AGREEMENT AND PLAN OF MERGER
between and among
CROWN JEEP EAGLE, INC.
BERYLSON, INC. and
XXXXXXX AUTOMOTIVE, LTD.,
and
XXXXX X. XXXXXX and
XXXX X. XXXXXX
and
UNITED AUTO GROUP, INC.,
UAG TEXAS, INC. and
UAG TEXAS II, INC.
dated
December 16, 1996
TABLE OF CONTENTS
ARTICLE 1 THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Surviving Corporation . . . . . . . . . . . . . . . . 2
SECTION 1.2 Certificate of Incorporation . . . . . . . . . . . . 2
SECTION 1.3 Bylaws . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Directors . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 Officers . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.7 Effective Time . . . . . . . . . . . . . . . . . . . 3
SECTION 1.8 Conversion of Companies' Stock . . . . . . . . . . . 3
SECTION 1.9 Treasury Stock . . . . . . . . . . . . . . . . . . . 4
SECTION 1.10 Fractional Shares . . . . . . . . . . . . . . . . . . 4
SECTION 1.11 Exchange of Companies' Stock . . . . . . . . . . . . 4
SECTION 1.12 Net Worth Adjustment . . . . . . . . . . . . . . . . 5
SECTION 1.13 Stock Price Adjustment . . . . . . . . . . . . . . . 7
SECTION 1.14 Piggyback Registration Rights Agreement . . . . . . . 8
SECTION 1.15 Loan Payoff . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.16 Escrow Deposit . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 9
SECTION 2.1 Organization and Good Standing . . . . . . . . . . . 9
SECTION 2.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.3 Capitalization . . . . . . . . . . . . . . . . . . . 10
SECTION 2.4 Authority; Approvals and Consents . . . . . . . . . . 10
SECTION 2.5 Financial Statements . . . . . . . . . . . . . . . . 12
SECTION 2.6 Absence of Undisclosed Liabilities . . . . . . . . . 13
SECTION 2.7 Absence of Material Adverse Effect; Conduct of
Business . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.9 Legal Matters . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.10 Property . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.11 Environmental Matters . . . . . . . . . . . . . . . . 17
SECTION 2.12 Inventories . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.13 Accounts Receivable . . . . . . . . . . . . . . . . . 20
SECTION 2.14 Insurance . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.15 Contracts; etc. . . . . . . . . . . . . . . . . . . . 21
SECTION 2.16 Labor Relations . . . . . . . . . . . . . . . . . . . 21
SECTION 2.17 Employee Benefit Plans . . . . . . . . . . . . . . . 23
SECTION 2.18 Other Benefit and Compensation Plans or Arrangements 25
SECTION 2.19 Transactions with Insiders . . . . . . . . . . . . . 26
SECTION 2.20 Propriety of Past Payments . . . . . . . . . . . . . 27
SECTION 2.21 Interest in Competitors . . . . . . . . . . . . . . . 27
SECTION 2.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.23 Accounts . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.24 Disclosure . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.25 Net Worth and Working Capital . . . . . . . . . . . . 28
SECTION 2.26 Investment Intent . . . . . . . . . . . . . . . . . . 28
ARTICLE 3 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 29
SECTION 3.1 Ownership of Shares; Title . . . . . . . . . . . . . 29
SECTION 3.2 Authority . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.3 Real Property and Improvements . . . . . . . . . . . 30
SECTION 3.4 Qualification of Shareholders . . . . . . . . . . . . 30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 31
SECTION 4.1 Organization and Good Standing . . . . . . . . . . . 31
SECTION 4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.3 Capitalization . . . . . . . . . . . . . . . . . . . 32
SECTION 4.4 SEC Filings . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.5 Authority; Approvals and Consents . . . . . . . . . . 32
SECTION 4.6 Financial Statements . . . . . . . . . . . . . . . . 33
SECTION 4.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.8 Brokers . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.9 Disclosure . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.10 Reorganization Classification; Certain Tax
Representatives . . . . . . . . . . . . . . . . . . . 35
ARTICLE 5 COVENANTS AND ADDITIONAL AGREEMENTS . . . . . . . . 36
SECTION 5.1 Access; Confidentiality . . . . . . . . . . . . . . . 36
SECTION 5.2 Furnishing Information; Announcements . . . . . . . . 37
SECTION 5.3 Antitrust Improvements Act Compliance . . . . . . . . 37
SECTION 5.4 Certain Changes and Conduct of Business . . . . . . . 37
SECTION 5.5 No Intercompany Payables or Receivables . . . . . . . 40
SECTION 5.6 Negotiations . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.7 Consents; Cooperation . . . . . . . . . . . . . . . . 41
SECTION 5.8 Additional Agreements . . . . . . . . . . . . . . . . 42
SECTION 5.9 Interim Financial Statements . . . . . . . . . . . . 42
SECTION 5.10 Notification of Certain Matters . . . . . . . . . . . 42
SECTION 5.11 Assurance by the Shareholders . . . . . . . . . . . . 43
SECTION 5.12 Broker's Fee . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.13 Shareholder Vote; No Appraisal Rights . . . . . . . . 43
SECTION 5.14 Continuity of Shareholder Interest . . . . . . . . . 43
SECTION 5.15 Continuity of Business . . . . . . . . . . . . . . . 44
SECTION 5.16 Crown Jeep Loans. . . . . . . . . . . . . . . . . . . 44
SECTION 5.17 Personal Guarantees. . . . . . . . . . . . . . . . . 44
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS . . . . . . . . . . . . . . 44
SECTION 6.1 Representations and Warranties; Agreements;
Covenants . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.2 Authorization; Consents . . . . . . . . . . . . . . . 45
SECTION 6.3 Opinion of the Companies' and the Shareholders'
Counsel . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.4 Absence of Litigation . . . . . . . . . . . . . . . . 45
SECTION 6.5 No Material Adverse Effect . . . . . . . . . . . . . 46
SECTION 6.6 Net Worth and Working Capital Requirements .......... 46
SECTION 6.7 Completion of Due Diligence . . . . . . . . . . . . . 46
SECTION 6.8 Board Approval . . . . . . . . . . . . . . . . . . . 46
SECTION 6.9 Stockholder Approval . . . . . . . . . . . . . . . . 46
SECTION 6.10 Certificates . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.11 Legal Matters . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.12 Net Income . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.13 Approval of Manufacturer and Distributor ...... . . . 47
SECTION 6.14 Employment Agreement . . . . . . . . . . . . . . . . 47
SECTION 6.15 Environmental Laws . . . . . . . . . . . . . . . . . 47
SECTION 6.16 Nondisturbance Agreements . . . . . . . . . . . . . . 47
SECTION 6.17 Title Insurance . . . . . . . . . . . . . . . . . . . 47
SECTION 6.18 Memorandum of Leases . . . . . . . . . . . . . . . . 48
SECTION 6.19 Schedules . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.20 Registration Rights Agreement . . . . . . . . . . . . 48
SECTION 6.21 Estoppel Certificates . . . . . . . . . . . . . . . . 48
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS
TO EFFECT THE CLOSING . . . . . . . . . . . .. . . . . . . 48
SECTION 7.1 Representations and Warranties; Agreements ......... 48
SECTION 7.2 Authorization of the Agreement, Consents ......... . 49
SECTION 7.3 Opinions of UAG's Counsel . . . . . . . . . . . . . . 49
SECTION 7.4 Absence of Litigation . . . . . . . . . . . . . . . . 49
SECTION 7.5 Certificates . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.6 Legal Matters . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.7 Employment Agreement . . . . . . . . . . . . . . . . 50
SECTION 7.8 Registration Rights Agreement . . . . . . . . . . . . 50
ARTICLE 8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.1 Termination . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.2 Effect of Termination . . . . . . . . . . . . . . . . 51
ARTICLE 9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.1 Indemnification by the Shareholders . . . . . . . . . 51
SECTION 9.2 Indemnification by UAG . . . . . . . . . . . . . . . 52
SECTION 9.3 Procedures . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.4 Remedies . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.1 Survival of Provisions . . . . . . . . . . . . . . . 54
SECTION 10.2 Fees and Expenses . . . . . . . . . . . . . . . . . . 55
SECTION 10.3 Headings . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.5 Assignment . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.6 Entire Agreement . . . . . . . . . . . . . . . . . . 57
SECTION 10.7 Waiver and Amendments . . . . . . . . . . . . . . . . 57
SECTION 10.8 Counterparts . . . . . . . . . . . . . . . . . . . . 57
SECTION 10.9 Accounting Terms . . . . . . . . . . . . . . . . . . 58
SECTION 10.10 Certain Miscellaneous Definitions . . . . . . . . . . 58
SECTION 10.11 Schedules . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.12 Severability . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.13 Remedies . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.14 Number, Gender . . . . . . . . . . . . . . . . . . . 59
SECTION 10.15 Governing Law . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.16 Right of First Refusal . . . . . . . . . . . . . . . 59
1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated December
16, 1996, is between and among (i) CROWN JEEP EAGLE, INC., a Delaware
corporation ("Crown Jeep"), BERYLSON, INC., a Texas corporation ("Berylson"
and, together with Crown Jeep, the "Companies") and XXXXXXX AUTOMOTIVE, LTD.,
a Texas limited partnership d/b/a Crown Dodge and Crown Jeep Eagle Chrysler
Plymouth (the "Partnership"); (ii) XXXXX X. XXXXXX, an individual resident of
the State of Texas ("Xxxxxx") and XXXX X. XXXXXX, an individual resident of
the State of Texas ("Xxxxxx" and together with Xxxxxx, the "Shareholders");
and (iii) UNITED AUTO GROUP, INC., a Delaware corporation ("Purchaser" or
"UAG"), UAG TEXAS, INC., a Delaware corporation ("UAG Texas") and UAG TEXAS
II, INC., a Delaware corporation ("UAG Texas II" and, together with UAG Texas,
the "Merger Subs" and individually a "Merger Sub").
W I T N E S S E T H:
WHEREAS, the Partnership is a Texas limited partnership operating
franchise automobile dealerships and related businesses in Houston, Texas
under the names Crown Dodge and Crown Jeep Eagle Chrysler Plymouth; and
WHEREAS, Crown Jeep is a general and limited partner of the
Partnership with a ninety-nine (99%) percent capital interest;
WHEREAS, Berylson is a limited partner of the Partnership with a one
(1%) percent capital interest; and
WHEREAS, Xxxxxx owns one hundred (100%) percent of the issued and
outstanding shares of capital stock of Crown Jeep (the "Crown Jeep Stock");
and
WHEREAS, Xxxxxx owns one hundred (100%) of the issued and outstanding
shares of capital stock of Berylson (the "Berylson Stock"); and
WHEREAS, UAG owns all of the issued and outstanding capital stock of
each of the Merger Subs; and
WHEREAS, each of the respective Shareholders of each of the Companies
has approved this Agreement, and the transactions contemplated hereby,
pursuant to action taken by unanimous written consent in accordance with the
requirements of applicable law and the articles or certificate of
incorporation and the bylaws of each such Company; and
WHEREAS, UAG desires to acquire by merger the businesses of the
Companies upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
2
ARTICLE 1
THE MERGERS
SECTION 1.1 Surviving Corporation.
Subject to the terms and conditions of this Agreement, the Texas
Business Corporation Act (the "TBCA") and the Delaware General Corporation Law
(the "DGCL"), at the Effective Time (as defined in Section 1.7), Crown Jeep
shall be merged with and into UAG Texas (the "Crown Jeep Merger") and Berylson
shall be merged with and into UAG Texas II (the "Berylson Merger" and,
together with the Crown Jeep Merger, the "Mergers") and the separate corporate
existences of Crown Jeep and Berylson shall cease. UAG Texas and UAG Texas II
shall be the surviving corporations in the Mergers (hereinafter sometimes
referred to as the "Surviving Corporations") and shall continue their
corporate existences under the laws of the State of Delaware.
SECTION 1.2 Certificate of Incorporation.
The certificate of incorporation of the respective Merger Subs shall
be the certificate of incorporation of the respective Surviving Corporations
until thereafter duly amended in accordance with their terms and the DGCL.
SECTION 1.3 Bylaws.
The bylaws of the respective Merger Subs shall be the bylaws of the
respective Surviving Corporations until thereafter duly amended in accordance
with their terms and the DGCL.
SECTION 1.4 Directors.
The directors of the respective Surviving Corporations shall consist
of the persons who are the directors of Merger Subs immediately prior to the
Effective Time, such directors to hold office from the Effective Time until
their respective successors are duly elected and qualified.
SECTION 1.5 Officers.
The officers of the respective Surviving Corporations shall be the
officers of the respective Merger Subs immediately prior to the Effective
Time, such officers to hold office from the Effective Time until their respec-
tive successors are duly elected and qualified.
SECTION 1.6 Closing.
(a) The Closing shall take place on or before January 31, 1997 (the
"Closing Date") at a time and place to be agreed to by the parties. If, on or
before the Closing Date, all of the conditions set forth herein shall have
been fulfilled or waived in accordance with the terms hereof and this
Agreement shall not have been terminated in accordance with Article 8, then
the
3
Mergers shall be consummated (the "Merger Closings") on the Closing Date.
(b) Subject to the conditions set forth in this Agreement, at the
time of the Merger Closings:
(i) the Shareholders shall execute and deliver to UAG
certificates representing the Crown Jeep Stock and Berylson Stock, duly
endorsed in blank, or with separate notarized stock powers attached
thereto and signed in blank, free and clear of all liens, security
interests, claims, restrictions, and any other encumbrances whatsoever, in
exchange for the delivery by UAG to the Shareholders of (A) certificates
representing UAG Common Stock and (B) funds as set forth in Sections 1.8-
1.11 hereof;
(ii) the Partnership shall enter into an Employment Agreement
with Xxxxxx (the "Xxxxxx Employment Agreement") in substantially the form
attached hereto as Exhibit A;
(iii) the Merger Subs shall assume or pay off the Crown Jeep
Loans as set forth in Section 1.15 hereof; and
(iv) UAG and Xxxxxx shall enter into the Registration Rights
Agreement as set forth in Section 1.14 hereof.
SECTION 1.7 Effective Time.
