AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of April 6, 1999 (this
"AGREEMENT") by and among SONIC AUTOMOTIVE, INC., a Delaware corporation (the
"BUYER"), MANHATTAN AUTO, INC., a Delaware corporation ("MAI" or the "COMPANY"),
XXXXXX XXXXXX, XXXXXX XXXXX, XXXX XXXXX and XXXXXXX XXXXX (collectively, the
"SELLERS").
W I T N E S S E T H:
WHEREAS, the Sellers own beneficially and, subject to the Voting Trust
Agreement (as defined in Section 3.1), of record all of the issued and
outstanding shares (the "SHARES") of common stock of MAI, no par value (the "MAI
COMMON STOCK"), in the amounts set forth opposite their respective names on
Exhibit 3.1 hereto; and
WHEREAS, contemporaneously with the execution of this Agreement, Buyer has
entered into a Contract to Purchase and Sell Property with Marco LP ("MARCO")
and its general partners (the "MARCO REAL PROPERTY PURCHASE AGREEMENT -
Fairfax") whereby Buyer has agreed to buy and Marco LP has agreed to sell the
property at which the Company conducts certain of its automobile dealership
businesses; and
WHEREAS, contemporaneously with the execution of this Agreement, Buyer has
entered into a Contract to Purchase and Sell Property with OGTR II LP ("OGTR")
and its general partners (the AOGTR REAL PROPERTY PURCHASE AGREEMENT," which
shall sometimes be referred to herein, together with the Marco Real Property
Purchase Agreement - Fairfax, as the "MANHATTAN REAL PROPERTY PURCHASE
Agreements") whereby Buyer has agreed to buy and OGTR II LP has agreed to sell
the property at which the Company conducts certain of its automobile dealership
businesses; and
WHEREAS, contemporaneously with the execution of this Agreement, the Buyer
has entered into an Asset Purchase Agreement (the "ASSET PURCHASE AGREEMENT")
with MIC, L.O.R., Inc., a Maryland corporation ("LOR"), Waldorf Automotive,
Inc., a Maryland corporation ("WALDORF"), and the shareholders named therein
with respect to the sale to the Buyer of certain automobile dealership assets;
and
WHEREAS, the consummation of the transactions contemplated by this
Agreement is, to the extent described in Sections 7.15 and 8.8, subject to the
consummation of the transactions contemplated by the Manhattan Real Property
Purchase Agreements; and
WHEREAS, the Buyer desires to acquire the Shares from the Sellers, and the
Sellers are willing to transfer the Shares to the Buyer, upon the terms and
conditions hereinafter set forth; and
WHEREAS, the acquisition by the Buyer of the Shares is to be accomplished
by the merger (the "MERGER") of the Company with and into one wholly-owned
subsidiary of the Buyer
(the "SUB"), to be formed by the Buyer prior to the consummation of the
transactions contemplated hereby (the "CLOSING"), on the terms and subject to
the conditions set forth herein.
WHEREAS, although the transactions contemplated hereby are not subject to
the consummation of the transactions contemplated by the Asset Purchase
Agreement, the parties hereto nonetheless fully intend to and, to the extent
practicable, will coordinate the consummation of the transactions contemplated
hereby with the consummation of the transactions contemplated by the Asset
Purchase Agreement in such a manner as to close both transactions on the same
day.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and representations hereinafter stated, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
THE MERGER & THE MERGER CONSIDERATION
1.1 The Merger.
(a) Subject to the provisions of this Agreement and the
Articles of Merger substantially in the form of Exhibit 1.1 attached hereto (the
"ARTICLES OF MERGER"), upon the filing of the Articles of Merger in connection
with the Closing the Company shall be merged with and into the Sub in accordance
with the provisions of the Delaware General Corporation Law and the law of the
jurisdiction of incorporation of the Sub (collectively, "MERGER LAW"), whereupon
the existence of the Company shall cease and the Sub shall be the surviving
corporation (the Sub and the Company are sometimes herein referred to as the
"MERGING COMPANIES" and the Sub after the Merger is sometimes herein referred to
as the "SURVIVING COMPANY").
(b) As soon as practicable after satisfaction of, or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the Merging
Companies shall execute and file the Articles of Merger with the Secretary of
State of the State of Delaware in accordance with the Merger Law, and shall
otherwise make all other filings or recordings required by the Merger Law in
connection with the Merger. The Merger shall become effective at such date and
time as the Articles of Merger are duly filed with, and accepted by, the
Secretary of State of the State of Delaware (the "EFFECTIVE TIME").
(c) At the Effective Time, the separate existence of the
Company shall cease and the Company shall be merged with and into the Sub and
the Sub shall be the Surviving Company, whose name thereafter shall be as
designated by Buyer.
(d) From and after the Effective Time: (i) the Articles of
Incorporation and the Bylaws of the Sub, both as in
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effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and the Bylaws of the Surviving Company, until thereafter amended
in accordance with applicable law; (ii) the directors of the Sub at the
Effective Time shall become the directors of the Surviving Company, until their
respective successors are duly elected or appointed and qualified in accordance
with applicable law; and (iii) the officers of the Sub at the Effective Time
shall become the initial officers of the Surviving Company, to serve at the
pleasure of the boards of directors of the Surviving Company.
(1) At the Effective Time, by virtue of the Merger and the applicable
provisions of the Merger Law and without any further action on the part of the
Merging Companies or on the part of the Company's shareholders:
(i) each share of common stock of the Sub outstanding
immediately prior to the Effective Time shall, automatically and without any
action on the part of the holder thereof, be converted into one share of common
stock of the Surviving Company; and
(ii) all of the Shares shall, automatically and without any
action on the part of the Sellers, cease to be outstanding and shall be
converted into the right to receive the Merger Consideration (as defined in
Section 1.2(a) below) in accordance with the provisions of said Section 1.2. All
Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and the Sellers
holding Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration in accordance with provisions of said
Section 1.2.
(2) The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"),
and this Agreement is intended to be a "plan of reorganization" within the
meaning of the regulations promulgated under Section 368(a) of the Code.
1.2 The Merger Consideration.
(a) THE MERGER CONSIDERATION. The consideration to be paid by the
Buyer for the Shares pursuant to the Merger (the "MERGER CONSIDERATION") shall
consist of the sum of (i) Ten Million Five Hundred Thousand Dollars
($10,500,000), plus (ii) the Net Book Value (as defined in Section 1.2(e)(i)
below).
(b) PAYMENT OF THE MERGER CONSIDERATION. Upon the terms and subject
to the conditions hereof, the Merger Consideration shall be paid as follows:
(i) Subject to Section 1.2(b)(ii), the Buyer shall:
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(A) issue and deliver at Closing the Registered Common
Stock (as defined below), if any, OR the Restricted Common Stock (as defined
below) in accordance with Sections 1.2(c) and 1.2(d), respectively; and
(B) satisfy and pay any Net Book Value Excess, or the
Sellers shall satisfy and pay any Net Book Value Shortfall, in either case, in
accordance with Section 1.2(e)(iii).
(ii) (A) At the Closing, Buyer shall place the Escrowed Shares
into escrow with First Union National Bank or another escrow agent mutually
acceptable to the parties hereto (the "ESCROW AGENT"), all in accordance with
the escrow agreement in the form of Exhibit 1.2(b) hereto, with such other
changes thereto as the Escrow Agent shall reasonably request (the "ESCROW
AGREEMENT"). As used herein, the term "ESCROWED SHARES" shall mean: such number
of whole shares of Nonmarket Protected Shares (as defined below) due to the
Sellers hereunder, of which the Market Price (as defined in Section 1.2(c))
thereof as of the Closing Date equals One Million Dollars ($1,000,000) (plus the
Market Price of any requisite fractional share). For purposes of this Agreement,
a "BUSINESS DAY" is a day other than a Saturday, a Sunday or a day on which
banks are required to be closed in the State of North Carolina.
(B) The term of the Escrow Agreement shall be for a
period of ninety (90) days from the Closing Date (or such longer period of time
as shall be necessary to complete the determination of Net Book Value pursuant
to Section 1.2(e) below). If, as of the date which is ninety (90) days from the
Closing Date (or such later date as shall be necessary to complete the
determination of the Net Book Value pursuant to Section 1.2(e) below), the Buyer
shall have made no claims in respect of any Net Book Value Shortfall (as defined
in Section 1.2(e)(iii) below), the Buyer shall at such time execute a joint
instruction with the Sellers pursuant to the Escrow Agreement to instruct the
Escrow Agent to deliver all of the Escrowed Shares to the Sellers pursuant to
the terms of the Escrow Agreement.
(c) ISSUANCE OF REGISTERED COMMON STOCK. The Buyer will use its best
reasonable efforts to deliver to the Sellers prior to the Closing a prospectus
(a "PROSPECTUS") with respect to the Buyer's offer and sale to the Sellers of
the Registered Common Stock to the Sellers no later than the thirtieth (30th)
Business Day prior to the Closing Date. The Sellers shall provide Buyer with a
notice (the "SELLERS' NOTICE") not sooner than twenty (20) Business Days after
the receipt by the Sellers from the Buyer of the Prospectus, and not later than
five (5) Business Days before the Closing Date. The Sellers' Notice shall
indicate whether the Sellers desire to receive Registered Common Stock (as
defined below) or Restricted Common Stock (as defined below). In the event that
the Sellers' Notice provides for the issuance of shares of Registered Common
Stock, the Buyer shall issue and deliver to the Sellers at the Closing, in the
respective percentages set forth opposite their names on Exhibit 3.1, that
number of whole shares
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(the "REGISTERED COMMON STOCK") of Buyer's Class A Common Stock, par value $.01
per share (the "COMMON STOCK") with an aggregate Market Price (as of the Closing
Date) equal to Eighteen Million Dollars ($18,000,000). As used herein, the term
"MARKET PRICE" shall mean the average of the daily closing prices on the New
York Stock Exchange for one share of Common Stock for the twenty (20)
consecutive trading days ending on the last trading day immediately prior to the
date of determination. In lieu of the issuance of any fractional share of Common
Stock under this Section, the Buyer shall pay to the Sellers in cash or by bank
or cashier's check an amount equal to the Market Price of such share as of the
date payment is due multiplied by the fraction of such share.
(d) ALTERNATIVE ISSUANCE OF STOCK. In the event that: (i) Buyer
shall fail, for any reason, to satisfy its "best reasonable efforts" obligation
to deliver timely to the Sellers the Prospectus in accordance with Section
1.2(c), (ii) if the Sellers' Notice indicates the Sellers' preference for the
issuance and delivery of Registered Common Stock and Buyer shall for any reason
fail to deliver the Registered Common Stock to the Sellers at the Closing, or
(iii) if the Sellers' Notice indicates the Sellers' preference for the issuance
and delivery of Restricted Common Stock then, in any such case, notwithstanding
anything contained in Section 1.2(c) to the contrary, the Buyer shall issue and
deliver to the Sellers at the Closing, in the respective percentages set forth
opposite their names on Exhibit 3.1, that number of whole shares (the
"RESTRICTED COMMON STOCK") of Common Stock with an aggregate Market Price (as of
the Closing Date) equal to Eighteen Million Dollars ($18,000,000). Subject to
the terms and conditions hereof, the issuance and delivery of such shares shall
satisfy in full all of Buyer's obligations under Section 1.2(c). In lieu of the
issuance of any fractional share of Common Stock under this Section, the Buyer
shall pay to the Sellers in cash or by bank or cashier's check an amount equal
to the Market Price of such share as of the date payment is due multiplied by
the fraction of such share.
