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ASSET PURCHASE AGREEMENT
by and among
SONIC AUTO WORLD, INC.,
KIA OF CHATTANOOGA, LLC,
EUROPEAN MOTORS OF NASHVILLE, LLC,
EUROPEAN MOTORS, LLC,
JAGUAR OF CHATTANOOGA LLC,
CLEVELAND CHRYSLER-PLYMOUTH-JEEP EAGLE LLC,
▇▇▇▇▇▇ ▇▇▇▇▇▇ DODGE, LLC,
CLEVELAND VILLAGE IMPORTS, INC.,
SATURN OF CHATTANOOGA, INC.,
▇▇▇▇▇▇ ▇▇▇▇▇▇ FORD, L.P.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
AND THE OTHER SHAREHOLDERS NAMED HEREIN
Dated as of June 24, 1997
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TABLE OF CONTENTS
Page
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Article 1 - Purchase and Sale of Assets; Assumption of Liabilities.............1
1.1 Agreement of Purchase and Sale....................................1
1.2 Assumed Liabilities...............................................1
1.3 Purchase Price; Allocation........................................2
1.4 Instruments of Conveyance and Transfer; Dealership Leases;
Employment Agreement.........................................4
1.5 Offers of Employment to Sellers' Employees........................5
Article 2 - Closing............................................................5
Article 3 - Representations and Warranties of the Sellers......................6
3.1 Organization; Good Standing; Qualifications.......................6
3.2 Authority; Consent................................................6
3.3 Ownership; Investments............................................6
3.4 Financial Statements..............................................7
3.5 Absence of Certain Changes........................................7
3.6 Material Contracts................................................8
3.7 Title to Purchased Assets and Related Matters.....................9
3.8 Real Property of the Sellers......................................9
3.9 Machinery, Equipment, Etc.........................................9
3.10 Inventories of the Sellers......................................10
3.11 Accounts Receivable of the Sellers..............................10
3.12 Approvals, Permits and Authorizations...........................10
3.13 Compliance with Laws............................................10
3.14 Insurance.......................................................11
3.15 Taxes...........................................................11
3.16 Litigation......................................................11
3.17 Powers of Attorney..............................................12
3.18 Broker's and Finder's Fees......................................12
3.19 Employee Relations..............................................12
3.20 Compensation....................................................12
3.21 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc.....12
3.22 Accounts Payable................................................13
3.23 No Undisclosed Liabilities......................................13
3.24 Certain Transactions............................................13
3.25 Business Generally..............................................13
3.26 Employee Benefits...............................................13
3.27 Sellers and Shareholders Not Foreign Persons....................14
3.28 Suppliers and Customers.........................................14
3.29 Environmental Matters...........................................15
3.30 Bank Accounts and Safe Deposit Boxes............................16
3.31 Warranties......................................................16
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3.32 Interest in Competitors and Related Entities....................17
3.33 Availability of Sellers' Employees..............................17
3.34 Misstatements and Omissions.....................................17
Article 4 - Representations and Warranties of the Buyer.......................17
4.1 Organization and Good Standing...................................17
4.2 Authority; Consents; Enforceability..............................17
4.3 Broker's and Finder's Fees.......................................18
4.4 Litigation.......................................................18
4.5 Misstatements or Omissions.......................................18
Article 5 - Pre-closing Covenants of the Shareholders and the Sellers.........18
5.1 Provide Access to Information; Cooperation with Buyer............19
5.2 Operation of Business of the Sellers.............................19
5.3 Other Changes....................................................20
5.4 Additional Information...........................................20
5.5 Publicity........................................................20
5.6 Other Negotiations...............................................20
5.7 Closing Conditions...............................................21
5.8 Environmental Audit..............................................21
5.9 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance.....................................21
5.10 Audit of Sellers at Buyer's Expense.............................21
Article 6 - Pre-closing Covenants of the Buyer................................21
6.1 Publicity; Disclosure............................................21
6.2 Closing Conditions...............................................22
6.3 Application to Automobile Manufactures and Distributors. .......22
6.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance.....................................22
Article 7 - Conditions Precedent to Obligations of the Buyer..................22
7.1 Representations and Warranties...................................22
7.2 Performance of Obligations of the Sellers........................22
7.3 Closing Certificate..............................................22
7.4 Opinions of Counsel..............................................23
7.5 Supporting Documents.............................................23
7.6 Bills of Sale, Etc...............................................23
7.7 Dealership Leases and Other Agreements...........................24
7.8 Books and Records................................................24
7.9 Change of Name of Sellers; Use of Sellers' Name by Buyer.........24
7.10 Consents........................................................24
7.11 No Litigation...................................................24
7.12 Authorizations..................................................25
7.13 No Material Adverse Change or Undisclosed Liability.............25
7.14 Approval of Legal Matters.......................................25
7.15 Adverse Laws....................................................25
7.16 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period................................25
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Article 8 - Conditions Precedent to Obligations of the Sellers................25
8.1 Representations and Warranties...................................25
8.2 Performance of Obligations of the Buyer..........................25
8.3 Closing Certificate..............................................26
8.4 Payment of Purchase Price........................................26
8.5 Opinion of Counsel...............................................26
8.6 Supporting Documents.............................................26
8.7 Approval of Legal Matters........................................26
8.8 Dealership Leases; Other Agreements; Guaranty....................26
8.9 No Litigation....................................................26
8.10 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period................................27
8.11 Releases of Shareholders........................................27
Article 9 - Transfer Taxes....................................................27
9.1 Certain Taxes and Fees...........................................27
Article 10 - Survival of Representations and Warranties; Indemnification......27
10.1 Survival of Representations and Warranties......................27
10.2 Agreement to Indemnify by the Sellers and Shareholders..........28
10.3 Agreement to Indemnify by the Buyer.............................28
10.4 Claims for Indemnification......................................29
10.5 Procedures Regarding Third Party Claims.........................29
10.6 Effectiveness...................................................30
10.7 Certain Provisions Relating to Claims for Buyer's Damages.......30
Article 11 - Termination and Termination Fee..................................31
11.1 Termination.....................................................31
11.2 Procedure and Effect of Termination.............................32
Article 12 - Miscellaneous Provisions.........................................32
12.1 Access to Books and Records after Closing.......................32
12.2 Notices.........................................................33
12.3 Parties in Interest; No Third Party Beneficiaries...............35
12.4 Assignability...................................................35
12.5 Entire Agreement; Amendment.....................................35
12.6 Headings........................................................35
12.7 Counterparts....................................................35
12.8 Governing Law...................................................35
12.9 Knowledge.......................................................35
12.10 Jurisdiction; Arbitration......................................36
12.11 Waivers........................................................36
12.12 Severability...................................................37
12.13 Expenses.......................................................37
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 24th day of June, 1997, by and among SONIC AUTO WORLD, INC., a
Delaware corporation (the "Buyer"), KIA OF CHATTANOOGA, LLC, a Tennessee limited
liability company, EUROPEAN MOTORS OF NASHVILLE, LLC, a Tennessee limited
liability company, EUROPEAN MOTORS, LLC, a Tennessee limited liability company,
JAGUAR OF CHATTANOOGA LLC, a Tennessee limited liability company, CLEVELAND
CHRYSLER-PLYMOUTH-JEEP EAGLE LLC, a Tennessee limited liability company, ▇▇▇▇▇▇
▇▇▇▇▇▇ DODGE, LLC, a Tennessee limited liability company (collectively, the
"LLCs"), CLEVELAND VILLAGE IMPORTS, INC., a Tennessee corporation, SATURN OF
CHATTANOOGA, INC., a Tennessee corporation (collectively, the "Corporations"),
▇▇▇▇▇▇ ▇▇▇▇▇▇ FORD, L.P., a Tennessee limited partnership (the "Partnership" and
together with the LLCs and the Corporations, the "Sellers"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇, a shareholder of the Corporations and a member of the LLCs, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, a shareholder of certain of the Corporations and a member of certain of
the LLCs, and the other persons who are signatories to this Agreement and who
are shareholders, members or partners, as the case may be, of the respective
Sellers (collectively, the "Shareholders").
W I T N E S S E T H:
In consideration of the mutual representations, warranties, covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 Agreement of Purchase and Sale. On the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Article 2 hereof),
the Sellers shall sell, transfer, convey, assign and deliver (or cause to be
sold, transferred, conveyed, assigned and delivered) to the Buyer, and the Buyer
shall purchase and accept delivery of, all of the Sellers' right, title and
interest in and to all of the assets of the Sellers of every kind, character and
description, tangible or intangible, real, personal or mixed, and wherever
located, including, without limitation, the assets described on Schedule 1.1(a),
but excluding, however, the assets described on Schedule 1.1(b) (the "Excluded
Assets"); said assets, other than the Excluded Assets, are hereinafter called
the "Purchased Assets". The Purchased Assets will be sold free and clear of all
mortgages, deeds of trust, liens, pledges, charges, security interests,
contractual restrictions, claims or encumbrances of any kind or character
(collectively, "Encumbrances"), other than the Encumbrances set forth on
Schedule 1.1(c) (the "Permitted Encumbrances").
1.2 Assumed Liabilities. On the terms and subject to the conditions of this
Agreement and in reliance upon the representations and warranties contained
herein, at the Closing the Buyer shall assume and undertake to perform all of
the liabilities and obligations of the Sellers
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specifically described on Schedule 1.2 (the "Assumed Liabilities"). Except for
the Assumed Liabilities, the Buyer shall not assume, and the Sellers shall
retain and remain responsible for, any and all liabilities and obligations of
the Sellers of any nature whatsoever, whether past, current or future, whether
accrued, contingent, known or unknown (such retained liabilities and obligations
being hereinafter called the "Retained Liabilities").
1.3 Purchase Price; Allocation.
(a) Purchase Price. In addition to the assumption by the Buyer of the
Assumed Liabilities, as the full consideration to be paid by the Buyer for the
Purchased Assets, the Buyer shall pay to the Sellers the aggregate purchase
price of (i) $23,000,000, minus the Rental Cost Adjustment (as defined in
Section 1.3(c) below) (as so adjusted, the "Base Price"), plus (ii) the positive
Net Book Value (as defined in Section 1.3(d) below), not to exceed $10,500,000
(the "Adjustment Amount" and, together with the Base Price, the "Purchase
Price").
(b) Payment of Purchase Price. The Purchase Price shall be paid as follows:
(1) The Base Price, plus $4,500,000 (the "Initial Adjustment Amount
Payment") shall be payable to the Sellers at Closing by wire transfer of
immediately available funds to the account or accounts of the Sellers,
which shall be designated by the Sellers in writing at least one full
Business Day prior to the Closing Date, in the percentage shares specified
in Schedule 1.3(e). The sum of $1,000,000 (the "Escrowed Adjustment
Amount") shall be placed in escrow with Chicago Title Insurance Company,
c/o Milligan ▇▇▇▇▇▇▇▇ Title Agency, Inc. (the "Escrow Agent"), by the Buyer
in accordance with the escrow agreement in the form of Exhibit 1.3(A), with
such other changes thereto as the Escrow Agent shall reasonably request
(the "Escrow Agreement"). The Initial Adjustment Amount Payment and the
Escrowed Adjustment Amount are sometimes hereinafter collectively referred
to as the "Initial Adjustment Amount." For purposes of this Agreement, a
"Business Day" is a day other than a Saturday, a Sunday or a day on which
banks are required to be closed in the State of North Carolina.
(2) At the Closing, the Buyer shall execute and deliver to the
respective Sellers one or more promissory notes in the form of Exhibit
1.3(B) (the "Notes"). The Notes shall: be in an aggregate principal amount
of $5,000,000 less the amount, if any, by which the Net Book Value shall be
less than $10,500,000; bear interest on the outstanding principal amount
thereof at the prime rate from time to time as announced by NationsBank,
N.A. (Carolinas) in Charlotte, North Carolina, less 0.5% per annum; be
payable in twenty-eight equal quarterly installments; and be subject to
offset as provided therein, all as more particularly provided in said
Exhibit 1.3(B). The Notes shall be guaranteed by Sonic Financial Corp.
pursuant to a Guaranty in the form of Exhibit 1.3(C) (the "Guaranty").
(c) Rental Cost Adjustment. The amount of the rental cost adjustment shall
be determined prior to the Closing in accordance with the procedures set forth
in Schedule 1.3(c) (the "Rental Cost Adjustment").