At the time of the Merger Closings as determined in accordance with
Section 1.6, the parties hereto shall cause certificates of merger meeting the
requirements of the DGCL and articles of merger meeting the requirements of
the TBCA (collectively, the "Merger Certificates") to be properly executed and
filed with the Secretaries of State of the States of Texas and Delaware, as
applicable. The Mergers shall become effective at the time specified in each
of the Merger Certificates, which shall be on the date of the Merger Closings
as determined pursuant to Section 1.6. The date and time when the Mergers
become effective is hereinafter referred to as the "Effective Time".
SECTION 1.8 Conversion of Companies' Stock.
As of the Effective Time, by virtue of the Mergers and without any
action on the part of any holder thereof:
(a) all of the shares of the common stock of Crown Jeep issued and
outstanding immediately prior to the Effective Time shall be converted into
the right to receive (i) cash in an aggregate amount of Two Million Eight
Hundred Forty-Eight Thousand Eight Hundred Dollars ($2,848,800), less the
amount of any distributions made by Crown Jeep to Xxxxxx from the date hereof
until the Closing Date (other than distributions of earnings attributable to
periods after September 30, 1996 which
4
do not have the effect of decreasing the Partnership's New Worth below its
September 30, 1996 Net Worth) (the "Xxxxxx Distributions"); and (ii) shares of
common stock, par value $.0001 per share of UAG ("UAG Common Stock") having an
aggregate Agreed Value (as defined below) on the Closing Date equal to Six
Million Four Hundred Thirty-Six Thousand Two Hundred ($6,436,200) Dollars (the
"Xxxxxx Shares"). For purposes of this Agreement, Agreed Value shall mean
Twenty-three and 50/100 Dollars ($23.50) per share which is the closing bid
price per share of UAG Common Stock, rounded to four decimal places on the
last trading day prior to the date of this Agreement; and
(b) all of the shares of the common stock of Berylson issued and
outstanding immediately prior to the Effective Time shall be converted into
the right to receive (i) cash in an aggregate amount of One Hundred Fifty-One
Thousand Two Hundred Dollars ($151,200) less the amount of any distributions
made by Berylson to Xxxxxx from the date hereof until the Closing Date (other
than distributions of earnings attributable to periods after September 30,
1996 which do not have the effect of decreasing the Partnership's Net Worth
below its September 30, 1996 Net Worth (the "Xxxxxx Distributions" and,
together with the Xxxxxx Distributions, the "Additional Distributions") and
(ii) shares of UAG Common Stock having an aggregate Agreed Value on the
Closing Date equal to Five Hundred Sixty-Three Thousand Eight Hundred Dollars
($563,800) (the "Berylson Shares" and together with the Xxxxxx Shares, the
"Shares").
SECTION 1.9 Treasury Stock.
Each share of the Companies' stock issued and outstanding immediately
prior to the Effective Time that is then held in the treasury of any of the
Companies shall be retired, without any conversion thereof or payment of any
consideration therefor.
SECTION 1.10 Fractional Shares.
No script or fractional shares of UAG Common Stock shall be issued in
the Mergers. All fractional shares of UAG Common Stock to which a Shareholder
would otherwise be entitled shall be aggregated. If a fractional share
results from such aggregation, then the number of shares of UAG Common Stock
to which such Shareholder shall be entitled shall be rounded up or down to the
nearest whole share of UAG Common Stock.
SECTION 1.11 Exchange of Companies' Stock.
(a) Exchange. At the time of the Merger Closings, subject to the
terms and conditions hereof, upon surrender by each Shareholder of all
certificates that, immediately prior to the Effective Time, represented shares
of the Companies' stock held by each Shareholder ("Certificates"), UAG shall
deliver to such Shareholder (i) stock certificates (properly issued, executed
and countersigned, as appropriate) representing the aggregate number of whole
shares of UAG Common Stock to which such Shareholder shall have become
entitled pursuant to the
5
provisions of Section 1.8; and (ii) funds in an aggregate amount equal to the
amount of funds to which such Shareholder shall have become entitled pursuant
to Section 1.8 (less the amount of the Escrow Deposit paid to such Shareholder
pursuant to Section 1.16) by certified check or wire transfer to an account
designated in writing by such Shareholder, and the Certificates so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the cash
payable upon the surrender of the Certificates. From the Effective Time until
surrender in accordance with the provisions of this Section 1.11, each
Certificate shall represent for all purposes only the right to receive the
consideration provided for herein.
(b) No Transfers After Effective Time. After the Effective Time,
there shall be no transfers on the stock transfer books of the Surviving
Corporation of the shares of Companies' stock that were outstanding
immediately prior to the Effective Time.
SECTION 1.12 Net Worth Adjustment.
(a) As soon as practicable after the Closing Date, the Shareholders
shall deliver to UAG a balance sheet of the Partnership dated as of the
Closing Date (such balance sheet so delivered is referred to herein as the
"Closing Date Balance Sheet"). The Closing Date Balance Sheet shall be
prepared in good faith on the same basis and in accordance with the accounting
principles, methods and practices used in preparing the Financial Statements
(as defined in Section 2.5 hereof) (such accounting principles, methods and
practices and such procedures, are referred to herein as the "Accounting
Principles"). In connection with the preparation of the Closing Date Balance
Sheet, the Shareholders and the Companies and the Reviewer (as defined below)
and other representatives of UAG will conduct a physical inventory at each
location where inventory is held by the Companies and the Partnership. From
the results of such inventory and prior to the Closing Date, UAG and the
Shareholders (or the respective representatives thereof) will prepare a
schedule, which shall be signed by each of UAG and the Shareholders, setting
forth the nature and quality of such inventory and such other items as shall
be agreed upon by UAG and the Shareholders to be included in the Closing Date
Balance Sheet.
(b) Within sixty (60) days after delivery of the Closing Date Balance
Sheet, (i) Coopers & Xxxxxxx or such other national accounting firm (the
"Reviewer") as may be selected by UAG, shall audit or otherwise review the
Closing Date Balance Sheet in such manner as UAG and the Reviewer deem
appropriate, and (ii) UAG shall deliver such reviewed balance sheet (the
"Reviewed Balance Sheet"), together with the Reviewer's report thereon, to the
Shareholders. The Reviewed Balance Sheet (i) shall be prepared on the same
basis and in accordance with the Accounting Principles and (ii) shall include
a schedule showing the computation of the Final Net Worth (as defined in
Section 1.12(g)(i) hereof), computed in accordance with the definition of
6
Net Worth set forth in Section 1.12(g)(iii) hereof. UAG and the Reviewer
shall have the opportunity to consult with the Shareholders, the Companies,
the Partnership and each of the accountants and other representatives of the
Shareholders, the Companies and the Partnership and examine the work papers,
schedules and other documents prepared by the Shareholders, the Companies, the
Partnership and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheet. The Shareholders and the
Shareholders' independent public accountants shall have the opportunity to
consult with the Reviewer and examine the work papers and schedules prepared
by UAG and the Reviewer during the preparation of the Reviewed Balance Sheet.
(c) The Shareholders shall have a period of forty-five (45) days
after delivery to the Shareholders of the Reviewed Balance Sheet to present in
writing to UAG all objections the Shareholders may have to any of the matters
set forth or reflected therein, which objections shall be set forth in
reasonable detail. During said forty-five (45) day period, the Shareholders,
their accountants and other representatives of the Shareholders may, at the
office of the Dealerships or the office of the Reviewer, examine Reviewer's
work papers and schedules, which relate to the Closing Date Balance Sheet or
Reviewed Balance Sheet and any entry thereto made by Reviewer. If no
objections are raised within such 45-day period, the Reviewed Balance Sheet
shall be deemed accepted and approved by the Shareholders and a supplemental
closing (the "Supplemental Closing") shall take place within five (5) Business
Days following the expiration of such 45-day period, or on such other date as
may be mutually agreed upon in writing by UAG and the Shareholders.
(d) If the Shareholders shall raise any objection within the 45-day
period, UAG and the Shareholders shall attempt to resolve the matter or
matters in dispute and, if resolved, the Supplemental Closing shall take place
within five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Shareholders
within ninety (90) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a firm of independent
certified public accountants having a reputation for special expertise in
automobile dealership accounting and mutually acceptable to UAG and the
Shareholders, which firm shall make a final and binding determination as to
such matter or matters. Such accounting firm shall send its written
determination to UAG and the Shareholders and the Supplemental Closing, if
any, shall take place five (5) Business Days following the receipt of such
determination by UAG and the Shareholders. The fees and expenses of the
accounting firm referred to in this Section 1.12(e) shall be paid one half by
UAG and one half by the Shareholders.
(f) UAG and the Shareholders agree to cooperate with each other and
each other's authorized representatives and with
7
any accounting firm selected by UAG and the Shareholders pursuant to Section
1.12 (e) hereof in order that any and all matters in dispute shall be resolved
as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of Sections 1.12 (a) through (e)
hereof plus the amount of the Additional Distributions (such amount being
referred to herein as the "Final Net Worth") shall be less than the Net Worth
of the Partnership as set forth on the Partnership's September 30, 1996
balance sheet (which balance sheet is attached hereto as Schedule 1.12(g))
plus any LIFO increment recorded up to the date of the Closing Date Balance
Sheet (the amount of any such deficiency being referred to herein as the "Net
Worth Deficiency"), the Shareholders shall pay to UAG at the Supplemental
Closing, by wire transfer of immediately available funds to an account
designated in writing by UAG within two (2) Business Days of the date of the
Supplemental Closing, an amount equal to the Net Worth Deficiency, together
with interest on such amount from the Closing Date to the date of the Supple-
mental Closing at the prime rate or its equivalent (as announced from time to
time by Citibank, N.A.).
(ii) If the Final Net Worth shall be more than the Net Worth of
the Partnership as set forth in the Partnership's September 30, 1996 Balance
Sheet plus any LIFO increment recorded up to the date of the Closing Date
Balance Sheet (the amount of any such surplus being referred to herein as the
"Net Worth Surplus"), UAG shall pay to the Shareholders at the Supplemental
Closing, by wire transfer of immediately available funds to an account
designated in writing by the Shareholders within two (2) Business Days of the
date of the Supplemental Closing, an amount equal to the Net Worth Surplus,
together with interest on such amount from the Closing Date to the date of the
Supplemental Closing at the prime rate or its equivalent (as announced from
time to time by Citibank, N.A.).
(iii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which
the total assets exceed the total liabilities reflected, in each case, on the
balance sheet of the Partnership comprising the Closing Date Balance Sheet or
the Reviewed Balance Sheet.
SECTION 1.13 Stock Price Adjustment.
If the UAG Market Value on the Adjustment Date (as defined below) is
less than the Agreed Value (the amount of any such deficiency being referred
to herein as the ("Stock Price Deficiency") then, no later than sixty (60)
days after the Adjustment Date, UAG shall pay to each Shareholder cash in an
amount equal to the Stock Price Deficiency multiplied by the number of Shares
such Shareholder is permitted to sell on the Adjustment Date.
8
For purposes of this Agreement, the Adjustment Date shall mean the
earlier of (i) the date on which the Shares are registered pursuant to the
Registration Rights Agreement or (ii) the date on which the Shareholders may
sell the Shares consistent with the provisions of this Agreement and in
reliance on Rule 144 promulgated by the Securities and Exchange Commission
("SEC") pursuant to the Securities Act of 1933, as amended ("Rule 144").
For purposes of this Agreement, UAG Market Value shall mean the
arithmetic average of the daily closing price per share of UAG Common Stock,
rounded to four decimal places, as reported on the New York Stock Exchange
Composite Tape for each of the twenty (20) consecutive trading days ending
(and including) the trading day that occurs one trading day prior to the date
on which the UAG Market Value is to be determined.
If any Shareholder is not permitted to sell all of his Shares on the
Adjustment Date as a result of any volume restrictions set forth in Rule 144
and the UAG Market Value ninety days after the Adjustment Date is less than
the Agreed Value (the amount of any such deficiency being referred to herein
as the ("Remaining Stock Price Deficiency") then, no later than one hundred
and fifty (150) days after the Adjustment Date, UAG shall pay to such
Shareholder cash in an amount equal to the Remaining Stock Price Deficiency
multiplied by the number of Shares that such Shareholder was not permitted to
sell on the Adjustment Date.
SECTION 1.14 Piggyback Registration Rights Agreement.
At the time of the Merger Closings, UAG and Xxxxxx shall enter into a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit B.
SECTION 1.15 Loan Payoff.
At the time of the Merger Closings, UAG shall assume or pay off
certain indebtedness owed by Crown Jeep to Bank of America and Xxxxxxx X. Way
and Xxxxx Way which indebtedness shall not exceed Four Million ($4,000,000)
Dollars (the "Crown Jeep Loans"). If the indebtedness is less than Four
Million ($4,000,000) Dollars then UAG will pay to Xxxxxx the difference
between the amount of the indebtedness and Four Million ($4,000,000) Dollars
(the "Loan Difference") in addition to the amount computed in accordance with
Section 1.8(a). UAG may, at its option, elect to pay the Loan Difference in
cash or to deliver to Xxxxxx shares of UAG Common Stock having an aggregate
UAG Market Value equal to the Loan Difference (which shares shall be included
within the definition of Shares for purposes of this Agreement.)
SECTION 1.16 Escrow Deposit.
Within three (3) business days of the execution of this Agreement, UAG
will deposit into escrow funds in the amount of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Escrow
9
Deposit") by delivering such funds to Xxxxxx & Xxxxxx (the "Escrow Agent")
which Escrow Deposit shall be held and disbursed by the Escrow Agent pursuant
to the terms of an escrow agreement in substantially the form attached hereto
as Exhibit "C".
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE PARTNERSHIP, THE COMPANIES AND THE SHAREHOLDERS
Subject to the parties' agreement that certain of the Schedules
referred to in this Article 2 are to be delivered by the Partnership, the
Companies and the Shareholders no later than December 20, 1996, the
Partnership, the Companies and the Shareholders hereby jointly and severally
represent and warrant to UAG and the Merger Subs as follows:
SECTION 2.1 Organization and Good Standing.
The Companies are corporations duly organized, validly existing and in
good standing in their respective states of incorporation and have the
corporate power and authority to own, lease and operate the properties used in
their businesses and to carry on their businesses as now being conducted. The
Companies are duly qualified to do business and are in good standing as a
foreign corporation in each state and jurisdiction where qualification as a
foreign corporation is required, except for such failures to be qualified and
in good standing, if any, which when taken together with all other such
failures of the Companies would not, or could not reasonably be expected to,
in the aggregate have a Material Adverse Effect (as defined in Section 10.10).
