AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND AMONG
UGLY DUCKLING CORPORATION
AND
E-Z PLAN, INC.
MCCOMBS FAMILY, L.L.C.
MCCOMBS HFC LIMITED, D/B/A MCCOMBS AUTOMOTIVE CENTER
LYNDA G. MCCOMBS
MARSHA M. SHIELDS,
AND
CONNIE M. MCNAB
DATED AS OF
MARCH 5, 1997
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
ARTICLE 1.PURCHASE AND SALE OF ASSETS 1
1.1 Purchase and Sale of the Assets 1
1.2 Assets Not Being Transferred 2
1.3 Assumed Liabilities 3
1.4 Liabilities Not Being Assumed 3
1.5 Purchase Price 4
1.6 Payment 4
1.7 Allocation of Purchase Price; Accounting Treatment 4
1.8 Lease Agreements 5
1.9 Transfer Fees and Taxes 6
1.10 Special Provisions relating to Contracts 6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF PURCHASER 7
2.1 Organization and Qualification 7
2.2 Authority Relative to this Agreement 8
2.3 No Conflicts 8
2.4 No Consents 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF
SELLER, SHAREHOLDERS AND LESSORS 8
3.1 Organization and Qualification 8
3.2 Authority Relative to this Agreement 9
3.3 No Conflicts 9
3.4 No Consents 10
3.5 Capitalization 10
3.6 Financial Statements 10
3.7 Subsidiaries 10
3.8 Absence of Undisclosed Liabilities 10
3.9 No Material Adverse Changes 10
3.10 Absence of Certain Developments 10
3.11 Real Estate 12
3.12 Good Title to and Condition of Inventory and Acquired
Assets 13
3.13 Title and Condition of Contracts 14
3.14 Solvency; Bulk Sales 16
3.15 Tax Matters 17
3.16 Contracts and Commitments 17
3.17 Restrictions on Business Activities 19
3.18 Intellectual Property 19
3.19 Litigation 19
3.20 Brokers' Fees 20
3.21 Employment Matters 20
3.22 Employee Benefit Plans 20
3.23 Permitted Liens 20
3.24 Insurance 21
3.25 Affiliate Transactions 21
3.26 Compliance with Laws; Permits 21
3.27 Warranties 22
3.28 Disclosure 22
ARTICLE 4 CONDUCT OF SELLER PENDING THE CLOSING 22
4.1 Conduct of Business Pending the Closing 22
4.2 Business Relationships 23
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4.3 Access to Information 23
4.4 Tax on Prior Sales 24
4.5 Notification of Certain Matters 24
4.6 Transfer of Permits 24
4.7 Closing 24
ARTICLE 5 ADDITIONAL AGREEMENTS 24
5.1 Employment 24
5.2 Expenses 25
5.3 No Negotiations 25
5.4 Public Announcements 25
5.5 Confidentiality 25
5.6 Books and Records 26
5.7 H-S-R Act 26
5.8 Additional Agreements 26
ARTICLE 6 CONDITIONS 27
6.1 Conditions to Obligations of Each Party 27
6.2 Additional Conditions to Obligation of Seller 28
6.3 Additional Conditions to Obligation of Purchaser 28
ARTICLE 7 THE CLOSING 30
7.1 Closing 30
7.2 Seller's, Shareholders' and Lessors' Obligations 30
7.3 Purchaser's Obligations 32
ARTICLE 8 INDEMNITIES 32
8.1 Survival of Representations and Warranties 32
8.2 Nature of Statements 32
8.3 Indemnification of Purchaser by Seller, Shareholders,
and Lessors 32
8.4 Indemnification of Seller, Shareholders, and Lessors by
Purchaser 33
8.5 Procedure for Indemnification 34
ARTICLE 9 TERMINATION 35
9.1 Termination 35
9.2 Effect of Termination 35
ARTICLE 10 GENERAL PROVISIONS 35
10.1 Notices 35
10.2 Counterparts 36
10.3 Governing Law 36
10.4 Assignment 36
10.5 Further Assurances 37
10.6 Gender and Number 37
10.7 Schedules and Exhibits 37
10.8 Waiver of Provisions 37
10.9 Litigation Costs 37
10.10 Section and Paragraph Headings 37
10.11 Amendment 37
10.12 Transaction Expenses 38
10.13 Severability 38
10.14 Extent of Obligations 38
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INDEX OF SCHEDULES
Schedule 1.1(a) Contracts
Schedule 1.1(b) Inventory
Schedule 1.1(c) Acquired FFE
Schedule 1.1(d) Acquired Permits
Schedule 1.1(f) Assumed Agreements
Schedule 1.2(a) Excluded Leases; Excluded Facilities; Excluded FFE
Schedule 1.2(b) Excluded Policies
Schedule 1.3 Assumed Liabilities
Schedule l.8(a) Independent Facilities
Schedule 1.8(b) Related Facilities
Schedule 1.10(a)(4) Affiliated Contracts
Schedule 3.3 Conflicts
Schedule 3.4 Required Consents
Schedule 3.5 Capitalization
Schedule 3.6 Financial Statements
Schedule 3.9 No Material Adverse Changes
Schedule 3.10 Certain Developments
Schedule 3.11(b) Leases
Schedule 3.12 Title and Condition of Assets
Schedule 3.16 Contracts and Commitments
Schedule 3.18 Intellectual Property
Schedule 3.19 Litigation
Schedule 3.21 Employment
Schedule 3.23 Permitted Liens
Schedule 3.24 Insurance
Schedule 3.25 Affiliate Transactions
Schedule 3.26 Compliance with Law; Permits
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (the "Agreement") is made
as of March 5, 1997, by and among UGLY DUCKLING CORPORATION, a Delaware
corporation ("Purchaser"); E-Z PLAN, INC., a Texas corporation ("Seller");
MCCOMBS FAMILY, L.L.C., a Texas limited liability company ("McCombs L.L.C.");
MCCOMBS HFC LIMITED, a Texas limited partnership d/b/a MCCOMBS AUTOMOTIVE
CENTER ("McCombs Automotive" and collectively with McCombs L.L.C., "Lessors");
and LYNDA G. MCCOMBS, MARSHA M. SHIELDS, and CONNIE M. MCNAB, as shareholders
of Seller (the "Shareholders").
RECITALS
A. Seller engages in the business (the "Business") of selling and
financing used motor vehicles ("Vehicles") at dealerships located in the state
of Texas (the "Dealerships").
B. Upon the terms and subject to the conditions set forth herein,
Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, selected assets of Seller related to its Business, all to be completed
on or before the date set forth in Section 7.1 of this Agreement (the "Closing
Date").
NOW, THEREFORE, in consideration of the covenants and mutual agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance upon the
representations and warranties contained herein, the parties hereto do hereby
agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF ASSETSARTICLE
1.1 Purchase and Sale of the Assets. Upon the terms and subject to
the conditions set forth herein, and in reliance on the respective
representations and warranties of the parties, Seller agrees to sell,
transfer, assign, and deliver to Purchaser, and Purchaser agrees to purchase
from Seller, all of Seller's right, title, and interest in and to those
assets, rights, and properties of the Seller relating to the Business, as
specified below (the "Acquired Assets"):
(a) The portfolio of installment sales contracts held by Seller and
secured by Vehicles sold by Seller or affiliates of Seller (the "Contracts"),
as specified on a Schedule 1.1(a) to be prepared by Seller and delivered to
Purchaser on or before determination of the Purchase Price pursuant to Section
1.5 hereof;
(b) The inventory of Vehicles held for retail sale by Seller (but
excluding repossessions) (the "Inventory"), as specified on a Schedule 1.1(b)
to be prepared by Seller and delivered to Purchaser on or before determination
of the Purchase Price pursuant to Section 1.5 hereof;
(c) All furniture, leasehold improvements, fixtures, equipment,
supplies, tools for maintenance and repair, other goods, and all other
appurtenances in and to the premises utilized by Seller in the operation of
the Business at the Acquired Facilities (defined below) ("Acquired FFE"), as
specified on a Schedule 1.1(c) to be prepared by Seller and delivered to
Purchaser on or before determination of the Purchase Price pursuant to Section
1.5 hereof;
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(d) All assignable title, claims, and rights under Permits (as
defined in Section 3.26), but excluding any Permits relating solely to
Excluded Assets (defined below) ("Acquired Permits"), as specified on a
Schedule 1.1(d) to be prepared by Seller and delivered to Purchaser on or
before determination of the Purchase Price pursuant to Section 1.5 hereof;
(e) Any additional items of tangible or intangible property used or
owned by Seller related to the Business, the Acquired Assets or the Acquired
Facilities, which are not included above, including, without limitation,
software, trademarks, tradenames, service marks and licenses thereto and
goodwill, provided, however, that Seller may continue to use software it has
developed in its continuing business operations; and
(f) All Agreements (as defined in Section 3.16) relating to the
Business, the Acquired Assets, or the Acquired Facilities that Purchaser
agrees to assume and that are listed in a Schedule 1.1(f) ("Assumed
Agreements"), to be prepared by Seller and delivered to Purchaser on or before
determination of the Purchase Price pursuant to Section 1.5 hereof;
(g) All books of account, records, files, invoices, customer lists
and information, supplier lists and information, employee files, operating
manuals, catalogs, technical information sheets, pricing sheets, advertising
and display materials, and brochures and other materials and data associated
with, used, or employed by Seller in the operation of the Business and
ownership of the Acquired Assets.
1.2 Assets Not Being Transferred. Anything contained in Section 1.1
or elsewhere herein to the contrary notwithstanding, there are expressly
excluded from the assets, properties, interests in properties and rights of
the Seller to be sold, transferred, assigned, and delivered to the Purchaser
at the Closing (as defined below) the following (the "Excluded Assets"):
(a) All leasehold interests of Seller ("Excluded Leases") in
facilities not included within the Acquired Facilities (the "Excluded
Facilities"), all as listed in Schedule 1.2(a), and all furniture, leasehold
improvements, fixtures, equipment, supplies, and tools for maintenance and
repair located at the Excluded Facilities ("Excluded FFE"), as listed on
Schedule 1.2(a), which Schedule shall be updated as of the Closing Date;
(b) Individual life insurance policies on executives of Seller, as
listed in Schedule 1.2(b) ("Excluded Policies"), which Schedule shall be
updated as of the Closing Date;
(c) Accounts receivable from affiliates of Seller;
(d) Unamortized loan origination fees and prepayments of insurance
premiums;
(e) All of Seller's right, title and interest under or related to
this Agreement, including, without limitation, the consideration delivered to
Seller pursuant to this Agreement;
(f) The minute books, stock transfer books, seals, blank share
certificates, and other documents and things relating to organizational
matters and the existence of Seller as a corporation and the corporate tax
returns of Seller (the "Excluded Records");
(g) Cash, real estate loans, stockholder loans, and any other loans
not specifically purchased hereunder; and
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(h) Seller's right, title, and interest relating to any assets,
rights, and properties of Seller, wherever located, whether tangible or
intangible, unrelated to the Business.