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(d) Adjustment Amount Procedures.
(1) Not later than 60 days after the Closing Date, the Sellers, acting
through ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇, as agent for the Sellers (the "Sellers' Agent"),
will prepare and deliver to the Buyer an unaudited balance sheet (the "Closing
Balance Sheet") of the Sellers as of the Closing Date, consisting of a
computation of the tangible book value as of the Closing Date of the Purchased
Assets (excluding goodwill and other intangible assets) less the book value as
of the Closing Date of the Assumed Liabilities, all as determined in accordance
with generally accepted accounting principles; provided, however, that:
inventory shall be valued on a FIFO basis; and there shall be included
appropriate reserves and/or write-offs for doubtful accounts receivable and bad
debts and for damaged, spoiled, obsolete or slow-moving inventory. The
preparation of the Closing Balance Sheet shall include a physical inventory as
of the Closing Date and the Buyer shall have the right to have a representative
present at such inventory. The Buyer shall also have the right to review the
Sellers' and their accountants' work papers related to such preparation. The
tangible net book value reflected on the Closing Balance Sheet is hereinafter
called the "Net Book Value". If within 30 days following delivery of the Closing
Balance Sheet (or the next Business Day if such 30th day is not a Business Day),
the Buyer has not given the Sellers' Agent notice of the Buyer's objection to
the computation of the Net Book Value as set forth in the Closing Balance Sheet
(such notice to contain a statement in reasonable detail of the nature of the
Buyer's objection), then the Net Book Value reflected in the Closing Balance
Sheet will be deemed mutually agreed by the Buyer and the Sellers and will be
used in computing the Adjustment Amount. If the Buyer shall have given such
notice of objection in a timely manner, then the issues in dispute will be
submitted to a "Big Six" accounting firm mutually acceptable to the Buyer and
the Sellers' Agent (the "Accountants") for resolution. If issues in dispute are
submitted to the Accountants for resolution, (i) each party will furnish to the
Accountants such workpapers and other documents and information relating to the
disputed issues as the Accountants may request and are available to the party or
its subsidiaries (or its independent public accountants), and will be afforded
the opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (ii) the
Accountants will be instructed to determine the Net Book Value based upon their
resolution of the issues in dispute; (iii) such determination by the Accountants
of the Net Book Value, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties; and (iv) the Buyer
and the Sellers shall each bear 50% of the fees and expenses of the Accountants
for such determination. If issues in dispute are submitted to the Accountants,
any portion of the Escrowed Adjustment Amount in excess of that which, based
upon such issues in dispute, would be necessary to satisfy any potential Net
Book Value Shortfall (as hereinafter defined) shall be released to the Sellers'
Agent within 5 Business Days after the submission of such issues to the
Accountants, and the Sellers' Agent and the Buyer shall execute and deliver to
the Escrow Agent a joint instruction to such effect.
(2) To the extent that the Net Book Value, as deemed mutually agreed by the
parties or as determined by the Accountants, as aforesaid, exceeds the Initial
Adjustment Amount Payment, the Buyer shall be obligated to pay the amount of
such excess, up to the amount of the Escrowed Adjustment Amount, promptly to the
Sellers. In furtherance of such obligation of the Buyer, the parties shall
execute and deliver to the Escrow Agent a joint instruction to pay such
3
excess to the Sellers in the percentage shares set forth in Schedule 1.3(e),
with any remaining balance of the Escrowed Adjustment Amount to be paid to the
Buyer. To the extent that the Net Book Value, as deemed mutually agreed by the
parties or as determined by the Accountants, as aforesaid, exceeds the Initial
Adjustment Amount, the Buyer shall be obligated to pay the amount of such
excess, up to $5,000,000, pursuant to the provisions of the Notes. To the extent
that the Net Book Value, as deemed mutually agreed by the parties or as
determined by the Accountants, as aforesaid, is less than the Initial Adjustment
Amount (the "Net Book Value Shortfall"), the Sellers shall be obligated to pay
the amount of the Net Book Value Shortfall promptly to the Buyer. In furtherance
of such obligation of the Sellers, the parties shall execute and deliver to the
Escrow Agent a joint instruction to pay up to the entire amount of the Escrowed
Adjustment Amount to the Buyer. To the extent that the amount of the Net Book
Value Shortfall shall exceed the Escrowed Adjustment Amount, the Sellers shall
be obligated to pay such excess amount of the Net Book Value Shortfall promptly
to the Buyer. Any interest earned on the Escrowed Adjustment Amount shall be
paid to the Buyer or the Sellers, as the case may be, in proportion to the
respective principal amounts of the Escrowed Adjustment Amount received by each
of them.
(e) Allocation. The allocation of the Purchase Price and the Assumed
Liabilities as among the respective Sellers and as to the Purchased Assets shall
be as set forth in Schedule 1.3(e).
1.4 Instruments of Conveyance and Transfer; Dealership Leases; Employment
Agreement.
(a) Instruments of Conveyance and Transfer. At the Closing, each of the
Sellers shall deliver to the Buyer a ▇▇▇▇ of Sale and Assignment, substantially
in the form of Exhibit 1.4(A) (the "Bills of Sale"), and such other instruments
of assignment, conveyance and transfer, as shall be necessary to vest in the
Buyer good title to the Purchased Assets in accordance herewith. Simultaneously
therewith, the Sellers shall take all steps as may be required to transfer to
the Buyer actual possession and exclusive operating control of the Purchased
Assets.
(b) Employment Agreements. At the Closing, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ (the "Principals") will enter into employment agreements with the
Buyer, substantially in the forms of Exhibits 1.4(B)(1) and (2) (the "Employment
Agreements").
(c) Dealership Leases. At the Closing, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ or his
affiliates will enter into leases with the Buyer, as lessee, regarding the
Leased Premises (as defined in Section 3.8(a) below) owned by them, such leases
to be substantially in the form of Exhibit 1.4(C) (the "Dealership Leases"). For
purposes of this Agreement, the term "affiliate" shall mean any entity directly
or indirectly controlling, controlled by or under common control with the
specified person, whether by stock ownership, agreement or otherwise, or any
parent, child or sibling of such specified person and the concept of "control"
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities, by contract or otherwise.
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(d) Non-Competition Agreement. At the Closing, the Sellers and the
Shareholders will enter into a non-competition agreement with the Buyer in
substantially in the form of Exhibit 1.4(D) (the "Non-Competition Agreement").
(e) Further Assurances. The Sellers further agree that, from and after the
Closing, they will execute and deliver to the Buyer such additional instruments
and documents and take such further action as the Buyer may reasonably request
in order to more fully vest, record and/or perfect the Buyer's title to, or
interest in, the Purchased Assets.
(f) Shareholders' Covenant to Close. The Shareholders further covenant and
agree to take all necessary officer, director and stockholder, partner or member
actions to cause the Sellers to perform their obligations at and prior to the
Closing, as contemplated by this Agreement.
1.5 Offers of Employment to Sellers' Employees. On or before the Closing
Date, the Buyer may offer employment to such of the Sellers' employees as the
Buyer shall select, in its sole discretion, such employment to begin on or after
the date of the Closing and to be upon such terms and conditions as determined
by the Buyer in its sole discretion, but the Buyer has no obligation to employ
any person, except the Principals pursuant to the terms of the Employment
Agreements. Notwithstanding the foregoing, the Buyer agrees to offer employment
to a sufficient number of the Sellers' employees to avoid triggering any notice
requirements under the Worker Adjustment Retraining Notification Act, 29 U.S.C.
ss. 2101 et seq. (the "Warn Act").
ARTICLE 2
CLOSING
The sale and purchase of the Purchased Assets contemplated hereby shall
take place at a closing (the "Closing") at the offices of Grant, ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, P.C., Republic Centre, Ninth Floor, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on the fifth (5th) Business Day, or such
shorter period as the Buyer may choose, following the date the Buyer gives
notice of the Closing to the Sellers, but in no event earlier than October 20,
1997 or later than October 31, 1997 or such later date as shall be necessary to
finalize the determination of the Rental Cost Adjustment (October 31, 1997 or
such later date being hereinafter called the "Closing Date Deadline"), unless
another date or place is agreed to in writing by the Sellers and the Buyer. The
date on which the Closing actually occurs is hereinafter referred to as the
"Closing Date".
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to the Buyer as follows:
3.1 Organization; Good Standing; Qualifications. Each of the Sellers is a
corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of the State of Tennessee.
Each of the Sellers is qualified as foreign corporation, limited liability
company or limited partnership and in good standing in the jurisdictions listed
with respect to it on Schedule 3.1, which jurisdictions are the only
jurisdictions where the nature of such Seller's business and its assets require
such qualification except where the failure to be so qualified will not have a
material adverse effect on the Purchased Assets, or on the financial condition,
business or operations of the Sellers taken as a whole.
3.2 Authority; Consent. Each of the Sellers has full corporate, limited
liability company or limited partnership, as the case may be, power and
authority to carry on its business as now conducted, to execute and deliver this
Agreement and the other agreements, documents and instruments contemplated
hereby, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution and delivery by
each of the Sellers of this Agreement and the other agreements, documents and
instruments contemplated hereby, the consummation by each of the Sellers of the
transactions contemplated hereby and thereby and the performance by each of the
Sellers of its obligations hereunder and thereunder: (i) have been duly and
validly authorized by all necessary corporate, limited liability company or
limited partnership, as the case may be, action, including, without limitation,
all necessary shareholder, member or partner action, as the case may be; and
(ii) do not and will not, except as set forth on Schedule 3.2, (A) conflict with
or violate any of the provisions of the certificate of incorporation, by-laws,
articles of organization, operating agreement, or limited partnership agreement,
as the case may be, each as amended, with respect to any of the Sellers, (B)
violate any law, ordinance, rule or regulation or any judgment, order, writ,
injunction or decree or similar command of any court, administrative or
governmental agency or other body applicable to any of the Sellers, the
Purchased Assets or the Assumed Liabilities, (C) violate or conflict with the
terms of, or result in the acceleration of, any indebtedness or obligation of
either of the Sellers under, or violate or conflict with or result in a breach
of, or constitute a default under, any material instrument, agreement or
indenture or any mortgage, deed of trust or similar contract to which either of
the Sellers is a party or by which either of the Sellers or any of the Purchased
Assets or Assumed Liabilities are bound or affected, (D) result in the creation
or imposition of any Encumbrance upon any of the Purchased Assets, or (E)
require the consent, authorization or approval of, or notice to, or filing or
registration with, any governmental body or authority, or any other third party.
3.3 Ownership; Investments.
(a) Ownership. All issued and outstanding shares of capital stock of the
Corporations, all limited liability company interests of the LLCs and all
partnership interests of the Partnership, are held of record and beneficially by
the Shareholders, free and clear of any
6
Encumbrances. Schedule 3.3(a) hereto sets forth a list of all Sellers and their
respective stockholders, members or partners, indicating in each case the
respective percentage ownership interests thereof. No Seller has any outstanding
securities or other instruments, agreements or arrangements of any character or
nature whatsoever under which such Seller is or may be obligated to issue any
shares of its capital stock (in the case of the Corporation) or admit any person
as a member or partner (in the case of the LLCs or the Partnership).
(b) Investments. Except as set forth on Schedule 3.3(b), the Sellers do not
own, directly or indirectly, any shares of capital stock or other equity
ownership or proprietary or membership interest in any corporation, limited
liability company, partnership, association, trust, joint venture or other
entity, and they do not have any commitment to contribute to the capital of,
make loans to, or share in the losses of, any enterprise.
3.4 Financial Statements. The Sellers have delivered to the Buyer prior to
the date hereof: (a) The unaudited balance sheets for the Sellers as of December
31, 1996, and the related unaudited statements of income, stockholders' equity,
members' equity or partners' equity, as the case may be, and changes in cash
flows of the Sellers for the fiscal year then ended (including the notes thereto
and any other information included therein), (collectively, the "Annual
Financial Statements"); and (b) The unaudited balance sheets of the Sellers as
of March 31, 1997 and the related unaudited statements of income, stockholders'
equity, members' equity or partners' equity, as the case may be, and changes in
cash flow for the three month period then ended (collectively, the "Interim
Financial Statements"); (the Annual Financial Statements and the Interim
Financial Statements are hereinafter collectively referred to as the "Financial
Statements"). The Financial Statements (i) are in accordance with the books and
records of the Sellers, which books and records are true, correct and complete
in all material respects, (ii) fully and fairly present the financial condition
and results of the operations of the Sellers as of and for the periods
indicated, and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as set forth on Schedule 3.4.