(e) ADJUSTMENT PROCEDURES.
(i) Not later than 60 days after the Closing Date, the Buyer
will prepare and deliver to Xxxxxx Xxxxxx (the "SELLERS' AGENT") an unaudited
balance sheet (the "CLOSING BALANCE SHEET") of the Company as of the Closing
Date, consisting of a computation of the net book value of the tangible assets
(including without limitation receivables, security deposits and assets in
respect of Taxes) of the Company (excluding the Distributed Assets, as defined
in Section 1.7) as of the Closing Date, less the book value of the liabilities
of the Company (excluding the Distributed Liabilities, as defined in Section
1.7) as of the Closing Date, all in accordance with generally accepted
accounting principles consistently applied ("GAAP"), except as provided below.
The tangible net book value reflected on the Closing Balance Sheet is
hereinafter called the "NET BOOK VALUE." The Closing Balance Sheet will be
prepared in accordance with the following principles: (A) it will utilize the
first in-first out (FIFO) method of inventory accounting; (B) the liabilities of
the Company shall include any Tax liabilities associated with the conversion
from the last in-first out (LIFO) method of accounting to the FIFO method of
accounting; (C) there shall be included appropriate write-offs for doubtful
accounts receivable and bad debts, to the extent not already reserved for in the
listing of accounts receivable, and for damaged, spoiled or obsolete inventory;
(D) any receivables due the Company from any of the Sellers, any of the
directors, officers, employees or Affiliates of the Company or any of the
persons or entities contemplated by Section 7.8 shall be excluded as assets
(except that any cash received contemporaneously with the Closing in
satisfaction and payment of such receivables shall be included as assets); (E)
the liabilities of the Company shall
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include appropriate accruals for all Tax liabilities of the Company associated
with the distribution of the Distributed Assets and Distributed Liabilities or
the forgiveness of any of the Company's indebtedness or other liabilities or
obligations owed to any of the persons or entities referred to in Section 7.8 of
this Agreement; (F) any amounts loaned or contributed by the Company to the
Leasing Subsidiary (as defined in Section 1.7) shall not be included as an
asset; (G) all goodwill carried on the Company's books shall not be included as
an asset; (H) the Inducement Fee will not be included as a liability of the
Company; (I) any liability of the Company owed to any persons or entities
contemplated by Section 7.8 which is satisfied in connection with the Closing
shall not be included as a liability; and (J) the values of the following asset
categories shall be calculated as follows:
(I) NEW VEHICLES. The value of the Company's untitled
new 1999 and 1998 motor vehicles in stock and unsold as of the Closing Date
(collectively, the "NEW VEHICLES") shall be the price at which the New Vehicle
was invoiced to the Company by the applicable Manufacturer (as defined in
Article 2), as adjusted pursuant to clauses (III) and (IV) below.
(II) DEMONSTRATORS. The value of the Company's
untitled 1999 and 1998 motor vehicles in stock and unsold as of the Closing Date
which are used in the ordinary course of business for the purpose of
demonstration and that have, as of the Closing Date, 6,000 miles or less on its
odometer (collectively, the "DEMONSTRATORS") shall be the price at which the
Demonstrator was invoiced to the Company by the Manufacturer, as adjusted
pursuant to clauses (III) and (IV) below, and as reduced by an amount equal to
ten cents ($.10) multiplied by the total mileage on such odometer.
(III) ADJUSTMENT TO VALUE OF NEW VEHICLES AND
DEMONSTRATORS. The value of each New Vehicle and each Demonstrator shall be: (I)
increased by the dealer cost of any equipment and accessories which have been
installed by the Company; and (II) decreased by (1) the dealer cost of any
equipment and accessories which have been removed from such vehicles, (2) all
paid or unpaid rebates, discounts, holdback for dealer account and other factory
incentives to the extent not already deducted from dealer cost (including
without limitation rebates applied for and paid but not earned, incentive monies
claimed on pre-reported units and carryover allowances on 1998 models), and (3)
refundable advertising allowances, if any.
(IV) DAMAGED NEW VEHICLES AND DEMONSTRATORS. If any
New Vehicles or Demonstrators shall have suffered any damage on or prior to the
Closing Date, the Sellers and the Buyer will attempt to agree on the cost to
cover reasonably required repairs prior to sale, which amount shall be deducted
from the value of such New Vehicle or Demonstrator to the extent not repaired
prior to Closing. With respect to any New Vehicle or Demonstrator which shall
have been damaged and repaired prior to the Closing Date, the Sellers and the
Buyer will attempt to agree on an adjustment to the price to reflect the
decrease, if any, in the wholesale value of such New Vehicle or Demonstrator
resulting from such damage and repair, which amount shall be deducted from the
value of such New Vehicle or Demonstrator. In the event the Buyer and the
Sellers cannot agree on the cost of repairs, the amount of reduction or such
adjustment, the Closing Balance Sheet shall allocate no value to such damaged
New Vehicle or Demonstrator, and the Sellers may divest any such damaged New
Vehicle or Demonstrator prior to Closing in accordance with Section 1.7.
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(V) USED VEHICLES. The value of each motor vehicle
owned by the Company that is not a New Vehicle or a Demonstrator as of the
Closing Date shall be equal to a value mutually agreed upon by Buyer and the
Sellers. In the event the Buyer and the Sellers cannot agree upon a price, the
Closing Balance Sheet shall allocate no value to such motor vehicle, and the
Sellers may divest any such motor vehicle prior to Closing in accordance with
Section 1.7.
(VI) INVENTORY. The Buyer and the Sellers shall engage
a mutually acceptable third party engaged in the business of appraising, valuing
and preparing inventories for automobile dealerships (hereinafter referred to as
the "INVENTORY SERVICE") to prepare an inventory list (the "INVENTORY") of the
parts and accessories, as well as the Miscellaneous Inventories, owned by the
Company. The Inventory (insofar as it relates to parts and accessories) shall be
posted to each Manufacturer's approved system of inventory control. The
Inventory shall be completed as of the Closing Date. The Inventory shall
identify each part and accessory and its purchase price. The cost of the
Inventory shall be borne equally by the Buyer, on the one hand, and the Sellers,
on the other hand, and paid at or promptly after the Closing.
(1) RETURNABLE AND NON-RETURNABLE PARTS AND
ACCESSORIES. The Inventory shall classify parts and accessories as "returnable"
or "nonreturnable." For purposes of this Agreement, the terms "returnable parts"
and "returnable accessories" shall describe and include only those new parts and
new accessories for vehicles which are listed (coded) in the latest current
Master Parts Price List Suggested List Prices and Dealer Prices, or other
applicable similar price lists, of the Manufacturer (as defined in Article 2)
with supplements or the equivalent in effect as of the Closing Date (the "MASTER
PRICE LIST"), as returnable to the Manufacturer at not less than the purchase
price reflected in the Master Price List or in the most recent applicable price
list. All parts and accessories listed (coded) in the Master Price List as
non-returnable to the Manufacturer shall be classified as "nonreturnable." The
value of each "returnable part" and "returnable accessory" will be the price
listed in the Master Price List. The value of each "nonreturnable" part and
accessory, of which type the Company has made no sales during the ninety (90)
day period prior to the Closing Date, shall be sixty percent (60%) of the price
listed therefor in the Master Price List. The value of each Anonreturnable" part
and accessory, of which type the Company has made retail sales to one or more
customers during the ninety (90) day period prior to the Closing Date, shall be
one hundred percent (100%) of the price therefor listed in the Master Price
List. The value of all "Jobber" and/or "NPN" parts shall be equal to the
Company's original cost of such parts. The value of all nuts, bolts and any
other parts not addressed in this Section shall equal the fair market value
thereof as determined by the Inventory Service. The Closing Balance Sheet shall
allocate no value to any damaged parts or accessories, parts and accessories
with component parts missing, superseded or obsolete parts or accessories, or
used parts or accessories, and the Sellers may
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divest any such parts or accessories prior to Closing in accordance with Section
1.7.
(2) MISCELLANEOUS INVENTORIES. "MISCELLANEOUS
INVENTORIES" shall include all useable gas, oil and grease, all undercoat
material and body materials in unopened cans and such other miscellaneous
useable and saleable articles in unbroken lots (including office supplies) which
are owned by the Company on the Closing Date provided that Miscellaneous
Inventories shall not include any miscellaneous inventories which represent more
than a sixty (60) day supply of any particular item(s). The value of the
Miscellaneous Inventories shall be equal to the replacement cost of the
Miscellaneous Inventories as determined by the Inventory Service and set forth
on the Inventory. The Closing Balance Sheet shall allocate no value to any
miscellaneous items that are not included in the Miscellaneous Inventories, and
the Sellers may divest any such miscellaneous items prior to Closing in
accordance with Section 1.7.
(VII) WORK IN PROGRESS. The value of any repair orders
which are in process at the close of business on the Closing Date shall be the
Company's actual cost for parts and labor for such orders as the Company shall
have performed prior to the Closing Date.
(VIII) FIXTURES AND EQUIPMENT. The value of all
fixtures, machinery, equipment (including special tools and shop equipment),
furniture, leasehold improvements and all signs and office equipment owned by
the Company shall be the Company's depreciated book value thereof; provided,
however, that all leasehold improvements subject to the Renovations (as defined
in Section 11.2(a)) shall be valued at an amount equal to the costs incurred and
paid by Seller in connection with the Renovations in accordance with Section
11.2 prior to the Closing Date without any adjustment for depreciation.
(ii) If within 30 days following delivery of the Closing
Balance Sheet (or the next Business Day if such 30th day is not a Business Day),
the Sellers' Agent has not given the Buyer notice of the Sellers' objection to
the computation of the Net Book Value as set forth in the Closing Balance Sheet
(such notice to contain a statement in reasonable detail of the nature of the
Sellers' objection), then the Net Book Value reflected in the Closing Balance
Sheet will be deemed mutually agreed by the Buyer and the Sellers. If the
Sellers' Agent shall have given such notice of objection in a timely manner,
then the issues in dispute will be submitted to a "Big Five" accounting firm not
in the employ of Buyer or Seller and mutually acceptable to the Buyer and the
Sellers' Agent (the "ACCOUNTANTS") for resolution. If issues in dispute are
submitted to the Accountants for resolution: (A) each party will furnish to the
Accountants such work papers and other documents and information relating to the
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disputed issues as the Accountants may request and are available to the party or
its subsidiaries (or its independent public accountants), and will be afforded
the opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (B) the
Accountants will be instructed to determine the Net Book Value in accordance
with the terms hereof based upon their resolution of the issues in dispute as
soon as reasonably practicable; (C) such determination by the Accountants of the
Net Book Value, as set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties; and (D) the Buyer
and the Sellers shall each bear 50% of the fees and expenses of the Accountants
for such determination.