Schedule 2.1(a) hereto lists (i) the states and other jurisdictions where the
Companies are so qualified and (ii) the assumed names under which the
Companies conduct business. Attached hereto as Schedule 2.1(b) are complete
and correct copies of each of the Companies charter and bylaws (including
comparable governing instruments with different names), as amended and
presently in effect.
The Partnership is a limited partnership duly organized, validly
existing and in good standing in the State of Texas and has the power and
authority to own, lease and operate the properties used in its businesses and
to carry on its businesses as they are now being conducted. The Partnership
conducts business only in the State of Texas. Attached hereto as Schedule
2.1(c) are true and correct copies of the Partnership's Certificate of Limited
Partnership, as amended and presently in effect (the "LP Certificate") and the
Partnership's limited partnership agreement, as amended and presently in
effect (the "Limited Partnership Agreement"). The Partnership is not in
violation of any of the provisions of the Certificate or the Partnership
Agreement.
10
SECTION 2.2 Subsidiaries.
The Companies do not have any interest or investment in any Person (as
defined in Section 10.10) other than the Partnership. The Partnership does
not have any interest or investment in any Person.
SECTION 2.3 Capitalization.
The authorized stock of the Companies and the number of shares of
capital stock which are issued and outstanding are set forth on Schedule
2.3(a) hereto. The shares listed on Schedule 2.3(a) hereto constitute all the
issued and outstanding shares of capital stock of the Companies and have been
validly authorized and issued, are fully paid and nonassessable, have not been
issued in violation of any preemptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
There is no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent,
that directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Companies or any securities
convertible into, or other rights to acquire, any shares of capital stock of
the Companies, or (ii) obligates the Companies to grant, offer or enter into
any of the foregoing, or (iii) relates to the voting or control of such
capital stock, securities or rights. The Companies have not agreed to
register any securities under the Securities Act of 1933, as amended (the
"Securities Act").
Each partner holds of record and owns beneficially the partnership
interest set forth next to its name on Schedule 2.3(b) hereto, free and clear
of any restrictions on transfer (other than restrictions set forth in the
Partnership Agreement and any restrictions under federal securities laws),
liens, encumbrances, options, warrants, purchase rights, contracts,
commitments, equities, demands, pledges, and all other claims of any type. No
partner is a party to any option, warrant, purchase right, pledge agreement,
or other contract or commitment that could require the partner to sell,
transfer or otherwise dispose of all or any part of its partnership interest
(other than this Agreement).
SECTION 2.4 Authority; Approvals and Consents.
The Companies have the corporate power and authority to enter into
this Agreement and the Documents to which they are a party and to perform
their obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Documents to which they are a party and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized and approved by the Board of Directors of each of the
Companies and no other corporate proceedings on the part of the Companies are
necessary to authorize and approve this Agreement and the transactions contem-
plated hereby and thereby. This Agreement has been duly executed and
delivered by, and
11
constitutes valid and binding obligations of, each of the Companies,
enforceable against the Companies in accordance with its respective terms.
The execution and delivery of this Agreement and any other instruments
to be executed and delivered by the Partnership pursuant hereto and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Partnership. No other act or proceeding on the part of
the Partnership or its partners is necessary to authorize this Agreement, the
other instruments to be executed and delivered by the Partnership pursuant
hereto or the transactions contemplated hereby or thereby. This Agreement
constitutes, and when executed and delivered the other instruments to be
executed and delivered by the Partnership pursuant hereto will constitute, the
legal, valid and binding agreements of such Partnership, enforceable against
the Partnership in accordance with their respective terms.
The execution, delivery and performance by each of the Companies, the
Partnership and each Shareholder of this Agreement and the Documents to which
it or he is a party and the consummation of the transactions contemplated
hereby and thereby do not and will not:
(a) contravene any provisions of the Articles of Incorporation or
ByLaws (including any comparable governing instrument with a different name)
of either of the Companies or any provisions of the LP Certificate or the
Limited Partnership Agreement;
(b) (after notice or lapse of time or both) conflict with, result in
a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any Company Agreement (as defined in Section 2.15)
or, except as set forth on Schedule 2.4 hereto, require any consent or waiver
of any party to any Company Agreement;
(c) result in the creation of any security interest upon, or any
person obtaining any right to acquire, any properties, assets or rights of the
Companies or the Partnership (other than the rights of the Merger Subs
hereunder);
(d) violate or conflict with any Legal Requirements (as defined in
Section 2.9) applicable to the Companies or the Partnership or any of their
respective businesses or properties; or
(e) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any governmental,
administrative or judicial authority, except in connection with or in
compliance with the provisions of the H-S-R Act (as defined in Section 5.3).
12
Except as set forth or referred to above, no authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any governmental administrative or judicial authority is
necessary to be obtained or made by the Companies or the Partnership to enable
the Companies and the Partnership to continue to conduct their respective
businesses and operations and use their respective properties after the
Closing in a manner which is in all material respects consistent with that in
which they are presently conducted.
SECTION 2.5 Financial Statements.
Except as otherwise indicated below, attached as Schedule 2.5 hereto
are true and complete copies of:
(a) the audited balance sheets of the Partnership as of December 31
in each of the years 1993, 1994 and 1995, and the related consolidated
statements of income, changes in partners' capital and cash flow for the
fiscal years ended on such dates, together with the notes thereto, in each
case examined by and accompanied by the report of independent certified public
accountants;
(b) the unaudited balance sheets of the Companies as of December 31,
1995 and September 30, 1996 (the "Company Balance Sheets"); and
(c) the most recent monthly and year-to-date financial statements
provided to each franchiser of the Dealerships (each, a "Company Factory
Statement" and, collectively, the "Company Factory Statements") and the
Company Factory Statements as of September 30, 1996;
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Financial Statements"). The Financial
Statements are in accordance with the books and records of the Partnership and
the Companies, fairly present the financial position, results of operations,
shareholders' equity, partners' capital accounts and changes in financial
position of the Partnership and the Companies as of the dates and for the
periods indicated in conformity with GAAP consistently applied (except as
otherwise indicated in such statements) during such periods, and can be
legitimately reconciled with the financial statements and the financial
records maintained and the accounting methods applied by the Companies and the
Partnership for federal income tax purposes, and the unaudited financial
statements included in the Financial Statements indicate all adjustments,
which consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the Financial Statements
do not contain any items of special or nonrecurring income except as expressly
specified therein, and the balance sheets included in the Financial Statements
do not reflect any write-up or revaluation increasing the book value of any
assets. The books and accounts of the Companies and the Partnership are
complete
13
and correct in all material respects and fairly reflect all of the
transactions, items of income and expense and all assets and liabilities of
the businesses of the Companies and the Partnership and are consistent with
prior practices of the Companies and the Partnership.
SECTION 2.6 Absence of Undisclosed Liabilities.
The Companies and the Partnership do not have any known liability of
any nature whatsoever (due or to become due, accrued, absolute, contingent or
otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Section 2.18 and 2.19
or liabilities for Taxes (as defined in Section 2.8), except for (i)
liabilities reflected or reserved against on the most recent Financial
Statements and (ii) liabilities disclosed on Schedule 2.6 hereto. The Com-
panies and the Partnership are not parties to any Company Agreement, or
subject to any charter or bylaw provision, any other corporate limitation, any
provision of the Limited Partnership Agreement or any Legal Requirement, which
has, or can reasonably be expected to have, a Material Adverse Effect.
SECTION 2.7 Absence of Material Adverse Effect; Conduct of Business.
(a) Since December 31, 1995, the Companies and the Partnership have
operated in the ordinary course of business consistent with past practice,
except as set forth on Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Companies or the Partnership, and no factor, event, condition,
circumstance or prospective development exists which threatens or may
threaten to have a Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty
to the property or other assets of the Companies or the Partnership,
whether or not covered by insurance;
(iii) any change in any method of accounting or accounting
practice of the Companies or the Partnership; or
(iv) any loss of the employment, services or benefits of any
key employee of the Companies or the Partnership.
(b) Since December 31, 1995, except as set forth in Schedule 2.7(b)
hereto, the Companies and the Partnership have not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except
14
in the ordinary course of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets;
(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected
in the Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any products or
product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to do
any of the foregoing.
SECTION 2.8 Taxes.
The Companies and the Partnership and, for any period during all or
part of which the tax liability of any other corporation was determined on a
combined or consolidated basis with the Companies or the Partnership, any such
other corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes (as
15
defined below) and all other information required to be reported thereon and
have paid, or made adequate provision for the payment of, all Taxes which are
due pursuant to such returns or pursuant to any assessment received by the
Companies or the Partnership or any such other corporation. As used herein,
"Taxes" shall mean all taxes, fees, levies or other assessments, including but
not limited to income, excise, property, sales, franchise, withholding, social
security and unemployment taxes imposed by the United States, any state,
county, local or foreign government, or any subdivision or agency thereof or
taxing authority therein, and any interest, penalties or additions to tax
relating to such taxes, charges, fees, levies or other assessments. Copies of
all tax returns for the fiscal years ended since December 31, 1986 have been
furnished to UAG or its representatives and such copies are accurate and
complete as of the date hereof. The Companies and the Partnership have also
furnished to UAG correct and complete copies of all notices and correspondence
sent or received since December 31, 1986 by the Companies or the Partnership
to or from any federal, state or local tax authorities. The Companies and the
Partnership have adequately reserved for the payment of all Taxes with respect
to periods ended on, prior to or through the Closing Date for which tax
returns have not yet been filed. In the ordinary course, the Companies and
the Partnership make adequate provision on their books for the payment of all
Taxes (including for the current fiscal period) owed by the Companies or the
Partnership. Except to the extent reserves therefor are reflected on the
Financial Statements or on Schedule 2.8 hereto, the Companies and the
Partnership are not liable, and will not become liable, for any Taxes for any
period ending on, prior to or through the Closing Date. The Companies and the
Partnership have not been subject to a federal or state tax audit of any kind,
and no adjustment has been proposed by the Internal Revenue Service ("IRS")
with respect to any return for any subsequent year. Neither the Companies,
the Partnership nor any Shareholder knows of any basis for an assertion of a
deficiency for Taxes against the Companies or the Partnership. The Share-
holders will cooperate, and will cause their Affiliates to cooperate, with the
Companies and the Partnership in the filing of any returns and in any audit or
refund claim proceedings involving Taxes for which the Companies or the
Partnership may be liable or with respect to which the Companies or the
Partnership may be entitled to a refund.
SECTION 2.9 Legal Matters.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the
Companies, the Partnership or the Shareholders, threatened against or
affecting, the Companies or the Partnership, any ERISA Plan (as defined in
Section 2.18(a)) or any of the Companies or the Partnership's respective
assets, properties or rights before or by any court, arbitrator, panel, agency
or other governmental, administrative or judicial entity, domestic or foreign,
nor is any basis known to the Shareholders, the Companies or the Partnership
for any
16
such Claims, and (ii) the Companies and the Partnership are not subject to any
judgment, decree, writ, injunction, ruling or order (collectively,
"Judgments") of any governmental, administrative or judicial authority,
domestic or foreign. Schedule 2.9(a) hereto identifies each Claim and Judg-
ment disclosed thereon which is fully covered by an insurance policy.
(b) The businesses of the Companies and the Partnership are being
conducted in compliance with all laws, ordinances, codes, rules, regulations,
standards, judgments and other requirements of all governmental,
administrative or judicial entities (collectively, "Legal Requirements")
applicable to the Companies, the Partnership or any of their respective busi-
nesses or properties. The Companies and the Partnership hold, and are in com-
pliance with, all franchises, licenses, permits, registrations, certificates,
consents, approvals or authorizations (collectively, "Permits") required by
all applicable Legal Requirements. A list of all such permits is set forth on
Schedule 2.9(b) hereto.
(c) The Companies and the Partnership own or hold all Permits
material to the conduct of their respective businesses. No event has occurred
and is continuing which permits, or after notice or lapse of time or both
would permit, any modification or termination of any Permit.
SECTION 2.10 Property.
(a) The properties and assets owned by or leased to the Companies and
the Partnership are adequate for the conduct of the respective businesses of
the Companies and the Partnership as presently conducted. Set forth on
Schedule 2.10(a) hereto is a list of all interests in real property owned by
or leased to the Companies or the Partnership (including all real property
owned or leased by the Shareholders (directly or indirectly) and used in the
businesses of the Companies or the Partnership) and of all options or other
contracts to acquire any such interest (collectively, the "Real Property").
With respect to any leased Real Property, there are no defaults by either
party thereto under such leases and true and correct copies of such leases
(the "Leases") are attached to Schedule 2.10(b) hereto. All improvements to
the Real Property ("Improvements") and all machinery, equipment and other
tangible property owned or used by or leased to the Companies, or the
Partnership are in good operating condition and in good repair and are fit for
the particular purposes for which they are used by the Companies and the
Partnership, subject only to ordinary wear and tear. Such tangible properties
and all Improvements owned or leased by the Companies or the Partnership
conform in all material respects with all applicable laws, ordinances, rules
and regulations and other Legal Requirements and such Improvements do not
encroach in any respect on property of others. The Real Property is currently
zoned to permit the conduct of the respective businesses of the Companies and
the Partnership as presently conducted. Certificates of Occupancy have been
issued with respect to the Improvements without special conditions or
17
restrictions. To the knowledge of the Shareholders, all utilities servicing
the Real Property and the Improvements are provided by publicly-dedicated
utility lines and are located within public rights-of-way and do not cross or
encumber any private land. No notice of any pending, threatened or
contemplated action by any governmental authority or agency having the power
of eminent domain has been given to the Companies, the Partnership or the
Shareholders with respect to the Real Property.
SECTION 2.11 Environmental Matters.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the
Companies, the Partnership, the Real Property, the Improvements and any
property formerly owned, occupied or leased by the Companies or the
Partnership are in full compliance with all Environmental Laws (as defined
below), (ii) the Companies and the Partnership have obtained all Environmental
Permits (as defined below), (iii) such Environmental Permits are in full force
and effect, and (iv) the Companies and the Partnership are in full compliance
with all terms and conditions of such Environmental Permits. As used herein,
"Environmental Laws" shall mean all applicable requirements of environmental,
public or employee health and safety, public or community right-to-know,
ecological or natural resource laws or regulations or controls, including all
applicable requirements imposed by any law (including without limitation
common law), rule, order, or regulations of any federal, state, or local
executive, legislative, judicial, regulatory, or administrative agency, board,
or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to, (i) noise, (ii) pollution or
protection of the air, surface water, groundwater, or soil, (iii) solid,
gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or
(v) regulation of the manufacture, processing, distribution and commerce, use,
or storage of Hazardous Materials. As used herein, "Environmental Permits"
shall mean all permits, licenses, approvals, authorizations, consents or
registrations required under applicable Environmental Laws in connection with
the ownership, use and/or operation of the Companies' and the Partnership's
businesses or the Real Property or Improvements.