3.5 Absence of Certain Changes. Since December 31, 1996 the Sellers have
operated their businesses in the ordinary course, consistent with past practices
and, except as set forth on Schedule 3.5 or as reflected in the Interim
Financial Statements, there has not been incurred, nor has there occurred: (a)
Any damage, destruction or loss (whether or not covered by insurance) adversely
affecting the Purchased Assets or the business of any of the Sellers in excess
of $100,000; (b) Any sale, transfer, pledge or other disposition of any tangible
or intangible assets of any of the Sellers (except sales of vehicles and parts
inventory in the ordinary course of business) having an aggregate book value of
$100,000 or more; (c) Any termination, amendment, cancellation or waiver of any
Material Contract (as defined in Section 3.6 hereof) or any termination,
amendment, cancellation or waiver of any rights or claims of any of the Sellers
under any Material Contract (except in each case in the ordinary course of
business and consistent with past practices); (d) Any change in the accounting
methods, procedures or practices followed by any of the Sellers or any change in
depreciation or amortization policies or rates theretofore adopted by the
Sellers; (e) Any material change in policies, operations or practices with
respect to business operations followed by any of the Sellers, including,
without limitation, with respect to selling methods, returns, discounts
7
or other terms of sale, or with respect to the policies, operations or practices
of the Sellers concerning the employees of the Sellers or the employee benefit
plans of the Sellers; (f) Any capital appropriation or expenditure or commitment
therefor on behalf of the Sellers in excess of $100,000 individually, or
$200,000 in the aggregate; (g) Any general uniform increase, other than in the
ordinary course of business, in the cash or other compensation of employees of
any of the Sellers, or any increase in excess of $50,000 in any such
compensation payable to any individual officer, director, consultant or agent
thereof, or any loans or commitments therefor made by any of the Sellers to any
persons, including any officers, directors, stockholders, employees, consultants
or agents of the Sellers or any of their affiliates; (h) Any account receivable
in excess of $100,000 or note receivable in excess of $100,000 owing to any of
the Sellers which (i) has been written off as uncollectible, in whole or in
part, (ii) has had asserted against it any claim, refusal or right of setoff, or
(iii) the account or note debtor has refused to, or threatened not to, pay for
any reason, or such account or note debtor has become insolvent or bankrupt; (i)
any write-down or write-up of the value of any inventory or equipment of the
Sellers or any increase in inventory levels in excess of historical levels for
comparable periods; (j) Any other change in the condition (financial or
otherwise), business operations, assets, earnings, business or prospects of any
of the Sellers which has, or could reasonably be expected to have, a material
adverse effect on the Purchased Assets, or on the business or operations of the
Sellers taken as a whole; or (k) Any agreement, whether in writing or otherwise,
by either of the Sellers to take or do any of the actions enumerated in this
Section 3.5.
3.6 Material Contracts.
(a) List of Material Contracts. Set forth on Schedule 3.6(a) is a list of
all contracts, agreements, documents, instruments, guarantees, plans,
understandings or arrangements, written or oral, which are material to the
business of the Sellers, as currently conducted or to the Purchased Assets or
the Assumed Liabilities (collectively, the "Material Contracts"). True copies of
all written Material Contracts and written summaries of all oral Material
Contracts described or required to be described on Schedule 3.6(a) have been
furnished to the Buyer.
(b) Performance, Defaults, Enforceability. The Sellers have in all material
respects performed all of their obligations required to be performed by them to
the date hereof, and are not in default or alleged to be in default in any
material respect, under any Material Contract, and, to the knowledge of the
Sellers, there exists no event, condition or occurrence which, after notice or
lapse of time or both, would constitute such a default. To the knowledge of the
Sellers, no other party to any Material Contract is in default in any respect of
any of its obligations thereunder. Each of the Material Contracts is valid and
in full force and effect and enforceable against the parties thereto in
accordance with their respective terms, except where any lack of validity or
enforceability would not have a material adverse effect on the Purchased Assets,
or on the financial condition, business or operations of the Sellers taken as a
whole, and, except as set forth in Schedule 3.6(b), the transfer and assignment
to the Buyer of all of the Material Contracts, will not (i) require the consent
of any party thereto or (ii) constitute an event permitting termination thereof.
8
3.7 Title to Purchased Assets and Related Matters. The Sellers
have good and valid title to all of the Purchased Assets, free and clear of all
Encumbrances, except those described on Schedule 3.7. Except as set forth in
Schedule 3.7, the Purchased Assets (including, without limitation, the Material
Contracts) and the Leased Premises (as defined in Section 3.8 below) include all
properties and assets (real, personal and mixed, tangible and intangible, and
all leases, licenses and other agreements) utilized by the Sellers in carrying
on their business in the ordinary course. Except as set forth on Schedule 3.7,
the Purchased Assets (i) are in the exclusive possession and control of the
Sellers and no person or entity other than the Sellers is entitled to possession
of any portion of the Purchased Assets; and (ii) do not include any contracts
for future services, prepaid items or deferred charges the full value or benefit
of which will not be usable by or transferable to the Buyer, or any goodwill,
organizational expense or other similar intangible asset.
3.8 Real Property of the Sellers.
(a) Leased Premises. Schedule 3.8(a) contains a complete list and
description (including buildings and other structures thereon and the name of
the owner thereof) of all real property which is used by the Sellers in their
respective businesses and operations, indicating which parcels of such real
property are to be leased under the Dealership Leases to the Buyer and which
parcels are subject to existing leases which are to be assigned to the Buyer
(such existing leases being hereinafter called the "Existing Leases"). All such
real property on Schedule 3.8(a) is hereinafter collectively called either the
"Real Property" or the "Leased Premises". True, correct and complete copies of
all Existing Leases have been delivered to the Buyer.
(b) Easements, etc. The Real Property enjoys all easements and rights of
way over the property of others necessary for the operation of the Sellers'
businesses. No portion of the Real Property has been condemned or otherwise
taken by any public authority, and the Sellers have no knowledge of any pending
or threatened condemnation or taking thereof. None of the buildings or
improvements on the Real Property encroaches on any adjoining property or on any
easements or rights of way. The Sellers have no knowledge of any event or
condition which currently exists which would create a legal or other impediment
to the use of the Real Property as currently used, or would increase the
additional charges or other sums payable by the tenant under any of the
Dealership Leases or the Existing Leases (including, without limitation, any
pending tax reassessment or other special assessment affecting the Real
Property). The buildings and improvements (including building systems) which
comprise a part of the Real Property are in good condition, maintenance and
repair, ordinary wear and tear excepted. There is no person or entity other than
the Sellers in or entitled to possession of the Real Property. Notwithstanding
the terms of this paragraph (b), all of the representations and warranties
contained in this paragraph (b) are made to the knowledge of the Sellers insofar
as they relate to Real Property which is not owned by the Sellers or any of
their affiliates.
3.9 Machinery, Equipment, Etc. Schedule 3.9(a) sets forth a list of all
material machinery, equipment, tools, motor vehicles, furniture and fixtures
owned by the Sellers and included in the Purchased Assets, including which items
are owned by the Sellers and which items are leased to the Sellers
(collectively, the "Equipment"). With respect to Equipment which is leased,
9
Schedule 3.9(a) also contains a list of all leases or other agreements, whether
written or oral, relating thereto. The Equipment is in good operating condition,
maintenance and repair in accordance with industry standards taking into account
the age thereof and ordinary wear and tear excepted.
3.10 Inventories of the Sellers. All inventories of the Sellers included in
the Purchased Assets consist of items of a quality and quantity usable and
salable in the normal course of their businesses, are generally sufficient to do
business in the ordinary course, and the levels of inventories are consistent
with the levels maintained by the Sellers in the ordinary course consistent with
past practices and the Sellers' obligations under their agreements with all
applicable vehicle manufacturers or distributors.
3.11 Accounts Receivable of the Sellers. All accounts receivable of the
Sellers included in the Purchased Assets are collectible at the aggregate
recorded amounts thereof, subject to adjustments for doubtful accounts
consistent with the Sellers' past year-end practices, in the ordinary course of
the Sellers' business, and are not subject to any known offsets or
counterclaims.
3.12 Approvals, Permits and Authorizations. Set forth on Schedule 3.12 is a
list of all governmental licenses, permits, certificates of inspection, other
authorizations, filings and registrations which are necessary for the Sellers to
own the Purchased Assets and to operate their businesses as presently conducted,
except where the failure to have or maintain any of the foregoing would not have
a material adverse effect on the Purchased Assets, or on the financial
condition, business or operations of the Sellers taken as a whole (collectively,
the "Authorizations"). All Authorizations have been duly and lawfully secured or
made by the Sellers and are in full force and effect. There is no proceeding
pending or, to the Sellers' knowledge, threatened or probable of assertion, to
revoke or limit any Authorization. Except as indicated on Schedule 3.12, all
Authorizations may be lawfully transferred to the Buyer as contemplated by this
Agreement and, except as indicated on Schedule 3.12, none of the transactions
contemplated by this Agreement will terminate, violate or limit the
effectiveness, either by virtue of the terms thereof or because of the
non-assignability thereof, of any Authorization.
3.13 Compliance with Laws. The Sellers have conducted their operations and
businesses in compliance with, and all of the Purchased Assets and Leased
Premises comply with (i) all applicable laws, rules, regulations and codes
(including, without limitation, any laws, rules, regulations and codes relating
to anticompetitive practices, contracts, discrimination, employee benefits,
employment, health, safety, fire, building and zoning, but excluding
Environmental Laws which are the subject of Section 3.29 hereof) and (ii) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances,
except where the failure to comply would not have a material adverse effect on
the Purchased Assets, or on the financial condition, business or operations of
the Sellers taken as a whole. The Sellers have not received any notification of
any asserted present or past failure by them to comply with such laws, rules or
regulations, or such orders, rules, writs, judgments, injunctions, decrees or
ordinances. Set forth on Schedule 3.13 are all orders, writs, judgments,
injunctions, decrees and other awards of any court or any governmental
instrumentality applicable to the Purchased Assets or the Sellers or their
businesses and operations. The Sellers have delivered to the Buyer copies of all
reports, if any, of the Sellers required under the Federal
10
Occupational Safety and Health Act of 1970, as amended, and under all other
applicable health and safety laws and regulations. The deficiencies, if any,
noted on such reports or any deficiencies noted by inspection through the
Closing Date have been corrected by the Sellers.
3.14 Insurance.
(a) Schedule 3.14(a) of this Agreement sets forth a list of all policies of
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Sellers on their properties, operations, inventories, assets,
businesses or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000 thereunder).
Each such insurance policy identified therein is and shall remain in full force
and effect on and as of the Closing Date and the Sellers are not in default in
any material respect with respect to any provision contained in any such
insurance policy and have not failed to give any notice or present any claim
under any such insurance policy in a due and timely fashion. The insurance
maintained by, or on behalf of, the Sellers is adequate in accordance with the
standards of business of comparable size in the industry in which the Sellers
operate and no notice of cancellation or termination has been received with
respect to any such policy. The Sellers have not, during the last three (3)
fiscal years, been denied or had revoked or rescinded any policy of insurance.
(b) Set forth on Schedule 3.14(b) is a summary of information pertaining to
property damage and personal injury claims in excess of $5,000 against any of
the Sellers during the past three (3) years, all of which are fully satisfied or
are being defended by the insurance carrier and involve no exposure to the
Sellers.
3.15 Taxes. All federal, state and local tax returns and reports required
as of the date hereof to be filed by the Sellers for taxable periods ending
prior to the date hereof have been duly and timely filed by the Sellers with the
appropriate governmental agencies, and all federal, state and local income,
profits, franchise, sales, use, occupation, property, excise, payroll,
withholding, employment, estimated and other taxes of any nature, including
interest, penalties and other additions to such taxes ("Taxes") shown to be due
on such tax returns have been paid and the respective Sellers will pay all Taxes
ultimately determined by any taxing authority to have been required to be shown
on such tax returns. All Taxes for all periods arising on or prior to the
Closing Date for which tax returns are not required to be filed prior to the
Closing Date have been adequately reserved for by the Sellers or, with respect
to Taxes required to be accrued, the Sellers have properly accrued or will
properly accrue such Taxes in the ordinary course of business consistent with
past practice of the Sellers. Saturn of Chattanooga made a valid election to be
treated as an "S Corporation" for federal income tax purposes which election has
been continuously in effect since May 10, 1990.