(iii) To the extent that the Net Book Value, as deemed
mutually agreed by the parties or as determined by the Accountants, as
aforesaid, is greater than Seven Million Five Hundred Thousand Dollars
($7,500,000) (the "ESTIMATED NET BOOK VALUE"), the Buyer shall be obligated to
pay the amount of such excess, together with interest on the amount of such
excess at the Buyer's floor plan financing rate from time to time in effect (the
"INTEREST RATE") from the Closing Date to the date of such payment, promptly to
the Sellers (such excess together with such interest being referred to as the
"NET BOOK VALUE EXCESS"). If the Buyer issued to the Sellers Registered Common
Stock under Section 1.2(c) and if the Acquisition Shelf Registration Statement
(as defined below) is then current, the payment of the Net Book Value Excess
shall be made through the issuance and delivery of additional shares of Common
Stock with an aggregate value equal to the Net Book Value Excess, the offer and
sale of which shall be registered under the Acquisition Shelf Registration
Statement in accordance with Section 1.8, and such shares shall be considered
Registered Common Stock under the terms hereof. If the Buyer issued to the
Sellers Registered Common Stock under Section 1.2(c) but the Acquisition Shelf
Registration Statement is not then current, the payment of the Net Book Value
Excess shall be made in immediately available funds by check, bank or cashier's,
or wire transfer. If the Buyer issued to the Sellers Restricted Common Stock
under Section 1.2(d), the payment of the Net Book Value Excess shall be made
through the issuance and delivery of additional whole shares of Common Stock
with an aggregate value equal to the Net Book Value Excess, and such shares
shall be considered Restricted Common Stock under the terms hereof. To the
extent that the Net Book Value, as deemed mutually agreed by the parties or as
determined by the Accountants, as aforesaid, is less than the Estimated Net Book
Value, the Sellers shall be obligated, jointly and severally, to pay the amount
of such shortfall, together with interest on the amount of such shortfall at the
Interest Rate from the Closing Date to the date of such payment promptly to the
Buyer (such shortfall together with such interest being referred to as the "NET
BOOK VALUE SHORTFALL"). In furtherance of such
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obligation of the Sellers, the parties shall execute and deliver to the Escrow
Agent a joint instruction to deliver some or all whole Escrowed Shares to the
Buyer in accordance with Section 5 of the Escrow Agreement. To the extent that
the Net Book Value Shortfall exceeds the value of the Escrowed Shares, the
Sellers shall be obligated, jointly and severally, to pay in cash or by wire
transfer and/or by return of Registered Common Stock or Restricted Common Stock
the amount of such excess promptly to the Buyer. In lieu of the issuance of any
fractional share of Common Stock under this Section, the Buyer shall pay to the
Sellers in cash or by bank or cashier's check an amount equal to the Market
Price of such share as of the date payment is due multiplied by the fraction of
such share. For purposes of this Section 1.2(e)(iii), the value of a share of
Common Stock shall be the Market Price as of the date of such payment.
(f) MARKET PROTECTION FOR SONIC COMMON SHARES.
(2) As used herein, the term "CLOSING DATE MARKET PRICE" shall
mean the Market Price as of the Closing Date. As used herein, the term
"RESTRICTIVE PERIOD MARKET PRICE" shall mean the Market Price, as determined as
of the later of (A) the first trading day after the date of the expiration of
the Restrictive Period and (B) the first trading day after the date on which
Sellers are first able to utilize a prospectus supplement to the Acquisition
Shelf Registration Statement or the S-3 Registration Statement for resales. As
used herein, the term "MARKET PROTECTED SHARES" shall mean all Sonic Common
Shares issued and delivered hereunder to the Sellers except for that number of
whole (plus any requisite fractional share) Sonic Common Shares which are issued
and delivered hereunder to the Sellers with an aggregate Market Price, as of the
Closing Date, equal to Two Million Dollars ($2,000,000). As used herein, the
term "NONMARKET PROTECTED SHARES" shall mean all Sonic Common Shares issued
hereunder other than the Market Protected Shares.
(ii) In the event that the Restrictive Period Market Price is
less than the Closing Date Market Price, then Buyer shall pay to the Sellers, in
the respective percentages set forth opposite their names on Exhibit 3.1, no
later than the third Business Day after the date the Restrictive Period Market
Price may be determined, an amount equal to the number of Market Protected
Shares issued hereunder and then held by them multiplied by the difference
between the Restrictive Period Market Price and the Closing Date Market Price.
If Registered Common Shares were issued to the Sellers at the Closing and if the
Acquisition Shelf Registration Statement is then current and effective in
accordance with Section 1.8 (including Section 1.8(a)(ii)), such payment shall
be made through the issuance and delivery of additional whole shares of Common
Stock with an aggregate Restrictive Period Market Price equal to the amount due
under this Section 1.2(f)(ii), and the offer and resale of such
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shares of Common Stock shall be registered under the Acquisition Shelf
Registration Statement in accordance with Section 1.8. Such shares shall be
considered Registered Common Stock under the terms hereof. If the Acquisition
Shelf Registration Statement is not then current and effective in accordance
with Section 1.8 (including Section 1.8(a)(ii)), such payment shall be made in
immediately available funds by bank or cashier's check or wire transfer. Any
fractional share amount shall be paid by bank or cashier's check or wire
transfer. Notwithstanding anything contained in this Section 1.2(f)(ii) to the
contrary, in the event that Sonic Common Shares are redeemed pursuant to Section
1.2(f)(iv), no payment shall be made under this Section 1.2(f)(ii).
(iii) In the event that the Restrictive Period Market Price
exceeds the Closing Date Market Price, then the Sellers shall return to Buyer,
no later than the third Business Day after the date the Restrictive Period
Market Price may be determined, pro rata according to their respective amounts
set forth opposite their names on Exhibit 3.1 hereto, an aggregate amount of
whole Sonic Common Shares with an aggregate Restrictive Period Market Price
equal to the number of Market Protected Shares issued hereunder and then held by
the Sellers multiplied by the difference between the Closing Date Market Price
and the Restrictive Period Market Price. Any fractional share amount shall be
paid by bank or cashier's check or wire transfer. Notwithstanding anything
contained in this Section 1.2(f)(iii) to the contrary, in the event that Sonic
Common Shares are redeemed pursuant to Section 1.2(f)(iv), no payment shall be
made under this Section 1.2(f)(iii).
(iv) Notwithstanding any other provision of this Agreement, if on or
prior to the ninetieth (90th) day after the Restrictive Period Expiration Date
all steps on the part of Buyer necessary to register the resale of all Sonic
Common Shares by Sellers shall not have been taken (including, without
limitation the filing of the Acquisition Shelf Registration Statement and/or the
S-3 Registration Statement together with the appropriate S-3 Resale Prospectus
and/or the Resale Prospectus (as hereinafter defined)), the Buyer shall, as and
to the extent permitted by the Delaware General Corporation Law, immediately
redeem all of the Sonic Common Shares issued hereunder and then held by the
Sellers and deliver to the Sellers therefor, in immediately available funds by
bank or cashier's check or wire transfer, an amount equal to (A) the aggregate
Market Price, as of the Closing Date, of all such Market Protected Shares plus
(B) the aggregate Market Price, as of the date of redemption, of all such
Nonmarket Protected Shares, together, in either case, with any accrued and
unpaid interest thereon required under Section 1.8(b)(i). Any such payment shall
be made to the Sellers in the respective percentages set forth opposite their
names on Exhibit 3.1. In such an event, Sellers shall deliver to Buyer
certificates representing such Sonic Common Shares, duly endorsed for transfer
11
to Buyer or accompanied by appropriate stock powers and vesting unto Buyer good
and marketable title to all of such shares, free and clear of any and all
Encumbrances. In addition, in such event, the Sellers and Buyer shall take such
steps as are necessary to release the Escrowed Shares to Buyer.
1.3 Delivery of the Shares.
(a) At the Closing, each Seller shall deliver to the Buyer a
certificate or certificates representing the number of Shares owned beneficially
or of record by such Seller, duly endorsed in blank or with a fully executed
stock power attached, all in proper form for transfer with all transfer taxes,
if any, paid by such Seller. If such certificate or certificates cannot, after a
diligent search, be located, in lieu of such certificate or certificates, such
Seller shall provide an affidavit of lost certificate and indemnity in a form
reasonably satisfactory to the Buyer. Upon such surrender by all the Sellers,
the Sellers shall be entitled to the Merger Consideration, as more fully
provided in Section 1.2 above. Until surrendered in accordance with Section 1.3,
each such certificate for Shares shall be deemed for all purposes to evidence
only the right to receive the Merger Consideration payable pursuant to Section
1.2 (subject to any taxes required to be withheld).
(b) The Shares shall be delivered to the Buyer free and clear
of all liens, pledges, encumbrances, claims, security interests, charges, voting
trusts, voting agreements, other agreements, rights, options, warrants or
restrictions or claims of any kind, nature or description (collectively,
"ENCUMBRANCES").
1.4 Non-Competition Agreements; Employment Agreement AND
TERMINATION AGREEMENT
(1) At the Closing, each of the Sellers (other than Xxxxxxx
Xxxxx) will enter into a non-competition agreement with the Buyer and the Sub
substantially in the form of Exhibit 1.4(a) hereto (the "NON-COMPETITION
AGREEMENT"). The amount of the Merger Consideration allocated to the
Non-Competition Agreement shall be Ten Thousand Dollars ($10,000).
(c) At the Closing, the Buyer and Xxxx Xxxxx will enter into
an employment agreement substantially in the form of Exhibit 1.4(b) hereto (the
"EMPLOYMENT AGREEMENT").
(c) The Sellers shall cause the Company and each of Marco LP
and OGTR II to execute and deliver to Buyer at Closing a termination agreement,
in recordable form, of the leases with respect to the Leased Premises (as
defined in Section 3.16(b)). The Sellers will record, at their expense, such
12
termination agreements where appropriate promptly after Closing.
1.5 The Sellers' Covenant to Close. The Sellers further covenant
and agree to vote all of the Shares held by them in favor of the Merger, and
otherwise to take all officer, director, or shareholder actions necessary to
cause the Company to adopt, approve and consummate, the Merger.
1.6 [INTENTIONALLY DELETED]
1.7 Certain Divestitures Prior to Closing. Prior to the Closing,
the Company will distribute to its stockholders or otherwise divest itself of
the stock of BMW of Fairfax Leasing, Inc., a Virginia corporation and a
wholly-owned subsidiary of Seller (the "LEASING SUBSIDIARY"), together with
certain other assets, as more fully described on Exhibit 1.7 hereto
(collectively, the "DISTRIBUTED ASSETS"). In connection with such distribution,
the Company shall also distribute to its stockholders or otherwise divest itself
of certain liabilities, also as more fully described on Exhibit 1.7 hereto
(collectively, the "DISTRIBUTED LIABILITIES"). The term "DISTRIBUTED ASSETS"
shall also include any divested New Vehicles, Demonstrators, Used Vehicles,
parts and accessories, or Miscellaneous Inventories, as contemplated by Section
1.2(e)(i) above.
1.8 Additional Terms Relating to the Issuance of Common Stock.
(a) ISSUANCE UNDER SECTION 1.2(C). In the event that Buyer
issues and delivers Registered Common Stock to the Sellers hereunder, the
parties agree as follows:
(i) ACQUISITION SHELF REGISTRATION STATEMENT. The offer
and sale of the Registered Common Stock by the Buyer shall be registered under
an effective registration statement on Form S-4 (the "ACQUISITION SHELF
REGISTRATION STATEMENT") filed by the Buyer with the Securities and Exchange
Commission (the "SEC").