As used in this Section 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous
substances," "hazardous materials," "toxic substances" or similar terms in or
pursuant to, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as
amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 00-
000, 000 Xxxxx, 0000), the Resource Conservation and Recovery Act of 1976 (42
U.S.C. 6901 et seq.) ("RCRA"), the Occupational Safety and Health Act of
1970 (29 U.S.C. 651 et seq.) ("OSHA"), and the Hazardous Materials
Transportation Act, 49 U.S.C. 1801 et seq. ("HMTA"), and in the regulations
18
promulgated pursuant to such laws, all as amended, (ii) those substances
listed in the United States Department of Transportation Table (49 CFR 172.101
and amendments thereto) or by the Environmental Protection Agency (or any
successor agency) as hazardous substances (40 CFR part 302 and amendments
thereto), (iii) any material, waste or substance which is or contains (A)
petroleum, including crude oil or any fraction thereof, natural gas, or
synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C)
polychlorinated biphenyls, (D) designated as a "hazardous substance" pursuant
to Section 311 of the Clean Water Act, 33 U.S.C. 1251 et seq. (33 U.S.C.
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C.
1317), (E) flammable explosives, (F) radioactive materials, and (iv) such
other substances, materials and wastes which are or become regulated or
classified as hazardous, toxic or as "special wastes" under any Environmental
Laws.
(b) The Companies, the Partnership and the Shareholders have not
violated, done or suffered any act which could give rise to liability under,
and are not otherwise exposed to liability under, any Environmental Law. No
event has occurred with respect to the Real Property, the Improvements or any
property formerly owned, occupied or leased by the Companies or the
Partnership, which, with the passage of time or the giving of notice, or both,
would constitute a violation of or noncompliance with any applicable Environ-
mental Law. The Companies and the Partnership have no contingent liability
under any Environmental Law. There are no liens under any Environmental Law
on the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) neither the
Companies, the Partnership, the Real Property or any portion thereof, the
Improvements, or, to the knowledge of the Shareholders, any property formerly
owned, occupied or leased by the Companies or the Partnership, nor, to the
knowledge of the Shareholders, any property adjacent to the Real Property is
being used or has been used for the treatment, generation, transportation,
processing, handling, production or disposal of any Hazardous Materials or as
a landfill or other waste disposal site and there has been no spill, release
or migration of any Hazardous Materials on or under the Real Property and no
Hazardous Material is present on or under the Real Property (provided,
however, that certain petroleum products are stored and handled on the Real
Property in the ordinary course of the Partnership's businesses in compliance
with all Environmental Laws including the existing regulations of the United
States Environmental Protection Agency requiring spill protection, overfill
protection and corrosion protection by December 22, 1998 and all secondary
containment requirements with respect to aboveground storage tanks), (ii) none
of the Real Property or portion thereof, the Improvements or, during the
period of ownership, lease or occupancy by the Companies or the Partnership,
any property formerly owned, occupied or leased by the Companies or the
Partnership has been subject to investigation by any governmental authority
evaluating the need to investigate or undertake Remedial Action (as defined
below) at such property, and (iii) to the knowledge of the Shareholders,
19
the Companies and the Partnership, none of the Real Property, the Improvements
or, during the period of ownership, lease or occupancy by the Companies or the
Partnership, any property formerly owned, occupied or leased by the Companies
or the Partnership, or, to the knowledge of the Companies, the Partnership or
the Shareholders, any site or location where the Companies or the Partnership
sent waste of any kind, is identified on the current or proposed (A) National
Priorities List under 00 X.X.X. 000 Xxxxxxxx X, (X) Comprehensive
Environmental Response Compensation and Liability Inventory System list, or
(C) any list arising from any statute analogous to CERCLA. As used herein,
"Remedial Action" shall mean any action required to (i) clean up, remove or
treat Hazardous Materials, (ii) prevent a release or threat of release of any
Hazardous Material, (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care, (iv) cure a violation of Environmental Law
or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of
RCRA or analogous state law.
(d) Except as set forth on Schedule 2.11(d) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-
containing equipment, including transformers, or (iv) wetlands (as defined
under any Environmental Law) located within any portion of the Real Property,
nor have any liens been placed upon any portion of the Real Property, the
Improvements or any property formerly owned, occupied or leased by the
Companies or the Partnership in connection with any actual or alleged
liability under any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Companies, the Partnership, the Real
Property, the Improvements, any property formerly owned, leased or occupied by
the Companies or the Partnership, any offsite contamination affecting the
business of the Companies or the Partnership or any operations conducted at
the Real Property, (ii) there are no ongoing negotiations with or agreements
with any governmental authority relating to any Remedial Action or other
environmentally related claim, (iii) the Companies and the Partnership have
not submitted notice pursuant to Section 103 of CERCLA or analogous statute or
notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) the Companies and the
Partnership have not received any notice, claim, demand, suit or request for
information from any governmental or private entity with respect to any
liability or alleged liability under any Environmental Law, nor to knowledge
of the Shareholders, the Companies and the Partnership, has any other entity
whose liability therefor, in whole or in part, may be attributed to the
Companies or the
20
Partnership, received such notice, claim, demand, suit or request for
information.
(f) The Shareholders, the Companies and the Partnership have provided
to UAG all environmental studies and reports obtained by them or known to them
pertaining to the Real Property, the Improvements, the Companies, the
Partnership and any property formerly owned, occupied or leased by the
Companies or the Partnership, and have permitted (or will have permitted as of
the Closing Date), the testing of the soil, groundwater, building components,
tanks, containers and equipment on the Real Property, the Improvements, and
any property formerly owned, occupied or leased by the Companies or the
Partnership, by UAG or UAG's agents or experts as they have or shall have
deemed necessary or appropriate to confirm the condition of such properties.
SECTION 2.12 Inventories.
The values at which inventories are carried on the Financial
Statements reflect the normal inventory valuation policies of the Companies
and the Partnership in conformity with GAAP consistently applied. All
inventories reflected on the Financial Statements or arising since the date
thereof are currently marketable and can reasonably be anticipated to be sold
at normal xxxx-ups within 120 days after the date hereof in the ordinary
course of business (subject to any reserve for obsolete, off-grade or slow-
moving items that is reflected in the Financial Statements), except for spare
parts inventory which inventory is good and usable.
SECTION 2.13 Accounts Receivable.
All accounts receivable reflected on the Financial Statements are, and
all accounts receivable that will be or will have been reflected on the
Closing Date Balance Sheets will be, good, and have been or will have been
collected or are collectible, without resort to litigation, within 90 days of
the Closing Date, and are subject to no defenses, setoffs or counterclaims
other than normal cash discounts accrued in the ordinary course of business.
SECTION 2.14 Insurance.
All material properties and assets of the Companies and the
Partnership which are of an insurable character are insured against loss or
damage by fire and other risks to the extent and in the manner reasonable in
light of the risks attendant to the businesses and activities in which the
Companies and the Partnership are engaged and customary for companies engaged
in similar businesses or owning similar assets. Set forth on Schedule 2.14
hereto is a list and brief description (including the name of the insurer, the
type of coverage provided, the amount of the annual premium for the current
policy period, the amount of remaining coverage and deductibles and the
coverage period) of all policies for such insurance and the Companies and
21
the Partnership have made or will make available to UAG true and complete
copies of all such policies. All such policies are in full force and effect,
unwritten by financially sound insurers, sufficient for all applicable
requirements of law and will not in any way be affected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement. No notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by the
Companies or the Partnership.
SECTION 2.15 Contracts; etc.
As used in this Agreement, the term "Company Agreement" shall mean all
mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on Schedule 2.10
hereto) to which either of the Companies or the Partnership is a party or by
which either of the Companies or the Partnership or any of their respective
assets or properties (including the Real Property and the Improvements) may be
bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing. Set forth on Schedule 2.15 hereto is a
complete and accurate list of each Company Agreement which is material to the
business, operations, assets, condition (financial or otherwise) or prospects
of the Companies or the Partnership. True and complete copies of all written
Company Agreements referred to on Schedule 2.15 and Schedule 2.10 hereto,
exclusive of individual vehicle titles and/or manufacturer's certificates of
origin and floor plan liens applicable to individual vehicles, have been
delivered or made available to UAG, and the Companies and the Partnership have
provided UAG with accurate and complete written summaries of all such Company
Agreements which are unwritten. Except as set forth on Schedule 2.15 hereto,
the Companies and the Partnership are not, nor, to the knowledge of the
Companies, the Partnership and the Shareholders is, any other party thereto,
in breach of or default under any Company Agreement, and no event has occurred
which (after notice or lapse of time or both) would become a breach or default
under, or would permit modification, cancellation, acceleration or termination
of, any Company Agreement or result in the creation of any Lien upon, or any
Person obtaining any right to acquire, any properties, assets or rights of the
Companies or the Partnership in any such case where such breach, default or
other event would have, or could reasonably be expected to have, a Material
Adverse Effect. There are no material unresolved disputes involving either of
the Companies or the Partnership under any Company Agreement.
SECTION 2.16 Labor Relations.
(a) The Companies and the Partnership have paid or made provision for
the payment of all salaries and accrued wages and have complied in all
material respects with all applicable laws, rules and regulations relating to
the employment of labor, including those relating to wages, hours, collective
bargaining
22
and the payment and withholding of taxes, and have withheld and paid to the
appropriate governmental authority, or are holding for payment not yet due to
such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of the respective employees.
(b) Except as set forth on Schedule 2.16(b) hereto, the Companies and
the Partnership are not a party to any (i) outstanding employment agreements
or contracts with officers or employees that are not terminable at will, or
that provide for payment of any bonus or commission, (ii) agreement, policy or
practice that requires any of them to pay termination or severance pay to
salaried, non-exempt or hourly employees (other than as required by law),
(iii) collective bargaining agreement or other labor union contract applicable
to persons employed by the Companies or the Partnership, nor do the
Shareholders or the Companies or the Partnership know of any activities or
proceedings of any labor union to organize any such employees. The Companies
and the Partnership have furnished to UAG complete and correct copies of all
such agreements ("Employment and Labor Agreements"). The Companies and the
Partnership have not breached or otherwise failed to comply with any provi-
sions of any Employment or Labor Agreement, and there are no grievances
outstanding thereunder.
(c) There is no (i) unfair labor practice charge or complaint pending
before the National Labor Relations Board ("NLRB") with respect to the
Companies or the Partnership or any of their employees, (ii) labor strike,
material slowdown or material work stoppage or lockout actually pending or, to
the Shareholders', the Partnership's or the Companies' knowledge, threatened,
against or affecting the Companies or the Partnership, and the Companies and
the Partnership have not experienced any strike, material slow down or
material work stoppage, lockout or other collective labor action by or with
respect to employees of the Companies or the Partnership, (iii) no
representation claim or petition pending before the NLRB or any similar
foreign agency and no question concerning representation exists relating to
the employees of the Companies or the Partnership, (iv) charge with respect to
or relating to the Companies or the Partnership pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices. The Companies
and the Partnership have not received formal notice from any federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws of an intention to conduct an investigation of the Companies or the
Partnership and, to the knowledge of the Companies, the Partnership and the
Shareholders, no such investigation is in progress and (vi) the consents of
the unions that are parties to any Employment and Labor Agreements are not
required to complete the transactions contemplated by this Agreement.
(d) The Companies and the Partnership have never caused any "plant
closing" or "mass layoff" as such actions are defined in the Worker Adjustment
and Retraining Notification Act, as
23
codified at 29 U.S.C. 2101-2109, and the regulations promulgated therein.
SECTION 2.17 Employee Benefit Plans.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Companies or the Partnership or to which the Companies
or the Partnership are required to make contributions ("Pension Benefit
Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(1) of ERISA, maintained by the Companies or the Partnership or to which
the Companies or the Partnership are required to make contributions
("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to UAG together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination
letters or applications therefor with respect to any Pension Benefit Plan
intended to be qualified pursuant to Section 401 (a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and valuation or actuarial reports,
accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or
5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans:
(i) there is no ERISA Plan which is a " multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the
Companies, the Partnership or the Shareholders) is threatened or about to
occur which would constitute a prohibited transaction under Section 406 of
ERISA or under Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under Section
401(a) of the Code:
24
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder has been exempt
from taxation under Section 501(a) of the Code and is currently in
compliance with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by
the IRS and, or to the knowledge of the Companies, the Partnership or the
Shareholders, no such action is contemplated or under consideration and
the IRS has not asserted that any Pension Benefit Plan is not qualified
under Section 401(a) of the Code or that any trust established under a
Pension Benefit Plan is not exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of Section
2.17(d)(iv), each defined contribution plan under Section 414(i) of the Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Companies or the Partnership since the effective date of ERISA and all
premiums due and owing to the PBGC have been timely paid;
(ii) the PBGC has not notified the Companies or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of
ERISA to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Companies, the Partnership or the
Shareholders) is threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code); and
(v) if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Companies or the Partnership and (B) all benefits accrued
to the day prior to the Closing Date (whether or not vested) would be
fully funded in accordance with the actuarial assumptions and method
utilized by such plan for valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.17(e)
hereto contains a list of all Pension Benefit Plans to which ERISA has applied
which have been or are being terminated,
25
or for which a termination is contemplated, and a description of the actions
taken by the PBGC and the IRS with respect thereto.
(f) The approximate aggregate of the amounts of contributions by the
Companies and the Partnerships to be paid or accrued under ERISA Plans for the
current fiscal year is set forth on Schedule 2.17(f) hereto (the "Aggregate
ERISA Contributions"), and the Aggregate ERISA Contributions are not expected
to exceed the total amount set forth on Schedule 2.17(f) hereto. To the
extent required in accordance with GAAP, the Financial Statements reflect in
the aggregate an accrual of all amounts of employer contributions accrued but
unpaid by the Companies and the Partnership under the ERISA Plans as of the
date of the Financial Statements.