3.16 Litigation. Except as set forth in Schedule 3.16, there are no
actions, suits, claims, investigations or legal or administrative or arbitration
proceedings pending, or to the Sellers' knowledge, threatened or probable of
assertion, against the Sellers with respect to the Purchased Assets or the
Assumed Liabilities or the businesses of the Sellers. The Sellers know of no
basis for
11
the institution of any such suit or proceeding. The Sellers are not now under
any judgment, order, writ, injunction, decree, award or other similar command of
any court, administrative agency or other governmental authority applicable to
the businesses of the Sellers or any of the Purchased Assets or Assumed
Liabilities.
3.17 Powers of Attorney. Except as set forth in Schedule 3.17, there are no
persons, firms, associates, corporations, business organizations or other
entities holding general or special powers of attorney from the Sellers.
3.18 Broker's and Finder's Fees. Except for ▇▇▇▇▇▇▇▇ Inc., the Sellers have
not incurred any liability to any broker, finder or agent or any other person or
entity for any fees or commissions with respect to the transactions contemplated
by this Agreement, and the Sellers hereby agree to assume all liability to any
such broker, finder or agent or any other person or entity claiming any such fee
or commission.
3.19 Employee Relations. The Sellers employ a total of approximately 350
employees as of the date hereof. Except as set forth in Schedule 3.19: (a) the
Sellers are not delinquent in the payment (i) to or on behalf of any past or
present employees of any cash or other compensation for all periods prior to the
date hereof or the date of the Closing, as the case may be, (ii) of any amount
which is due and payable to any state or state fund pursuant to any workers'
compensation statute, rule or regulation or any amount which is due and payable
to any workers' compensation claimant; (b) there are no collective bargaining
agreements currently in effect between the Sellers and labor unions or
organizations representing any employees of the Sellers; (c) no collective
bargaining agreement is currently being negotiated by the Sellers; (d) to the
knowledge of the Sellers, there are no union organizational drives in progress
and there has been no formal or informal request to the Sellers for collective
bargaining or for an employee election from any union or from the National Labor
Relations Board; and (e) no dispute exists between either of the Sellers and any
of their sales representatives or, to the knowledge of the Sellers, between any
such sales representatives with respect to territory, commissions, products or
any other terms of their representation.
3.20 Compensation. Schedule 3.20 contains a schedule of all employees
(including sales representatives) and consultants of the Sellers whose
individual cash compensation for the year ended December 31, 1996, or projected
for the year ended December 31, 1997, is in excess of $100,000, together with
the amount of total compensation paid to each such person for the twelve month
period ended December 31, 1996 and the current aggregate base salary or hourly
rate (including any bonus or commission) for each such person.
3.21 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc. Except as
set forth on Schedule 3.21, there are no patents, trademarks, trade names,
service marks, service names and registered copyrights which are material to the
Sellers' businesses and there are no applications therefor or licenses thereof,
inventions, computer software, logos or slogans, which are owned or leased by
the Sellers or used in the conduct of the Sellers' business. The Sellers are not
individually or jointly a party to, nor pay a royalty to anyone under, any
license or similar
12
agreement. There is no existing claim, or, to the knowledge of the Sellers, any
basis for any claim, against the Sellers that any of their operations,
activities or products infringe the patents, trademarks, trade names, copyrights
or other property rights of others or that any of the Sellers is wrongfully or
otherwise using the property rights of others. The Sellers are the owners of the
names set forth on Schedule 3.21 (the "Proprietary Names") in the State of
Tennessee and, to the knowledge of the Sellers, no person uses, or has the right
to use, such name or any derivation thereof in connection with the manufacture,
sale, marketing or distribution of products or services commonly associated with
an automobile dealership.
3.22 Accounts Payable. All accounts payable of the Sellers to third parties
as of the date hereof arose in the ordinary course of business and none are
delinquent or past due.
3.23 No Undisclosed Liabilities. The Sellers do not have any material
liabilities or obligations of any nature, known or unknown, fixed or contingent,
matured or unmatured, other than those (a) reflected in the Financial
Statements, (b) incurred in the ordinary course of business since the date of
the Financial Statements and of the type and kind reflected in the Financial
Statements, or (c) disclosed specifically on Schedule 3.23.
3.24 Certain Transactions. Except as set forth in Schedule 3.24, there are
no contracts, agreements or other arrangements between the Sellers and any of
the Shareholders (including the Shareholders' affiliates), or the Sellers' or
Shareholders' (including the Shareholders' affiliates) directors, officers or
salaried employees, or the family members or affiliates of any of the above
(other than for services in the ordinary course as employees, officers and
directors).
3.25 Business Generally. The Sellers are not aware of the existence of any
conditions, including, without limitation, any actual or potential competitive
factors in the markets in which the Sellers participate, and which could
reasonably be expected to have a material adverse effect on the businesses and
operations of the Sellers, and which have not been disclosed to the Buyer, other
than general business and economic conditions affecting the industry and markets
in which the Sellers participate.
3.26 Employee Benefits.
(a) The Sellers have listed on Schedule 3.26(a) and have delivered to the
Buyer true and complete copies of all Employee Plans (as defined below) and
related documents, established, maintained or contributed to by the Seller
(which shall include for this purpose and for the purpose of all of the
representations in this Section 3.26, the Shareholders and all employers,
whether or not incorporated, that are treated together with the Sellers as a
single employer with the meaning of Section 414 of the Code). The term "Employee
Plan" shall include all plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and also shall
include, without limitation, any deferred compensation, stock, employee or
retiree pension benefit, welfare benefit or other similar fringe or employee
benefit plan, program, policy, contract or arrangement, written or oral,
qualified or nonqualified, funded or unfunded, foreign or
13
domestic, covering employees or former employees of the Sellers and maintained
or contributed to by the Sellers.
(b) Where applicable, each Employee Plan (i) has been administered in
material compliance with the terms of such Employee Plan and the requirements of
ERISA and the Code; and (ii) is in material compliance with the reporting and
disclosure requirements of ERISA and the Code. The Sellers do not maintain or
contribute to, and have never maintained or contributed to, an Employee Plan
subject to Title IV of ERISA or a "multiemployer plan." There are no facts
relating to any Employee Plan that (i) have resulted in a "prohibited
transaction" of a material nature or have resulted or is reasonably likely to
result in the imposition of a material excise tax, penalty or liability pursuant
to Section 4975 of the Code, (ii) have resulted in a material breach of
fiduciary duty or violation of Part 4 of Title I of ERISA, or (iii) have
resulted or could result in any material liability (whether or not asserted as
of the date hereof) of the Sellers or any ERISA affiliate pursuant to Section
412 of the Code arising under or related to any event, act or omission occurring
on or prior to the date hereof. Each Employee Plan that is intended to qualify
under Section 401(a) or to be exempt under Section 501(c)(g) of the Code is so
qualified or exempt as of the date hereof in each case as such Employee Plan has
received favorable determination letters from the Internal Revenue Service with
respect thereto. To the knowledge of the Sellers, the amendments to and
operation of any Employee Plan subsequent to the issuance of such determination
letters do not adversely affect the qualified status of any such Employee Plan.
No Employee Plan has an "accumulated funding deficiency" as of the date hereof,
whether or not waived, and no waiver has been applied for. The Sellers have made
no promises or incurred any liability under any Employee Plan or otherwise to
provide health or other welfare benefits to former employees of the Sellers,
except as specifically required by law. There are no pending or, to the best
knowledge of the Sellers, threatened claims (other than routine claims for
benefit) or lawsuits with respect to any of Sellers' Employee Plans. As used in
this Section 3.26, all technical terms enclosed in quotation marks shall have
the meaning set forth in ERISA.
3.27 Sellers and Shareholders Not Foreign Persons. Neither the Sellers nor
any of the Shareholders is a "foreign person" as that term is defined in the
Code and the regulations promulgated pursuant thereto, and the Buyer has no
obligation under Section 1445 of the Code to withhold or pay over to the IRS any
part of the "amount realized" (as such term is defined in the regulations issued
under Section 1445 of the Code) by the Sellers and/or the Shareholders in the
transactions contemplated hereby.
3.28 Suppliers and Customers. The Sellers are not required to provide
bonding or any other security arrangements in connection with any transactions
with any of its respective customers or suppliers. To the knowledge of the
Sellers, no such supplier, customer or creditor intends or has threatened, or
reasonably could be expected, to terminate or modify any of their respective
relationships with the Sellers.
14
3.29 Environmental Matters.
(a) For purposes of this Section 3.29, the following terms shall have the
following meaning: (i) "Environmental Law" means all present federal, state and
local laws, statutes, regulations, rules, ordinances and common law, and all
judgments, decrees, orders, agreements, or permits, issued, promulgated,
approved or entered thereunder by any government authority relating to
pollution, Hazardous Materials, or protection of human health or the
environment. (ii) "Hazardous Materials" means any waste, pollutant, chemical,
hazardous material, hazardous substance, toxic substance, hazardous waste,
special waste, solid waste, petroleum or petroleum-derived substance or waste
(regardless of specific gravity), or any constituent or decomposition product of
any such pollutant, material, substance or waste, including, but not limited to,
any hazardous substance or constituent contained within any waste and any other
pollutant, material, substance or waste regulated under or as defined by any
Environmental Law.
(b) The Sellers have obtained all material permits, licenses and other
authorizations or approvals required under Environmental Laws for the conduct
and operation of the Purchased Assets ("Environmental Permits"). All such
Environmental Permits are in good standing, the Sellers are and have been in
compliance in all material respects with the terms and conditions of all such
Environmental Permits, and no appeal or any other action is pending or, to the
knowledge of the Sellers, threatened to revoke any such Environmental Permit.
(c) Except as set forth in Schedule 3.29, the Sellers and the Purchased
Assets are and have been in compliance in all material respects with all
Environmental Laws.
(d) Except as set forth in Schedule 3.29, neither the Sellers nor the
Shareholders has received any written order, notice, complaint, request for
information, claim, demand or other communication from any government authority
or other person, whether based in contract, tort, implied or express warranty,
strict liability, or any other common law theory, or any criminal or civil
statute, arising from or with respect to (i) the presence, release or threatened
release of any Hazardous Material or any other environmental condition on, in or
under the Real Property, (ii) any other circumstances forming the basis of any
actual or alleged violation by the Sellers of any Environmental Law or any
liability of the Sellers under any Environmental Law, (iii) any remedial or
removal action required to be taken by the Sellers under any Environmental Law,
or (iv) any harm, injury or damage to real or personal property, natural
resources, the environment or any person alleged to have resulted from the
foregoing, nor are the Sellers aware of any facts which might reasonably give
rise to such notice or communication. To the knowledge of the Sellers, none of
the Sellers has entered into any agreement concerning any removal or remediation
of Hazardous Materials.
(e) Except as set forth in Schedule 3.29, no lawsuits, claims, civil
actions, criminal actions, administrative proceedings, investigations or
enforcement or other actions are pending or, to the knowledge of the Sellers,
threatened under any Environmental Law with respect to the Sellers or the Real
Property.
15
(f) Except as set forth in Schedule 3.29, to the knowledge of the Sellers,
no Hazardous Materials are or have been released, discharged, spilled or
disposed of onto, or migrated onto, the Real Property or any other property
previously owned, operated or leased by the Sellers, and no environmental
condition exists (including, without limitation, the presence, release,
threatened release or disposal of Hazardous Materials) related to the Real
Property, to any property previously owned, operated or leased by the Sellers,
or to the Sellers' past or present operations, which would constitute a
violation of any Environmental Law or otherwise give rise to costs, liabilities
or obligations under any Environmental Law.
(g) Except as set forth in Schedule 3.29, neither the Sellers nor, to the
knowledge of the Sellers, any of their predecessors in interest has transported
or disposed of, or arranged for the transportation or disposal of, any Hazardous
Materials to any location (i) which is listed on the National Priorities List,
the CERCLIS list under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any similar federal, state or local
list, (ii) which is the subject of any federal, state or local enforcement
action or other investigation, or (iii) about which the Sellers or the
Shareholders have received or, to the knowledge of the Sellers, expect to
receive a potentially responsible party notice or other notice under any
Environmental Law.