(ii) PROSPECTUS SUPPLEMENT. To the extent required by law,
the Buyer shall prepare as soon as reasonably practicable after the issuance of
such shares a prospectus supplement or post-effective amendment to the
Acquisition Shelf Registration Statement that would permit the offer and resale
of the Registered Common Stock from time to time by the Sellers after the
Restrictive Period. Promptly after Buyer has prepared such supplement or
amendment, Buyer will provide the Sellers with notice thereof.
(iii) LISTING. The Buyer shall cause the Registered Common
Stock to be listed for trading on the New York Stock Exchange prior to the
termination of the Restrictive Period.
(iv) CURRENCY OF SHELF. The Buyer shall maintain the
effectiveness of the Acquisition Shelf Registration Statement for the resale of
the Registered Common Stock and maintain a current resale prospectus to permit
the resale of the Registered Common Stock until
13
all of the shares of Registered Common Stock that remain unsold may be sold by
the Sellers without restriction pursuant to clause (d) of Rule 145 or any
successor regulation thereto ("RULE 145"), promulgated by the SEC under the
Securities Act of 1933, as amended (the "SECURITIES ACT"). So long as the
Acquisition Shelf Registration Statement is effective, the Sellers agree that
they shall effect each resale of Registered Common Stock only as permitted by
Rule 145(d) or pursuant to a current prospectus or supplements thereto that is a
part of the Acquisition Shelf Registration Statement (the "RESALE PROSPECTUS")
with respect to which the Buyer, for each such resale, has granted its prior
consent to the use thereof.
(b) ISSUANCE UNDER SECTION 1.2(d). In the event that Buyer
issues and delivers Restricted Common Stock to the Sellers hereunder, the
parties agree as follows:
(i) S-3 REGISTRATION STATEMENT. The Buyer shall use its
best reasonable efforts to register the resale of the Restricted Common Stock
pursuant to a registration statement on Form S-3 (the "S-3 REGISTRATION
Statement") effective as of the first Business Day after the expiration of the
Restrictive Period (the "RESTRICTIVE PERIOD EXPIRATION DATE") or as soon
thereafter as reasonably practicable. Promptly after the S-3 Registration
Statement becomes effective, Buyer shall notify the Seller thereof. In the event
that the S-3 Registration Statement shall not be effective as of the Restrictive
Period Expiration Date, the Buyer shall be obligated to pay to the Sellers,
during the period commencing upon the Restrictive Period Expiration Date and
ending upon the date the S-3 Registration Statement becomes effective and an S-3
Resale Prospectus (as hereinafter defined) is current and effective, interest in
the amount of the Interest Rate upon (A) the aggregate Market Price, as of the
Closing Date, of the Market Protected Shares issued hereunder and then held by
the Sellers and (B) the aggregate Market Price, as of the Restrictive Period
Expiration Date, of the Nonmarket Protected Shares issued hereunder and then
held by the Sellers. Any such interest payments shall be made to the Sellers in
the respective percentages set forth opposite their names on Exhibit 3.1. Any
such interest payments shall be made monthly in arrears and shall be paid, with
respect to any calendar month, no later than the fifth Business Day of the
following calendar month.
(ii) LISTING. The Buyer shall cause the Restricted Common
Stock to be listed for trading on the New York Stock Exchange prior to the
termination of the Restrictive Period.
(iii) CURRENCY OF S-3 REGISTRATION STATEMENT. The Buyer
shall maintain the effectiveness of the S-3 Registration Statement for the
resale of the Restricted Common Stock and maintain a current resale prospectus
to permit the resale of the Restricted Common Stock until all of the Restricted
Common Stock that remains unsold may be sold by the Sellers without restriction
pursuant to clause (k) of Rule 144, or any successor regulation thereto. So long
as the S-3 Registration Statement is effective, the Sellers agree that they
shall effect each resale of Restricted Common Stock only as permitted by Rule
144 or any successor regulation thereto ("RULE 144"), promulgated by the SEC
under the Securities Act, or pursuant to a current prospectus or supplements
thereto that is a part of the S-3 Registration Statement (the "S-3 RESALE
PROSPECTUS") with respect to which the Buyer, for each such resale, has granted
its prior consent to the use thereof.
(c) ADDITIONAL SELLERS' OBLIGATIONS. The Sellers agree and
acknowledge, with regard to the offer or resale by either of them of any shares
of Common Stock issued to them hereunder (as used herein the term "SONIC COMMON
SHARES" shall refer to such shares), that:
14
(i) any offering of any of the Sonic Common Shares under
the Resale Prospectus or under the S-3 Resale Prospectus by a Seller will be
effected in an orderly manner through one or more of three (3) reputable
securities dealers (including, unless otherwise indicated by Buyer, Xxxxxxx
Xxxxx & Co., BancBoston Xxxxxxxxx Xxxxxxxx and Xxxxxxxx, Inc.), acting as broker
or dealer, selected by the Buyer in its sole discretion (each a "DESIGNATED
BROKER");
(ii) if requested by the Buyer, in connection with a
resale of Sonic Common Shares under the Acquisition Shelf Registration Statement
or the S-3 Registration Statement, the Sellers will enter into one or more
custody agreements with one or more banks with respect to such Sonic Common
Shares so that all such Sonic Common Shares are held in the custody of such bank
or banks provided however that any Sonic Common Shares not sold pursuant to the
Acquisition Shelf Registration Statement or the S-3 Registration Statement shall
be released from custody on request of the Sellers;
(iii) each Seller will make resales of Registered Common
Stock only by one or more methods described in the Resale Prospectus (including
resales pursuant to Rule 144 or Rule 145, as applicable, as appropriately
supplemented or amended when required; and each Seller will make resales of
Restricted Common Stock only by one or more methods described in the S-3 Resale
Prospectus (including resales pursuant to Rules 145 or 144, as applicable, as
appropriately supplemented or amended when required;
(iv) since the Sonic Common Shares may be subject to
restrictions on resale under Rules 144 or 145, as applicable, the certificates
representing the Sonic Common Shares will be issued by the Buyer to the Sellers
with such legends as the Buyer may reasonably require until such Sonic Common
Shares are offered pursuant to the foregoing terms under the Resale Prospectus,
the S-3 Resale Prospectus or pursuant to Rules 144 or 145, as applicable, at
which time such certificates shall be tendered to the Buyer by the Sellers and a
new certificate or certificates without legends shall be issued by the Buyer to
the Designated Broker in order to settle any resales by the Sellers;
(v) the Sellers shall provide the Buyer, in writing, with
all information concerning the Sellers and their resale of the Sonic Common
Shares as may be reasonably requested by the Buyer in order to comply with the
Securities Act, and the Sellers shall indemnify the Buyer for any liabilities
(the "SELLERS' LIABILITIES") arising under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or any state securities
or blue sky laws resulting from any material misstatements in, or omissions of
material information from, such information provided by the Sellers to the Buyer
pursuant to this clause (E); and
(vi) the Sellers shall pay the commissions or fees of the
Designated Brokers in connection with the resale of the Sonic Common Shares, and
Buyer shall pay all fees related to the registration, listing and maintaining
the registered status of the Sonic Common Shares and the fees and expenses of
the custodial bank or banks holding such Sonic Common Shares, if applicable.
(d) ADDITIONAL BUYER OBLIGATIONS. The Buyer agrees that:
15
(i) the Buyer shall pay all expenses, including legal and
accounting fees, in connection with the preparation, filing and maintenance of,
as applicable, the Acquisition Shelf Registration Statement, the S-3
Registration Statement (including any amendments to either Registration
Statement), the Resale Prospectus, the S-3 Resale Prospectus (including any
supplements to either Prospectus), the issuance of certificates representing the
Sonic Common Shares and other expenses incurred by the Buyer in meeting its
obligations set forth in Sections 1.2 and 1.8; and
(ii) the Buyer shall indemnify the Sellers for any
liabilities arising under the Securities Act, the Exchange Act, or any state
securities or blue sky laws resulting from any material misstatements in, or
omissions of material information from, the Resale Prospectus, the S-3 Resale
Prospectus, the Acquisition Shelf Registration Statement and the S-3
Registration Statement, including the information incorporated by reference
therein, except for the Sellers' Liabilities.
(e) NO INJUNCTION. Notwithstanding any provision of this
Agreement to the contrary, the Sellers shall not have any right to take any
action (and the Sellers hereby agree that none of them shall take any action) to
restrain, enjoin or otherwise delay any registration as a result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement. Nothing contained in this Section 1.2(e) shall
prevent the Sellers from making a claim for monetary relief.
(f) RESTRICTIVE PERIOD. The Sellers shall not offer, sell or
otherwise dispose of, or contract to sell or dispose of, any of the Sonic Common
Shares for a period of one hundred eighty (180) days after the Closing Date (the
"RESTRICTIVE PERIOD"); provided, however, that each Seller may transfer his or
her Sonic Common Shares during the Restrictive Period: (A) to his or her spouse
or issue or to a trust for the benefit of his or her spouse or issue or (B) in
connection with his or her death; provided, further, that in the event of any
such transfer contemplated by clause (A) or (B) above, such Sonic Common Shares
shall remain subject to the restrictions on transfer in this Section 1.8(f).
1.9 [Intentionally Deleted]
1.10 Inducement Fee. As an inducement to the Buyer to negotiate
and enter into this Agreement and to undertake the further cost and expense of
conducting its due diligence investigation and preparing to satisfy its
obligations at Closing, the Sellers hereby agree to cause the Company to pay to
the Buyer not later than nine (9) months after the date hereof, the sum of
$1,500,000 (the "INDUCEMENT Fee"). The Inducement Fee will be included in the
liabilities of the Company and will become an obligation of any person or entity
(including any holder of a right of first refusal, preemptive right or other
similar right, with respect to any of the assets of the Company or the Shares)
who purchases the assets of the Company or the Shares, or any portion thereof,
as a result of the execution and delivery by Sellers of this Agreement. This
Section 1.10 shall survive the termination hereof except that the Inducement Fee
will be canceled if this Agreement is terminated for any reason other than the
exercise of a right of first refusal, preemptive
16
right or other similar right, by an applicable automobile manufacturer or
distributor or any person or entity claiming by, through or under it.