1.3 Assumed Liabilities. From and after the Closing Date, Purchaser
shall assume only those liabilities of Seller (the "Assumed Liabilities") as
specified in Schedule 1.3 hereto. It is expressly understood and agreed that
Purchaser shall not be liable for any of the obligations or liabilities of
Seller of any kind or nature other than those specifically assumed by
Purchaser under this Section 1.3.
1.4 Liabilities Not Being Assumed. Anything contained herein to the
contrary notwithstanding, the Purchaser is expressly not assuming any of the
following liabilities or obligations, whether fixed or contingent, known or
unknown, matured or unmatured, executory or non-executory, of Seller (the
"Excluded Liabilities"), which liabilities and obligations shall at and after
the Closing remain the exclusive responsibility of Seller:
(a) All liabilities and obligations of Seller under this Agreement or
with respect to or arising out of the consummation of the transactions
contemplated by this Agreement;
(b) All liabilities and obligations of Seller for Seller's fees and
expenses and taxes incurred by Seller in connection with, relating to, or
arising out of the consummation of the transactions contemplated by this
Agreement;
(c) All liabilities and obligations of Seller secured by any Acquired
Assets or that are payable upon transfer of the Acquired Assets; and
(d) All other liabilities that are not specifically assumed by
Purchaser under Section 1.3 hereof, including but not limited to any
liabilities not so expressly assumed that are reflected on any balance sheet
of Seller provided to Purchaser at or prior to the Closing or that should be
so reflected under generally accepted accounting procedures ("GAAP").
Seller shall discharge all Excluded Liabilities on or before the Closing Date.
1.5 Purchase Price. The purchase price to be paid by Purchaser to
Seller for the Acquired Assets (the "Purchase Price") shall be an amount equal
to the book value of the Acquired Assets plus the book value of the Excluded
FFE, excluding leasehold improvements at the Excluded Facilities, as
determined as of the Closing Date under the same policies and procedures used
in the audited financial statements of Seller for the year ended December 31,
1996 (the "1996 Audited Financials"). The Purchase Price will be determined
within five days prior to the Closing Date (the "Closing Purchase Price") and
will be subject to approval by Seller and Purchaser prior to the Closing Date.
Within thirty (30) days after the Closing Date, the Seller and Purchaser shall
again determine the Purchase Price based on the financial statements of Seller
as of the Closing Date (the "Final Purchase Price"), such Final Purchase Price
to be subject to approval by Seller and Purchaser within thirty (30) days
after the Closing Date. If the Final Purchase Price is more than the Closing
Purchase Price, Purchaser shall pay the difference to Seller. If the Final
Purchase Price is less than the Closing Purchase Price, Seller shall refund
the difference to Purchaser.
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1.6 Payment. The Purchase Price shall be paid in cash on the Closing
Date by wire transfer of immediately available funds to the bank account
designated by Seller. The total amount of the Assumed Liabilities shall be
applied to payment of the Purchase Price. The Purchase Price shall not be
reduced by any liabilities disclosed in the 1996 Audited Financials and/or in
the most recent financial statements of Seller as of the Closing Date (the
"Disclosed Liabilities"). Purchaser is not assuming and shall not be required
to pay the Disclosed Liabilities at any time and Seller shall remain solely
liable for and shall discharge the Disclosed Liabilities and any other
Excluded Liabilities on or before the Closing Date.
1.7 Allocation of Purchase Price; Accounting Treatment. Upon
approval of the Closing Purchase Price and again upon approval of the Final
Purchase Price, the Purchase Price will be allocated among the Acquired Assets
by both Seller and Purchaser in a manner determined by Purchaser (the
"Purchase Price Allocation"). The Purchase Price Allocation will include a
reduction of the book value of the Vehicles by an amount equal to 167% of the
LIFO reserve therefor and a reduction to the book value of the Contracts by an
amount equal to 167% of the accrued but unpaid Texas sales taxes on the
Contracts (collectively, the "Book Value Reductions"). In the event that
Purchaser determines that certain Acquired Assets should be reported on the
financial statements of Purchaser using accounting policies and procedures at
amounts different than those determined under Seller's accounting policies and
procedures, then Seller will make such adjustments on its books prior to the
Closing Date (the "Accounting Adjustments"). The Book Value Reductions and
Accounting Adjustments shall not change the Purchase Price. Seller and
Purchaser hereby agree to report this transaction for federal tax purposes in
accordance with the allocation of the Purchase Price described above. Such
allocation shall be reported by Purchaser and Seller on Internal Revenue
Service Form 8594, Asset Acquisition Statement, which will be filed with
Purchaser's and Seller's Federal Income Tax Return for the tax year that
includes the Closing Date. To the extent not specified above, the parties
further agree to coordinate their accounting for the transaction.
1.8 Lease Agreements. Purchaser, Seller and Lessors further agree
that as of the Closing Date Purchaser shall:
(a) assume all of the existing leases entered into by Seller for
facilities used in the Business and owned by non-affiliates of Seller as
described on Schedule 1.8(a) ("Independent Facilities") for the remaining term
of such leases and under their existing terms and provisions (the "Acquired
Third-Party Leases");
(b) enter into new leases for facilities used in the Business and
owned by Seller or affiliates of Seller as described on Schedule 1.8(b)
("Related Facilities") at the rental rates stated in Schedule 1.8(b) on a
triple net basis for a period of ten years, including one ten-year extension
option, upon terms and subject to conditions mutually acceptable to the
parties (the "Acquired Related Party Leases"); provided, however, that the
Acquired Related Party Leases will provide that they are terminable at any
time by Purchaser upon three months notice and payment of a termination fee
equal to three months rent; and
(c) enter into a new month-to-month lease for Seller's principal
office facility (the "Principal Facility" and together with the Independent
Facilities and the Related Facilities, the "Acquired Facilities"), located at
9000 Tesoro Drive, #104, San Antonio, Texas 78217 at the rental rate stated in
Schedule 1.8(b) on a triple net basis, upon terms and subject to conditions
mutually acceptable to the parties (the "Acquired Principal Facility Lease"
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and together with the Acquired Third-Party Leases and the Acquired Related
Party Leases, the "Acquired Leases").
Each of the Acquired Related Party Leases will include an option granted
by the Lessor to Purchaser to acquire at any time within the term of the
applicable lease any or all of the Related Facilities at fair market value
determined as provided in the applicable lease.
1.9 Transfer Fees and Taxes. Seller shall pay any and all transfer
and assumption fees and expenses and sales and use taxes arising out of the
transfer of the Acquired Assets and shall pay its portion, prorated as of the
Closing Date, of state and local real and personal property taxes relating to
the Acquired Assets. Purchaser shall not be responsible for any payroll,
excise, income, business, occupation, withholding, or similar tax, or any
taxes of any kind related to any period prior to the Closing Date.
1.10 Special Provisions relating to Contracts.
(a) The term "Contracts" shall be deemed to include, and Seller shall
convey to Purchaser:
1. any and all monies and payments (including in kind collections)
received or due or to become due with respect to the Contracts and all other
rights and benefits thereunder due as of the Closing Date;
2. the security interests in the Vehicles granted by the retail
consumers ("Customers") pursuant to the Contracts and any other interest of
Seller in the Vehicles, including, without limitation, the certificates of
title with respect to Vehicles, and in and to all other security, warranties,
guaranties and credit support with respect to the Contracts;
3. except as provided in Section 1.2(b), any proceeds from claims on
any physical damage, credit life and credit accident and health insurance
policies or other insurance (including vendor's single interest insurance) or
certificates relating to the Vehicles or the Customers;
4. all of Seller's rights of recourse against any dealers under any
dealer agreements relating to the Contracts or otherwise, including all
guarantees made by affiliates of Seller as to those Contracts originated by
affiliates of Seller and described on Schedule 1.10(a)(4) (the "Affiliated
Contracts") and Seller and Shareholders hereby guarantee all amounts due under
the Affiliated Contracts, including all deficiency amounts and charge off
amounts.
5. refunds for the costs of extended service contracts with respect
to Vehicles, refunds of unearned premiums with respect to credit life and
credit accident and health insurance policies or other insurance certificates
covering any Customer or Vehicle or the Customer's obligations with respect to
a Vehicle and any recourse to dealers for any of the forgoing;
6. all documents, records, instruments and files related to each
Contract; and
7. the proceeds of any and all of the foregoing.
(b) Subject to the guarantees of the Affiliated Contracts and the
representations, warranties and covenants of Seller and Shareholders stated in
this Agreement, the Contracts are being conveyed to Purchaser without
recourse.
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(c) The parties intend that the transfer of the Contracts pursuant to
this Agreement be a true sale of the Contracts from the Seller to Purchaser
and not a financing secured by the Contracts, and the beneficial interest in
and title to the Contracts shall not be a part of the Seller's estate in the
event of the filing of a bankruptcy petition by or against Seller under any
bankruptcy law. However, if under any bankruptcy law, this transaction is
deemed to be a financing arrangement, or it is otherwise determined that any
conveyance hereunder is for any reason not considered a sale and that the
beneficial interest in and title to the Contracts remain part of Seller's
estate, the parties intend that with respect to any such Contracts this
Agreement shall constitute a security agreement (as defined in the UCC as in
effect in the State of Texas) under the UCC, and Seller hereby grants to
Purchaser a first priority perfected security interest in and against all of
the Seller's right, title and interest in and to the Contracts.
(d) Within two days after the Closing Date, Seller and Purchaser
shall mail to the Customers written notice of the transfer of the Contracts to
Purchaser (the "Customer Notice"). The Customer Notice shall provide the name,
address and telephone number of Purchaser, shall instruct Customers to make
all payments to Purchaser and shall be in a form mutually agreed upon.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date hereof and as of the Closing Date, Purchaser hereby
represents and warrants to Seller each of the following:
2.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware, and has the requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted in every
jurisdiction where the failure to do so would have a material adverse effect
on its business, properties, or ability to conduct the business currently
conducted by it.
2.2 Authority Relative to this Agreement. Purchaser has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby have been duly authorized by Purchaser, and no other
corporate proceedings on the part of Purchaser are necessary to authorize this
Agreement and such transactions, subject to Section 6.3(f). This Agreement
has been duly executed and delivered by Purchaser and constitutes a valid and
binding obligation of Purchaser, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity.
2.3 No Conflicts. Purchaser is not subject to, or obligated under,
any provision of (a) its Certificate of Incorporation or Bylaws, (b) any
material agreement, arrangement, or understanding, (c) any material license,
franchise, or permit, or (d) any law, regulation, order, judgment, or decree,
which would be breached or violated, or in respect of which a right of
termination or acceleration would arise, or pursuant to which any encumbrance
on any of its or any of its subsidiaries' material assets would be created, by
its execution, delivery, and performance of this Agreement and the
consummation by it of the transactions contemplated hereby.
