big five" accounting firm not in the employ of any party
hereto to be retained to resolve the matter, and after joint retention of such
firm the determination of such firm shall be final and binding on the parties
with respect to such disputed accounting matter. The costs of the accounting
firm shall be borne 50% by Buyer and 50% by Sellers.
(c) Nothing contained in this Section 11.10 shall prevent any party
hereto from seeking any equitable relief to which it would otherwise be entitled
from a court of competent jurisdiction.
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11.11 PERMITTED SUCCESSORS; ASSIGNS; NO THIRD PARTY BENEFICIARIES. Subject
to Section 11.1, this Agreement shall be binding upon, inure to the benefit of
and be enforceable by the respective successors, heirs 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 any Seller, or any
other person, firm, corporation or legal entity, other than the parties hereto
and their successors and permitted assigns, any rights, remedies or other
benefits under or by reason of this Agreement.
11.12 HEADINGS. The article headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.13 SEVERABILITY. In the event that any provision, or part thereof, of
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.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Asset Purchase Agreement
to be executed as of the day and year first above written.
SONIC AUTOMOTIVE, INC.
/s/ O. Bruton Smith
---------------------------------------
By: O. Bruton Smith
Its: Chief Executive Officer
L.O.R., INC.
/s/ John Jaffe
---------------------------------------
By: John Jaffe
Its: Vice President
WALDORF AUTOMOTIVE, INC.
/s/ John F. Birch
---------------------------------------
By: John F. Birch
Its: President
MANHATTAN IMPORTED CARS, INC.
/s/ Joseph Herson
---------------------------------------
By: Joseph Herson
Its: Chairman
STOCKHOLDERS:
/s/ Joseph Herson (SEAL)
---------------------------------------
JOSEPH HERSON
/s/ John Birch (SEAL)
---------------------------------------
JOHN BIRCH
/s/ John Jaffe (SEAL)
---------------------------------------
JOHN JAFFE
/s/ Bernard Mills (SEAL)
---------------------------------------
BERNARD MILLS
/s/ Mollye Mills (SEAL)
---------------------------------------
MOLLYE MILLS
/s/ Richard Mills (SEAL)
---------------------------------------
RICHARD MILLS
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