ARTICLE 2
CLOSING
The Closing shall take place at the offices of Seller's counsel in
Washington, D.C., at 9:30 a.m., local time, on the Closing Date. The Closing
Date shall be the date designated by the Buyer, which date shall be as soon as
reasonably practicable after: (a) the receipt by Buyer of the approval of BMW of
North America, Inc. (the "MANUFACTURER") contemplated in Section 7.10; (b) the
satisfaction of the conditions set forth in Section 7.14; and (c) the completion
of the audited financial statements contemplated in Section 7.13. In no event
shall the Closing Date be later than the sixtieth (60th) day after the date
hereof (the "CLOSING DATE DEADLINE"); PROVIDED, HOWEVER, if, as of the Closing
Date Deadline, (x) the Buyer shall not have obtained such approvals under
Section 7.10, (y) the conditions set forth in Section 7.14 shall not have been
satisfied; and/or (z) such audited financial statements shall not have been
completed, either Seller or the Buyer may elect to extend the Closing Date
Deadline for up to an additional sixty (60) days. The date upon which the
Closing shall take place is hereinafter called the "CLOSING DATE."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers, jointly and severally, hereby represents and warrants
to the Buyer, as follows:
1.11 Ownership of Shares. Each Seller beneficially owns the number
of Shares set forth opposite such Seller's name on Exhibit 3.1 hereto. Each
Seller owns of record, subject to the terms of that certain Voting Trust
Agreement dated as of December 15, 1984 among Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxx
Xxxxx and Xxxxxxx Xxxxx (the "VOTING TRUST AGREEMENT"), the number of Shares set
forth opposite such Seller's name on Exhibit 3.1 hereto. Each Seller has,
subject to the Voting Trust Agreement, good and valid title to the Shares to be
sold by such Seller hereunder, free and clear of all Encumbrances. Each Seller
will have, at the time of the Closing, good and valid title to the Shares to be
sold by such Seller hereunder, free and clear of all Encumbrances.
1.12 The Sellers' Power and Authority; Consents and Approvals.
(1) Each Seller has full capacity, right, power and authority
to execute and deliver this Agreement and the other
17
agreements, documents and instruments to be executed and delivered by each
Seller in connection herewith, to consummate the transactions contemplated
hereby and thereby and to perform his or her obligations hereunder and
thereunder.
(2) Except as set forth on Schedule 3.2(b) hereto, or as
specifically contemplated hereby, no authorization, approval or consent of, or
notice to or filing or registration with, any governmental agency or body, or
any other third party, is required in connection with the execution and delivery
by each Seller and by the Company of this Agreement and the other agreements,
documents and instruments to be executed and delivered by each Seller or the
Company in connection herewith, the consummation of the transactions
contemplated hereby and thereby and the performance by each Seller and the
Company of his, her or its obligations hereunder and thereunder.
(c) Each Seller understands that the Restricted Common Stock,
if any, will not be registered, except for resales as expressly contemplated
hereby, under the Securities Act or applicable state securities laws on the
basis that the sale provided for in this Agreement and the issuance of such
Restricted Common Stock hereunder is exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, and that the Buyer's reliance
on such exemption is predicated on the representations and warranties of such
Seller.
(d) The Restricted Common Stock, if any, is being acquired for
the account of each Seller for the purposes of investment and not with a view to
the distribution thereof, as those terms are used in the Securities Act and the
rules and regulations promulgated thereunder.
(e) Each Seller is an "accredited investor" within the meaning
of Rule 501(a) of Regulation D promulgated under the Securities Act; and each
Seller has sufficient knowledge and experience in financial and business matters
so as to be capable of evaluating the merits and risks of acquiring the
Restricted Common Stock; each Seller has delivered to the Buyer an Investor
Qualification Questionnaire with respect to such Seller's status as an
"accredited investor."
(f) Each Seller has received copies of: (i) the Prospectus
dated November 10, 1997; (ii) the Form 10-K filing of Buyer for the year ended
December 31, 1997 (without exhibits); (iii) the Form 10-Q filings of Buyer for
the first, second and third quarters of 1998 (without exhibits); (iv) the Form
8-K filings of Buyer filed March 24, 1998 and July 9, 1998 (without exhibits);
and has been furnished such other information, and has had an opportunity to ask
such questions and have them answered by the Buyer, as he or she has deemed
necessary in order to make an informed investment decision with respect to the
acquisition of the Restricted Common Stock.
18
(g) Each Seller understands, and has the financial capability
of assuming, the economic risk of an investment in the Restricted Common Stock
for an indefinite period of time.
(h) Each Seller has been advised that such Seller will not be
able to sell, pledge or otherwise dispose of the Restricted Common Stock, or any
interest therein, without first complying with the relevant provisions of the
Securities Act and any applicable state securities laws, and that the provisions
of Rule 144 or 145, permitting routine sales of securities of certain issuers
subject to the terms and conditions thereof, may not currently be available to
such Seller with respect to the Restricted Common Stock.
(i) Each Seller has, to the extent such Seller has deemed
necessary, consulted with his or her own investment advisors, legal counsel and
tax advisors regarding an investment in the Restricted Common Stock.
(j) Each Seller acknowledges that, except as set forth in this
Agreement, the Buyer is not under any obligation (i) to register the Restricted
Common Stock, or (ii) to furnish any information or to take any other action to
assist the Sellers in complying with the terms and conditions of any exemption
which might be available under the Securities Act or any state securities laws
with respect to sales of the Restricted Common Stock by the undersigned in the
future.
1.13 Execution and Enforceability. This Agreement and the other
agreements, documents and instruments to be executed by the Sellers in
connection herewith, and the consummation by each Seller of the transactions
contemplated hereby and thereby, have been duly authorized, executed and
delivered by each Seller and constitute, and the other agreements, documents and
instruments contemplated hereby, when executed and delivered by each Seller,
shall constitute, the legal, valid and binding obligations of each Seller,
enforceable against each such Seller in accordance with their respective terms.
1.14 Litigation Regarding the Sellers. There are no actions,
suits, claims, investigations or legal, administrative or arbitration
proceedings pending or, to each of the Sellers' knowledge, threatened or
probable of assertion, against such Seller relating to the Shares, this
Agreement or the transactions contemplated hereby before any court, governmental
or administrative agency or other body. None of the Sellers knows of any basis
for the institution of any such suit or proceeding. No judgment, order, writ,
injunction, decree or other similar command of any court or governmental or
administrative agency or other body has been entered against or served upon any
Seller relating to the Shares, this Agreement or the transactions contemplated
hereby.
19
1.15 Interest in Competitors and Related Entities; Certain
Transactions.
(a) Except as set forth on Schedule 3.5 hereto, neither any
Seller nor any Affiliate of any Seller (i) has any direct or indirect interest
in any person or entity engaged or involved in any business which is competitive
with the business of the Company, (ii) has any direct or indirect interest in
any person or entity which is a lessor of assets or properties to, material
supplier of, or provider of services to, the Company, or (iii) has a beneficial
interest in any contract or agreement to which the Company is a party; PROVIDED,
HOWEVER, that the foregoing representation and warranty shall not apply to any
person or entity, or any interest or agreement with any person or entity, which
is a publicly held corporation in which such Seller individually owns less than
3% of the issued and outstanding voting stock. For purposes of this Agreement,
the term "AFFILIATE" shall mean any entity directly or indirectly controlling,
controlled by or under common control with the specified person, whether by
stock ownership, agreement or otherwise, or any parent, child or sibling of such
specified person, and the concept of "CONTROL" means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise.
(1) Except as set forth in Schedule 3.5 hereto, there are no
transactions between the Company and any of the Sellers (including the Sellers'
Affiliates), or any of the directors, officers or salaried employees of the
Company, or the family members or Affiliates of any of the above (other than for
services as employees, officers and directors), including, without limitation,
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from, any of the Sellers, or any such
officer, director or salaried employee, family member, or Affiliate or any
corporation, partnership, trust or other entity in which such family member,
Affiliate, officer, director or employee has a substantial interest or is a
shareholder, officer, director, trustee or partner.
1.16 The Sellers Not Foreign Persons. Each Seller is a "United
States person" as that term is defined in Section 7701(a)(30) of the Code, and
the regulations promulgated thereunder.
1.17 Organization; Good Standing; Qualifications; and Power. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company is qualified to do business as a foreign
20
corporation and is in good standing in the State of Virginia, which is the only
jurisdiction where the nature of its business and assets requires such
qualification.
1.18 Capitalization. The authorized capital stock of MAI consists
of 500 shares of common stock, no par value, of which 315.6 shares are issued
and outstanding, which constitute all of the Shares. All of the Shares are duly
authorized, validly issued, fully paid and non-assessable and are held by the
Sellers in the amounts indicated on Exhibit 3.1 hereto. Except as set forth on
Schedule 3.8 hereto, there are no preemptive rights, whether at law or
otherwise, to purchase any of the securities of the Company, and there are no
outstanding options, warrants, "phantom" stock plans, subscriptions, agreements,
plans or other commitments pursuant to which the Company is or may become
obligated to sell or issue any shares of its capital stock or any other debt or
equity security, and there are no outstanding securities convertible into shares
of such capital stock or any other debt or equity security.
1.19 Subsidiaries and Investments. Except for the stock of the
Leasing Subsidiary, the Company does not own or maintain, directly or
indirectly, any capital stock of or other equity or ownership or proprietary
interest in any other corporation, partnership, association, trust, joint
venture or other entity and does not have any commitment to contribute to the
capital of, make loans to, or share in the losses of, any such entity.
1.20 No Violation; Conflicts. Except as set forth on Schedule 3.10
hereto, the execution and delivery by the Sellers of this Agreement and the
other agreements, documents and instruments to be executed and delivered by the
Sellers in connection herewith, the consummation by the Sellers of the
transactions contemplated hereby and thereby and the performance by the Sellers
of their respective obligations hereunder and thereunder do not and will not (a)
conflict with or violate any of the terms of the Articles of Incorporation or
By-Laws of the Company, (b) violate or conflict with any law, ordinance, rule or
regulation, or any judgment, order, writ, injunction, decree or similar command
of any court, administrative or governmental agency or other body, applicable to
the Company, (c) provided that the transactions contemplated hereby and (to the
extent required in Sections 7.15 and 8.8) by the Manhattan Real Property
Purchase Agreements are consummated, violate or conflict with the terms of, or
result in the acceleration of, any indebtedness or obligation of the Company
under, or violate or conflict with or result in a breach of, or constitute a
default under, any indenture, mortgage, deed of trust, agreement or instrument
to which the Company is a party or by which the Company or any of its assets or
properties is bound or affected, (d) result in the creation or imposition of any
Encumbrance of any nature upon any of the assets or properties of the Company,
(e) constitute an event permitting termination of any agreement, license or
other
21
right of the Company, or (f) except as specifically contemplated hereby, require
any authorization, approval or consent of, or any notice to or filing or
registration with, any governmental agency or body, or any other third party,
applicable to the Company or any of its properties or assets.
1.21 Title to Assets; Related Matters. The Company has good and
valid title to all assets, rights, interests and other properties, real,
personal and mixed, tangible and intangible, owned by it, other than the
Distributed Assets (collectively, the "ASSETS"), free and clear of all
Encumbrances, except those specified on Schedule 3.11 and liens for taxes not
yet due and payable. The Assets (a) include all properties and assets (real,
personal and mixed, tangible and intangible) owned by the Company; and (b) do
not include (i) any contracts for future services, prepaid items or deferred
charges the full value or benefit of which will not be usable by or transferable
to the Buyer, or (ii) any goodwill, organizational expense or other similar
intangible asset.
1.22 Possession. The tangible assets included within the Assets
are in the possession or control of the Company and no other person or entity
has a right to possession or claims possession of all or any part of such
Assets, except the rights of lessors of Leased Equipment and Leased Premises
(each as defined in Section 3.16) under their respective contracts and leases.