(h) No environmental lien has attached or, to the knowledge of the Sellers,
is threatened to be attached to the Real Property.
(i) [Intentionally Deleted]
(j) Except as set forth on Schedule 3.29, none of the Sellers or their
respective affiliates has installed or operated on the Real Property and, to the
knowledge of the Sellers, the Real Property does not contain, any: (i) septic
tanks into which process wastewater or any Hazardous Materials have been
disposed; (ii) asbestos; (iii) polychlorinated biphenyls (PCBs); (iv)
underground injection or monitoring ▇▇▇▇▇; or (v) underground storage tanks.
(k) [Intentionally Deleted]
(l) Except as set forth on Schedule 3.29, to the knowledge of the Sellers,
there have been no environmental studies or reports made relating to the Real
Property or any other property or facility previously owned, operated or leased
by the Sellers.
3.30 Bank Accounts and Safe Deposit Boxes. Schedule 3.30 lists all bank
accounts, credit cards and safe deposit boxes in the name of, or controlled by,
the Sellers, and details about the persons having access to or authority over
such accounts, credit cards and safe deposit boxes.
3.31 Warranties. Set forth on Schedule 3.31 are descriptions or copies of
the forms of all express warranties and disclaimers of warranty made by the
Sellers (separate and distinct from any applicable manufacturers', suppliers' or
other third-parties' warranties or disclaimers of warranties) during the past
five (5) years to customers or users of the vehicles, parts, products or
16
services of the Sellers. There have been no breach of warranty or breach of
representation claims against the Sellers during the past five (5) years which
have resulted in any cost, expenditure or exposure to the Sellers more than
$100,000 individually or in the aggregate.
3.32 Interest in Competitors and Related Entities. Except as set forth on
Schedule 3.32, no Shareholder and no affiliate of any Shareholder (i) has any
direct or indirect interest in any person or entity engaged or involved in any
business which is competitive with the business of the Sellers, (ii) has any
direct or indirect interest in any person or entity which is a lessor of assets
or properties to, material supplier of, or provider of services to, the Sellers,
or (iii) has a beneficial interest in any contract or agreement to which either
of the Sellers are a party; provided, however, the foregoing representation and
warranty shall not apply to any person or entity, or any interest or agreement
with any person or entity, which is a publicly held corporation in which the
Shareholders individually and collectively own less than 3% of the issued and
outstanding voting stock.
3.33 Availability of Sellers' Employees. Except as set forth in Schedule
3.33, there have been no actions taken by the Sellers, their affiliates, or any
of their respective shareholders, officers, directors, members, partners,
managers or employees, to discourage, or in any way prevent, any of the
employees of the Sellers from being hired by the Buyer after Closing, and as of
the Closing each of the Sellers' employees will be available without penalty for
employment by the Buyer.
3.34 Misstatements and Omissions. No representation or warranty made by the
Sellers in this Agreement, and no statement contained in any certificate or
Schedule furnished or to be furnished by the Sellers or any of the Shareholders
pursuant hereto, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
such representation or warranty or such statement not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers as follows:
4.1 Organization and Good Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 Authority; Consents; Enforceability.
(a) Authority. The Buyer has full corporate power and authority to execute
and deliver the Agreement and the other agreements and documents and instruments
contemplated hereby, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. The execution
and delivery by the Buyer of this Agreement and the other agreements, documents
and instruments contemplated hereby, the consummation by the Buyer of the
transactions contemplated hereby and thereby and the performance by the Buyer
17
of its obligations hereunder and thereunder: (i) have been duly and validly
authorized by all necessary corporate action on the part of the Buyer; and (ii)
do not and will not, except as set forth on Schedule 4.2(a), (A) conflict with
or violate any of the provisions of the Certificate of Incorporation or By-laws
of the Buyer, (B) violate any law, ordinance, rule or regulation or any
judgment, order, writ, injunction or decree or similar command of any court
administrative or governmental agency or other body applicable to the Buyer or
any of its assets, or (C) violate or conflict with the terms of, or result in
the acceleration of, any indebtedness or obligation of the Buyer under, or
violate or conflict with or result in a breach by the Buyer of, or constitute a
default under, any material instrument, agreement or indenture or any mortgage,
deed of trust or similar contract to which the Buyer is a party or by which the
Buyer or any of its assets may be otherwise bound or affected; or (D) require
the consent, authorization or approval of, or notice to, or filing or
registration with, any governmental body or authority, or any other third party.
4.3 Broker's and Finder's Fees. The Buyer has not incurred any liability to
any broker, finder or agent or any other person or entity for any fees or
commissions with respect to the transactions contemplated by this Agreement, and
the Buyer hereby agrees to assume all liability to any such broker, finder or
agent or any other person or entity claiming any such fee or commission.
4.4 Litigation. There are no actions, suits, claims, investigations or
legal or administrative or arbitration proceedings pending or, to the Buyer's
knowledge, threatened or probable of assertion, against the Buyer before any
court, governmental or administrative agency or other body relating to this
Agreement and/or the transactions contemplated hereby. The Buyer is not now
under any judgment, order, writ, injunction, decree or other similar command of
any court, administrative agency or other governmental agency which relate to
this Agreement and/or the transactions contemplated hereby.
4.5 Misstatements or Omissions. No representation or warranty made by the
Buyer in this Agreement, and no statement contained in any certificate or
Schedule furnished or to be furnished by the Buyer to the Sellers and/or the
Shareholders pursuant hereto, contains or will contain an untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make such representation or warranty or such statement not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS
OF THE SHAREHOLDERS AND THE SELLERS
The Sellers hereby covenant and agree that from and after the date hereof
until the Closing:
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5.1 Provide Access to Information; Cooperation with Buyer.
(a) Access. The Sellers shall afford to the Buyer, its attorneys,
accountants, and such other representatives of the Buyer as the Buyer shall
designate to the Sellers, free and full access at all reasonable times, and upon
reasonable prior notice, to the Purchased Assets and the properties, books and
records of the Sellers, and to interview personnel, suppliers and customers of
the Sellers, in order that the Buyer may have full opportunity to make such
investigation as it shall reasonably desire of the Purchased Assets, Assumed
Liabilities and the businesses and operations of the Sellers. In addition, the
Sellers shall provide to the Buyer and its representatives such additional
financial and operating data and other information in respect of the Purchased
Assets, Assumed Liabilities and the business and properties of the Sellers as
the Buyer shall from time to time reasonably request.
(b) Cooperation in IPO Preparation. At the Buyer's expense, the Sellers and
Shareholders shall cooperate with the Buyer in the preparation of any
description of the transactions contemplated by this Agreement deemed by the
Buyer, in its sole discretion, as necessary for the completion of any
registration statement, prospectus or amendment or supplement thereto prepared
in connection with the closing of the Initial Public Offering ("IPO") of the
Buyer's securities.
(c) Cooperation in Obtaining Consents. The Sellers and Shareholders shall
use reasonable best efforts in cooperating with the Buyer in the preparation of
and delivery to all applicable automobile manufacturers or distributors, as soon
as practicable after the date hereof, of an application and other information
necessary to obtain such automobile manufacturer's or distributor's consent to
or the approval of the transactions contemplated by this Agreement as
contemplated by Section 7.10.
5.2 Operation of Business of the Sellers. At all times before the Closing,
the Sellers shall (a) maintain their corporate, limited liability company or
limited partnership, as the case may be, existence in good standing, (b) operate
their businesses substantially as presently operated and only in the ordinary
course and consistent with past operations and their obligations under any
existing agreements with all applicable automobile manufacturers or
distributors, (c) use their reasonable best efforts to preserve intact their
present business organizations and employees and their relationships with
persons having business dealings with them, including, but not limited to, all
applicable automobile manufacturers or distributors and any floor plan financing
creditors, (d) comply in all material respects with all applicable laws, rules
and regulations, (e) maintain their insurance coverages, (f) file all tax
returns when due and pay all Taxes, charges and assessments reflected thereon as
due and payable, as well as any Taxes ultimately determined by any taxing
authority to be due and payable, and make all proper accruals for Taxes not yet
due and payable, (g) make all debt service payments when contractually due and
payable, (h) pay all accounts payable and other current liabilities when due,
(i) maintain the Employee Plans, (j) maintain the property, plant and equipment
included in the Purchased Assets in good operating condition in accordance with
industry standards taking into account the age thereof, (k) maintain their books
and records of account in the usual, regular and ordinary manner, (l) use their
reasonable best efforts to encourage
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such personnel of the Sellers as the Buyer may designate in writing to become
employees of the Buyer after the date of the Closing, and (m) use their
reasonable best efforts to pay dividends and make distributions only to the
extent that such payment or making will, as nearly as possible, result in a Net
Book Value of not less than $10,500,000.
5.3 Other Changes. The Sellers shall not, without the prior written consent
of the Buyer (a) engage in any reorganization or similar transaction, (b) agree
to take any of the foregoing actions, (c) enter into any contract, agreement,
undertaking or commitment which would have been required to be set forth in
Schedule 3.6(a) if in effect on the date hereof or enter in to any contract,
agreement, undertaking or commitment which cannot be assigned to the Buyer or a
permitted assignee of the Buyer, or (d) take, cause, agree to take or cause, or
permit to occur any of the actions or events set forth in Section 3.5 of this
Agreement.
5.4 Additional Information. The Sellers shall furnish to the Buyer such
additional information with respect to any matters or events arising or
discovered subsequent to the date hereof which, if existing or known on the date
hereof, would have rendered any representation or warranty made by the Sellers
or any information contained in any Schedule hereto or in other information
supplied in connection herewith then inaccurate or incomplete. The receipt of
such additional information by the Buyer shall not operate as a waiver by the
Buyer of the obligation of the Sellers to satisfy the conditions to Closing set
forth in Section 7.1 hereof; provided, however, if such information shall be
furnished to the Buyer in a writing which shall also specifically refer to one
or more representations and warranties of the Sellers contained herein which in
the absence of such information is inaccurate or incomplete, then if the Buyer
waives in writing the condition to Closing set forth in said Section 7.1 hereof
and elects to close the transactions contemplated hereunder, the furnishing of
such additional information shall be deemed to have amended as of the Closing
any such representation and warranty so specifically referred to by the Sellers.
5.5 Publicity. Except as may be required by law or as necessary in
connection with the transactions contemplated hereby, the Sellers shall not (i)
make any press release or other public announcement relating to this Agreement
or the transactions contemplated hereby, without the prior written approval of
the Buyer and (ii) otherwise disclose the existence and nature of their
discussions or negotiations regarding the transactions contemplated hereby to
any person or entity other than their accountants, attorneys and similar
professionals, all of whom shall be subject to this nondisclosure obligation as
agents of the Sellers and the Shareholders, as the case may be. The Sellers and
the Shareholders shall cooperate with the Buyer in the preparation and
dissemination of any public announcements of the transactions contemplated by
this Agreement.
5.6 Other Negotiations. Neither the Sellers nor any of the Shareholders
shall pursue, initiate, encourage or engage in any negotiations or discussions
with, or provide any information to, any person or entity (other than the Buyer
and its representatives and affiliates) regarding the sale of the assets,
capital stock or membership interests of any of the Sellers or any merger or
consolidation or similar transaction involving any of the Sellers.
20
5.7 Closing Conditions. The Sellers shall use all reasonable best efforts
to satisfy promptly the conditions to Closing set forth in Article 7 hereof
required herein to be satisfied by the Sellers.
5.8 Environmental Audit. The Sellers shall allow an environmental
consulting firm selected by the Buyer (the "Environmental Auditor") to have
prompt access to the Real Property in order to conduct an environmental
investigation, satisfactory to the Buyer in scope (such scope being sufficient
to result in a Phase I environmental audit report and a Phase II environmental
audit report, if desired by the Buyer), of, and to prepare a report with respect
to, the Property (the "Environmental Audit"). The Sellers shall provide to the
Environmental Auditor: (i) reasonable access to all of their existing records
concerning the matters which are the subject of the Environmental Audit; and
(ii) reasonable access to the employees of the Sellers and the last known
addresses of former employees of the Sellers who are most familiar with the
matters which are the subject of the Environmental Audit (the Sellers agreeing
to use reasonable efforts to have such former employees respond to any
reasonable requests or inquiries by the Environmental Auditor). The Sellers
shall otherwise cooperate with the Environmental Auditor in connection with the
Environmental Audit, it being understood that the Buyer shall bear all of the
costs, fees and expenses incurred in connection with the preparation of the
Environmental Audit.