(g) With respect to any Multiemployer Plan (1) the Companies and the
Partnership have not, since their formation, made or suffered a "complete
withdrawal" or "partial withdrawal" as such terms are respectively defined in
Sections 4203 and 4205 of ERISA; (2) there is no withdrawal liability of the
Companies or the Partnership under any Multiemployer Plan, computed as if a
"complete withdrawal" by the Companies had occurred under each such Plan as of
December 31, 1995; and (3) the Companies and the Partnership have not received
notice to the effect that any Multiemployer Plan is either in reorganization
(as defined in Section 4241 of ERISA) or insolvent (as defined in Section 4245
of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Companies or the
Partnership under Welfare Benefit Plans with respect to any condition
which relates to a claim filed on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
SECTION 2.18 Other Benefit and Compensation Plans or Arrangements.
(a) Set forth on Schedule 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan whether written or oral, which the Companies or the Partnership
maintain or are required to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Companies or the Partnership
pursuant to which payments may
26
be required to be made at any time following the date hereof (including,
without limitation, any employment, deferred compensation, severance,
supplemental pension, termination or consulting agreement or arrangement); and
(iii) each employee of the Companies and the Partnership whose
aggregate compensation for the fiscal year ended December 31, 1995
exceeded, and whose aggregate compensation for the fiscal year ended
December 31, 1996 is likely to exceed, $50,000. True and complete copies
of all of the written plans, arrangements and agreements referred to on
Schedule 2.18(a) hereto ("Compensation Commitments") have been provided to
UAG together with, where prepared by or for the Companies and the
Partnership, any valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation Commitment for the
last three years. An accurate and complete written summary has been
provided to UAG with respect to any Compensation Commitment which is
unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by
the IRS or any other federal or state agency and (to the knowledge of the
Companies, the Partnership or the Shareholders) no such action is
contemplated or under consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code;
and
(vi) has operated since its inception in material compliance
with the reporting and disclosure requirements imposed under ERISA and the
Code.
SECTION 2.19 Transactions with Insiders.
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Companies, the
Partnership or any ERISA Plan, on the one hand, and any Insider, on the other
hand, that have occurred since January 1, 1993. For purposes of this
Agreement:
(a) the term "Insider" shall mean the Shareholders, any director or
officer of the Companies, and any Affiliate, Associate or Relative of any of
the foregoing persons;
27
(b) the term "Associate" used to indicate a relationship with any
person means (A) any corporation, partnership, joint venture or other entity
of which such person is an officer or partner or is, directly or indirectly,
through one or more intermediaries, the beneficial owner of 10% or more of (1)
any class or type of equity securities or other profits interest or (2) the
combined voting power of interests ordinarily entitled to vote for management
or otherwise, and (B) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee
or in a similar fiduciary capacity; and
(c) a "Relative" of a person shall mean such person's spouse, such
person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
SECTION 2.20 Propriety of Past Payments.
No funds or assets of the Companies or the Partnership have been used
for illegal purposes; no unrecorded funds or assets of the Companies or the
Partnership have been established for any purpose; no accumulation or use of
the Companies' or the Partnership's funds or assets has been made without
being properly accounted for in the respective books and records of the
Companies or the Partnership; all payments by or on behalf of the Companies
and the Partnership have been duly and properly recorded and accounted for in
their respective books and records; no false or artificial entry has been made
in the books and records of the Companies or the Partnership for any reason;
no payment has been made by or on behalf of the Companies or the Partnership
with the understanding that any part of such payment is to be used for any
purpose other than that described in the documents supporting such payment;
and the Companies and the Partnership have not made, directly or indirectly,
any illegal contributions to any political party or candidate, either domestic
or foreign. Neither the IRS nor any other federal, state, local or foreign
government agency or entity has initiated or threatened any investigation of
any payment made by the Companies, or the Partnership, or alleged to be of the
type described in this Section 2.20.
SECTION 2.21 Interest in Competitors.
Except as set forth on Schedule 2.21 hereto, neither the Companies,
the Partnership nor the Shareholders, nor any of their Affiliates, have any
interest, either by way of contract or by way of investment (other than as
holder of not more than 2% of the outstanding capital stock of a publicly
traded Person, so long as such holder has no other connection or relationship
with such Person) or otherwise, directly or indirectly, in any Person other
than the Companies and the Partnership that is engaged in the retail sale or
servicing of automobiles or light duty trucks.
28
SECTION 2.22 Brokers.
Neither the Companies, nor any director, officer or employee thereof,
nor the Partnership, nor the Shareholders or any representative of the
Shareholders, has employed any broker or finder or has incurred or will incur
any broker's, finder's or similar fees, commissions or expenses, in each case
in connection with the transactions contemplated by this Agreement except that
the Shareholders have employed Xxx Xxxxx as a broker (the "Broker") in
connection with this transaction.
SECTION 2.23 Accounts.
Schedule 2.23 hereto correctly identifies each bank account maintained
by or on behalf or for the benefit of the Companies and the Partnership and
the name of each person with any power or authority to act with respect
thereto.
SECTION 2.24 Disclosure.
Neither the Companies, the Partnership, nor the Shareholders have made
any material misrepresentation to UAG relating to the Companies or the
Companies' stock or relating to the Partnership or the partnership interests
and neither the Companies, the Partnership nor the Shareholders have omitted
to state to UAG any material fact relating to the Companies, the Partnership
or the Companies' stock which is necessary in order to make the information
given by or on behalf of the Companies, the Partnership or the Shareholders to
UAG not misleading or which if disclosed would reasonably affect the decision
of a person considering an acquisition of the Companies or the Partnership.
No fact, event, condition or contingency exists or has occurred which has, or
in the future can reasonably be expected to have, a Material Adverse Effect,
which has not been disclosed in the Financial Statements or the schedules to
this Agreement.
SECTION 2.25 Net Worth and Working Capital.
The Net Worth of the Partnership on the Closing Date, as determined in
accordance with the Accounting Principles, will be equal to or greater than
the Net Worth of the Partnership as of September 30, 1996 except for any LIFO
inventory adjustment to increase the LIFO reserve. The net working capital of
the Partnership as of the date hereof is sufficient to operate the businesses
of the Partnership and to satisfy any working capital requirements of
Chrysler.
SECTION 2.26 Investment Intent.
Each Shareholder has no present plan, intention or arrangement to
dispose of any of the UAG Common Stock received by such Shareholder in the
Mergers.
29
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Subject to the parties' agreement that certain of the Schedules
referred to in this Article 3 are to be delivered by the Shareholders no later
than December 20, 1996, each Shareholder hereby jointly and severally further
represents and warrants to UAG as follows:
SECTION 3.1 Ownership of Shares; Title.
Each Shareholder is the owner of record and beneficially of the shares
of the Companies' stock set forth on Schedule 3.1 hereto and has good and
marketable title to the shares of the Companies' stock owned by him, free and
clear of any and all security interests, proxies and voting or other
agreements except restrictions on transfer imposed by applicable federal and
state securities laws.
SECTION 3.2 Authority.
Each Shareholder has all requisite power and authority and has full
legal capacity and is competent to execute, deliver and perform this Agreement
and the Documents to which he is a party and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
each Shareholder and constitutes, and the Documents to which each Shareholder
is a party when executed and delivered by each Shareholder will constitute, a
valid and binding obligation of each Shareholder, enforceable against each
Shareholder in accordance with its terms. The execution, delivery and
performance of this Agreement and the Documents by each Shareholder and the
consummation of the transactions contemplated hereby and thereby do not and
will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to which
any Shareholder is a party or to which any Shareholder or any of such
Shareholder's property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to any Shareholder or any of such Shareholder's businesses or properties;
or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
30
SECTION 3.3 Real Property and Improvements.
To the knowledge of the Companies, the Partnership and the
Shareholders, the owners of the Real Property (as set forth on Schedule 2.10)
own the Real Property and Improvements in fee simple, free and clear of all
liens, claims and encumbrances, except for such liens, claims and
encumbrances, none of which currently or in the future will or could affect
the use of the Real Property and Improvements for the conduct of the
respective businesses of the Companies and the Partnership as presently
conducted. No assessments have been made against any portion of the Real
Property which are unpaid, whether or not they have become liens. There are
no disputes concerning the location of the lines and corners of the Real
Property. No one has been granted any right to purchase or lease the Real
Property or Improvements other than existing leases in favor of the
Partnership.
SECTION 3.4 Qualification of Shareholders.
Each Shareholder (i) is an "accredited investor" within the meaning of
Regulation D of the Securities Act, and is acquiring the UAG Common Stock to
be issued in the Mergers for his own account and not with a view to, or for
resale in connection with, any distribution thereof; (ii) understands and
acknowledges that such UAG Common Stock has not been registered under the
Securities Act or any state securities laws by reason of certain exemptions
from the registration provisions thereof which depend upon, among other
things, the bona fide nature of such Shareholder's investment intent as
expressed herein; (iii) is able to bear the economic risk of investment in
such UAG Common Stock and has such knowledge and experience in financial and
business matters that he is capable of evaluating the risks and merits of such
UAG Common Stock; (iv) acknowledges that the Shares were not offered to him by
means of publicly disseminated advertisements or sales literature, or as part
of a general solicitation; (v) acknowledges that in deciding to proceed with
the transaction set forth herein he has relied solely on his own independent
investigation of UAG and upon the representations of UAG set forth herein; and
(vi) understands and acknowledges that such UAG Common Stock will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act and that the certificate representing such UAG Common Stock
will bear a legend restricting transfer unless (A) the transfer is exempt from
the registration requirements under the Securities Act and any applicable
state securities law and an opinion of counsel reasonably satisfactory to UAG
that such transfer is exempt therefrom is delivered to UAG or (B) the transfer
is made pursuant to an effective registration statement under the Securities
Act and any applicable state securities law.
31
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF UAG
Subject to the parties' agreement that certain of the Schedules
referred to in this Article 4 are to be delivered by UAG no later than
December 20, 1996, UAG hereby represents and warrants to the Companies, the
Partnership and the Shareholders as follows:
SECTION 4.1 Organization and Good Standing.
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business
and to carry on its business as now being conducted. UAG is duly qualified to
do business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and the UAG Subsidiaries
(as defined below) would not, or could not reasonably be expected to, in the
aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries,
taken as a whole. UAG has made available to the Shareholders complete and
correct copies of its charter and by-laws, as amended and presently in effect.
SECTION 4.2 Subsidiaries.
Each of the UAG Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own, lease and operate
the properties and assets used in its business and to carry on its business as
now being conducted, and is duly qualified to do business and in good standing
as a foreign corporation in each jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of
UAG and the UAG Subsidiaries would not, or could not reasonably be expected
to, in the aggregate have a Material Adverse Effect on UAG and the UAG
Subsidiaries, taken as a whole. All of the outstanding shares of capital
stock of the UAG Subsidiaries have been validly authorized and issued, are
fully paid and non-assessable, have not been issued in violation of any
preemptive rights or of any federal or state securities law. "UAG Subsidiary"
shall mean any corporation or other entity in which UAG, directly or
indirectly, owns beneficially securities representing 50% or more of (i) the
aggregate equity or profit interests or (ii) the combined voting power of
voting interests ordinarily entitled to vote for management or otherwise.
32
SECTION 4.3 Capitalization.
The authorized stock of UAG and the number of shares of capital stock
which are issued and outstanding are set forth on Schedule 4.3 hereto. The
shares listed on Schedule 4.3 hereto constitute all the issued and outstanding
shares of capital stock of UAG and have been validly authorized and issued,
are fully paid and nonassessable, have not been issued in violation of any
preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof.
SECTION 4.4 SEC Filings.
UAG has heretofore made available to the Shareholders UAG's
Registration Statement on Form S-1 as declared effective by the SEC on October
23, 1996 and UAG's Quarterly Report on Form 10-Q for the period ending
September 30, 1996 (the "SEC Filings"). As of their respective dates, the SEC
filings did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 4.5 Authority; Approvals and Consents.
UAG has the corporate power and authority to enter into this Agreement
and the Documents to which it is a party and to perform its obligations
hereunder and thereunder. At the Effective Time, the execution, delivery and
performance of this Agreement and the Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby will have
been duly authorized and approved by the Board of Directors of UAG and no
other corporate proceedings on the part of UAG will be necessary to authorize
and approve this Agreement and the Documents and the transactions contemplated
hereby and thereby. This Agreement has been, and on the Closing Date the
Documents will be, duly executed and delivered by, and constitute a valid and
binding obligation of, UAG, enforceable against UAG in accordance with their
respective terms. Except as set forth on Schedule 4.5 hereto, the execution,
delivery and performance by UAG of this Agreement and the Documents to which
it is a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws (including any comparable governing instrument
with a different name) of UAG;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any agreement to which UAG is a
party ("UAG Agreement") or require any consent or waiver of any party to
any UAG Agreement that would or could reasonably
33
be expected to have a Material Adverse Effect on UAG and the UAG Subsidiaries,
taken as a whole;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or
rights of UAG or any UAG Subsidiary that would or could reasonably be
expected to have a Material Adverse Effect on UAG and the UAG
Subsidiaries, taken as a whole;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or any UAG Subsidiary or any of their respective businesses or
properties that would or could reasonably be expected to have a Material
Adverse Effect on UAG and the UAG Subsidiaries, taken as a whole; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any governmental administrative or judicial authority is
necessary to be obtained or made by UAG to enable UAG to continue to conduct
its business and operations and use its properties after the Closing in a
manner which is in all material respects consistent with that in which they
are presently conducted.
SECTION 4.6 Financial Statements.
Attached as Schedule 4.6 are true and complete copies of:
(a) the audited consolidated financial statements of UAG and its
consolidated UAG Subsidiaries as of December 31 in each of the years 1994 and
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for the fiscal years ended on such dates, together with the
notes thereto, in each case examined by and accompanied by the report of
Coopers & Xxxxxxx, independent certified public accountants; and
(b) the unaudited consolidated balance sheet of UAG and its
consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance
Sheet"), and the unaudited consolidated statements of income, stockholders'
equity and cash flows for the month periods ended on such dates, together with
the notes thereto;
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and
the UAG Subsidiaries, fairly present the consolidated financial position,
results of operations, stockholders' equity and changes in
34
financial position of UAG and the UAG Subsidiaries as of the dates and for the
periods indicated, in each case in conformity with GAAP consistently applied
(except as otherwise indicated in such statements) during such periods, and
can be legitimately reconciled with the financial statements and the financial
records maintained and the accounting methods applied by UAG and the UAG
Subsidiaries for federal income tax purposes, and the unaudited financial
statements included in the UAG Financial Statements indicate all adjustments,
which consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the UAG Financial
Statements do not contain any items of special or nonrecurring income except
as expressly specified therein, and the balance sheets included in the UAG
Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets. The books and accounts of UAG and the UAG
Subsidiaries are complete and correct in all material respects and fairly
reflect all of the transactions, items of income and expense and all assets
and liabilities of the businesses of UAG and the UAG Subsidiaries consistent
with prior practices of UAG and the UAG Subsidiaries.