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2.4 No Consents. Except for such filings to be made pursuant to
federal or state securities or other laws and regulations, including any
required filing under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "H-S-R Act")
or for Permits necessary to own the Acquired Assets or operate the Business,
no authorization, consent, or approval of, or filing with, any public body,
court, or authority is necessary on the part of Purchaser for the consummation
by Purchaser of the transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER,
SHAREHOLDERS AND LESSORS
As of the date hereof and as of the Closing Date, the Seller and each
Shareholder, and each Lessor with respect to Sections 3.1 through 3.4, 3.11
and 3.16 (as applicable to each Lessor or Acquired Lease to which it is a
party and the associated Related Facility or Principal Facility), hereby
jointly and severally represent and warrant to Purchaser each of the
following:
3.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Texas, and has the requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted. Each
Lessor is duly organized and validly existing and has the requisite power and
authority to own and operate its properties and to carry on its business as
now conducted. Seller and each Lessor is duly qualified to do business and is
in good standing in the State of Texas, the only jurisdiction where the
failure to be so qualified would have a material adverse effect on its
business, properties, or ability to conduct the business currently conducted
by it.
3.2 Authority Relative to this Agreement. Seller has the requisite
corporate power and authority and each Lessor has the requisite power and
authority to enter into this Agreement and each other agreement contemplated
hereby to which Seller or such Lessor is a party, to carry out its obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and of each
such other agreement by Seller and each Lessor and the consummation by Seller
and each Lessor of the transactions contemplated hereby and thereby has been
duly authorized by the Board of Directors of Seller or comparable body of
each Lessor, and has been duly approved by all of the shareholders of Seller
and by the members or partners of Lessors, as required, and no other corporate
proceedings on the part of Seller or other proceedings on the part of Lessors
are necessary to authorize this Agreement, such other agreements, and such
transactions. Seller has delivered to Purchaser complete and correct copies
of its Articles of Incorporation and Bylaws, each as amended to the date
hereof, and all recorded actions and minutes of the shareholders and the Board
of Directors of Seller and the committees thereof. Each Lessor has delivered
to Purchaser complete and correct copies of its operating or partnership
agreement, as amended to the date hereof, and all recorded actions and minutes
of its members or partners, as the case may be. Each Shareholder possesses
the legal capacity to execute and deliver this Agreement and each other
agreement contemplated hereby to which he or she is a party, to perform his or
her obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby, without obtaining any approval,
authorization, consent, or waiver or giving any notice. This Agreement and
each other agreement contemplated hereby to which Seller, Lessors or any of
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the Shareholders is a party has been duly executed and delivered by Seller,
Lessors and/or Shareholders, as the case may be, and constitutes a valid and
binding obligation of Seller, Lessors and/or Shareholders, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, or other similar laws relating to
the enforcement of creditors' rights generally and by general principles of
equity.
3.3 No Conflicts. Except as set forth in Schedule 3.3 hereto,
neither Seller nor any Lessor is subject to, or obligated under, any provision
of (a) its Articles of Incorporation or Bylaws or, in the case of Lessors, its
operating agreement or partnership agreement, (b) any agreement, arrangement,
or understanding, (c) any license, franchise, or permit or (d) any law,
regulation, order, judgment, or decree, which would be breached or violated,
or in respect of which a right of termination or acceleration would arise, or
pursuant to which any encumbrance on any of its assets would be created, by
its execution, delivery, and performance of this Agreement, each other
Agreement contemplated hereby to which it is a party and the consummation by
it of the transactions contemplated hereby and thereby.
3.4 No Consents. Except as set forth on Schedule 3.4 hereto, no
authorization, consent, or approval of, or filing with, any public body,
court, or authority is necessary on the part of Seller or any Lessor for the
consummation by Seller or any Lessor of the transactions contemplated by this
Agreement.
3.5 Capitalization. All of the issued and outstanding shares of
capital stock of Seller are owned free and clear by the Shareholders as listed
in Schedule 3.5 and there are no other shares of capital stock of Seller
outstanding. There are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating Seller to issue or to transfer from treasury any additional shares
of its capital stock.
3.6 Financial Statements. The 1996 Audited Financials and Seller's
unaudited balance sheet as of January 31, 1997 and the related unaudited
statements of income and cash flow for the one-month period then ended (the
"Current Financial Statements") and any subsequent financial statements
presented to Purchaser pursuant to this Agreement, including but not limited
to unaudited financial statements as of and for the month ended February 28,
1997, have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved and fairly present the financial position of
Seller as of the dates thereof and the results of its operations and cash
flows for the periods then ended. The 1996 Audited Financials and the Current
Financial Statements are attached hereto as Schedule 3.6.
3.7 Subsidiaries. Seller does not have, nor has it ever had, any
Subsidiaries and Seller does not own, and has never otherwise owned, any
stock, partnership interest, joint venture interest, or any other security
issued by or equity interest in any other corporation, organization,
association, or entity. For purposes of this Agreement, the term "Subsidiary"
means any corporation of which securities having a majority of the ordinary
voting power in electing directors are owned by Seller directly or through
another Subsidiary.
3.8 Absence of Undisclosed Liabilities. Seller has no obligations or
liabilities (whether accrued, absolute, contingent, liquidated, unliquidated,
or otherwise, whether due or to become due and regardless of when asserted),
except (a) liabilities reflected on the unaudited balance sheet included in
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the Current Financial Statements, (b) liabilities which have arisen in the
ordinary course of business after the date of the Current Financial Statements
(none of which is an uninsured liability for breach of contract, breach of
warranty, tort, infringement, claim, or lawsuit), and (c) liabilities
specifically disclosed in any Schedule to this Agreement.
3.9 No Material Adverse Changes. Except as set forth in Schedule 3.9
hereto, since the date of the Current Financial Statements, there has not been
any material adverse change in the assets, financial condition, or operating
results, customer, employee, or supplier relations, business condition or
prospects, or financing arrangements of Seller.
3.10 Absence of Certain Developments:
(a) Changed its accounting methods or practices (including any change
in loan reserve or write off policies) or revalued any of its assets;
(b) Borrowed any amount under existing lines of credit, or otherwise
incurred or become subject to any indebtedness, except as is reasonably
necessary for the ordinary operation of its business and in a manner and in
amounts that are in keeping with its historical practice;
(c) Mortgaged, pledged, or subjected to any lien, charge, or other
encumbrance, any of its assets with an aggregate fair market value in excess
of $5,000, except liens for current property taxes not yet due and payable;
(d) Sold, assigned, or transferred (including, without limitation,
transfers to any Insiders as defined in Section 3.25) any assets, except in
the ordinary course of business;
(e) Disclosed any proprietary or confidential information to any
person other than Purchaser;
(f) Modified, waived, canceled or written off any receivable, note,
right or claim, including any write-off or compromise of any Contract, other
than in the ordinary course of business and consistent with past practice;
(g) Entered into any transaction with any Insider;
(h) Suffered any extraordinary financial or other loss or suffered
any material theft, damage, destruction, or loss of or to any property or
properties owned or used by it, whether or not covered by insurance;
(i) Increased the annualized level of compensation of or granted any
extraordinary bonuses, benefits, or other forms of direct or indirect
compensation to any employee, officer, director, or consultant, or increased,
terminated, or amended or otherwise modified any plans for the benefit of
employees, except in the ordinary course of business and consistent with
historical adjustments to such compensation and benefits;
(j) Made any capital expenditures or commitments therefor that
aggregate in excess of $25,000;
(k) Taken any other action or entered into any other transaction
other than in the ordinary course of business and in accordance with past
custom and practice, or entered into or modified any transaction with any
Insider or any contract, written or oral, that involves consideration or
performance by it of a value exceeding $25,000 or a term exceeding six months;
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(l) Made any loans or advances to, or guarantees for the benefit of,
any persons;
(m) Acquired (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint venture, or
other business organization or division or material assets thereof;
(n) Redeemed or purchased, directly or indirectly, any shares of its
capital stock, or declared or paid any dividends or distributions with respect
to any shares of its capital stock;
(o) Issued or sold any equity securities, securities convertible into
or exchangeable for equity securities, warrants, options, or other rights to
acquire equity securities, or bonds or other debt securities;
(p) Discharged or satisfied any lien or encumbrance or paid any
liability, other than current liabilities (or current installments due on
intermediate or long-term liabilities) paid in the ordinary course of
business;
(q) Revalued any of its assets;
(r) Sold, assigned, or transferred (including, without limitation,
transfers to any employees, shareholders, or affiliates) any patents,
trademarks, trade names, copyrights, trade secrets, or other intangible assets,
except in the ordinary course of business, or disclosed any proprietary
or confidential information to any person other than Purchaser; or
(s) made charitable contributions or pledges which in the aggregate
exceed $1,000.
3.11 Real Estate.
(a) Seller does not own any real estate.
(b) Schedule 3.11(b) sets forth a list of all leases of real property
and improvements relating to the Business ("Leases"), specifying whether or
not such Leases are Acquired Leases, in each case, setting forth (i) the
lessor and lessee thereof and the date and term of each of the Leases, (ii)
the street address of each property covered thereby, and (iii) a brief
description (including size and function) of the principal improvements and
buildings thereon (the "Leased Premises"). The Leases are in full force and
effect and have not been amended, Seller has a valid and existing leasehold
interest under each such Lease for the term set forth therein, and neither
Seller, any Lessor, or any other party thereto is in material default or
material breach under any such Lease. No event has occurred which, with the
passage of time or the giving of notice or both, would cause a breach of or
default under any of such Leases, except for breaches or defaults which in the
aggregate could not reasonably be expected to have a material adverse effect
on Seller's business, financial condition, or results of operations. True and
correct copies of the Acquired Third-Party Leases have been delivered to
Purchaser and have not been amended.
(c) The properties set forth on Schedules 1.8(a), (b) and (c) and
3.11 (b) constitute all of the real estate used or occupied by Seller in
connection with the Business, and each such property has access, sufficient
for the conduct of the business conducted thereon, to public roads and to all
utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operations of the Business.
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(d) Neither Seller nor any Lessor is in violation of any applicable
zoning ordinance or other law, regulation, or requirement relating to the
operation of any of the properties used in the Business, including, without
limitation, applicable environmental protection and occupational health and
safety laws and regulations, and neither Seller nor any Lessor has received
any notice of any such violation, or of the existence of any condemnation
proceeding with respect to any such properties owned or leased by it.
(e) On the Closing Date, all Acquired Facilities shall be surrendered
to Purchaser in a clean and fully-operating condition. Prior to the Closing
Date, Seller shall lawfully remove and dispose of all waste, refuse and
rubbish from the Acquired Facilities, including without limitation, all waste
oils, fuels and solvents, all empty containers and containers holding waste
or unknown items, inoperable batteries, tires and other vehicle parts, and any
item that is not an Acquired Asset. Prior to the Closing Date, Seller shall
lawfully clean all drains and waste traps at the Acquired Facilities and all
such drains and waste traps shall be in full operating condition, all as
certified by a licensed drain and waste trap service company. On the Closing
Date, the condition of the Acquired Facilities and the activities conducted
thereat shall comply fully with all applicable environmental, occupational,
zoning, fire, health and safety laws, rules and regulations.