5.9 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance. Subject to the determination by the Buyer
that any of the following actions is not required, the Sellers shall promptly
prepare and file Notification and Report Forms under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act") with the Federal
Trade Commission (the "FTC") and respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division of the Department of
Justice (the "Antitrust Division") for additional information or documentation.
5.10 Audit of Sellers at Buyer's Expense. The Sellers shall allow,
cooperate with and assist Buyer's accountants, and shall instruct the Seller's
accountants to cooperate, in the preparation of audited financial statements of
the Sellers as necessary for the IPO; provided that the expense of such audit
shall be borne by the Buyer.
ARTICLE 6
PRE-CLOSING COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees that, from and after the date hereof
until the Closing:
6.1 Publicity; Disclosure. Except as may be required by law or as necessary
in connection with the transactions contemplated hereby or in connection with
the preparation and filing of any registration statement regarding the IPO, the
Buyer shall not (i) make any press release or other public announcement relating
to this Agreement or the transactions contemplated hereby, without the prior
written approval of the Sellers and the Shareholders, or (ii) otherwise disclose
the existence and nature of its discussions or negotiations regarding the
transactions contemplated
21
hereby to any person or entity other than its accountants, attorneys and similar
professionals, all of whom shall be subject to this nondisclosure obligation as
agents of the Buyer. The Buyer shall cooperate with the Sellers and the
Shareholders in the preparation and dissemination of any public announcements of
the transactions contemplated by this Agreement. Subject to the Buyer's legal
obligations and the advice of its IPO underwriters, the Buyer shall submit to
the Sellers for their pre- approval (such approval shall not be unreasonably
withheld) of the content of any disclosures in the IPO context about the
transactions contemplated hereby.
6.2 Closing Conditions. The Buyer shall use all reasonable best efforts to
satisfy promptly the conditions to Closing set forth in Article 8 hereof
required herein to be satisfied by the Buyer.
6.3 Application to Automobile Manufactures and Distributors. Subject to the
reasonable cooperation of the Sellers, the Buyer shall provide to all applicable
automobile manufacturers and distributors promptly after the execution and
delivery of this Agreement any application or other information with respect to
such application necessary in connection with the seeking of the consents of
such manufacturers and distributors contemplated by Section 7.10.
6.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance. Subject to the determination by the Buyer
that any of the following actions is not required, the Buyer shall promptly
prepare and file Notification and Report Forms under the HSR Act with the FTC
and respond as promptly as practicable to all inquiries received from the FTC or
the Antitrust Division for additional information or documentation, and Buyer
shall pay all filing fees in connection therewith.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement at the Closing and the
consummation by the Buyer of the transactions contemplated hereby are subject to
the satisfaction or fulfillment by the Sellers, prior to or at the Closing, of
each of the following conditions, unless waived in writing by the Buyer:
7.1 Representations and Warranties. The representations and warranties made
by the Sellers in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though such representations and warranties were made at and as of such
times.
7.2 Performance of Obligations of the Sellers. The Sellers shall have
performed and complied with all their covenants, agreements, obligations and
restrictions pursuant to this Agreement required to be performed or complied
with prior to or at the Closing.
7.3 Closing Certificate. The Sellers shall have delivered a certificate,
signed by each of the Sellers' respective Presidents, General Partners or
Managers, as the case may be, and dated
22
the Closing Date, certifying to the satisfaction of the conditions set forth in
Sections 7.1 and 7.2 hereof.
7.4 Opinions of Counsel. The Buyer shall have received an opinion of Grant,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C., counsel to the Sellers, and ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
counsel to The ▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust u/w ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, each dated the
Closing Date, in form and substance reasonably acceptable to the Buyer and its
counsel.
7.5 Supporting Documents. The Buyer shall have received from the Sellers
the following:
(a) To the extent applicable, one or more certificates of the
Secretary of State of the State of Tennessee dated as of a recent date as
to the due incorporation or organization and existence of the Sellers;
(b) To the extent applicable, one or more certificates of officials
from the jurisdictions listed on Schedule 3.1 hereto as to the good
standing of the Sellers in such jurisdictions;
(c) A certificate of the Secretary, an Assistant Secretary, General
Partner or Manager, as appropriate, of each of the Sellers dated the
Closing Date and certifying (i) that attached thereto are true, complete
and correct copies of the certificates of incorporation and by-laws of the
Corporations, the certificate of limited partnership and the agreement of
limited partnership of the Partnership or the operating agreements of the
LLCs, as applicable, each as amended to and as in effect on the date of
such certification, (ii) that attached thereto are true, complete and
correct copies of the resolutions duly adopted by the Boards of Directors
and shareholders of the Corporations, the General Partner and (if
applicable) the limited partners of the Partnership and the Manager and (if
applicable) the members of the LLCs, approving the transactions
contemplated hereby and authorizing the execution, delivery and performance
by the Sellers of this Agreement and the sale and transfer of the Purchased
Assets, as in effect on the date of such certification, and (iii) as to the
incumbency and signatures of those officers of the Sellers executing any
instrument or other document delivered in connection with such
transactions;
(d) Uniform Commercial Code Search Reports on Form UCC-11 with respect
to each of the Sellers from the states and local jurisdictions where the
principal places of business of the Sellers and the Purchased Assets are
located; and
(e) Such reasonable additional supporting documents and other
information as the Buyer or its counsel may reasonably request.
7.6 Bills of Sale, Etc. The Buyer shall have received from the respective
Sellers duly executed Bills of Sale and all necessary deeds, assignments,
documents and instruments to effect the transfers, conveyances and assignments
to the Buyer referred to in Article 1 hereof, and the Sellers shall have taken
such action as shall be necessary to put the Buyer in actual possession
23
and exclusive control of each of the Purchased Assets (including, without
limitation, the delivery of keys).
7.7 Dealership Leases and Other Agreements. The Buyer shall have received
the Dealership Leases, the Employment Agreements and the Non-Competition
Agreement, duly executed by the parties thereto other than the Buyer.
7.8 Books and Records. The Buyer shall have received all books and records
of, or pertaining to, the businesses of the Sellers and the Purchased Assets and
Assumed Liabilities, except to the extent included in the Excluded Assets.
7.9 Change of Name of Sellers; Use of Sellers' Name by Buyer. The Sellers
shall have delivered to the Buyer all documents, including, without limitation,
resolutions of the Board of Directors, General Partner or Managers and the
shareholders, partners or members, as the case may be, of the Sellers, necessary
to effect a change of names of the Sellers after the Closing to names other than
the Proprietary Names or any variation thereof which names shall be sufficiently
different from the name of the Buyer and the Proprietary Names as to distinguish
them upon the records in the office of the Secretary of State of Tennessee from
such names. The Sellers shall also have delivered to the Buyer a written consent
to the use by the Buyer or any parent, subsidiary or affiliate of the Buyer, or
any successor or assignee of any thereof, of the Proprietary Names or any
variant thereof and an agreement satisfactory to the Buyer that the Sellers will
not use the Proprietary Names or any variant thereof, except as may be necessary
for the winding up of the affairs of the Sellers.
7.10 Consents. The Buyer shall have received duly executed copies of all
consents, authorizations, approvals, notices, registrations and filings referred
to in Schedules 3.2 and 3.6(b), which are required for the Sellers to consummate
the transactions contemplated hereby, and including, but not limited to, the
consents of all applicable automobile manufacturers and distributors; provided,
however, the receipt of any such consent, authorization or approval relative to
the transfer of the Saturn of Chattanooga, Inc. dealership agreement shall not
be a condition to closing so long as the Buyer and the applicable Seller shall
have entered into a mutually satisfactory arrangement (to be negotiated in good
faith) whereby the business and assets of such Seller included in the Purchased
Assets will be operated by such Seller or the Buyer for the account of the
Buyer.
7.11 No Litigation. No action, suit or other proceeding shall be pending or
threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in respect thereof,
or involving a claim that consummation thereof would result in a violation of
any law, rule, decree or regulation of any governmental authority having
appropriate jurisdiction, and no order, decree or ruling of any governmental
authority or court shall have been entered challenging the legality, validity or
propriety of this Agreement or the transactions contemplated hereby or
prohibiting, restraining or otherwise preventing the consummation of the
transactions contemplated hereby.
24
7.12 Authorizations. The Buyer shall have received evidence of the transfer
to the Buyer of all Authorizations referred to in Section 3.12 of this Agreement
or, to the extent the Authorizations are not transferrable, the Sellers shall
have effectively obtained or made on behalf of the Buyer, or assisted the Buyer
in obtaining or making, all such Authorizations.
7.13 No Material Adverse Change or Undisclosed Liability. There shall have
been no material adverse change or development in (a) the business, prospects,
properties, earnings, results of operations or financial condition of the
Sellers taken as a whole, (b) the Purchased Assets taken as a whole, or (c) the
Assumed Liabilities taken as a whole.
7.14 Approval of Legal Matters. The form of all instruments, certificates
and documents to be executed and delivered by the Sellers to the Buyer pursuant
to this Agreement and all legal matters in respect of the transactions as herein
contemplated shall be reasonably satisfactory to the Buyer and its counsel, none
of whose approval shall be unreasonably withheld or delayed.
7.15 Adverse Laws. No statute, rule, regulation or order shall have been
adopted or promulgated which materially adversely affects the Purchased Assets,
the Assumed Liabilities or the businesses of the Sellers.
7.16 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods under
the HSR Act shall have expired without any indication by the Antitrust Division
or the FTC that either of them intends to challenge the transactions
contemplated hereby or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SELLERS
The obligations of the Sellers under this Agreement at the Closing and the
consummation by the Sellers of the transactions contemplated hereby are subject
to the satisfaction or fulfillment by the Buyer, prior to or at the Closing, of
each of the following conditions, unless waived in writing by the Sellers:
8.1 Representations and Warranties. The representations and warranties made
by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing
Date as though such representations and warranties were made at and as of such
times.
8.2 Performance of Obligations of the Buyer. The Buyer shall have performed
and complied with all its covenants, agreements, obligations and restrictions
pursuant to this Agreement required to be performed or complied with prior to or
at the Closing.
25
8.3 Closing Certificate. The Buyer shall have delivered a certificate,
signed by the Buyer's President and dated the Closing Date, certifying to the
satisfaction of the conditions set forth in Sections 8.1 and 8.2 hereto.
8.4 Payment of Purchase Price. The Buyer shall have: tendered to the
Sellers payment of the Base Price and the Initial Adjustment Amount Payment;
placed into escrow the Escrowed Adjustment Amount; and tendered the Notes,
executed by the Buyer, to the respective Sellers.
8.5 Opinion of Counsel. The Sellers shall have received an opinion of
Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P., counsel to the Buyer, dated the Closing
Date, in form and substance reasonably acceptable to the Sellers and the
Shareholders and their counsel.
8.6 Supporting Documents. The Sellers shall have received the following:
(a) A certificate of the Secretary of State of the State of Delaware
dated as of a recent date as to the due incorporation and good standing of
the Buyer;
(b) A certificate of the Secretary or an Assistant Secretary of the
Buyer dated the Closing Date, and certifying (i) that attached thereto is a
true, complete and correct copy of the certificate of incorporation and
by-laws of the Buyer, as amended and as in effect on the date of such
certification, (ii) that attached thereto are true, complete and correct
copies of the resolutions duly adopted by the Board of Directors of the
Buyer approving the transactions contemplated hereby and authorizing the
execution, delivery and performance by the Buyer of this Agreement, as in
effect on the date of such certification, and (iii) as to the incumbency
and signatures of certain officers of the Buyer executing any instrument or
other document delivered in connection with such transactions; and
(c) Copies of all authorizations, consents, approvals, notices,
filings and registrations referred to in Section 4.2(a) hereof.
8.7 Approval of Legal Matters. The form of all certificates, instruments
and documents to be executed and/or delivered by the Buyer to the Sellers
pursuant to this Agreement and all legal matters in respect of the transactions
as herein contemplated shall be reasonably satisfactory to the Sellers, the
Shareholders and their respective counsel, none of whose approval shall be
unreasonably withheld or delayed.