1.23 Financial Statements. The Sellers have delivered to the Buyer
the financial statements of the Company listed in Schedule 3.13 attached hereto
(the "FINANCIAL STATEMENTS"). The Financial Statements (a) are in accordance
with the books and records of the Company, which books and records are true,
correct and complete, (b) fully and fairly present the financial condition of
the Company as of the dates indicated and the results of operations changes in
stockholders' equity and cash flow of the Company for the periods indicated, and
(c) except as set forth in Schedule 3.13, have been prepared in accordance with
GAAP consistently applied. No financial statements of any person or entity other
than the Company and the Leasing Subsidiary are required by GAAP to be included
in the Financial Statements.
1.24 Accounts Receivable. All accounts receivable of the Company
are collectible at the aggregate recorded amounts thereof, except as otherwise
provided in the Company's agreements with the Manufacturer.
1.25 Inventories. All inventories of the Company consist of items
of a quality and quantity usable and saleable in the ordinary course of business
of the Company, and the levels of inventories are consistent with the levels
maintained by the Company in the ordinary course consistent with past practice
and the Company's obligations under their agreements with all
22
applicable vehicle Manufacturers and distributors. The values at which such
inventories are carried are based on the LIFO method and are stated in
accordance with GAAP by the Sellers at the lower of historic cost or market.
1.26 REAL PROPERTY; MACHINERY AND EQUIPMENT.
(a) OWNED REAL PROPERTY. The Company does not own any interest
in real property, except its leasehold interests in the Leased Premises. The
only real property used by the Company in connection with the Company's business
is the Leased Premises.
(b) LEASED PREMISES. Schedule 3.16(b) hereto contains a
complete list and legal description of all real property of which the Company is
a tenant (herein collectively referred to as the "LEASED PREMISES," and
sometimes referred to as the "REAL PROPERTY"). True, correct and complete copies
of all leases of all Leased Premises (the "LEASES") have been delivered to the
Buyer. The Leased Premises (other than the building which, in accordance with
Schedule 11.2, will be converted into the Company's automobile body repair shop
(the "NEW BODY SHOP BUILDING")) are in good physical condition and, with respect
to each Lease, no event or condition currently exists which would give rise to a
material repair or restoration obligation if such Lease were to terminate. The
Sellers have no knowledge of any event or condition which currently exists which
would create a legal or other impediment to the use of the Leased Premises as
currently used, or would increase the additional charges or other sums payable
by the tenant under any of the Leases (including, without limitation, any
pending tax reassessment or other special assessment affecting the Leased
Premises except as such might arise as a result of the Renovations). The
improvements and building systems which comprise a part of the Leased Premises
(other than with respect to the New Body Shop Building) as to which the Company
is responsible for the maintenance and repair thereof are in good condition,
maintenance and repair.
(c) CLAIMS. Except in connection with the Renovations, there
has been no work performed, services rendered or materials furnished in
connection with repairs, improvements, construction, alteration, demolition or
similar activities with respect to the Real Property for at least ninety (90)
days before the date hereof; there are no outstanding claims or persons entitled
to any claim or right to a claim for a mechanics' or materialman's lien against
the Real Property; and there is no person or entity other than the Company in or
entitled to possession of the Real Property.
(d) EASEMENTS, ETC. The Company has (or pursuant to its leases
has the benefit of and the right to use) all easements and rights, including,
but not limited to, easements for power lines, water lines, sewers, roadways and
other means of
23
ingress and egress, necessary to conduct the business the Company now conducts,
all such easements and rights are perpetual, unconditional appurtenant rights to
the Real Property, and none of such easements or rights are subject to any
forfeiture or divestiture rights.
(e) CONDEMNATION. Neither the whole nor any portion of any of
the Real Property has been condemned, expropriated, ordered to be sold or
otherwise taken by any public authority, with or without payment or compensation
therefor, and the Sellers do not know of any such condemnation, expropriation,
sale or taking, or have any grounds to anticipate that any such condemnation,
expropriation, sale or taking is threatened or contemplated. The Sellers have no
knowledge of any pending assessments which would affect the Real Property.
(f) ZONING, ETC. None of the Real Property is in violation of
any public or private restriction or any law or any building, zoning, health,
safety, fire or other law, ordinance, code or regulation, and no notice from any
governmental body has been served upon the Company or upon any of the Real
Property claiming any violation of any such law, ordinance, code or regulation
or requiring or calling to the attention of the Company the need for any work,
repair, construction, alterations or installation on or in connection with said
properties which has not been complied with. All improvements which comprise a
part of the Real Property are located within the record lines of the Real
Property and none of the improvements located on the Real Property encroach upon
any adjoining property or any easements or rights of way and no improvements
located on any adjoining property encroach upon any of the Real Property or any
easements or rights of way servicing the Real Property.
(g) OWNED EQUIPMENT. Schedule 3.16(g) hereto sets forth a list
of all material machinery, equipment, motor vehicles (other than vehicles held
for sale), furniture and fixtures owned by the Company (collectively, the "OWNED
EQUIPMENT").
(h) LEASED EQUIPMENT. Schedule 3.16(h) hereto contains a list
of all leases or other agreements, whether written or oral, under which the
Company is lessee of or holds or operates any items of machinery, equipment,
motor vehicles, furniture and fixtures or other property (other than real
property) owned by any third party (collectively, the "LEASED EQUIPMENT").
(i) MAINTENANCE OF EQUIPMENT. The Owned Equipment and the
Leased Equipment which currently is actively used in the operation of the
Company's business are in good operating condition, maintenance and repair in
accordance with industry standards taking into account the age thereof.
24
1.27 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc.
(a) Except as set forth on Schedule 3.17 hereto, there are no
patents, trademarks, trade names, service marks, service names and copyrights,
and there are no applications therefor or licenses thereof, inventions, trade
secrets, computer software, logos, slogans, proprietary processes and formulae
or other proprietary information, know-how and intellectual property rights,
whether patentable or unpatentable, that are owned or leased by the Company or
used in the conduct of the Company's business. The Company is not a party to,
and does not pay a royalty to anyone under, any license or similar agreement.
There is no existing claim, or, to the knowledge of the Sellers, any basis for
any claim, against the Company that any of its operations, activities or
products infringe the patents, trademarks, trade names, copyrights or other
property rights of others or that the Company is wrongfully or otherwise using
the property rights of others.
(b) The Company has the right to use the names "BMW of
Fairfax" and "Manhattan Auto" in the State of Virginia and, to the knowledge of
the Sellers, no person or entity uses, or has the right to use, such name or any
derivation thereof in connection with the manufacture, sale, marketing or
distribution of products or services commonly associated with an automobile
dealership.
1.28 Certain Liabilities.
(a) All accounts payable by the Company to third parties as of
the date hereof arose in the ordinary course of business and none are delinquent
or past-due.
(b) Schedule 3.18 hereto sets forth a list of all indebtedness
of the Company, other than indebtedness expressly identified on the Financial
Statements and accounts payable in the ordinary course of business, as of the
close of business on the day preceding the date hereof, including, without
limitation, money borrowed, indebtedness of the Company owed to stockholders and
former stockholders, the deferred purchase price of assets, letters of credit
and capitalized leases, indicating, in each case, the name or names of the
lender, the date of maturity, the rate of interest, any prepayment penalties or
premiums and the unpaid principal amount of such indebtedness as of such date.
1.29 No Undisclosed Liabilities. The Company does not have any
material liabilities or obligations of any nature, known or unknown, fixed or
contingent, matured or unmatured, other than those (a) reflected in the
Financial Statements, (b) incurred in the ordinary course of business since the
date of the Financial Statements and of the type and kind reflected in the
Financial
25
Statements, or (c) disclosed specifically on Schedule 3.19 hereto.
1.30 Absence of Changes. Since December 31, 1998, the business of
the Company has been operated in the ordinary course, consistent with past
practices and, except as set forth on Schedule 3.20 hereto, there has not been
incurred, nor has there occurred, except as contemplated in Sections 1.7 and
11.2:
(a) any damage, destruction or loss (whether or not covered by
insurance), adversely affecting the business or assets of the Company in excess
of $50,000; (b) any strikes, work stoppages or other labor disputes involving
the employees of the Company; (c) any sale, transfer, pledge or other
disposition of any of the Assets of the Company having an aggregate book value
of $50,000 or more (except sales of vehicles and parts inventory in the ordinary
course of business); (d) any declaration or payment of any dividend or other
distribution in respect of its capital stock or any redemption, repurchase or
other acquisition of its capital stock; (e) any amendment, termination, waiver
or cancellation of any Material Agreement (as defined in Section 3.29(a) or any
termination, amendment, waiver or cancellation of any material right or claim of
the Company under any Material Agreement (except in each case in the ordinary
course of business and consistent with past practice); (f) any (1) general
uniform increase in the compensation of the employees of the Company (including,
without limitation, any increase pursuant to any bonus, pension, profit-sharing,
deferred compensation or other plan or commitment) other than as required under
existing written contracts, (2) increase in any such compensation payable to any
individual officer, director, consultant or agent thereof other than as required
under existing written contracts, or (3) loan or commitment therefor made by the
Company to any officer, director, stockholder, employee, consultant or agent of
the Company; (g) any change in the accounting methods, procedures or practices
followed by the Company or any change in depreciation or amortization policies
or rates theretofore adopted by the Company; (h) any material change in
policies, operations or practices of the Company with respect to business
operations followed by the Company, including, without limitation, with respect
to selling methods, returns, discounts or other terms of sale, or with respect
to the policies, operations or practices of the Company concerning the employees
of the Company; (i) any capital appropriation or expenditure or commitment
therefor on behalf of the Company in excess of $50,000 individually; (j) any
write-down or write-up of the value of any inventory or equipment of the Company
or any increase in inventory levels in excess of historical levels for
comparable periods; (k) any account receivable in excess of $50,000 or note
receivable in excess of $50,000 owing to the Company which (1) has been written
off as uncollectible, in whole or in part, (2) has had asserted against it any
claim, refusal or right of setoff, or (3) the account or note debtor has refused
to, or threatened not to, pay for any
26
reason, or such account or note debtor has become insolvent or bankrupt; (l) any
other change in the condition (financial or otherwise), business operations,
assets, earnings, business or prospects of the Company which has, or could
reasonably be expected to have, a material adverse effect on the assets,
business or operations of the Company; or (m) any agreement, whether in writing
or otherwise, for the Company to take any of the actions enumerated in this
Section 3.20.
1.31 Tax Matters.
(a) All federal, state and local tax returns and tax reports
for taxable periods ending prior to the date hereof which are required to be
filed on or prior to the date hereof have been duly and timely filed prior to
the due date thereof (as such due date may have been lawfully extended) by the
Company with the appropriate governmental agencies, and all such returns and
reports are true, correct and complete.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("TAXES"), payable by, or due from, the Company for all
periods prior to the date hereof have been fully paid or adequately reserved for
by the Company or, with respect to Taxes required to be accrued, the Company has
properly accrued or will properly accrue such Taxes in the ordinary course of
business consistent with past practice of the Company.
(c) Except as set forth on Schedule 3.21, the federal and
state income tax returns of the Company have been audited by the Internal
Revenue Service ("IRS") or are closed by the applicable statute of limitations
for all taxable years. Except as set forth on Schedule 3.21 hereto, the Company
has not received any notice of any assessed or proposed claim or deficiency
against it in respect of, or of any present dispute between it and any
governmental agency concerning, any Taxes. Except as set forth on Schedule 3.21
hereto, no examination or audit of any tax return or report of the Company by
any applicable taxing authority is currently in progress and there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return or report of the Company. Copies of all federal,
state and local tax returns and reports required to be filed by the Company for
the years ended 1997, 1996, 1995, 1994, and 1993, together with all schedules
and attachments thereto, have been delivered by the Sellers to the Buyer.