3.12 Good Title to and Condition of Inventory and Acquired Assets.
(a) The Inventory of Vehicles recorded on the balance sheet included
in the Current Financial Statements, and the Inventory purchased since the
date thereof, is saleable in the ordinary course of business, is not
slow-moving, obsolete, damaged or defective, and is carried at a value
determined in accordance with GAAP. Seller has good and marketable title to
the Vehicles, free and clear of liens, encumbrances and security interests.
(b) The other Acquired Assets that are tangible assets are in good
condition and repair, ordinary wear and tear excepted, and are usable in the
ordinary course of business. Seller has good and marketable title to all
machinery, equipment, and other tangible assets necessary for the conduct of
the Business (which it is conveying hereby), free and clear of all liens,
encumbrances and security interests, except as disclosed in Schedule 3.12, all
of which shall be released as of the Closing, or leases such equipment under
valid leases, all of which are listed on Schedule 3.12. Seller is not in
default, and no circum-stances exist which could result in such default, under
any of such equipment leases, nor is any other party to any of such equipment
leases in default.
3.13 Title and Condition of Contracts:
(a) Seller and each affiliate of Seller and the Dealerships have
fully complied with all federal, state and municipal laws, rules and
regulations applicable to the transaction creating each Contract, including
the Federal Truth In Lending Act, the Federal Equal Credit Opportunity Act and
the Texas Motor Vehicle Installments Sales Law.
(b) Seller and each affiliate of Seller and the Dealerships have all
required licenses, permits and authority to sell used Vehicles, finance the
sale of used Vehicles and, in the case of affiliates of Seller and the
Dealerships, to assign the Contracts to Seller, and Seller has all required
licenses, permits and authority to acquire, hold, collect and assign the
Contracts to Purchaser.
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(c) Seller or any affiliate of Seller or the Dealerships, as
appropriate, has received the down payment amount stated in each Contract in
cash or its equivalent and no part of the down payment on any Contract has
been loaned directly or indirectly to the Customer by Seller, any affiliate of
Seller, or the Dealerships other than "pick-up" payments disclosed in the
Contracts.
(d) All Vehicles and any other goods and services sold by Seller, any
affiliate of Seller, or the Dealerships pursuant to each Contract are free of
all liens and claims of any kind other than those in favor of Seller and the
description of the Vehicle in each Contract is true, complete and accurate.
(e) The Vehicle sold to the Customer pursuant to each Contract has
been delivered to the Customer named in the Contract and application to the
appropriate agency of the State of Texas has been filed in accordance with
applicable law for registration of the Vehicle showing the Customer as the
owner and Seller as the only lien holder.
(f) The Customer named in each Contract has full legal capacity to
make the Contract and the name of the Customer stated in the Contract is the
true and actual name of the Customer and said Customer named in the Contracts
has executed the Contract.
(g) No Customer of any Contract being sold to Purchaser has put
Seller or any affiliate of Seller on notice of any claim, offset, defense,
dispute or claim of rescission or cancellation of any type, including any
claim or defense relating to the Vehicle sold by Seller, any affiliate of
Seller or the Dealerships, the performance or non-performance by Seller or any
affiliate of Seller of its obligations under any Contract, warranty or
guarantee, or arising from any act, error, omission, representation or
warranty of Seller or any affiliate of Seller or its or their officers, agents
or employees. Seller and each affiliate of Seller has fully and in good faith
performed and discharged all of its obligations to the Customer arising under
each Contract or relating to the Contract accrued as of the date of the
assignment of the Contract to Purchaser.
(h) If required by applicable law at the time of the origination of
each Contract, the Vehicle securing the Contract was insured for liability of
the Customer in accordance with applicable law at the time of the origination
of the Contract.
(i) All sales taxes assessed in connection with the sale of the
Vehicle to the Customer have been paid in full, or if not paid in full, will
be paid in full when due by Seller.
(j) Each Contract has created a valid and enforceable first priority
perfected security interest in favor of Seller in the Vehicle, which security
interest will be or has been validly assigned and transferred by Seller to
Purchaser on the Closing Date.
(k) Each Contract is in the form attached hereto as an Exhibit and
does not include any amendments, modifications or supplements other than in
the form attached hereto.
(l) Each Contract provides for level payments not less frequently
than monthly, in amounts that fully amortize the amount financed stated
therein over the original term (except for the last payment, which may be less
than the level payment) and yield interest at the annual percentage rate
stated in the Contract.
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(m) Each Contract accurately reflects the actual terms and conditions
of the Customer's purchaser of the Vehicle and the financing thereof and there
are no terms and conditions not expressly stated in the Contract.
(n) No Vehicle shall have been repossessed or designated for
repossession and no investigation has been initiated by Seller, any affiliate
of Seller or any Dealership to determine the whereabouts of a Vehicle or
Customer for the purposes of the repossession of the Vehicle, except as
disclosed to Purchaser prior to the Closing Date.
(o) Within the most recent ninety (90) days, a payment in an amount
not less than the regularly-scheduled installment has been received and
applied to each such Contract.
(p) Each Contract is free of all liens and encumbrances.
(q) Except for the conveyances hereunder, Seller will not sell,
pledge, assign or transfer to any other person, or grant, create, incur,
assume or suffer to exist any lien on any Contract, or Vehicle securing the
Contract, whether now existing or hereafter created, or any interest therein.
(r) Seller shall defend the right, title and interest of Purchaser
in, to and under the Contracts, whether now existing or hereafter created,
against all claims of third parties claiming through or under Seller or the
Dealerships and Seller and Shareholders shall indemnify and hold harmless
Purchaser from and against any loss, liability, expense or damage suffered or
sustained by reason of third party claims which may be asserted against or
incurred by Purchaser at any time as a result of the sale of the Contracts by
Seller to Purchaser.
(s) If any of the foregoing representations, warranties or covenants
of Seller as to the Contracts are materially false, breached or violated, and
Purchaser actually incurs a loss as a result thereof, then Purchaser may
demand and Seller shall immediately pay a refund in an amount equal to the
outstanding principal balance of the Contracts for which the representation,
warranties or covenants are materially false, breached or violated and upon
such refund Purchaser shall transfer said Contracts back to Seller without
recourse, representation, warranty or covenant, but free of all liens and
encumbrances created by Purchaser.
3.14 Solvency; Bulk Sales. Seller is solvent and able to pay its
outstanding debts as they mature. Seller shall not be rendered insolvent by
the transfer of the Contracts pursuant to this Agreement, and the transfer of
the Contracts is not fraudulent to any creditor or equity interest holder of
Seller. There is no Texas bulk sales or bulk transfer law applicable to the
sale of the Acquired Assets hereunder.
3.15 Tax Matters. Seller and Shareholders have filed all federal,
foreign, state, county, and local income, excise, property, sales,
employment-related wages and benefits and other tax returns which are required
to be filed by it or them, as the case may be, in respect of Seller, the
Business or the Acquired Assets, and all such returns are true and correct;
all taxes due and payable by Seller or by any Shareholders in respect of
Seller, the Business or the Acquired Assets have been paid; Seller's
provisions for taxes on the balance sheet included in the Current Financial
Statements and any other financial statements delivered hereunder are
sufficient for all accrued and unpaid taxes as of the dates of such balance
sheets; Seller has paid all taxes due and payable by it or which it is
obligated to withhold from amounts owing to any employee, creditor, or third
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party; Seller has not waived any statute of limitations in respect of taxes or
agreed to any extension of time with respect to a tax assessment or
deficiency; the assessment of any additional taxes relating to or for periods
for which returns have been filed is not expected; and Seller has not received
notice of any unresolved questions or claims concerning its tax liability.
Seller has not filed any consent agreement under or made an election under
341(f) of the Internal Revenue Code of 1986, as amended (the "Code"). Seller
is not a party to a tax sharing or allocation agreement nor does Seller owe
any amount under any such agreement. Neither Seller nor the Acquired Assets
are subject to any federal sales tax upon sale or other disposition of the
Acquired Assets.
3.16 Contracts and Commitments.
(a) Except as set forth in Schedule 3.16 hereto or any other Schedule
hereto, Seller is not a party to any: (i) collective bargaining agreement or
contract with any labor union; (ii) bonus, pension, profit sharing,
retirement, or other form of deferred compensation plan; (iii) hospitalization
insurance, or similar plan or practice, whether formal or informal; (iv)
contract for the employment or compensation of any officer, individual
employee, or other person on a full-time or consulting basis or relative to
severance pay or change-in-control benefits for any such person; (v) agreement
or indenture relating to the borrowing of money in excess of $5,000 relating
to the Business or Acquired Assets or to mortgaging, pledging, or otherwise
placing a lien on any of the Acquired Assets; (vi) guaranty of any obligation
for borrowed money or otherwise, other than endorsements made for collection;
(vii) lease or agreement under which it is lessor or lessee of, or permits any
third party to hold or operate, any Acquired Assets; (viii) other agreement
material to the Business or (ix) agreement not entered into in the ordinary
course of business (collectively, the "Agreements"). Schedule 3.16 sets forth
the material terms of each such Agreement and identifies each such Agreement
which is not terminable at will by Seller. Purchaser is not assuming any
obligations of Seller under the Agreements unless the Agreement is an Assumed
Agreement identified in Schedule 1.1(f).
(b) Seller has furnished Purchaser with a true and correct copy of
each written Agreement, and a written description of each oral Agreement,
referred to in Schedule 3.16, together with all amendments, waivers, or other
changes thereto.
(c) Except as specifically disclosed in Schedule 3.16 hereto: (i) no
customer or supplier has indicated that it will stop or decrease the rate of
business done with Seller, except for changes in the ordinary course of the
Business; (ii) Seller and each Lessor has performed in all material respects
the obligations required to be performed by it in connection with the
Agreements and neither Seller nor any Lessor has been advised of or received
any claim of default or threatened claim of default or any other claim
relating to any Agreement; (iii) Seller and each Lessor has no present
expectation or intention of not fully performing any obligation pursuant to
any Agreement; and (iv) there has been no breach and there is no anticipated
breach by any other party to any Agreement.
(d) Each Assumed Agreement is valid, binding, and in full force and
effect. Except as set forth on Schedule 3.16, no Assumed Agreement has been
amended or supplemented in any way and no party thereto has assigned any of
its rights or delegated any of its duties thereunder. True and complete
copies of the Assumed Agreements have been delivered to the Purchaser.
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(e) No breach of default exists under any Assumed Agreement and no
event has occurred with respect thereto that with the lapse of time or action
or inaction by Seller or, to the best knowledge of the Seller, any other party
thereto, would result in a breach thereof or a default thereunder.