8.8 Dealership Leases; Other Agreements; Guaranty. The Sellers' Agent shall
have received the Dealership Leases and the Employment Agreements, duly executed
by the Buyer, and all of the Sellers shall have received the Guaranty, duly
executed by Sonic Financial Corp.
8.9 No Litigation. No action, suit or other proceeding shall be pending or
threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages
26
in respect thereof, or involving a claim that consummation thereof would result
in a violation of any law, rule, decree or regulation of any governmental
authority having appropriate jurisdiction, and no order, decree or ruling of any
governmental authority or court shall have been entered challenging the
legality, validity or propriety of this Agreement or the transactions
contemplated hereby or prohibiting, restraining or otherwise preventing the
consummation of the transactions contemplated hereby.
8.10 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods under
the HSR Act shall have expired without any indication by the Antitrust Division
or the FTC that either of them intends to challenge the transactions
contemplated hereby, or, if any such challenge or investigation is made or
commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
8.11 Releases of Shareholders. The Buyer shall have, with the reasonable
cooperation of the Sellers, used its reasonable best efforts to obtain the
release of the Shareholders from any guarantees of obligations of the Sellers
included in the Assumed Liabilities, it being understood that the Shareholders
will otherwise be indemnified, pursuant to Section 10.3(c) hereof, against any
liability incurred by them under such guarantees of such Assumed Liabilities.
ARTICLE 9
TRANSFER TAXES
9.1 Certain Taxes and Fees. All sales, transfer, documentary, stamp,
recording and other similar taxes and/or fees and Taxes which may be due or
payable in connection with the sale of the Purchased Assets pursuant hereto
shall be borne equally as between the Buyer (50%) and the Sellers (50%).
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Survival of Representations and Warranties. All statements contained
in any schedule or certificate delivered hereunder or in connection herewith by
or on behalf of any of the parties pursuant to this Agreement shall be deemed
representations and warranties by the respective parties hereunder unless
otherwise expressly provided herein. The representations and warranties of the
Sellers and the Buyer contained in this Agreement, including those contained in
any Schedule or certificate delivered hereunder or in connection herewith, shall
survive the Closing * with the exception of (a) the representations and
warranties of the Sellers contained in Section 3.29, which shall survive the
Closing * , and (b) the representations and warranties of the Sellers contained
in Sections 3.7, 3.15 and 3.23, which shall survive the Closing * . As to each
* Confidential portions omitted and filed separately with the Commission.
27
representation and warranty of the parties hereto, the date to which such
representation and warranty shall survive is hereinafter referred to as the
"Survival Date."
10.2 Agreement to Indemnify by the Sellers and Shareholders. Subject to the
terms and conditions of Sections 10.4, 10.5 and 10.7 hereof, each of the Sellers
and the Shareholders hereby agrees to indemnify and save the Buyer, its
affiliates, and their respective shareholders, officers, directors, employees,
successors and assigns (each, a "Buyer Indemnitee") harmless from and against,
for and in respect of, any and all demands, judgments, injuries, penalties,
fines, damages, losses, obligations, liabilities, claims, actions or causes of
action, encumbrances, costs, expenses (including, without limitation, reasonable
attorneys' fees, consultants' fees and expert witness fees), suffered,
sustained, incurred or required to be paid by any Buyer Indemnitee
(collectively, "Buyer's Damages") arising out of, based upon, in connection with
or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Sellers contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in
connection herewith; provided, however, (i) the Sellers and the
Shareholders shall have no obligation to pay Buyer's Damages pursuant to
this Subsection 10.2(a) unless and until (and only to the extent that) all
claims with respect of Buyer's Damages exceed a cumulative aggregate total
of * and (ii) the maximum indemnification obligation of the Sellers and the
Shareholders for Buyer's Damages pursuant to this Subsection 10.2(a) shall
be an aggregate total of * ;
(b) the breach or nonfulfillment of any covenant or agreement of any
of the Sellers contained in this Agreement or in any other agreement
document or instrument delivered hereunder or pursuant hereto;
(c) the assertion against any Buyer Indemnitee or any of the Purchased
Assets of any liability or obligation arising out of or based upon the
ownership or operation, prior to the Closing, of the Purchased Assets and
the Leased Premises including, without limitation, any of the Retained
Liabilities, but excluding, however, any of the Assumed Liabilities; or
(d) all claims of creditors asserted by reason of the parties'
non-compliance with any applicable bulk sales laws.
10.3 Agreement to Indemnify by the Buyer. Subject to the terms and
conditions of Sections 10.4 and 10.5 hereof, the Buyer hereby agrees to
indemnify and save the Sellers and the Shareholders (each, a "Seller
Indemnitee") harmless from and against, for and in respect of, any and all
demands, judgments, injuries, penalties, damages, losses, obligations,
liabilities, claims, actions or causes of action, encumbrances, costs and
expenses (including, without limitation, reasonable attorneys' fees and expert
witness fees) suffered, sustained, incurred or required to be paid by any Seller
Indemnitee arising out of, based upon, in connection with or as a result of:
* Confidential portions omitted and filed separately with the Commission.
28
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Buyer contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in
connection herewith;
(b) the breach or nonfulfillment of any covenant or agreement of the
Buyer contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;
(c) the assertion against any Seller Indemnitee of any of the Assumed
Liabilities; or
(d) the assertion against any Seller Indemnitee of any claims,
liabilities, or obligations arising from the Buyer's operation of the
Purchased Assets and the Leased Premises after the Closing Date, except to
the extent that such claims, liabilities or obligations arise out of or are
based upon the Retained Liabilities.
10.4 Claims for Indemnification. No claim for indemnification with respect
to a breach of a representation and warranty shall be made under this Agreement
after the applicable Survival Date unless prior to such Survival Date the Buyer
Indemnitee or the Seller Indemnitee, as the case may be, shall have given the
Sellers or the Buyer, as the case may be, written notice of such claim for
indemnification based upon actual loss sustained, or potential loss anticipated,
as a result of the existence of any claim, demand, suit or cause of action
against such Buyer Indemnitee or Seller Indemnitee, as the case may be.
10.5 Procedures Regarding Third Party Claims. The procedures to be followed
by the Buyer and the Sellers and the Shareholders with respect to
indemnification hereunder regarding claims by third persons shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action
or proceeding (including, without limitation, any notice relating to a tax
audit) or the assertion of any claim by a third person, which the person
receiving such notice has reason to believe may result in a claim by it for
indemnity pursuant to this Agreement, such person (the "Indemnified Party")
shall give notice of such action, proceeding or claim to the party against
whom indemnification pursuant hereto is sought (the "Indemnifying Party"),
setting forth in reasonable detail the nature of such action or claim,
including copies of any written correspondence from such third person to
such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at its own expense, to
participate in the defense of such action, proceeding or claim, and, if (i)
the action, proceeding or claim involved seeks (and continues to seek)
solely monetary damages, (ii) the Indemnifying Party confirms, in writing,
its obligation hereunder to indemnify and hold harmless the Indemnified
Party with respect to such damages in their entirety pursuant to Sections
10.2 or 10.3 hereof, as the case may be, and (iii) the Indemnifying Party
shall have made provision which, in the reasonable judgment of the
Indemnified Party, is adequate to satisfy any adverse judgment as a result
of its
29
indemnification obligation with respect to such action, proceeding or
claim, then the Indemnifying Party shall be entitled to assume and control
such defense with counsel chosen by the Indemnifying Party and approved by
the Indemnified Party, which approval shall not be unreasonably withheld or
delayed. The Indemnified Party shall be entitled to participate therein
after such assumption, the costs of such participation following such
assumption to be at its own expense. Upon assuming such defense, the
Indemnifying Party shall have full rights to enter into any monetary
compromise or settlement which is dispositive of the matters involved;
provided, that such settlement is paid in full by the Indemnifying Party
and will not have any direct or indirect continuing material adverse effect
upon the Indemnified Party.
(c) With respect to any action, proceeding or claim as to which (i)
the Indemnifying Party does not have the right to assume the defense or
(ii) the Indemnifying Party shall not have exercised its right to assume
the defense, the Indemnified Party shall assume and control the defense of
and contest such action, proceeding or claim with counsel chosen by it and
approved by the Indemnifying Party, which approval shall not be
unreasonably withheld. The Indemnifying Party shall be entitled to
participate in the defense of such action, the cost of such participation
to be at its own expense. The Indemnifying Party shall be obligated to pay
the reasonable attorneys' fees and expenses of the Indemnified Party to the
extent that such fees and expenses relate to claims as to which
indemnification is due under Sections 10.2 or 10.3 hereof, as the case may
be. The Indemnified Party shall have full rights to dispose of such action
and enter into any monetary compromise or settlement; provided, however, in
the event that the Indemnified Party shall settle or compromise any claims
involved in the action insofar as they relate to, or arise out of, the same
facts as gave rise to any claim for which indemnification is due under
Sections 10.2 or 10.3 hereof, as the case may be, it shall act reasonably
and in good faith in doing so.
(d) Both the Indemnifying Party and the Indemnified Party shall
cooperate fully with one another in connection with the defense, compromise
or settlement of any such claim, proceeding or action, including, without
limitation, by making available to the other all pertinent information and
witnesses within its control.
10.6 Effectiveness. The provisions of this Article 10 shall be effective
upon consummation of the Closing, and prior to the Closing, shall have no force
and effect.
10.7 Certain Provisions Relating to Claims for Buyer's Damages.
(a) With respect to any claim by a Buyer Indemnitee or Buyer Indemnitees
for indemnification hereunder, the Buyer, on behalf of such Buyer Indemnitee or
Buyer Indemnitees, shall first exercise its right of postponement and offset and
reduction under the Notes (and/or draw against the Escrowed Adjustment Amount
(in the case of a right to payment under Section 1.3(d)(2)). Any such right of
postponement, offset and reduction under the Notes shall be made pro rata
according to the outstanding principal balances of the Notes, except in a case
(such as the bankruptcy of a particular payee under the Notes) where such right
is stayed or otherwise prohibited by law or order of a court of competent
jurisdiction, in which case such right shall be exercised pro rata according to
the outstanding principal balances of the Notes as to which there
30
shall be no such stay or prohibition. The exercise of such right against the
Notes shall be made without regard to whether the claim or claims giving rise to
indemnification are attributable to any particular Seller or group of Sellers,
and/or their respective Shareholders.
(b) To the extent that any Buyer Indemnitee or Buyer Indemnitees shall have
claims for Buyer's Damages which exceed that which can be satisfied by the
exercise of rights under paragraph (a) above, such Buyer Indemnitee or Buyer
Indemnitees shall only be entitled to seek indemnification from the Seller or
Sellers, and their respective Shareholders, to whom the breach or the facts or
circumstances giving rise to such claims are attributable. In such a situation,
the liability of any such Seller and its Shareholders shall be joint and several
as between such Seller and such Shareholders, however the liability of such
Shareholders as among themselves shall be several in proportion to their
respective stockholder, membership or partnership interests, as the case may be,
in such Seller.
ARTICLE 11
TERMINATION AND TERMINATION FEE
11.1 Termination. Notwithstanding any other provision herein contained to
the contrary, this Agreement may be terminated at any time prior to the Closing
Date as follows:
(a) This Agreement may be terminated by written consent of the parties
hereto;
(b) The Buyer may terminate this Agreement by giving written notice to
the Sellers at any time prior to the Closing (1) in the event the Sellers
have breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, provided that the Buyer shall
have notified the Sellers of the breach and the breach shall have continued
without cure or remedy for a period of thirty (30) days after the notice of
breach, or (2) if the Closing shall not have occurred on or before the
Closing Date Deadline by reason of the failure of any condition precedent
under Article 7 hereof other than any condition contained in Sections 7.4,
7.11, 7.13(a) or (b), 7.14, 7.15, or 7.16 (provided, however, that the
Buyer may not terminate under this subsection (b) if the Buyer is in breach
of any material representation, warranty, or covenant of the Buyer
contained in this Agreement);
(c) The Sellers may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (1) in the event the Buyer
has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, provided that the Sellers shall
have notified the Buyer of the breach and the breach has continued without
cure or remedy for a period of thirty (30) days after the notice of breach,
or (2) if the Closing shall not have occurred on or before the Closing Date
Deadline by reason of the failure of any condition precedent under Article
8 hereof other than any condition contained in Sections 8.5, 8.7, 8.9,
8.10, or 8.11 (provided, however, that the Sellers may not terminate under
this subsection (c) if any Seller is in breach of any material
representation, warranty, or covenant contained in this Agreement);
31
(d) The Buyer may terminate this Agreement if, after any initial HSR
Act filing, the FTC makes a "second request" for information, or the FTC or
the Antitrust Division challenges the transactions contemplated hereby;
provided that the Buyer delivers written notice to the Sellers of its
termination hereunder within fifteen (15) days of the Buyer's receipt of
such second request or of notice of such challenge; or
(e) The Buyer may terminate this Agreement within thirty (30) days of
the date hereof if, and only if, the Buyer is not satisfied, in its
reasonable discretion, with the results of any environmental audit or other
environmental investigation undertaken with respect to the Real Property.