SECTION 4.7 Taxes.
UAG, each UAG Subsidiary and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined
or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. In the ordinary course,
UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG
Subsidiaries. Neither UAG nor any UAG Subsidiary has been subject to a
federal or state tax audit of any kind, and no adjustment has been proposed by
the IRS with respect to any return for any subsequent year. UAG knows of no
basis for an assertion of a deficiency for Taxes against UAG or any UAG
Subsidiary.
SECTION 4.8 Brokers.
Neither UAG nor any UAG Subsidiary, nor any director, officer or
employee thereof, has employed any broker or finder or has incurred or will
incur any broker's, finder's or similar fees, commissions or expenses, in each
case in connection with the transactions contemplated by this Agreement or the
Documents.
SECTION 4.9 Disclosure.
Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Companies, the Partnership or the
35
Shareholders relating to this Agreement and neither UAG nor any UAG Subsidiary
has omitted to state to the Companies, the Partnership or the Shareholders any
material fact relating to this Agreement which is necessary in order to make
the information given by or on behalf of UAG or any UAG Subsidiary to the
Companies, the Partnership or the Shareholders or their representatives at or
prior to Closing not misleading. No fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be expected
to have, a Material Adverse Effect on UAG and the UAG Subsidiaries, taken as a
whole, which has not been disclosed in the SEC Filings or the Schedules to
this Agreement.
SECTION 4.10 Reorganization Classification; Certain Tax Representatives.
Purchaser represents and warrants to the Shareholders as follows:
(a) At the Effective Time, Purchaser will own all the stock of each
Merger Sub. No Merger Sub will issue any of their stock in the Mergers.
(b) At the Effective Time, Purchaser will have no plan or intention
to lose control, within the meaning of Section 368(c) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code") of either Merger Sub
after the Mergers occur.
(c) At the Effective Time, Purchaser will have no plan or intention
(i) to liquidate either Merger Sub, (ii) to merge either Merger Sub with or
into another corporation, (iii) to sell or otherwise dispose of the stock of
either Merger Sub, (iv) to cause either Merger Sub to sell or otherwise
dispose of any of their assets, except for dispositions in the ordinary course
of business and transfers described in Section 368(a)(2)(C) of the Internal
Revenue Code or (v) to reacquire any UAG Common Stock issued in the Mergers.
(d) At the Effective Time, Purchaser will intend that UAG Texas will
either continue the historic business of Crown Jeep or use a significant
portion of Crown Jeep's historic business assets in a business, in each case
within the meaning of Treas. Reg. 1.368-1(d)(2). If Crown Jeep is a holding
company, then the representation in the preceding sentence shall be true so
long as the Mergers are intended to readjust continuing interests in property
under modified corporate form, within the meaning of Treas. Reg. 1.368-
1(d)(2).
(e) At the Effective Time, Purchaser will intend that UAG Texas II
will either continue the historic business of Berylson or use a significant
portion of Berylson's historic business assets in a business, in each case
within the meaning of Treas. Reg. 1.368-1(d)(2). If Berylson is a holding
company, then the representation in the preceding sentence shall be true so
long as the Mergers are intended to readjust continuing
36
interests in property under modified corporate form, within the meaning of
Treas. Reg. 1.368-1(d)(2).
(f) At the Effective Time, neither Purchaser nor either Merger Sub
will be an investment company, within the meaning of Section 368(a)(2)(F)(iii)
of the Internal Revenue Code (that is, neither Purchaser nor either Merger Sub
will be a regulated investment company, a real estate investment trust or a
corporation 50 percent or more of the value of whose total assets are stocks
and securities and 80 percent or more of the value of whose total assets are
assets held for investment after applying the conventions set out in such
Section 368(a)(2)(F)).
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
SECTION 5.1 Access; Confidentiality.
Between the date hereof and the Closing Date, the Shareholders, the
Companies and the Partnership will (i) provide to the officers and other
authorized representatives of UAG full access, during normal business hours,
to any and all premises, properties, files, books, records, documents, and
other information of the Companies and the Partnership and will cause their
officers to furnish to UAG and its authorized representatives any and all
financial, technical and operating data and other information pertaining to
the businesses and properties of the Companies and the Partnership, and (ii)
make available for inspection and copying by UAG true and complete copies of
any documents relating to the foregoing. UAG will hold in confidence (unless
and to the extent compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law including
federal or state securities laws) all Confidential Information (as defined
below) and will not disclose the same to any third party except in connection
with obtaining financing and otherwise as may reasonably be necessary to carry
out this Agreement and the transactions contemplated hereby, including any due
diligence review by or on behalf of UAG. If this Agreement is terminated, UAG
will promptly return to the Partnership and the Companies, upon the reasonable
request of the Partnership and the Companies, all Confidential Information
furnished by the Companies or the Partnership and held by UAG, including all
copies and summaries thereof. As used herein, "Confidential Information"
shall mean all information concerning the Companies and the Partnership
obtained by UAG from the Companies or the Partnership in connection with the
transactions contemplated by this Agreement, except information (x) ascer-
tainable or obtained from public information, (y) received from a third party
not employed by or otherwise affiliated with the Companies or the Partnership
or (z) which is or becomes known to the public, other than through a breach by
UAG of this Agreement.
37
SECTION 5.2 Furnishing Information; Announcements.
The Shareholders, the Partnership and the Companies, on the one hand,
and UAG, on the other hand, will, as soon as practicable after reasonable
request therefor, furnish to the other all the information concerning the
Shareholders, the Partnership and the Companies or UAG, respectively, required
for inclusion in any statement or application made by UAG or the Companies or
the Partnership to any governmental or regulatory body or in connection with
obtaining any third party consent in connection with the transactions contem-
plated by this Agreement. Neither the Shareholders, the Partnership nor the
Companies, on the one hand, nor UAG, on the other hand, or any representative
thereof, shall issue any press releases or otherwise make any public statement
with respect to the transactions contemplated hereby without the prior consent
of the other, except as may be required by law (including federal or state
securities laws) as determined by such parties' counsel.
SECTION 5.3 Antitrust Improvements Act Compliance.
UAG and the Shareholders, the Partnership and the Companies, as
applicable, shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice any notifications
required to be filed by the respective "ultimate parent" entities under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act"), and the rules and regulations promulgated thereunder, with respect to
the transactions contemplated herein. The parties shall use their best
efforts to make such filings promptly, to respond to any requests for
additional information made by either of such agencies, to cause the waiting
periods under the H-S-R Act to terminate or expire at the earliest possible
date and to resist vigorously, at their respective cost and expense
(including, without limitation, the institution or defense of legal proceed-
ings), any assertion that the transactions contemplated herein constitute a
violation of the antitrust laws, all to the end of expediting consummation of
the transactions contemplated herein; provided, however, that if UAG or the
Shareholders shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or their best interests, UAG or the
Shareholders, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in Section 8.2 hereof.
SECTION 5.4 Certain Changes and Conduct of Business.
(a) From and after the date of this Agreement and until the Closing
Date, the Companies and the Partnership shall, and the Shareholders shall
cause the Companies and the Partnership to conduct their respective businesses
solely in the ordinary course consistent with past practices and, without the
prior written consent of UAG, neither the Shareholders, the Partnership nor
the Companies will, except as required or permitted pursuant to the terms
hereof, permit the Companies or the Partnership to:
38
(i) make any material change in the conduct of their
respective businesses and operations or enter into any transaction other
than in the ordinary course of business consistent with past practices;
(ii) make any change in their articles of incorporation or
bylaws, issue any additional shares of capital stock or equity securities
or grant any option, warrant or right to acquire any capital stock or
equity securities or issue any securities convertible into or exchangeable
for their capital stock or alter any material term of any of their
outstanding securities or make any change in their outstanding shares of
capital stock or other ownership interests or its capitalization, whether
by reason of a reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, stock dividend or
otherwise;
(iii) make any change in the Limited Partnership Agreement or
issue any additional partnership interests or admit any new partners;
(iv) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Companies or the Partnership, or
(C) issue any options or other rights to acquire from the Companies or the
Partnership, directly or indirectly, debt securities of the Companies or
the Partnership or any security convertible into or exchangeable for such
debt securities;
(v) make any sale, assignment, transfer, abandonment or other
conveyance of any of their assets or any part thereof, except transactions
pursuant to existing contracts set forth in Schedule 2.15 hereto and
dispositions of inventory or of worn-out or obsolete equipment for fair
and reasonable value in the ordinary course of business consistent with
past practices;
(vi) subject any of their assets, or any part thereof, to any
lien or suffer such to be imposed other than such liens as may arise in
the ordinary course of business consistent with past practices by
operation of law which will not have, or cannot reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;
(vii) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination
thereof) in respect of any shares of their capital stock (other than
distributions that could not reasonably be expected to adversely effect
the business or operation of the Partnership or reduce the Partnership's
net
39
working capital to an amount insufficient to continue to operate the
businesses of the Partnership in the ordinary course and consistent with past
practice) or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of their capital stock;
(viii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(ix) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to become
payable to any employee, except in accordance with pre-existing
contractual provisions or consistent with past practices;
(x) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000;
(xi) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xii) guarantee any indebtedness for borrowed money or any other
obligation of any other person, other than in the ordinary course of
business consistent with past practice;
(xiii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by the Companies or the
Partnership (or on behalf of the Companies or the Partnership) on the date
hereof;
(xiv) make any loan, advance or capital contribution to or
investment in any person;
(xv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP or write-down the value
of any inventory or write-off as uncollectible any accounts receivable
except in the ordinary course of business consistent with past practices;
(xvi) settle, release or forgive any material claim or
litigation or waive any material right;
(xvii) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or
40
expenditure, other than in the ordinary course of business consistent with
past practice;
(xviii) take any other action that would cause any of the
representations and warranties made by the Companies or the Partnership in
this Agreement not to remain true and correct; or
(xix) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Shareholders, the Partnership and the Companies will cause the Companies and
the Partnership to use their reasonable best efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable
for their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event the Companies or the Partnership shall receive notice that there
exists a violation of any Environmental Law with respect to their
operations or any Real Property, promptly (and in any event within the
time period permitted by the applicable governmental authority) remove or
remedy such violation in accordance with all applicable Environmental
Laws; provided, however, that any remediation or removal shall be subject
to the prior approval of UAG;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against the Companies or the Partnership unless the validity thereof is
contested in good faith and by appropriate proceedings diligently
conducted;
(iv) keep their books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve their business organization intact and continue
to maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to them; and
(vi) continue to conduct their business in the ordinary course
consistent with past practices.
SECTION 5.5 No Intercompany Payables or Receivables.
Except as disclosed on Schedule 5.5 hereto, on the Closing Date there
will be no intercompany payables or intercompany receivables due and/or owing
between the
41
Shareholders and their Affiliates (other than the Companies or the
Partnership) on the one hand, and the Companies or the Partnership, on the
other hand.
SECTION 5.6 Negotiations.
Until the earlier of 180 days from the date hereof and the termination
of this Agreement pursuant to clauses (i) or (ii) of Section 8.1, no
Shareholder, nor the Companies, nor the Partnership, nor their officers,
directors, employees, advisors, agents, representatives, partners, Affiliates
or anyone acting on behalf of the Shareholders, the Companies, the Partnership
or such persons, shall, directly or indirectly, encourage, solicit, initiate
or engage in discussions or negotiations with, or provide any information to,
any person (other than UAG or its representatives) concerning any merger, sale
of assets (other than in the ordinary course of business), purchase or sale of
shares of capital stock, purchase or sale of partnership interests or similar
transaction involving the Companies or the Partnership. The Shareholders
shall promptly communicate to UAG any inquiries or communications concerning
any such transaction (including the identity of any person making such inquiry
or communication) which any Shareholder may receive or of which any
Shareholder may become aware.
SECTION 5.7 Consents; Cooperation.
Subject to the terms and conditions hereof, the Shareholders, the
Partnership, the Companies and UAG will use their respective best efforts at
their own expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for
(A) the consummation of the transactions contemplated by this Agreement,
(B) the ownership or leasing and operating after the Closing by the
Companies and the Partnership of all their material properties and (C) the
conduct after the Closing by the Companies and the Partnerships of their
respective businesses as conducted by them on the date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
42
SECTION 5.8 Additional Agreements.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
The Shareholders agree to execute and deliver any and all documents that
Chrysler Corporation typically requires a selling dealer to execute in
connection with the transfer of the dealership. In case at any time after the
Merger Closings any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper partners of the Partnership or officers
of the Companies shall take all such necessary action.
SECTION 5.9 Interim Financial Statements.
Within thirty (30) days after the end of each calendar month after the
date of this Agreement, the Partnership will deliver to UAG unaudited
consolidated balance sheets of the Dealership, as of the end of such calendar
month and at the end of the corresponding calendar month of the preceding
fiscal year, together with the related unaudited consolidated statements of
income and cash flow for the fiscal months then ended. All such financial
statements shall fairly present the financial position, results of operations
and cash flow of the Partnership as of the date or for the periods indicated.
All unaudited financial statements delivered pursuant to this Section 5.9
shall be prepared on a basis consistent with the Financial Statements.
SECTION 5.10 Notification of Certain Matters.