(f) Upon the assignment of each Assumed Agreement to the Purchaser
pursuant hereto, all rights of the Seller with respect to the Assumed
Agreements will inure to the Purchaser and the Assumed Agreements will be
enforceable by the Purchaser in accordance with their terms.
(g) The assignment to Purchaser of all of Seller's right, title, and
interest in, to and under each Assumed Agreement pursuant hereto will be free
and clear of any lien.
(h) As of the Closing, Seller will not owe any amount (whether
absolute, contingent, or otherwise) with respect to any Assumed Agreement ,
other than amounts incurred in the ordinary course of business consistent with
past practices and this Agreement, which amounts will be properly recorded in
the accounts payable ledger of Seller.
(i) No Assumed Agreement (i) requires Seller to make purchases or pay
for services in excess of the requirements of its Business, or (ii) except as
specified on Schedule 3.16, guarantees any obligation of another person or
provides any type of indemnification whatsoever.
(j) Seller has paid all rental and other payments due under each
lease (including each Lease) under which Seller is the lessee, in accordance
with its terms. With respect to each such lease, the Seller has been in
peaceable possession of the buildings, equipment, machinery, real property,
vehicles, or other tangible property covered thereby since the commencement of
the original term of such lease. Moreover, no indulgence, postponement, or
waiver of Seller's obligations under any such lease has been granted by the
lessor. Seller possesses full right and power to occupy or possess, as the
case may be, all of the buildings, equipment, machinery, real property,
vehicles, and other tangible property covered by such leases.
3.17 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order, or decree
to which Seller is a party or otherwise binding on Seller or its property
which has or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of Seller, any acquisition of property
(tangible or intangible) by Seller, or the conduct of the Business.
3.18 Intellectual Property. Seller has the full legal, right, title,
and interest in and to all trademarks, service marks, trade names, copyrights,
know-how, patents, trade secrets, licenses (including licenses for the use of
computer software programs), and other intellectual property used in and
material to the conduct of the Business (the "Intellectual Property"). The
conduct of Seller's Business as presently conducted and the unrestricted
conduct and the unrestricted use and exploitation of the Intellectual Property
does not infringe or misappropriate any rights held or asserted by any person,
and no person is infringing on the Intellectual Property. No payments are
required for the continued use of the Intellectual Property. None of the
Intellectual Property has ever been declared invalid or unenforceable, or is
the subject of any pending or threatened action for opposition, cancellation,
declaration, infringement, invalidity, unenforceability, or misappropriation
or like claim, action, or proceeding. Schedule 3.18 sets forth a list of all
material Intellectual Property owned by or licensed to Seller and lists all
trademark, trade name, and patent applications that are currently pending.
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3.19 Litigation. Except as set forth on Schedule 3.19, there are no
suits, claims, actions, arbitrations, investigations, or proceedings entered
against, now pending, or threatened against Seller before any court,
arbitration, administrative or regulatory body, or any governmental agency
which may result in any judgment, order, award, decree, liability, or other
determination which will or could reasonably be expected to have any effect
upon Seller, the Acquired Assets, the Acquired Leases or the Business. Seller
is not subject to any continuing court or administrative order, writ,
injunction, or decree applicable to it or the Business, or to its property or
employees, and Seller is not in default with respect to any order, writ,
injunction, or decree of any court or federal, state, municipal, or other
governmental department, commission, board, agency, or instrumentality.
3.20 Brokers' Fees. Neither Seller nor Shareholders have dealt with
any broker, finder, or other person entitled to any brokerage commissions,
finders' fees, or similar compensation in connection with the transactions
contemplated by this Agreement.
3.21 Employment Matters. Attached hereto as Schedule 3.21 is a list
of names, current annual rates of salary, bonus, employee benefits, accrued
vacation and sick time, sick pay, and other compensation and benefits and
perquisites, including the provision of company-owned automobiles, of all the
employees and agents of Seller whose work relates, directly or indirectly, to
the operation of the Business at the Acquired Facilities. No key employee of
Seller, and no group of Seller's other employees, has any plans to terminate
his, her, or its employment. Seller is not a party to any collective
bargaining agreement. There are no discussions, negotiations, demands, or
proposals that are pending or that have been conducted or made with or by any
labor union or association, and there are no pending or threatened labor
disputes, strikes, or work stoppages that may have a material and adverse
effect upon Seller, the Acquired Assets, or the Business. Seller has no
material labor relations problems pending, and Seller's labor relations are
satisfactory in all material respects. Seller has complied with all laws
relating to the employment of labor, terms and conditions of employment, and
wages and hours, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining, and the payment of social security and
other taxes, and is not engaged in any unfair labor practices. Seller may
terminate any employee, with or without cause, without liability or obligation
other than for salary accrued through the date of any such termination. None
of Seller's employee benefit plans will need to be assumed by Purchaser as a
matter of law or otherwise.
3.22 Employee Benefit Plans. With respect to all employees and former
employees of Seller, Seller does not presently maintain, contribute to, or have
any liability (including current or potential multi-employer plan withdrawal
liability under Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) under any: (i) non-qualified deferred compensation
or retirement plan or arrangement which is an "employee pension benefit plan"
as such term is defined in Section 3(2) of ERISA; (ii) defined contribution
retirement plan or arrangement designed to satisfy the requirements of section
401(a) of the Code, which is an employee pension benefit plan, (iii) defined
benefit pension plan or arrangement designed to satisfy the requirements of
section 401(a) of the Code, which is an employee pension benefit plan; (iv)
"multi-employer plan" as such term is defined in Section 3(37) of ERISA; (v)
unfunded or funded medical, health, or life insurance plan or arrangement for
present or future retirees or present or future terminated employees which is
an "employee welfare benefit plan" as such term is defined in Section 3(1) of
ERISA, except as required by section 4980B of the Code or sections 601 through
609 of ERISA; or (vi) any other employee welfare benefit plan.
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3.23 Permitted Liens. Seller's title to the Acquired Assets is free
and clear of all liens, other than the liens listed on Schedule 3.23 hereto
and approved by Purchaser (collectively, the "Permitted Liens").
3.24 Insurance3.24. Schedule 3.24 hereto lists and briefly describes
each insurance policy and fidelity bond maintained by Seller with respect to
its respective properties, assets, employees, officers, and directors and sets
forth the date of expiration of each such insurance policy. All of such
insurance policies are in full force and effect and Seller is not in default
with respect to its obligations under any of such insurance policies. There
is no claim of Seller pending under any of such policies or bonds as to which
coverage has been questioned, denied, or disputed by the underwriters of such
policies or bonds and there has been no threatened termination of, or material
premium increase with respect to, any of such policies. To the best knowledge
of Seller, the insurance coverage is customary for corporations of similar
size engaged in similar lines of business.
3.25 Affiliate Transactions. Except as set forth on Schedule 3.25,
no officer, director, or shareholder of Seller or any member of the immediate
family of any such officer, director, or shareholder, or any entity in which
any of such persons owns any beneficial interest (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any of such persons) (collectively "Insiders"), has any agreement
with Seller or any interest in any property (real, personal, or mixed,
tangible or intangible) used in or pertaining to the Business. For purposes
of the preceding sentence, the members of the immediate family of an officer,
director, or, shareholder shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and
brothers- and sisters-in-law of such officer, director, or shareholder.
3.26 Compliance with Laws; Permits. Seller and its officers,
directors, agents, and employees have complied with all applicable laws and
regulations of foreign, federal, state, and local governments and all agencies
thereof which affect the Business or any of Seller's assets and to which
Seller may be subject, and no claims have been filed or threatened against
Seller alleging a violation of any such law or regulation, except as set forth
in Schedule 3.26 hereto. Without limiting the generality of the foregoing,
Seller has not violated, or received a notice or charge asserting any
violation of any state or federal acts (including rules and regulations
thereunder) regulating or otherwise affecting employee health and safety, the
discharge of pollutants or wastes, or employee benefit plans. Neither Seller
nor any of the Shareholders has given or agreed to give any money, gift, or
similar benefit (other than incidental gifts of articles of nominal value) to
any actual or potential customer, supplier, governmental employee, or any
other person in a position to assist or hinder Seller in connection with any
actual or proposed transaction. Seller possesses all approvals,
authorizations, certificates, consents, registrations, franchises, licenses,
permits, rights, variances, and waivers necessary for the lawful conduct of
the Business and the ownership or operation of the Acquired Assets and the
Acquired Facilities (collectively, the "Permits"). All Permits are in full
force and effect, no violations have occurred with respect thereto, and no
basis exists for any limitation, revocation, or withdrawal thereof or any
denial of any extension or renewal with respect thereto. A list of all
Permits (including the expiration dates thereof) is set forth in Schedule 3.26
hereto. Except as indicated on Schedule 3.26, each Permit is transferable to
the Purchaser. Seller has made available to Buyer each Permit for Buyer's
review.
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3.27 Warranties. Seller is not responsible for any express
warranties to third parties with respect to any products sold or services
performed by Seller. Seller has no knowledge of any state of facts or the
occurrence of any event forming the basis of any present claim against Seller
for liability due to any express or implied warranty.
3.28 Disclosure. Neither this Agreement nor any of the Schedules or
Exhibits hereto or documents or agreements to be delivered hereunder contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed to Purchaser which materially adversely affects
or could reasonably be anticipated to materially adversely affect the assets,
including the Acquired Assets, financial condition or results of operations,
customer, employee or supplier relations, business condition, prospects, or
financing arrangements of Seller.
ARTICLE 4
CONDUCT OF SELLER PENDING THE CLOSINGARTICLE
Seller and Shareholders, and as to the Acquired Leases, the Related
Facilities, and the Principal Facility, each Lessor, hereby covenant and agree
that from the date hereof to the Closing Date, unless Purchaser shall
otherwise agree in writing or except as otherwise expressly contemplated or
permitted by this Agreement:
4.1 Conduct of Business Pending the Closing. Except as specifically
contemplated in this Agreement, from the date hereof to the Closing Date, the
Business of Seller shall be conducted only in, and Seller shall take no action
except in, the ordinary course, on an arm's length basis, and in accordance
with all applicable laws, rules, and regulations and past custom and practice,
including, without limitation, making any loans, making any cash payments, or
transferring any other assets or properties of Seller to any employee,
officer, shareholder, or director of Seller; and Seller shall maintain its
facilities in good operating condition, ordinary wear and tear excepted; and
Seller will not, directly or indirectly, do or permit to occur any of the
following:
(a) Breach any material contract, agreement, commitment, or
undertaking, including this Agreement;
(b) Knowingly violate or fail to comply with any laws applicable to
it, the Acquired Assets, the Acquired Leases, or the Business;
(c) Commit any act or permit the occurrence of any event or the
existence of any condition of the type described in Section 3.10 hereof;
(d) Cancel or terminate or permit to be canceled or terminated its
current insurance (or reinsurance) policies or permit any of the coverage
thereunder to lapse, unless simultaneous with such termination, cancellation,
or lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated, or lapsed policies for substantially
similar premiums are in full force and effect;
(e) Fail to maintain and repair its assets and properties in
accordance with good standards of maintenance and as required in any leases or
other agreements pertaining thereto;
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(f) Enter into or modify any employment, severance, or similar
agreements or arrangements with, or grant any bonuses, salary increases, or
severance or termination pay to, any officers, directors, employees, or
consultants, or adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment, or other
benefit plan, trust, fund, or group arrangement for the benefit or welfare of
any officers, directors, or employees;
(g) Amend its Articles of Incorporation or Bylaws;
(h) Create or acquire any Contracts that do not satisfy and comply
fully with the underwriting and origination requirements used by Seller during
the previous 180 days; or
(i) Agree to do any of the actions described in the preceding clauses
(a) through (h).