11.2 Procedure and Effect of Termination. If either party terminates this
Agreement pursuant to Section 11.1 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party except as set forth below:
(a) If this Agreement is terminated by the Buyer pursuant to the
provisions of Section 11.1(b) above, then the Sellers shall, on demand of
the Buyer, promptly pay to the Buyer in immediately available funds, as
liquidated damages for the loss of the transaction, a termination fee of
$500,000 (the "Sellers' Termination Fee").
(b) If this Agreement is terminated by the Sellers pursuant to the
provisions of Section 11.1(c) above, then the Buyer shall, upon demand of
the Sellers, promptly pay to the Sellers in immediately available funds, as
liquidated damages for the loss of the transaction, a termination fee of
$1,500,000 (the "Buyer's Termination Fee"). The Buyer's Termination Fee
shall be guaranteed by Sonic Financial Corp. pursuant to the Guaranty in
the form of Exhibit 1.3(C) hereto.
The respective rights of the parties to terminate this Agreement under
Sections 11.1(b) or 11.1(c), as the case may be, and to be paid the
Sellers' Termination Fee or the Buyer's Termination Fee, as the case may
be, shall be the respective parties' sole and exclusive remedies for
damages; in the event of such termination by either party, such party shall
have no right to equitable relief for any breach or alleged breach of this
Agreement, other than for specific performance for the payment of the
Sellers' Termination Fee or the Buyer's Termination Fee, as the case may
be.
(c) Except as specifically provided in this Section 11.2, nothing
contained in this Section 11.2 shall prevent any party from seeking any
equitable relief to which it would otherwise be entitled in the event of
breach by the other party.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Access to Books and Records after Closing. The Buyer shall, following
the Closing, give, and shall cause to be given, to the Sellers and its
authorized representatives such
32
access, during normal business hours and upon prior notice, to such books and
records constituting part of the Purchased Assets as shall be reasonably
necessary for the Sellers in connection with the preparation and filing of the
Sellers' tax returns for periods prior to the Closing, and to make extracts and
copies of such books and records at the expense of the Sellers.
12.2 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by telecopier or by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally or sent by telecopier, with receipt confirmed, or one (1)
Business Day after the date of deposit with such nationally recognized overnight
courier. All such notices, claims, certificates, requests, demands and other
communications shall be addressed to the respective parties at the addresses set
forth below or to such other address as the person to whom notice is to be given
may have furnished to the others in writing in accordance herewith.
If to the Buyer, to:
Sonic Auto World, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to the Sellers or the Sellers' Agent, to the Sellers c/o The ▇▇▇▇▇▇
Transportation Group, LLC at the following address:
▇▇▇▇▇▇ Transportation Group, LLC
▇/▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇ Centre
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
33
If to the Shareholders, to:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
▇/▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇ Centre
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇/▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇ Centre
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
in either case, with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
and:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
Suite 1000 Volunteer Building
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
The Buyer, the Sellers or the Shareholders may change the address or
telecopier number to which such communications are to be directed by giving
written notice to the others in the manner provided in this Agreement.
34
12.3 Parties in Interest; No Third Party Beneficiaries.
(a) Subject to Section 12.4 hereof, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
(b) Nothing in this Agreement, expressed or implied, is intended or shall
be construed to confer upon or give to any employee of the Sellers, or any other
person, firm, corporation or legal entity, other than the parties hereto and
their successors and permitted assigns, any rights, remedies or other benefits
under or by reason of this Agreement.
(c) In the case of any Shareholder who is acting in the capacity of a
trustee or in any other fiduciary capacity, the terms, conditions and
obligations of this Agreement shall inure to the benefit of and be binding upon
both the Shareholder and the trust estate represented by such Shareholder, but
such Shareholder acting as a trustee or other fiduciary shall not be personally
liable with respect to the terms, conditions and obligations of this Agreement.
12.4 Assignability. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties, provided that
Buyer may assign its rights under the Agreement to any affiliate of Buyer
presently existing or hereafter formed and to any person or entity that shall
acquire all or substantially all of the assets of the Buyer; provided, however,
that no such assignment by the Buyer shall release it from its obligations
hereunder without the consent of the Sellers.
12.5 Entire Agreement; Amendment. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire understanding
of the parties hereto and supersedes all prior agreements and understandings
between the parties hereto with respect to its subject matter. This Agreement
may be amended or modified only by a written instrument duly executed by the
parties hereto.
12.6 Headings. The article, section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
12.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee, without giving effect to its
principles of conflicts of law.
12.9 Knowledge. Whenever any representation or warranty of the Sellers
contained herein or in any other document executed and delivered in connection
herewith is based upon the
35
knowledge of the Sellers, such knowledge shall be deemed to include the actual
knowledge, if any, of any of the Sellers or any of the Shareholders, as well as
information of which ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ would reasonably
be expected to be aware in the prudent discharge of his duties in the ordinary
course of business (including consultation with legal counsel) on behalf of the
Sellers.
12.10 Jurisdiction; Arbitration. (a) Subject to the other provisions of
this Section 12.10, any judicial proceeding brought with respect to this
Agreement must be brought in any court of competent jurisdiction in the State of
Tennessee, and, by execution and delivery of this Agreement, each party (i)
accepts, generally and unconditionally, the exclusive jurisdiction of such
courts and any related appellate court, and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement, and (ii)
irrevocably waives any objection it may now or hereafter have as to the venue of
any such suit, action or proceeding brought in such court or that such court is
an inconvenient forum.
(b) Any dispute, claim or controversy arising out of or relating to this
Agreement, or the interpretation or breach hereof (including, without
limitation, any of the foregoing based upon a claim to any termination fee
hereunder), shall be resolved by binding arbitration under the commercial
arbitration rules of the American Arbitration Association (the "AAA Rules") to
the extent such AAA Rules are not inconsistent with this Agreement. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm the award
and order its enforcement, as the case may be. The demand for arbitration shall
be made by any party hereto within a reasonable time after the claim, dispute or
other matter in question has arisen, and in any event shall not be made after
the date when institution of legal proceedings, based on such claim, dispute or
other matter in question, would be barred by the applicable statute of
limitations. The arbitration panel shall consist of three (3) arbitrators, one
of whom shall be appointed by each party hereto within thirty (30) days after
any request for arbitration hereunder. The two arbitrators thus appointed shall
choose the third arbitrator within thirty (30) days after their appointment;
provided, however, that if the two arbitrators are unable to agree on the
appointment of the third arbitrator within 30 days after their appointment,
either arbitrator may petition the American Arbitration Association to make the
appointment. The place of arbitration shall be Atlanta, Georgia. The arbitrators
shall be instructed to render their decision within sixty (60) days after their
selection and to allocate all costs and expenses of such arbitration (including
legal and accounting fees and expenses of the respective parties) to the parties
in the proportions that reflect their relative success on the merits (including
the successful assertion of any defenses).
(c) Nothing contained in this Section 12.10 shall (i) prevent any party
hereto from seeking any equitable relief to which it would otherwise be entitled
from a court of competent jurisdiction, or (ii) prevent the Buyer from enforcing
its rights under the Non- Competition Agreement in the State of North Carolina.
12.11 Waivers. Any party to this Agreement may, by written notice to the
other parties hereto, waive any provision of this Agreement from which such
party is entitled to receive
36
a benefit. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision of this Agreement.
12.12 Severability. In the event that any provision, or part thereof, of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions, or parts
thereof, shall not in any way be affected or impaired thereby.
12.13 Expenses. Except as otherwise set forth herein, each party shall be
responsible for its own legal fees and other costs and expenses incurred in
connection with this Agreement and the negotiation and consummation of the
transactions contemplated hereby.
[Signatures begin on following page]
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
THE BUYER: SONIC AUTO WORLD, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
THE SELLERS: KIA OF CHATTANOOGA, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: Chief Manager
EUROPEAN MOTORS OF NASHVILLE, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: Chief Manager
EUROPEAN MOTORS, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: Chief Manager
SP-1
JAGUAR OF CHATTANOOGA LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: Chief Manager
CLEVELAND CHRYSLER-PLYMOUTH-JEEP
EAGLE LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: Chief Manager
▇▇▇▇▇▇ ▇▇▇▇▇▇ DODGE, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: Chief Manager
CLEVELAND VILLAGE IMPORTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: President
SATURN OF CHATTANOOGA, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: President
SP-2
▇▇▇▇▇▇ ▇▇▇▇▇▇ FORD, L.P.
By: Nebco of Southeast Tennessee, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: President
THE SHAREHOLDERS: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ (SEAL)
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Trustee (SEAL)
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Trustee
/s/ ▇▇▇▇▇ ▇▇▇▇▇ (SEAL)
------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ (SEAL)
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (SEAL)
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇ (SEAL)
------------------------------
▇▇▇ ▇▇▇▇▇
SP-3
NEBCO OF SOUTHEAST TENNESSEE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: President
INFINITI OF CHATTANOOGA, INC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Title: President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ TRUST U/W ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇., Trustee
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇., Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Trustee
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Trustee
SP-4
List of Schedules
-----------------
Schedule 1.1(a) - Purchased Assets
Schedule 1.1(b) - Excluded Assets
Schedule 1.1(c) - Permitted Encumbrances
Schedule 1.2 - Assumed Liabilities
Schedule 1.3(c) - Rental Cost Adjustment Procedures
Schedule 1.3(e) - Allocation of Purchase Price and Assumed
Liabilities
Schedule 3.1 - Jurisdictions of Foreign Qualification of
Sellers
Schedule 3.2 - Required Authorizations and Consents to
Agreement
Schedule 3.3(a) - Ownership Interests in Sellers
Schedule 3.3(b) - Investments
Schedule 3.4 - Financial Statements of the Sellers
Schedule 3.5 - Certain Changes
Schedule 3.6(a) - Material Contracts
Schedule 3.6(b) - Required Consents for Transfers of Material
Contracts
Schedule 3.7 - Encumbrances
Schedule 3.8(a) - Real Property; Leased Premises
Schedule 3.9(a) - Equipment
Schedule 3.12 - Approvals, Permits and Authorizations
Schedule 3.13 - Compliance with Laws
Schedule 3.14(a) - Insurance Policies
Schedule 3.14(b) - Property Damage and Personal Injury
Claims
Schedule 3.16 - Litigation
Schedule 3.17 - Powers of Attorney
Schedule 3.19 - Employee Relations
Schedule 3.20 - Compensation
Schedule 3.21 - Patents; Trademarks; Trade Names;
Copyrights; Licenses; Etc. and Proprietary
Names
Schedule 3.23 - Other Liabilities
Schedule 3.24 - Affiliate Transactions
Schedule 3.26 - Employee Plans
Schedule 3.29 - Environmental Matters
Schedule 3.30 - Bank Accounts and Safe Deposit Boxes
Schedule 3.31 - Warranties
Schedule 3.32 - Interests in Competitors
Schedule 3.33 - Availability of Sellers' Employees
Schedule 4.2(a) - Buyer Consents
List of Exhibits
----------------
Exhibit 1.3(A) - Form of Escrow Agreement
Exhibit 1.3(B) - Form of Notes
Exhibit 1.3(C) - Form of Guaranty by Sonic Financial Corporation
Exhibit 1.4(A) - Form of Bills of Sale and Assignment
Exhibit 1.4(B)(1) - Form of Employment Agreement -- ▇▇▇▇▇▇
Exhibit 1.4(B)(2) - Form of Employment Agreement -- ▇▇▇▇▇▇
Exhibit 1.4(C) - Form of Dealership Leases
Exhibit 1.4(D) - Form of Non-Competition Agreement