Between the date hereof and the Merger Closings, each party to this
Agreement will give prompt notice in writing to the other party hereto of: (i)
any information that indicates that any representation and warranty of such
party contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Closing Date, (ii) the occurrence of any
event which could result in the failure to satisfy a condition specified in
Article 6 or Article 7 hereof, as applicable, (iii) any notice or other
communication from any third person alleging that the consent of such third
person is or may be required in connection with the transactions contemplated
by this Agreement, and (iv) in the case of the Shareholders, the Partnership
and the Companies, any notice of, or other communication relating to, any
default or event which, with notice or lapse of time or both, would become a
default under any Company Agreement. Each party hereto will (x) promptly
advise the other party hereto of any event that has, or could reasonably be
expected in the future to have, a Material Adverse Effect on the Companies,
the Partnership or on UAG and the UAG Subsidiaries, taken as a whole, as
applicable, (y) confer on a regular and frequent basis with one or more
designated representatives of the other party to report operational matters
and to report the general status of ongoing operations, and (z)
43
notify the other party of any emergency or other change in the normal course
of business or in the operation of the properties of the Companies or the
Partnership and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or adjudicatory
proceedings involving any property of the Companies or the Partnership, and
will keep the other party fully informed of such events and permit the other
party access to all materials prepared in connection therewith. Each
Shareholder shall give prompt notice to UAG of any notice or other communi-
cation from any third person asserting (i) any right, title or interest in any
of the shares of the Companies' stock held by such Shareholder (including,
without limitation, any threat to commence, or notice of the commencement of
any action or other proceeding with respect to any shares of the Companies'
stock), (ii) any right, title or interest in the Partnership (including,
without limitation, any threat to commence, or notice of the commencement of
any action or other proceeding with respect to any ownership interest in the
Partnership) or (iii) the occurrence of any other event of which such
Shareholder has knowledge which could result in any failure to consummate the
transactions as contemplated by this Agreement.
SECTION 5.11 Assurance by the Shareholders.
The Shareholders shall cause each of the Companies and the Partnership
to comply with the respective covenants set forth in this Agreement.
SECTION 5.12 Broker's Fee.
UAG acknowledges that the Shareholders have employed the Broker in
connection with this transaction and UAG agrees to pay the Broker's fee in
full satisfaction of any obligations of the Shareholders, the Company or the
Partnership relating to the employment of Broker.
SECTION 5.13 Shareholder Vote; No Appraisal Rights.
Each Shareholder covenants and agrees (a) to vote all of the stock of
the Companies held by him in favor of the Mergers and the other transactions
contemplated by this Agreement; (b) that such Shareholder shall not demand
appraisal of the fair value of any of his shares of Companies' stock pursuant
to Sections 5.11-5.13 of the TBCA or Section 262 of the DGCL; and (c) that
such Shareholder shall not, without the prior written consent of UAG, transfer
any of such Shareholder's shares of the Companies' stock.
SECTION 5.14 Continuity of Shareholder Interest.
The Shareholders will not dispose of any UAG Common Stock received in
the Mergers within two years of the Closing Date or in a manner that would
cause the Mergers, or either of them, to violate the continuity of shareholder
interest requirement set forth in Treasury Regulation 1.368-1.
44
SECTION 5.15 Continuity of Business.
UAG will not cause the Merger Subs to liquidate or to merge with and
into another corporation or entity within two years of the Merger Closings.
SECTION 5.16 Crown Jeep Loans.
The Shareholders shall cause Crown Jeep to pay all principal and
interest on the Crown Jeep Loans that becomes due and payable from the date
hereof until the Closing Date and shall not permit the principal outstanding
under the Crown Jeep Loans to be increased between the date hereof and the
Closing Date.
SECTION 5.17 Personal Guarantees.
UAG will either (i) cause the Shareholders to be released from any and
all personal guarantees of any loans, leases or other indebtedness of the
Partnership or the Companies set forth on the Financial Statements (the
"Personal Guarantees") or (ii) indemnify and hold the Shareholders harmless
from any loss with respect to the Personal Guarantees which arises after the
Merger Closings; provided that if UAG does not obtain the releases for which
provision is made in clause (i) and thereby has obligations pursuant to clause
(ii), then so long as any such Personal Guarantee is not released, UAG shall
from time to time cause each Merger Sub and the Partnership to have sufficient
funds to make timely all payments which are required to be made with respect
to any "loan, lease or other indebtedess" to which any Personal Guarantee
which has not been released applies.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
The obligations of UAG and the Merger Subs required to be performed by
them at the Closing shall be subject to the satisfaction, at or prior to the
Closing, of each of the following conditions, each of which may be waived by
UAG or the Merger Subs as provided herein except as otherwise required by
applicable law:
SECTION 6.1 Representations and Warranties; Agreements; Covenants.
Each of the representations and warranties of the Companies, the
Partnership and the Shareholders contained in this Agreement shall be true and
correct as of the date hereof and (having been deemed to have been made again
at and as of the Closing Date) shall be true and correct as of the Merger
Closings. Each of the obligations of the Companies, the Partnership and the
Shareholders required by this Agreement to be performed by them at or prior to
the Merger Closings shall have been duly performed and complied with in all
respects as of the Merger Closings. At the Merger Closings, UAG shall have
received
45
a certificate, dated the Closing Date and duly executed by the Shareholders,
to the effect that the conditions set forth in the two preceding sentences
have been satisfied.
SECTION 6.2 Authorization; Consents.
(a) All action necessary to authorize the execution, delivery and
performance of this Agreement and the Documents, and the consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
taken by the Companies and the Partnership. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom any of the Companies or the Partnership
have entered into a franchise agreement (or comparable instrument)) required
to consummate the transactions contemplated hereby and all consents or waivers
shall have been made or obtained.
SECTION 6.3 Opinion of the Companies' and the Shareholders' Counsel.
UAG and the Merger Subs shall have been furnished with the opinion of
counsel for the Companies, the Partnership and the Shareholders, dated the
Closing Date, in form and substance satisfactory to UAG and its counsel which
opinion shall have been rendered with respect to those matters contained in
Sections 2.1, 2.2, 2.3, 2.4, 2.9, 3.1 and 3.2 hereof. In rendering the
foregoing opinion, such counsel may rely as to factual matters upon certi-
ficates or other documents furnished by officers and directors of the
Companies and by government officials and upon such other documents and data
as such counsel deem appropriate as a basis for their opinions. Such counsel
may specify the state or states in which they are admitted to practice, that
they are not admitted to the Bar in any other state or experts in the law of
any other state and that such opinions are limited to Texas and federal laws
and the DGCL.
SECTION 6.4 Absence of Litigation.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby. No
action, suit or proceeding before any court or any governmental or regulatory
entity shall be pending (or threatened by any governmental or regulatory
entity), and no investigation by any governmental or regulatory entity shall
have been commenced (and be pending), seeking to restrain or prohibit (or
questioning the validity or legality of)
46
the consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which UAG, in good faith and with the advice
of counsel, believes makes it undesirable to proceed with the consummation of
the transactions contemplated hereby.
SECTION 6.5 No Material Adverse Effect.
During the period from December 31, 1995 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Companies or the Partnership.
SECTION 6.6 Net Worth and Working Capital Requirements.
On the Closing Date, the Shareholders shall deliver to UAG a balance
sheet of the Partnership dated as of the most recent practicable date
preceding the Closing Date, prepared in accordance with the Accounting
Principles (the "Estimated Closing Date Balance Sheets"). The Estimated
Closing Date Balance Sheet shall show as of the date thereof, after taking
into account the payment of any of the fees, costs and expenses by the
Partnership incurred in connection with this Agreement, a Net Worth of not
less than the Net Worth set forth on the Partnership's September 30, 1996
balance sheet except for any LIFO adjustment made after September 30, 1996.
SECTION 6.7 Completion of Due Diligence.
UAG shall have completed its due diligence examination of the
Companies, the Partnership, the Real Property and the Improvements and the
results of such examination, including any Phase I or Phase II environmental
audits of the Companies and the Partnership, shall be satisfactory to UAG.
UAG will pay the costs for a Phase I environmental audit. If, after obtaining
the results of the Phase I environmental audit, UAG determines that a Phase II
environmental audit is required, then the expenses of performing the Phase II
environmental audit shall be paid one-half by UAG and one-half by the Share-
holders.
SECTION 6.8 Board Approval.
The Board of Directors of UAG and the Merger Subs shall have approved
the consummation of all of the transactions contemplated by this Agreement.
SECTION 6.9 Stockholder Approval.
UAG, as the sole stockholder of UAG Texas and UAG Texas II, shall have
approved the Mergers.
SECTION 6.10 Certificates.
The Shareholders, the Companies and the Partnership shall have
furnished UAG with a certificate, dated as of the Closing
47
Date, executed by the Shareholders certifying to the fulfillment of the
conditions set forth in Section 6.4, 6.5, 6.6, 6.12 and 6.15 and shall have
furnished UAG with such any other certificates of its officers and others as
UAG may reasonably request to evidence compliance with the conditions set
forth in this Article 6.
SECTION 6.11 Legal Matters.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Shareholders, the
Partnership and the Companies under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Shareholders, the Partnership and the Companies in furtherance of the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for UAG.
SECTION 6.12 Net Income.
Coopers & Xxxxxxx shall have confirmed to UAG that the net income of the
Companies and the Partnership for the year ending December 31, 1996 prior to
any LIFO adjustment (as determined in accordance with GAAP) is no less than
Three Million Six Hundred Fifty Thousand Dollars ($3,650,000) including the
amounts listed on Schedule 6.12 hereof.
SECTION 6.13 Approval of Manufacturer and Distributor.
UAG shall have obtained the consent, authorization and approval of
Chrysler Corporation on terms no less favorable to those granted to the
Companies and the Partnership immediately prior to the execution of this
Agreement.
SECTION 6.14 Employment Agreement.
Xxxxxx shall have entered into the Xxxxxx Employment Agreement.
SECTION 6.15 Environmental Laws.
The Companies and the Partnership shall be in compliance with all
applicable Environmental Laws.
SECTION 6.16 Nondisturbance Agreements.
The owners of the Real Property leased to the Companies or the
Partnership shall have obtained nondisturbance agreements in form and
substance satisfactory to the Companies and UAG with respect to the properties
that are the subject of the Leases.
SECTION 6.17 Title Insurance.
UAG shall have obtained title insurance on behalf of the Companies
and/or the Partnership with respect to the Companies
48
and/or Partnership's leasehold estates in form and substance satisfactory to
UAG.
SECTION 6.18 Memorandum of Leases.
The appropriate parties shall have executed Memorandum of Leases in
form and substance satisfactory to UAG.
SECTION 6.19 Schedules.
The Partnership, the Companies and the Shareholders shall have
delivered to UAG all Schedules referred to in Articles 2 and 3 and such
Schedules shall be acceptable in form and substance to UAG.
SECTION 6.20 Registration Rights Agreement.
Xxxxxx shall have entered into the Registration Rights Agreement.
SECTION 6.21 Estoppel Certificates.
UAG shall have received estoppel certificates from the lessors of the Real
Property leased to the Companies and/or the Partnership in favor of UAG,
Merger Subs and the Companies and in form and substance satisfactory to UAG.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE SHAREHOLDERS TO EFFECT THE CLOSING
The obligations of the Shareholders, the Partnership and the Companies
required to be performed by them at the Closing shall be subject to the satis-
faction, at or prior to the Closing, of each of the following conditions, each
of which may be waived by the Partnership, the Companies and the Shareholders
as provided herein except as otherwise required by applicable law:
SECTION 7.1 Representations and Warranties; Agreements.
Each of the representations and warranties of UAG contained in this
Agreement shall be true and correct as of the date hereof and (having been
deemed to have been made again as of the Closing Date) shall be true and
correct in all material respects as of the Merger Closings. Each of the
obligations of UAG required by this Agreement to be performed by it at or
prior to the Merger Closings shall have been duly performed and complied with
in all material respects as of the Closing. At the Closing, the Shareholders
shall have received a certificate, dated the Closing Date and duly executed by
UAG to the effect that the conditions set forth in the preceding two sentences
have been satisfied.
49
SECTION 7.2 Authorization of the Agreement, Consents.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG
. All filings required to be made under the H-S-R Act in connection with the
transactions contemplated hereby shall have been made and all applicable
waiting periods with respect to each such filing, including extensions
thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom any of the Companies or the Partnership has
entered into a franchise agreement (or comparable instrument)) required to
consummate the transactions contemplated hereby and all consents or waivers
shall have been made or obtained.
SECTION 7.3 Opinions of UAG's Counsel.
The Shareholders shall have been furnished with the opinion of Xxxxxx
& Xxxxxx, counsel to UAG, dated the Closing Date, in form and substance
reasonably satisfactory to the Shareholders and their counsel which opinion
shall be rendered with respect to those matters contained in Sections 4.1,
4.2, 4.3 and 4.5. In rendering the foregoing opinions, such counsel may rely
as to factual matters upon certificates or other documents furnished by
officers and directors of UAG and by government officials, and upon such other
documents and data as such counsel deems appropriate as a basis for its
opinion. Such counsel may specify the state or states in which they are
admitted to practice, that they are not admitted to the Bar in any other state
or are experts in the laws of any other state and that such opinions are
limited to Georgia and federal laws and the DGCL.
SECTION 7.4 Absence of Litigation.
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the
transactions contemplated hereby. No order, stay, judgment or decree shall
have been issued by any court and be in effect restraining or prohibiting the
consummation of the transactions contemplated hereby. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been
commenced (and be pending), seeking to restrain or prohibit (or questioning
the validity or legality of) the consummation of the transactions contemplated
by this Agreement or seeking damages in connection therewith which UAG, in
good faith and with the advice of counsel, believes makes it undesirable to
proceed with the consummation of the transactions contemplated hereby.
50
SECTION 7.5 Certificates.
UAG shall have furnished the Shareholders with such certificates of
its officers and others to evidence compliance with the conditions set forth
in this Article 7 as may be reasonably requested by the Shareholders.
SECTION 7.6 Legal Matters.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or the Merger Subs under
the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of UAG or the Merger Subs in furtherance
of the transactions contemplated hereby, shall be reasonably satisfactory in
form and substance to counsel for the Shareholders.
SECTION 7.7 Employment Agreement.
The Partnership and UAG shall have entered into the Xxxxxx Employment
Agreement.
SECTION 7.8 Registration Rights Agreement.
UAG shall have entered into the Registration Rights Agreement.
ARTICLE 8
TERMINATION
SECTION 8.1 Termination.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Shareholders;
(ii) by either UAG or the Shareholders if the Closing shall not
have taken place on or prior to January 31, 1997, or such later date as
shall have been approved by UAG and the Shareholders (provided that the
terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(iii) by UAG or the Shareholders if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
51
(iv) by UAG if any of the conditions specified in Article 6
hereof have not been met or waived by UAG at such time as such condition
is no longer capable of satisfaction (provided UAG is not otherwise in
material breach of its representations, warranties, covenants or
agreements under this Agreement);
(v) by the Shareholders if any of the conditions specified in
Article 7 hereof have not been met or waived by the Shareholders at such
time as such condition is no longer capable of satisfaction (provided that
neither any Shareholder, the Partnership, nor the Companies is otherwise
in material breach of his or its representations, warranties covenants or
agreements under this Agreement); or
(vi) by either UAG or the Shareholders if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured within ten (10) Business Days following receipt by the
breaching party of written notice of such breach or within such additional
time as may be agreed upon in writing by the parties.