4.2 Business Relationships. Seller and Shareholders will preserve
intact Seller's business organization and goodwill, keep available the
services of its officers and employees as a group, and maintain satisfactory
relationships with suppliers, distributors, customers, and others having
business relationships with it.
4.3 Access to Information. Purchaser and its counsel, accountants,
and other representatives shall have the opportunity to make a complete due
diligence review of the books, records, business, and affairs of Seller,
including, without limitation, the Acquired Assets, Independent Facilities,
Related Facilities, Principal Facility, and all other matters relating
thereto. In the event Purchaser, in its reasonable business discretion,
determines that prior to the Closing Date there has been any material change
in or material misrepresentation about the Business, Acquired Assets, Acquired
Facilities or matters relating thereto, Purchaser shall have no further
obligation to proceed with the transaction, and the parties shall have no
further liability to one another, except as expressly provided herein. To
facilitate the due diligence review, Seller shall provide to Purchaser and its
agents complete access to all of Seller's records and documents, shall provide
Purchaser with personal, bank, and professional references, and shall make
available for consultation employees, suppliers, and distribution channels.
4.4 Tax on Prior Sales. Seller agrees to furnish to Purchaser
certificates from the state taxing authorities and any related certificates
that Purchaser may reasonably request as evidence that all sales and use tax
liabilities of Seller accruing before the Closing Date have been fully
satisfied or provided for, to the extent such certificates are prepared by the
applicable state taxing authority.
4.5 Notification of Certain Matters. Seller, Shareholders and
Lessors shall (i) confer on a regular basis with representatives of Purchaser
and report operational matters and the general status of ongoing operations,
(ii) notify Purchaser of any material adverse change in the normal course of
its business or in the operation of its properties and of any governmental or
third party complaints, investigations, or hearings (or communications
indicating that the same may be contemplated); (iii) not take any action which
would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at, or at any
time prior to, the Closing; and (v) promptly notify Purchaser if Seller shall
discover that any representation or warranty made by it in this Agreement was
when made, or has subsequently become, untrue.
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4.6 Transfer of Permits. Seller, Shareholders, and Lessors will use
their best efforts to assist Purchaser to effect the assignment or other
transfer of Permits from Seller to Purchaser as of or as soon as practicable
after the Closing Date.
4.7 Closing. Seller, Shareholders, and Lessors shall use their best
efforts to cause the conditions specified in Section 6.3 hereof to be
satisfied at or prior to the Closing Date hereof.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Employment. After the Closing Date, except for up to six
management employees who may be designated by Seller and listed in Schedule
5.1 (the "Designated Employees"), Purchaser will agree to hire such employees
of Seller currently employed at the Acquired Facilities on an "at will" basis
or on other terms and conditions acceptable to Purchaser and such employees as
Purchaser determines in its sole discretion, and Seller will cooperate with
Purchaser to that end. All employees of Seller currently employed at the
Acquired Facilities to be hired by Purchaser will be terminated by Seller on
or before the Closing Date. Seller shall be responsible for any severance
and/or other payments, including, but not limited to, accrued vacation and
sick time, sick pay, and other compensation, benefits, and perquisites,
incurred in connection therewith and during the period prior to the Closing
Date. Seller and Shareholders agree not to solicit any of the employees
currently employed at the Acquired Facilities to be hired by Purchaser for a
period of three years after the Closing Date. The Designated Employees may be
employed by Purchaser in its discretion for a period of up to 90 days
following the Closing Date in order to assist with the transition of the
Business to Purchaser.
5.2 Expenses. Seller, Shareholders, and Lessors shall pay the costs
and expenses of Seller, Shareholders and Lessors, and Purchaser shall pay the
costs and expenses of Purchaser, incurred in connection with this Agreement
and the transactions contemplated hereby. Notwithstanding the foregoing, in
the event any party breaches the terms of this Agreement prior to the Closing,
and the transactions contemplated hereby are not consummated, the breaching
party agrees to pay the non-breaching party an amount equal to all of the
expenses incurred by the non-breaching party in connection with this
Agreement, and otherwise related to the transactions contemplated hereby,
including, but not limited to, all fees and expenses incurred by the
non-breaching party to accountants, attorneys, and finders, brokers or
consultants. Nothing herein shall be deemed to limit the right or remedy of a
party in the event of a breach of this Agreement by the other party.
5.3 No Negotiations. Neither Seller nor Shareholders shall, directly
or indirectly, through any officer, director, agent, or otherwise, solicit,
initiate, or encourage submission of any proposal or offer from any person or
entity (including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation, or
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in, Seller or other similar transaction or business
combination involving Seller, or participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist, participate in, facilitate, or
encourage, any effort or attempt by any other person or entity to do or seek
any of the foregoing. Seller or Shareholders shall promptly notify Purchaser
if any such proposal or offer, or any inquiry from or contact with any person
with respect thereto, is made and shall promptly provide Purchaser with such
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information regarding such proposal, offer, inquiry, or contact as Purchaser
may request.
5.4 Public Announcements. The parties hereto shall not issue any
press release or public announcement, including announcements by any party for
general reception by or dissemination to employees, agents, or customers, with
respect to this Agreement and the other transactions contemplated by this
Agreement without the prior written consent of the other parties hereto
(which consent shall not be withheld unreasonably); provided, however, that
Purchaser may make any disclosure or announcement that, in the opinion of its
counsel, it is obligated to make pursuant to applicable law or regulation of
the Nasdaq Stock Market, Inc. or any national securities exchange, as
applicable, in which case Purchaser shall reasonably consult with Seller prior
to making such disclosure or announcement; and provided further, that, upon
execution of this Agreement, Purchaser may make a public announcement of such
occurrence in a press release reviewed and reasonably approved by Seller prior
to publication.
5.5 Confidentiality. Each party hereto, and its officers, directors,
agents, and affiliates, will hold in strict confidence, and will not divulge,
communicate, use to the detriment of any other party hereto or for the benefit
of any other person or persons, or misuse in any way, any financial
information or other data obtained in connection with this Agreement,
including, without limitation, any confidential information or trade secrets
of such other party, personnel information, secret processes, know how,
cus-tomer lists, formulas, or other technical data; and if the transactions
contemplated by this Agreement are not consummated, each party hereto, and its
officers, directors, agents, and affiliates, will return to each other party
all such data and information as such other party may reasonably request,
including, without limitation, work sheets, test reports, manuals, lists,
memoranda, and other documents prepared by or made available in connection
with this transaction. The parties hereto may disclose such information to
their respective attorneys and accountants so long as they agree to keep such
information confidential.
5.6 Books and Records. Seller will make available to Purchaser, at
Purchaser's request and expense, from time to time, all books and records of
Seller relating, directly or indirectly, to the Business which are reasonably
necessary with respect to Purchaser's ongoing operations for inspection or
copying by Purchaser at any reasonable time for a six (6) year period after
the Closing Date, and to offer same to Purchaser, from time to time, at
Purchaser's expense, prior to the destruction of all or any part thereof. In
addition, the parties shall make reasonably available to one another any
records or documents that they maintain with respect to the Acquired Assets or
the Business for purposes of compliance with applicable tax laws or in
defending any third party litigation arising in respect of this Agreement.
5.7 H-S-R Act. To the extent required by law, Seller and
Shareholders on the one hand and Purchaser on the other shall each file or
cause to be filed with the Federal Trade Commission (the "FTC") and the United
States Department of Justice (the "DOJ") any notifications required to be
filed by their respective "ultimate parent entities" under the H-S-R Act, with
respect to the transactions contemplated herein. Each party shall be
responsible for all expenses incurred in the preparation of their respective
H-S-R Act filings and the filing fees to be paid in connection with the H-S-R
Act filings. The parties shall use their reasonable best efforts to make such
filings promptly, to respond to any requests for additional information made
by either the FTC or DOJ, to cause the waiting periods under the H-S-R Act to
terminate or expire at the earliest possible date and to resist vigorously, at
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their respective cost and expense (including, without limitation, the
institution or defense of legal proceedings) any assertion that the
transactions contemplated herein constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
herein.
5.8 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary,
proper, or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including
obtaining all necessary waivers, consents, and approvals and effecting all
necessary registrations and filings and submissions of information requested
by governmental authorities.
ARTICLE 6
CONDITIONS
6.1 Conditions to Obligations of Each Party. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) There shall not be threatened, instituted, or pending any action
or proceeding, before any court or governmental authority or agency, domestic
or foreign: (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly to restrain or prohibit, the consummation of
the transactions contemplated hereby, or seeking to obtain damages in
connection therewith; (ii) seeking to prohibit direct or indirect ownership or
operation by Purchaser or any of its subsidiaries of all or a material portion
of the Business or the Acquired Assets of Seller, or to compel Purchaser or
any of its subsidiaries to divest of or to hold separately all or a material
portion of the Business or the Acquired Assets of Seller as a result of the
transactions contemplated hereby; (iii) seeking to impose or confirm
limitations on the ability of Purchaser effectively to exercise directly or
indirectly full rights of ownership of any of the Acquired Assets or
properties of Seller; (iv) seeking or causing any material diminution in the
direct or indirect benefits expected to be derived by Purchaser as a result of
the transactions contemplated by this Agreement; (v) invalidating or rendering
unenforceable any material provision of this Agreement (including without
limitation any of the documents or agreements to be delivered hereunder); or
(vi) which otherwise might materially adversely affect Purchaser or any of its
subsidiaries or the Acquired Assets or Business;
(b) There shall not be any action taken, or any statute, rule,
regulation, judgment, order, or injunction proposed, enacted, entered,
enforced, promulgated, issued, or deemed applicable to the transactions
contemplated hereby by any federal, state, or foreign court, government, or
governmental authority or agency, which may, directly or indirectly, result in
any of the consequences referred to in (a) above or otherwise prohibit
consummation of the transactions contemplated hereby;
(c) No party hereto shall have terminated this Agreement as permitted
herein; and
(d) There shall not have occurred any of the following events that
could have a material adverse effect on Purchaser or Seller: (i) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States or any limitation by United States authorities
107
on the extension of credit by lending institutions; (ii) a commencement of
war, armed hostilities, or other international or national calamity directly
or indirectly involving the United States; or (iii) in the case of any of the
foregoing existing at the date hereof, a material acceleration or worsening
thereof.