(d) The Company is not now, and has never been, a member of a
consolidated group for federal income tax purposes or a consolidated, combined
or similar group for state tax purposes. No consent under Code Section 341 has
been made
27
affecting the Company. The Company is not a party to any agreement or
arrangement that would result in the payment of any "excess parachute payments"
under Code Section 280G. The Company is not required to make any adjustment
under Code Section 481(a). No power of attorney relating to Taxes is currently
in effect affecting the Company.
1.32 Compliance with Laws, Etc. The Company has conducted its
operations and business in material compliance with, and all of the Assets
(including all of the Real Property) comply in all material respects with, (i)
all applicable laws, rules, regulations and codes (including, without
limitation, any laws, rules, regulations and codes relating to anticompetitive
practices, contracts, discrimination, employee benefits, employment, health,
safety, fire, building and zoning, but excluding Environmental Laws which are
the subject of Section 3.36) and (ii) all applicable orders, rules, writs,
judgments, injunctions, decrees and ordinances. The Company has not received any
notification of any asserted present or past failure by it to comply with such
laws, rules or regulations, or such orders, writs, judgments, injunctions,
decrees or ordinances. Set forth on Schedule 3.22 hereto are all orders, writs,
judgments, injunctions, decrees and other awards of any court or governmental
agency applicable to the Company and/or its businesses or operations. The
Sellers have delivered to the Buyer copies of all reports, if any, of the
Company required to be submitted under the Federal Occupational Safety and
Health Act of 1970, as amended, and under all other applicable health and safety
laws and regulations. The deficiencies, if any, noted on such reports have been
corrected by the Company and any deficiencies noted by inspection through the
Closing Date will have been corrected by the Company by the Closing Date.
Neither any of the Sellers, nor any stockholder, director or officer of the
Company or, to the knowledge of the Sellers, any other person or entity
associated with or acting for or on behalf of the Company, has, directly or
indirectly, made any unlawful contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity,
regardless of form, whether in money, property or services: (x) to obtain
favorable treatment in securing business, (y) to pay for favorable treatment for
business secured, or (z) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company.
1.33 Litigation Regarding the Company. Except as set forth on
Schedule 3.23 hereto, there are no actions, suits, claims, investigations or
legal, administrative or arbitration proceedings pending (excluding any actions,
suits, claims, investigations or legal, administrative or arbitration
proceedings for which process has not been served) against the Company or
relating to any of its assets, business or operations or the transactions
contemplated by this Agreement. To the Sellers' knowledge, there are no actions,
suits, claims,
28
investigations or legal, administrative or arbitration proceedings pending or
threatened or probable of assertion, against the Company or relating to any of
its assets, business or operations or the transactions contemplated by this
Agreement, and the Sellers do not know of any basis for the institution of any
action, suit, claim, investigation or proceeding. No order, writ, judgment,
injunction, decree or similar command of any court or any governmental or
administrative agency or other body has been entered against or served upon the
Company relating to the Company or any of its assets, businesses or operations.
1.34 Permits, Etc. Set forth on Schedule 3.24 hereto is a list of
all governmental licenses, permits, approvals, certificates of inspection and
other authorizations, filings and registrations that are necessary for the
Company to own and operate its businesses as presently conducted (collectively,
the "Permits"). All such Permits have been duly and lawfully secured or made by
the Company and are in full force and effect. There is no proceeding pending,
or, to the Sellers' knowledge, threatened or probable of assertion, to revoke or
limit any such Permit. None of the transactions contemplated by this Agreement
will terminate, violate or limit the effectiveness of any such Permit.
1.35 Employees; Labor Relations. As of the date hereof, the
Company employed a total of approximately ninety (90) employees. As of the date
hereof, (a) the Company is not delinquent in the payment: (i) to or on behalf of
its past or present employees of any wages, salaries, commissions, bonuses,
benefit plan contributions or other compensation for all periods prior to the
date hereof, or (ii) of any amount which is due and payable to any state or
state fund pursuant to any workers' compensation statute, rule or regulation or
any amount which is due and payable to any workers' compensation claimant; (b)
there are no collective bargaining agreements currently in effect between the
Company and labor unions or organizations representing any employees of the
Company; (c) no collective bargaining agreement is currently being negotiated by
the Company; (d) to the knowledge of the Sellers, there are no union
organizational drives in progress and there has been no formal or informal
request to the Company for collective bargaining or for an employee election
from any union or from the National Labor Relations Board; and (e) no dispute
exists between the Company and any of its sales representatives or, to the
knowledge of the Sellers, between any such sales representatives with respect to
territory, commissions, products or any other terms of their representation.
1.36 Compensation. Schedule 3.26 contains a schedule of all
employees (including sales representatives) and consultants of the Company whose
individual cash compensation for the year ended December 31, 1998, is in excess
of $100,000, together with the amount of total compensation paid to each such
person for the
29
twelve month period ended December 31, 1998 and the current aggregate base
salary or hourly rate (including any bonus or commission) for each such person.
1.37 Employee Benefits.
(a) The Sellers have listed on Schedule 3.27 and have
delivered to the Buyer true and complete copies of all Employee Plans (as
defined below) and related documents, established, maintained or contributed to
by the Company (which shall include for this purpose and for the purpose of all
of the representations in this Section 3.27, the Sellers and all employers,
whether or not incorporated, that are treated together with the Company as a
single employer within the meaning of Section 414 of the Code). The term
"EMPLOYEE PLAN" shall include all plans described in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and also
shall include, without limitation, any deferred compensation, stock, employee or
retiree pension benefit, welfare benefit or other similar fringe or employee
benefit plan, program, policy, contract or arrangement, written or oral,
qualified or nonqualified, funded or unfunded, foreign or domestic, covering
employees or former employees of the Company and maintained or contributed to by
the Company.
(b) Where applicable, each Employee Plan (i) has been
administered in material compliance with the terms of such Employee Plan and the
requirements of ERISA and the Code; and (ii) is in material compliance with the
reporting and disclosure requirements of ERISA and the Code. The Company does
not maintain or contribute to, and has never maintained or contributed to, an
Employee Plan subject to Title IV of ERISA or a "multiemployer plan." There are
no facts relating to any Employee Plan that have resulted in a "prohibited
transaction" of a material nature. There are no facts relating to any Employer
Plan that have resulted or are reasonably likely to result in the imposition of
a material excise tax, penalty or liability pursuant to Section 4975 of the
Code. There are no facts relating to any Employer Plan that: (i) have resulted
in a material breach of fiduciary duty or violation of Part 4 of Title I of
ERISA, or (ii) have resulted or is reasonably likely to result in any material
liability (whether or not asserted as of the date hereof) of the Company or any
ERISA affiliate pursuant to Section 412 of the Code arising under or related to
any event, act or omission occurring on or prior to the date hereof. Each
Employee Plan that is intended to qualify under Section 401(a) or to be exempt
under Section 501(a) of the Code is so qualified or exempt as of the date hereof
in each case as such Employee Plan has received favorable determination letters
from the Internal Revenue Service with respect thereto. To the knowledge of the
Sellers, the amendments to and operation of any Employee Plan subsequent to the
issuance of such determination letters do not adversely affect the qualified
status of any such Employee Plan.
30
No Employee Plan has an "accumulated funding deficiency" as of the date hereof,
whether or not waived, and no waiver has been applied for. The Company has not
made any promises or incurred any liability under any Employee Plan or otherwise
to provide health or other welfare benefits to former employees of the Company,
except as specifically required by law. There are no claims (other than routine
claims for benefit) or lawsuits pending (excluding any claims or lawsuits for
which process has not been served) or, to the best knowledge of the Sellers,
threatened with respect to the Company's Employee Plans. As used in this Section
3.27, all technical terms enclosed in quotation marks shall have the meaning set
forth in ERISA.
1.38 Powers of Attorney. There are no persons, firms,
associations, corporations or business organizations or entities holding general
or special powers of attorney from the Company.
1.39 Material Agreements.
(a) LIST OF MATERIAL AGREEMENTS. Set forth on Schedule 3.29(a)
hereto is a list or, where indicated, a brief description of all leases and all
other contracts, agreements, documents, instruments, guarantees, plans,
understandings or arrangements, written or oral, which are material to the
Company or its businesses or assets (collectively, the "MATERIAL AGREEMENTS").
True copies of all written Material Agreements and written summaries of all oral
Material Agreements described or required to be described on Schedule 3.29(a)
have been furnished to the Buyer.
(b) PERFORMANCE, DEFAULTS, ENFORCEABILITY. The Company has in
all material respects performed all of its obligations required to be performed
by it to the date hereof, and is not in default or alleged to be in default in
any material respect, under any Material Agreement, and there exists no event,
condition or occurrence which, after notice or lapse of time or both, would
constitute such a default. To the knowledge of the Sellers, no other party to
any Material Agreement is in default in any respect of any of its obligations
thereunder. Each of the Material Agreements is valid and in full force and
effect and enforceable against the parties thereto in accordance with their
respective terms, and, except as set forth in Schedule 3.29(b) hereto, the
consummation of the transactions contemplated by this Agreement will not: (i)
require the consent of any party thereto or (ii) constitute an event permitting
termination thereof.
1.40 Brokers' or Finders' Fees, Etc. No agent, broker, investment
banker, person or firm acting on behalf of the Company or any of the Sellers or
any person, firm or corporation affiliated with any of the Sellers or under
their authority is or will be entitled to any brokers' or finders' fee or any
other commission or similar fee directly or indirectly from any of the parties
hereto in connection with the sale of the Shares
31
contemplated hereby, other than any such fee or commission the entire cost of
which will be borne by the Sellers.
1.41 Bank Accounts, Credit Cards, Safe Deposit Boxes and Cellular
Telephones. Schedule 3.31 hereto lists all bank accounts, credit cards and safe
deposit boxes in the name of, or controlled by, the Company, and all cellular
telephones provided and/or paid for by the Company, and details about the
persons having access to or authority over such accounts, credit cards, safe
deposit boxes and cellular telephones.
1.42 Insurance.
(a) Schedule 3.32(a) hereto contains a list of all policies of
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Company on its properties, operations, inventories, assets,
businesses or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $25,000
thereunder). Each such insurance policy identified therein is and shall remain
in full force and effect on and as of the Closing Date and the Company is not in
default with respect to any provision contained in any such insurance policy and
has not failed to give any notice or present any claim under any such insurance
policy in a due and timely fashion. The insurance maintained by, or on behalf
of, the Company is adequate in accordance with the standards of business of
comparable size in the industry in which the Company operates and no notice of
cancellation or termination has been received with respect to any such policy.
The Company has not, during the last three (3) fiscal years, been denied or had
revoked or rescinded any policy of insurance.
(b) Set forth on Schedule 3.32(b) hereto is a summary of
information pertaining to material property damage and personal injury claims in
excess of $5,000 against the Company during the past five (5) years, all of
which are fully satisfied or are being defended by the insurance carrier and
involve no exposure to the Company beyond any applicable deductible.