If UAG or the Shareholders shall terminate this Agreement pursuant to
the provisions hereof, such termination shall be effected by notice to the
other party specifying the provision hereof pursuant to which such termination
is made.
SECTION 8.2 Effect of Termination.
Except (i) for any breach of this Agreement prior to its termination,
(ii) for the obligations contained in Sections 5.1 and 10.2 hereof and (iii)
as set forth in Section 9.1 hereof, upon the termination of this Agreement
pursuant to Section 8.1 hereof, this Agreement shall forthwith become null and
void and none of the parties hereto or any of their respective officers,
directors, partners, employees, agents, Affiliates, consultants, shareholders
or principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 Indemnification by the Shareholders.
Notwithstanding the Merger Closings, each Shareholder, jointly and
severally, indemnifies and agrees to fully defend, save and hold harmless on
an after-tax basis UAG, the Merger Subs, the Companies (after Closing), the
Partnership (after Closing), the Operating Subsidiary and any of their
respective officers, directors, employees, shareholders, advisors,
representatives, agents and Affiliates (each a "UAG Indemnified Party"), if a
UAG Indemnified Party (including the Companies, the Operating Subsidiary and
the Partnership after the Closing Date) shall at any time or from time to time
suffer any Costs (as
52
defined below) arising, directly or indirectly, out of or resulting from, or
shall pay or become obligated to pay any sum on account of, (i) any and all
Events of Breach (as defined below) or (ii) any Claim before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, which Claim involves, affects or relates to any assets, properties or
operations of the Companies or the Partnership or the conduct of the business
of the Companies or the Partnership prior to the Closing Date (a "Shareholder
Third Party Claim"). As used herein, "Event of Breach" shall be and mean any
one or more of the following: (i) any untruth or inaccuracy in any
representation of the Shareholders, the Partnership or the Companies or the
breach of any warranty of the Shareholders, the Partnership or the Companies
contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit or other document furnished pursuant to this Agreement by the
Shareholders, the Partnership or the Companies (or any representative of the
Shareholders, the Partnership or the Companies) to UAG (or any representative
of UAG) and any misrepresentation in or omission from any document furnished
to UAG in connection with the Closing, (ii) any failure of any Shareholder,
the Partnership or the Companies duly to perform or observe any term,
provision, covenant, agreement or condition on the part of such Shareholder,
the Partnership or the Companies to be performed or observed, and (iii) the
failure of either or both of the Mergers to qualify as a "reorganization"
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code,
except to the extent, if any, that such failure directly results from any
untruth or inaccuracy in any of Purchaser's representations contained in
Section 4.10 of this Agreement or the breach by Purchaser of any warranty
contained in Section 4.10 of this Agreement. For purposes of this Article 9
"Costs" shall mean all liabilities, assessments, losses, costs, damages (not
including consequential damages), expenses, claims, attorneys' fees, experts'
fees, consultants' fees, and disbursements of any kind or of any nature
whatsoever. For purposes of application of the indemnity provisions of this
Article 9, the amount of any Cost arising from the breach of any
representation, warranty, covenant or agreement shall be the entire amount of
any Cost suffered, paid or required to be paid by the respective Indemnified
Party as a result of such breach.
SECTION 9.2 Indemnification by UAG.
Notwithstanding the Merger Closings, UAG indemnifies and agrees to
fully defend, save and hold harmless on an after-tax basis the Shareholders,
the Companies (prior to Closing), the Partnership (prior to Closing) and any
of their respective officers, directors, employees, shareholders, partners,
advisors, representatives, agents and Affiliates (each a "Shareholder
Indemnified Party"), if a Shareholder Indemnified Party shall at any time or
from time to time suffer any Costs arising, directly or indirectly, out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
(i) any and all UAG Events of Breach (as defined below) or (ii) any Claim
before or
53
by any court, arbitrator, panel, agency or other governmental, administrative
or judicial entity, which Claim arises out of the conduct of the businesses of
the Companies and the Partnership after the Merger Closings (a "UAG Third
Party Claim"). As used herein, "UAG Event of Breach" shall be and mean any
one or more of the following: (i) any untruth or inaccuracy in any
representation of UAG or the breach of any warranty of UAG contained in this
Agreement, including, without limitation, any misrepresentation in, or
omission from, any statement, certificate, schedule, exhibit or other document
furnished pursuant to this Agreement by UAG (or any representative of UAG) to
the Shareholders (or any representative of the Shareholders) and any
misrepresentation in or omission from any document furnished to the
Shareholders in connection with the Closing, and (ii) any failure of UAG duly
to perform or observe any term, provision, covenant, agreement or condition on
the part of UAG to be performed or observed.
SECTION 9.3 Procedures.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that a Shareholder has become obligated to a UAG Indemnified
Party pursuant to Section 9.1, or if any Shareholder Third Party Claim is
begun, made or instituted as a result of which a Shareholder may become
obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of Breach
occurs or is alleged and a Shareholder Indemnified Party asserts that UAG has
become obligated to a Shareholder Indemnified Party pursuant to Section 9.2,
or if any UAG Third Party Claim is begun, made or instituted as a result of
which UAG may become obligated to a Shareholder Indemnified Party hereunder
(for purposes of this Article 9, any UAG Indemnified Party and any Shareholder
Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG
and the Shareholders are sometimes referred to as an "Indemnifying Party," and
any UAG Third Party Claim and any Shareholder Third Party Claim is sometimes
referred to as a "Third Party Claim," in each case as the context so
requires), such Indemnified Party shall give written notice to the Indemni-
fying Party of its or his obligation to provide indemnification hereunder,
provided that any failure to so notify the Indemnifying Party shall not
relieve such party from any liability that it or he may have to the
Indemnified Party under this Article 9. If such notice relates to a Third
Party Claim, each Indemnifying Party, jointly and severally, agrees to defend,
contest or otherwise protect such Indemnified Party against any such Third
Party Claim at his or its sole cost and expense. Such Indemnified Party shall
have the right, but not the obligation, to participate at its own expense in
the defense thereof by counsel of such Indemnified Party's choice and shall in
any event cooperate with and assist the Indemnifying Party to the extent
reasonably possible. If the Indemnifying Party fails timely to defend,
contest or otherwise protect against such Third Party Claim, such Indemnified
Party shall have the right to do so, including, without limitation, the right
to make any compromise or settlement thereof, and such Indemnified Party shall
be entitled to recover the entire Cost thereof from the Indemnifying
54
Party, including, without limitation, attorneys' fees, disbursements and
amounts paid (or of which such Indemnified Party has become obligated to pay)
as the result of such Third Party Claim. Failure by the Indemnifying Party to
notify such Indemnified Party of its or their election to defend any such
Third Party Claim within fifteen (15) days after notice thereof shall have
been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its or their right to defend such Third Party Claim. If
the Indemnifying Party assumes the defense of the particular Third Party
Claim, the Indemnifying Party shall not, in the defense of such Third Party
Claim, consent to entry of any judgment or enter into any settlement, except
with the written consent of such Indemnified Party. In addition, the
Indemnifying Party shall not enter into any settlement of any Third Party
Claim except with the written consent of such Indemnified Party which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to such Indemnified Party a full release from all liability in
respect of such Third Party Claim. Notwithstanding the foregoing, the
Indemnifying Party shall not be entitled to control (but shall be entitled to
participate at their own expense in the defense of), and the Indemnified Party
shall be entitled to have sole control over, the defense or settlement of any
Third Party Claim to the extent the Third Party Claim seeks an order,
injunction or other equitable relief against the Indemnified Party which, if
successful, could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified Party.
SECTION 9.4 Remedies.
The rights of an Indemnified Party under this Article 9 are in
addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Survival of Provisions.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement (except covenants and agreements
which are expressly required to be performed and are performed in full on or
before the Closing Date) shall survive the Closing Date and the consummation
of the transactions contemplated by this Agreement. In the event of a breach
of any such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach available to it under the provisions of this
Agreement or otherwise, whether at law or in equity, regardless of any
disclosure to, or investigation made by or on behalf of, such party on or
before the Closing Date.
55
SECTION 10.2 Fees and Expenses.
Except as otherwise expressly provided in this Agreement, all legal
and other fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby through the Closing Date shall be
paid by the party incurring such fees, costs or expenses; provided, however,
that if the Closing does not occur and Section 5.6 hereof is breached, then
the Shareholders, the Partnership or the Companies shall pay to UAG, within
five (5) Business Days after receipt of a request therefor, an amount equal to
a reasonable amount of legal and other fees, costs and expenses necessarily
incurred by UAG in connection with this Agreement and the transactions
contemplated hereby.
SECTION 10.3 Headings.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
SECTION 10.4 Notices.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service or facsimile transmission or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Companies or the Partnership before the Closing Date:
Xxxxx X. Xxxxxx
00000 Xxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile No.: 713) 579-5420
with a copy to:
Law Offices of Xxxxx X. Xxxx, P.C.
000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxx, Esq.
If to the Companies or the Partnership after the Closing Date (in
addition to the foregoing addresses):
United Auto Group, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx
Executive Vice President
56
with a copy to:
Xxxxxx & Xxxxxx
2700 International Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxxxx, Esq.
If to any Shareholder:
Xxxxx X. Xxxxxx
00000 Xxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Law Offices of Xxxxx X. Xxxx, P.C.
000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000-000-0000
Attn: Xxxxx X. Xxxx, Esq.
If to UAG or the Merger Subs:
United Auto Group, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx,
Executive Vice President
with a copy to:
Xxxxxx & Xxxxxx
2700 Xxxx Tower,
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxxxx, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been
given as of the date so delivered or three (3) days after the date so mailed;
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
SECTION 10.5 Assignment.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto (and with respect to the
Shareholders, the personal representatives
57
and heirs of the Shareholders) and their respective successors and permitted
assigns, and the provisions of Article 9 hereof shall inure to the benefit of
the Indemnified Parties referred to therein; provided, however, that neither
this Agreement nor any of the rights, interests, or obligations hereunder may
be assigned by any of the parties hereto without the prior written consent of
the other parties. Notwithstanding the foregoing, UAG shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
its obligations hereunder to any Affiliate of UAG, but in such event UAG shall
remain fully liable for the performance of all of such obligations in the
manner prescribed in this Agreement.
SECTION 10.6 Entire Agreement.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to
the transactions contemplated hereby other than those expressly set forth
herein or in the Documents. Prior drafts of this Agreement shall not be used
as a basis for interpreting this Agreement.
SECTION 10.7 Waiver and Amendments.
Each of the Shareholders, the Partnership and the Companies as one
Party, and UAG and the Merger Subs as the other Party may by written notice to
the other parties (i) extend the time for the performance of any of the
obligations or other actions of the other parties, (ii) waive any inaccuracies
in the representations or warranties of the other parties contained in this
Agreement, (iii) waive compliance with any of the covenants of the other
parties contained in this Agreement, (iv) waive performance of any of the
obligations of the other parties created under this Agreement, or (v) waive
fulfillment of any of the conditions to its own obligations under this
Agreement. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the parties hereto.
SECTION 10.8 Counterparts.
This Agreement may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
58
SECTION 10.9 Accounting Terms.
All accounting terms used herein which are not expressly defined or
modified in this Agreement shall have the respective meanings given to them in
accordance with GAAP.
SECTION 10.10 Certain Miscellaneous Definitions.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, his spouse, his issue,
his parents, his estate and any trust entirely for the benefit of his spouse
and/or issue.
(b) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(c) "Documents" shall mean the Xxxxxx Employment Agreement and the
Registration Rights Agreement.
(d) "GAAP" shall mean generally accepted accounting principles in
effect in the United States on the Closing Date.
(e) "Material Adverse Effect" shall mean any change in, or effect on,
the Person specified (including the businesses thereof) which is, or might be,
materially adverse to the business, operations, assets, condition (financial
or otherwise) or prospects of such Person.
(f) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
SECTION 10.11 Schedules.
Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule
to this Agreement.
SECTION 10.12 Severability.
If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party
waives any provision of
59
law which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.
SECTION 10.13 Remedies.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in Article 8, indemnification as
set forth in Article 9 or the payment of certain fees, costs and expenses as
set forth in Section 10.2, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
SECTION 10.14 Number, Gender.
Whenever the context so requires, the singular number shall include
the plural and the plural shall include the singular, and the gender of any
pronoun shall include the other genders.
SECTION 10.15 Governing Law.
This Agreement shall be governed by the laws of the State of Texas.
SECTION 10.16 Right of First Refusal.
In the event that, after the Merger Closings, UAG, or any of its
Affiliates, desires to accept a bona fide third-party offer to purchase the
stock of the Merger Subs or any other entity owning or operating the
Dealerships and/or the assets of the Dealerships, then UAG shall promptly
deliver to Xxxxxx written notice (the "Notice") of the offer and the basic
terms and conditions thereof, including the proposed purchase price. Xxxxxx
will, for a period of ten (10) days following receipt of the Notice (the
"Option Period"), have the right to make a written offer (the "Xxxxxx Offer")
on the same terms and conditions as are set forth in the Notice. If the
Xxxxxx Offer is received within the Option Period, then UAG and Xxxxxx shall
negotiate in good faith to reach a definitive agreement within thirty days
(which agreement shall be subject to manufacturer's approval as well as such
other terms and conditions as UAG and Xxxxxx agree consistent with the Xxxxxx
Offer). If the Xxxxxx Offer is not received within the Option Period then
this right of first refusal will expire and will be null, void and of no
effect. Unless it has expired earlier pursuant to the terms hereof, this
right of first refusal will expire and will be null, void and of no effect on
December 31, 2007.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC., a Delaware
corporation
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President
UAG TEXAS, INC., a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President
UAG TEXAS II, INC., a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President
CROWN JEEP EAGLE, INC., a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
BERYLSON, INC., a Texas corporation
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: President
[Signatures continued on following page]
65
XXXXXXX AUTOMOTIVE, LTD., a Texas Limited
Partnership
By:/s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President of the General Partner
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, Individually
/s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, Individually
130900.06