6.2 Additional Conditions to Obligation of Seller. The obligation of
Seller to effect the transactions contemplated hereby is also subject to the
fulfillment at or prior to the Closing of the following conditions:
(a) The representations and warranties of Purchaser set forth in
Article 2 shall be true and correct as of the Closing Date as if made at and
as of the Closing Date, and Purchaser shall in all material respects have
performed each obligation and agreement and complied with each covenant to be
performed and complied with by it hereunder at or prior to the Closing; and
(b) Purchaser shall have furnished to Seller: (i) a copy of the text
of the resolutions by which the corporate action on the part of Purchaser
necessary to approve this Agreement and the transactions contemplated herein
were taken; and (ii) a certificate executed on behalf of Purchaser by its
corporate secretary or one of its assistant corporate secretaries certifying
to Seller that such copy is a true, correct, and complete copy of such
resolutions and that such resolutions were duly adopted and have not been
amended or rescinded.
6.3 Additional Conditions to Obligation of Purchaser. The
obligations of Purchaser to effect the transactions contemplated herein are
also subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) The representations and warranties of Seller, Shareholders, and
Lessors in this Agreement and in any certificate or other instrument delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby shall be true and correct as of the Closing Date as if
made at and as of the Closing Date, and Seller shall in all material respects
have performed each obligation and agreement and complied with each covenant
to be performed and complied with by them hereunder at or prior to the
Closing;
(b) Seller, Shareholders and Lessors shall have furnished to
Purchaser a certificate in which they shall certify that the conditions set
forth in Section 6.3(a) have been fulfilled;
(c) Seller, Shareholders, and Lessors shall have furnished to
Purchaser: (i) copies of the texts of the resolutions by which the corporate
action on the part of Seller and its shareholders and any comparable action on
the part of any Lessor and its members or partners necessary to approve this
Agreement and the transactions contemplated hereby were taken; and (ii)
certificates of Seller or Lessors certifying to Purchaser that such copies are
true, correct, and complete copies of such resolutions and that such
resolutions were duly adopted and have not been amended or rescinded;
(d) Purchaser shall have received from the chief financial officer of
Seller a letter, dated the Closing Date, that on the basis of a review (not an
audit) of the latest available accounting records of Seller, consultations
with other responsible officers of Seller, and other pertinent inquiries that
he may deem necessary, he has no reason to believe that during the period from
the date of the Current Financial Statements to the Closing Date, except as
may otherwise be set forth on any Schedule hereto, there has been any change
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in the financial condition or results of operations of the Business, except
changes incurred in the ordinary and usual course of business during that
period that in the aggregate are not materially adverse, and other changes or
transactions, if any, contemplated by this Agreement;
(e) Purchaser shall have received an opinion letter addressed to
Purchaser from counsel for Seller, Shareholders, and Lessors based on
customary reliance and subject to customary qualifications, in a form mutually
agreed upon;
(f) This Agreement and the transactions contemplated hereby shall
have been approved by Purchaser's Board of Directors;
(g) Seller shall have obtained all necessary consents to this
Agreement and the transactions contemplated hereby and Purchaser shall have
obtained or assumed all permits or licenses necessary to ownership of the
Acquired Assets and operation of the Business, including, without limitation,
the following: (i) the approval of the transaction by all governmental
authorities exercising jurisdiction over the ownership of the Acquired Assets;
(ii) the approval by all governmental authorities with respect to the issuance
to, or assumption by, Purchaser of all Acquired Permits; and (iii) each other
consent and approval necessary in order that the transactions contemplated
herein not constitute a breach or violation of, or result in a right of
termination or acceleration with respect to, or result in any encumbrance on
any of Seller's assets, including the Acquired Assets, pursuant to the
provisions of any agreement, arrangement, or understanding or any license,
franchise, or Permit;
(h) Purchaser shall have accepted, in its sole discretion, the
results of its inspections, investigations, studies, assessments and evalua-
tions of the Acquired Assets, Assumed Liabilities, Assumed Contracts,
Independent Facilities, Related Facilities, Principal Facility, the Business
and all matters relating thereto;
(i) Purchaser and Seller shall have agreed to the terms of leases
with respect to the Related Facilities and the Principal Facility, and
Purchaser shall have agreed to the terms relating to its assumption of leases
with respect to the Independent Facilities and Purchaser shall have completed
to its satisfaction any assessment of such facilities;
(j) There shall have been no damage, destruction, or loss of or to
any property or properties owned or used by Seller, whether or not covered by
insurance, which in the aggregate may have a material adverse effect on the
Business, financial condition, results of operations or prospects of Seller;
(k) All Insider agreements shall have been terminated;
(l) Receipt and approval of the Schedules to be prepared by Seller,
Shareholders, and Lessors, all updated as of the Closing Date, and preparation
of and agreement as to all closing documents, agreements and procedures
required under this Agreement;
(m) Purchaser shall have received such non-disturbance, subordination
and other agreements from Seller's lenders and third party lessors as
Purchaser shall reasonably request; and
(n) The form and substance of all certificates, instruments,
opinions, and other documents delivered to Purchaser under this Agreement
shall be satisfactory in all respects to Purchaser and its counsel.
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ARTICLE 7
THE CLOSING ARTICLE
7.1 Closing. The closing (the "Closing") of the transactions
contemplated herein shall be held on or before April 1, 1997 (the "Closing
Date"), at a time and place as the parties shall mutually agree.
7.2 Seller's, Shareholders' and Lessors' Obligations. In addition to
any other documents required to be delivered by Seller, Shareholders, or
Lessors at Closing, Seller, Shareholders or Lessors, as appropriate, shall
deliver to Purchaser at Closing the following documents:
(a) An executed Bill of Sale and Assumption and other instruments of
transfer, with full warranties of title, dated as of the Closing Date,
conveying to Purchaser all of Seller's right, title, and interest in and to
the Acquired Assets, all in form and substance satisfactory to Purchaser;
(b) Executed assignments of all Contracts (with consents if
required), the Contracts themselves, certificates of title to all Vehicles,
and a UCC-1 Financing Statement (in accordance with Section 1.10(c));
(c) Releases of all liens, encumbrances and security interests in
respect of the Acquired Assets, except Permitted Liens;
(d) The Acquired Leases contemplated by Section 1.8 and lease
assignments with respect to each item of personal property which is leased by
Seller and which is to be assumed by Purchaser hereunder, properly executed
and acknowledged by Seller, and accompanied by all consents of lessors
required by this Agreement and the leases being assigned, and such
subordination agreements, non-disturbance certificates and other documents as
Purchaser shall have reasonably requested;
(e) Executed assignments of all assignable Acquired Permits and
executed assignment and assumption agreements with respect to all Assumed
Agreements, with all necessary consents thereto;
(f) All books, records, and other data relating to the Acquired
Assets and the Business (other than corporate records);
(g) The certificate(s) as provided for in Section 6.3(b) hereof;
(h) Certified resolutions and the certificates provided for in
Section 6.3(c) hereof;
(i) The letter provided for in Section 6.3(d) hereof;
(j) The consents as provided for in Section 6.3(g) hereof;
(k) An executed opinion of Seller's, Shareholders', and Lessors'
counsel, as contemplated by Section 6.3(e); and
(l) Such other documents as Purchaser or its counsel or any lender or
lessor of Purchaser may reasonably request in order to effectuate the
transactions contemplated under this Agreement. Seller, Shareholders, and
Lessors, at any time before or after the Closing, will execute, acknowledge,
and deliver any further deeds, assignments, conveyances, and other assurances,
documents, and instruments of transfer reasonably requested by Purchaser, and
will take any other action consistent with the terms of this Agreement that
may reasonably be requested by Purchaser, for the purpose of assigning,
110
transferring, granting, conveying, and confirming to Purchaser, or reducing to
possession, any or all property to be conveyed and transferred by this
Agreement. If requested by Purchaser, Seller further agrees to prosecute or
otherwise enforce in its own name for the benefit of Purchaser, any claims,
rights, or benefits that are transferred to Purchaser by this Agreement and
that require prosecution or enforcement in Seller's name. Any prosecution or
enforcement of claims, rights, or benefits under this Section shall be solely
at Purchaser's expense, unless the prosecution or enforcement is made
necessary by a breach of this Agreement by Seller.
7.3 Purchaser's Obligations. Purchaser shall deliver to Seller at
Closing the following documents:
(a) Wire transfer in the amount of the Purchase Price, payable as
provided in Section 1.5 hereof;
(b) Executed counterparts of such of the closing documents of Seller
as shall require acceptance by Purchaser; and
(c) Certified resolutions of the Board of Directors of Purchaser as
provided for in Section 6.2(b) hereof.
ARTICLE 8
INDEMNITIES ARTICLE
8.1 Survival of Representations and Warranties. Regardless of any
investigation at any time made by or on behalf of any party hereto, or of any
information any party may have in respect thereof, all covenants, agreements,
representations, and warranties made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the
Closing.
8.2 Nature of Statements. All statements contained herein, in any
Schedule or Exhibit hereto, or in any certificate or other written instrument
delivered by or on behalf of Seller, Shareholders, Lessors, or Purchaser
pursuant to this Agreement, or in connection with the transactions
contemplated hereby, shall be deemed representations and warranties by Seller,
Shareholders, Lessors, or Purchaser, as the case may be.
8.3 Indemnification of Purchaser by Seller, Shareholders, and
Lessors. Seller, Shareholders, and Lessors (for purposes of this Section 8.3
only, the "Indemnifying Parties") each, jointly and severally, shall
indemnify, defend, and hold harmless Purchaser and its direct and indirect
parent companies, subsidiaries, and affiliates, and their respective officers,
directors, and shareholders, successors and assigns, from and against any and
all costs, expenses, losses, damages, fines, penalties, or liabilities
(including, without limitation, interest which may be imposed in connection
therewith, court costs, litigation expenses, and reasonable attorneys' and
accounting fees) ("Actual Loss") incurred by Purchaser, directly or
indirectly, with respect to, in connection with, arising from, or alleged to
result from, arise out of, or be in connection with:
(a) A breach by any of the Indemnifying Parties or any affiliate of
any representation or warranty made by such parties or affiliate and contained
in this Agreement or in any certificate or other document delivered by said
parties to Purchaser or any affiliate hereunder or thereunder;
(b) A breach by any of the Indemnifying Parties or any affiliate of
any covenant, restriction, or agreement made by or applicable to such parties
111
or affiliate and contained in this Agreement or in any certificate or other
document delivered by said parties or affiliate to Purchaser or any affiliate
hereunder or thereunder (including without limitation, the breach of any Lease
by any Lessor);
(c) Except for any Assumed Liabilities, any other liability,
obligation, claim, complaint, debt, suit, cause of action, investigation, or
proceeding of any kind whatsoever, including, without limitation, any
liability for sales, use or other taxes and any liability under any
environmental, pollution control, health or safety law, rule or regulation,
including actions or proceedings in respect thereof, against or relating to
Seller, the Business, the Acquired Assets, or the Leased Premises, whether
instituted or commenced prior to or after the Closing Date and which relates
to or arises from the business or assets of Seller on or before the Closing
Date or, with respect to the continuing business activities of Seller, after
the Closing Date; and
(d) Any scheduled contingency or item pertaining to Seller,
Shareholders, any Lessor, the Business, the Acquired Assets, or the Leased
Premises.
8.4 Indemnification of Seller, Shareholders, and Lessors by
Purchaser8. Purchaser shall indemnify, defend, and hold Seller, Shareholders,
and Lessors (for purposes of this Section 8.4 only, the "Indemnified Parties")
harmless from and against any Actual Losses incurred by the Indemnified
Parties with respect to, in connection with, arising from, or alleged to
result from, arise out of, or be in connection with:
(a) A breach by Purchaser of any representation or warranty made by
Purchaser and contained in this Agreement or in any certificate or other
document delivered by Purchaser to the Indemnified Parties hereunder or
thereunder;
(b) A breach by Purchaser of any covenant, restriction, or agreement
made by or applicable to Purchaser and contained in this Agreement or in any
certificate or other document delivered by Purchaser to the Indemnified
Parties hereunder or thereunder;
(c) All loss, expense, or damage suffered as the direct result of
Purchaser's failure to pay the Assumed Liabilities in accordance with the
terms of this Agreement; and
(d) Any other claim, suit, cause of action, investigation, or
proceeding of any kind whatsoever instituted or commenced after the Closing
Date which relates to or arises from Purchaser's operation of its separate and
independent business after the Closing Date, except for any claims arising out
of Seller's liabilities to Purchaser or obligations to Purchaser.
8.5 Procedure for Indemnification.
(a) The party which is entitled to be indemnified hereunder (the
"Indemnified Party") shall promptly give notice hereunder to the party
required to indemnify (the "Indemnifying Party") after obtaining written
notice of any claim as to which recovery may be sought against the
indemnifying party because of the indemnity in Section 8.3 and Section 8.4
hereof and, if such indemnity shall arise from the claim of a third party,
shall permit the Indemnifying Party to assume the defense of any such claim
and any litigation resulting from such claim. Notwithstanding the foregoing,
the right to indemnification hereunder shall not be affected by any failure of
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an Indemnified Party to give such notice, or delay by an Indemnified Party in
giving such notice, unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result of
the failure to give, or delay in giving, such notice. Failure by an
Indemnifying Party to notify an Indemnified Party of its election to defend
any such claim or action by a third party within 15 days after notice thereof
shall have been given to the Indemnifying Party shall be deemed a waiver by
the Indemnifying Party of its right to defend such claim or action.
(b) If the Indemnifying Party assumes the defense of such claim or
litigation resulting therefrom, the obligations of the Indemnifying Party
hereunder as to such claim shall include taking all steps necessary in the
defense or settlement of such claim or litigation and holding the Indemnified
Party harmless from and against any and all damages caused by or arising out
of any settlement approved by the Indemnifying Party or any judgment in
connection with such claim or litigation. The Indemnifying Party shall not,
in the defense of such claim or any litigation resulting therefrom, consent to
entry of any judgment (other than a judgment of dismissal on the merits
without costs) except with the written consent of the Indemnified Party, or
enter into any settlement (except with the written consent of the Indemnified
Party) which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party a release from all
liability in respect of such claim or litigation. Anything in this Section
8.5 to the contrary notwithstanding, the Indemnified Party may, with counsel
of its choice and at its expense, participate in the defense of any such claim
or litigation.
(c) If the Indemnifying Party shall not assume the defense of any
such claim by a third party or litigation resulting therefrom after receipt of
notice from such Indemnified Party, the Indemnified Party may defend against
such claim or litigation in such manner as it deems appropriate, and unless
the Indemnifying Party shall deposit with the Indemnified Party a sum
equivalent to the total amount demanded in such claim or litigation plus the
Indemnified Party's estimate of the costs of defending the same, the
Indemnified Party may settle such claim or litigation on such terms as it may
deem appropriate and the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of such settlement and for all damages
incurred by the Indemnified Party in connection with the defense against or
settlement of such claim or litigation.
(d) The Indemnifying Party shall promptly reimburse the Indemnified
Party for the amount of any judgment rendered with respect to any claim by a
third party in such litigation and for all damage incurred by the Indemnified
Party in connection with the defense against such claim or litigation, whether
or not resulting from, arising out of, or incurred with respect to, the act of
a third party.
ARTICLE 9
TERMINATION ARTICLE
9.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) By mutual written consent of duly authorized officers of
Purchaser and Seller;
(b) By Purchaser if, from the date of this Agreement to the Closing
Date there has been any material change in or material misrepresentation about
the Business, Acquired Assets, Acquired Facilities or matters relating
thereto;
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(c) By either Purchaser or Seller if the other party breaches any of
its material representations, warranties, or covenants contained herein and,
if such breach is curable, such breach is not cured within five (5) business
days after notice thereof;
(d) By either Purchaser or Seller if the transactions contemplated
herein shall not have been consummated on or before April 1, 1997 or such
later date as may be mutually agreed upon by the parties; provided, however,
that no party shall have the right to terminate this Agreement unilaterally if
the event giving rise to such right is primarily attributable to such party or
to any affiliated party.
9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall become void and
there shall be no liability or further obligation hereunder on the part of
Purchaser or Seller or their respective shareholders, officers, or directors,
except as set forth in Article 10 and Sections 5.2 and 5.5 hereof, and except
for liability arising from a breach of this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 . All notices, consents, and other communications hereunder
shall be in writing and deemed to have been duly given when (i) delivered by
hand, (ii) sent by telecopier (with receipt confirmed), provided that a copy
is mailed by registered mail, postage pre-paid return receipt requested, or
(iii) when received by the addressee, if sent by Express Mail, Federal
Express, or other express delivery service (postage pre-paid return receipt
requested), in each case to the appropriate addresses and telecopier numbers
set forth below (or to such other addresses and telecopier numbers as a party
may designate as to itself by notice to the other):
If to Purchaser: Ugly Duckling Corporation
2525 East Camelback Road, Suite 1150
Phoenix, Arizona 85016
Phone: (602) 852-6600
FAX: (602) 852-6656
Attn.: Steven P. Johnson, Esq.
With a copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Phone: (602) 382-6252
FAX: (602) 382-6070
Attn.: Steven D. Pidgeon, Esq.
If to Seller: E-Z Plan, Inc.
9000 Tesoro Drive, Suite 122
San Antonio, Texas 78217
Phone: (210) 821-6523
Fax: (210) 930-3856
Attn.: Gary V. Woods
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10.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument,
but all such separate counterparts shall constitute one and the same
agreement.
10.3 Governing Law. The validity, construction, and enforceability
of this Agreement shall be governed in all respects by the laws of the State
of Texas, without regard to its conflict of laws rules.
10.4 Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Purchaser may assign all or any portion of
its rights under this Agreement to any wholly owned subsidiary, but no such
assignment shall relieve Purchaser of its obligations hereunder, and except
that this Agreement may be assigned by operation of law to any corporation or
entity with or into which Purchaser may be merged or consolidated or to which
Purchaser transfers all or substantially all of its assets, and such
corporation or entity assumes this Agreement and all obligations and
undertakings of Purchaser hereunder.
10.5 Further Assurances. At any time on or after the date hereof,
the parties hereto shall each perform such acts, execute and deliver such
instruments, assignments, endorsements and other documents and do all such
other things consistent with the terms of this Agreement as may be reasonably
necessary to accomplish the transaction contemplated in this Agreement or
otherwise carry out the purpose of this Agreement.
10.6 Gender and Number. The masculine, feminine, or neuter pronouns
used herein shall be interpreted without regard to gender, and the use of the
singular or plural shall be deemed to include the other whenever the context
so requires.
10.7 Schedules and Exhibits. The Schedules and Exhibits referred to
herein are incorporated herein by such reference as if fully set forth in the
text hereof. Any Schedules and Exhibits referred to herein that are not
attached hereto upon execution of this Agreement shall be prepared and
attached to this Agreement as soon as reasonably possible after execution of
this Agreement and on or before the Closing Date. All Schedules shall be
updated as of the Closing Date. All documents and agreements delivered to
Purchaser in connection with its investigation of Seller shall be complete and
accurate and reflect all amendments thereto.
10.8 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party
at any time to require performance of any provisions hereof shall, in no
manner, affect the right at a later date to enforce the same. No waiver by
any party of any condition, or breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as
a further or continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation, or warranty of this
Agreement.
10.9 Litigation Costs. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default, or misrepresentation in connection
with any of the provisions of this Agreement, the successful or prevailing
party or parties shall be entitled to recover reasonable attorneys' fees,
accounting fees, and other costs incurred in that action or proceeding, in
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addition to any other relief to which it or they may be entitled.
10.10 Section and Paragraph Headings. The Article and Section
headings in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
10.11 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
10.12 Transaction Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses incident to this Agreement and
the transactions contemplated hereby, including without limitation, all fees
of counsel, consultants, and accountants.
10.13 Severability. If any term, provision, covenant, or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated and the court shall modify
this Agreement or, in the absence thereof, the parties shall negotiate in good
faith to modify this Agreement to preserve each party's anticipated benefits
under this Agreement.
10.14 Extent of Obligations. All covenants, representations,
warranties, indemnities, and agreements made by Seller, Shareholders, and
Lessors herein shall be deemed joint and several as to each of them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Purchaser, Seller, Shareholders and Lessors have
caused this Agreement to be executed on the date first written above by their
respective officers thereunder duly authorized.
UGLY DUCKLING CORPORATION,
a Delaware corporation
By: /s/ Gregory B. Sullivan
Name: Gregory B. Sullivan
Title: President
E-Z PLAN, INC.
a Texas corporation
By: /s/ Gary V. Woods
Name: Gary V. Woods
Title: President
MCCOMBS FAMILY, L.L.C.,
a Texas limited liability company
By: /s/ Gary V. Woods
Name: Gary V. Woods
Title: President
MCCOMBS HFC LIMITED,
a Texas limited partnership d/b/a
MCCOMBS AUTOMOTIVE CENTER,
By: /s/ Gary V. Woods
Name: Gary V. Woods
Title: President
*
---------------------------------
Lynda G. McCombs
*
---------------------------------
Marsha M. Shields
*
---------------------------------
Connie M. McNab
* By: /s/ Gary V. Woods
Gary V. Woods
Attorney-in-Fact
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