1.43 Warranties. Set forth on Schedule 3.33 hereto are
descriptions or copies of the forms of all express warranties and disclaimers of
warranty made by the Company (separate and distinct from any manufacturer's,
suppliers' or other third-parties' warranties or disclaimers of warranties)
during the past five (5) years to customers or users of the vehicles, parts,
products or services of the Company. There have been no breach of warranty or
breach of representation claims against the Company during the past five (5)
years which have resulted in any cost, expenditure or exposure to the Company of
more than $50,000 individually or in the aggregate.
32
1.44 Directors and Officers. Set forth on Schedule 3.34 hereto is
a true and correct list of the names and titles of each director and officer of
the Company.
1.45 Suppliers and Customers. The Company is not required to
provide bonding or any other security arrangements in connection with any
transactions with any of its respective customers and suppliers. To the
knowledge of the Sellers, no such supplier, customer or creditor intends or has
threatened, or reasonably could be expected, to terminate or modify any of its
relationships with the Company.
1.46 Environmental Matters.
(a) For purposes of this Section 3.36, the following terms
shall have the following meaning: (i) "ENVIRONMENTAL LAW" means all present and
future federal, state and local laws, statutes, regulations, rules, ordinances
and common law, and all judgments, decrees, orders, agreements, or permits,
issued, promulgated, approved or entered thereunder by any government authority
relating to pollution, Hazardous Materials, worker safety or protection of human
health or the environment. (ii) "HAZARDOUS MATERIALS" means any waste,
pollutant, chemical, hazardous material, hazardous substance, toxic substance,
hazardous waste, special waste, solid waste, petroleum or petroleum-derived
substance or waste (regardless of specific gravity), or any constituent or
decomposition product of any such pollutant, material, substance or waste,
including, but not limited to, any hazardous substance or constituent contained
within any waste and any other pollutant, material, substance or waste regulated
under or as defined by any Environmental Law.
(b) The Company has obtained all permits, licenses and other
authorizations or approvals required under Environmental Laws for the conduct
and operation of the Assets and the business of the Company ("ENVIRONMENTAL
PERMITS"). All such Environmental Permits are in good standing, the Company is
and has been in compliance with the terms and conditions of all such
Environmental Permits, and no appeal or any other action is pending or
threatened to revoke any such Environmental Permit.
(c) The Company and its businesses, operations and assets are
and have been in compliance with all Environmental Laws.
(d) Except as listed on Schedule 3.36(d), neither the Company
nor any of the Sellers has received any written or oral order, notice,
complaint, request for information, claim, demand or other communication from
any government authority or other person, whether based in contract, tort,
implied or express warranty, strict liability, or any other common law theory,
or any criminal or civil statute, arising from or with respect to (i) the
presence, release or threatened release of any Hazardous
33
Material or any other environmental condition on, in or under the Real Property
or any other property formerly owned, used or leased by the Company, (ii) any
other circumstances forming the basis of any actual or alleged violation by the
Company or the Sellers of any Environmental Law or any liability of the Company
or the Sellers under any Environmental Law, (iii) any remedial or removal action
required to be taken by the Company or the Sellers under any Environmental Law,
or (iv) any harm, injury or damage to real or personal property, natural
resources, the environment or any person alleged to have resulted from the
foregoing, nor are the Sellers aware of any facts which might reasonably give
rise to such notice or communication. Neither the Company nor any of the Sellers
has entered into any agreements concerning any removal or remediation of
Hazardous Materials.
(e) No lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions are
pending (excluding any lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions for
which process has not been served) under any Environmental Law with respect to
the Company, the Sellers or the Real Property. To the knowledge of the Sellers,
no lawsuits, claims, civil actions, criminal actions, administrative
proceedings, investigations or enforcement or other actions are pending,
threatened or probable of assertion under any Environmental Law with respect to
the Company, the Sellers or the Real Property.
(f) Except as listed on Schedule 3.36(f), no Hazardous
Materials are or have been released, discharged, spilled or disposed of onto, or
migrated onto, the Real Property or any other property previously owned,
operated or leased by the Company, and no environmental condition exists
(including, without limitation, the presence, release, threatened release or
disposal of Hazardous Materials) related to the Real Property, to any property
previously owned, operated or leased by the Company, or to the Company's past or
present operations, which would constitute a violation of any Environmental Law
or otherwise give rise to costs, liabilities or obligations under any
Environmental Law.
(g) Neither the Company nor any of the Sellers, nor any of
their respective predecessors in interest, has transported or disposed of, or
arranged for the transportation or disposal of, any Hazardous Materials to any
location (i) which is listed on the National Priorities List, the CERCLIS list
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any similar federal, state or local list, (ii) which is
the subject of any federal, state or local enforcement action or other
investigation, or (iii) about which the Company or the Sellers has received or
has reason to expect to receive a potentially responsible party notice or other
notice under any Environmental Law.
34
(h) No environmental lien has attached or, to Sellers'
knowledge, is threatened to be attached to the Real Property.
(i) No employee of the Company in the course of his or her
employment with the Company has been exposed to any Hazardous Materials or other
substance, generated, produced or used by the Company which could give rise to
any claim (whether or not such claim has been asserted) against the Company.
(j) Except as set forth on Schedule 3.36(j) hereto, the Real
Property does not contain any: (i) septic tanks into which process wastewater or
any Hazardous Materials have been disposed; (ii) asbestos; (iii) polychlorinated
biphenyls (PCBs); (iv) underground injection or monitoring xxxxx; or (v)
underground storage tanks.
(k) Except as set forth on Schedule 3.36(k), there have been
no environmental studies or reports made by or for the benefit of the Company or
the Sellers relating to the Real Property or any other property or facility
previously owned, operated or leased by the Company.
(l) Except as set forth on Schedule 3.36(l), the Company has
not agreed to assume, defend, undertake, guarantee, or provide indemnification
for, any liability, including, without limitation, any obligation for corrective
or remedial action, of any other person or entity under any Environmental Law
for environmental matters or conditions.
1.47 Year 2000 Matters. The Company has (i) initiated a review and
assessment of all areas within its business and operations (including those
affected by the manufacturers, suppliers, vendors and customers) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999), (ii) developed a plan and timetable as described on Schedule
3.37 for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan and timetable, except as set forth on said Schedule 3.37.
1.48 Business Generally. Except as listed on Schedule 3.38, none
of the Sellers is aware of the existence of any conditions, including, without
limitation, any actual or potential competitive factors in the markets in which
the Company participates, which have not been disclosed in writing to the Buyer
and which could reasonably be expected to have an adverse effect on the business
and operations of the Company, other than general business and economic
conditions generally affecting the industry and markets in which the Company
participates.
35
3.1 MISSTATEMENTS AND OMISSIONS. No representation and warranty by
the Sellers contained in this Agreement, and no statement contained in any
certificate or Schedule furnished or to be furnished by the Sellers to the Buyer
in connection with this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make such representation and warranty or such statement not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers as follows:
1.49 Organization and Good Standing. The Buyer is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Delaware. The Buyer has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
The Buyer is qualified to do business as a foreign entity and is in good
standing in each of the jurisdictions in which the nature of its business and
assets require such qualification.
1.50 Buyer's Power and Authority; Consents and Approvals.
(a) The Buyer has, or will have prior to Closing, all
requisite corporate power and authority to execute and deliver this Agreement
and the other agreements, documents and instruments to be executed and delivered
by the Buyer in connection herewith, to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder.
(b) Except as set forth in Schedule 4.2(b) hereto, no
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party, is required in
connection with the execution and delivery by the Buyer of this Agreement and
the other agreements, documents and instruments to be executed by the Buyer in
connection herewith, the consummation by the Buyer of the transactions
contemplated hereby or thereby or the performance by the Buyer of its
obligations hereunder and thereunder.
1.51 Execution and Enforceability. This Agreement and the other
agreements, documents and instruments to be executed and delivered by the Buyer
in connection herewith, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, have been, or will be prior to Closing, duly
and validly authorized, executed and delivered by all necessary corporate action
on the part of the Buyer and this Agreement
36
constitutes, and the other agreements, documents and instruments to be executed
and delivered by the Buyer in connection herewith, when executed and delivered
by the Buyer, shall constitute the legal, valid and binding obligations of the
Buyer, enforceable against the Buyer in accordance with their respective terms.
1.52 Litigation Regarding Buyer. There are no actions, suits,
claims, investigations or legal, administrative or arbitration proceedings
pending or, to the Buyer's knowledge, threatened or probable of assertion
against the Buyer relating to this Agreement or the transactions contemplated
hereby before any court, governmental or administrative agency or other body,
and no judgment, order, writ, injunction, decree or other similar command of any
court or governmental or administrative agency or other body has been entered
against or served upon the Buyer relating to this Agreement or the transactions
contemplated hereby.
1.53 No Violation; Conflicts. The execution and delivery by the
Buyer of this Agreement and the other agreements, documents and instruments to
be executed and delivered by the Buyer in connection herewith, the consummation
by the Buyer of the transactions contemplated hereby and thereby and the
performance by the Buyer of its obligations hereunder and thereunder do not and
will not (a) conflict with or violate any of the terms of the Certificate of
Incorporation or By-Laws of the Buyer, or (b) violate or conflict with any
domestic law, ordinance, rule or regulation, or any judgement, order, writ,
injunction or decree of any court, administrative or governmental agency or
other body, material to the Buyer.
1.54 Brokers' or Finders' Fees, Etc. No agent, broker, investment
banker, person or firm acting on behalf of the Buyer or any person, firm or
corporation affiliated with the Buyer or under its authority is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with the
sale of the Shares contemplated hereby.
1.55 Authorization of the Stock. The issuance hereunder of the
Sonic Common Shares have been, or prior to Closing will be, duly authorized by
all necessary corporate action of the Buyer. Upon the issuance of the Sonic
Common Shares pursuant to this Agreement, the Sonic Common Shares shall be
validly issued, fully paid and non-assessable.
1.56 Capitalization. The authorized capital stock of the Buyer
consists of:
(a) As of the date hereof, 3,000,000 shares of Preferred Stock, par
value $0.10 per share, of which 300,000 shares are designated Class A
Convertible Preferred Stock and are, in turn, divided into 100,000 shares of
Series I (the
37
"SERIES I PREFERRED STOCK"), 100,000 shares of Series II (the "SERIES II
PREFERRED STOCK") and 100,000 shares of Series III (the "SERIES III PREFERRED
STOCK"); as of March 29, 1999, approximately 14,410 shares of Series I Preferred
Stock were issued and outstanding and/or were committed to be issued by the
Buyer, approximately 20,088 shares of Series II Preferred Stock were issued and
outstanding and/or were committed to be issued by the Buyer, and approximately
49,610 shares of Series III Preferred Stock were issued and outstanding and/or
were committed to be issued by the Buyer;
(b) 50,000,000 shares of Class A Common Stock, par value $0.01
per share, of which 12,155,963 shares were issued and outstanding as of March
29, 1999; and
(c) 15,000,000 shares of Class B Common Stock, par value $0.01
per share, of which 12,400,000 shares were issued and outstanding as of March
29, 1999.
All outstanding capital stock of the Buyer is duly authorized, validly issued,
fully paid and non-assessable and has been issued in conformity with all
applicable federal and state securities laws.
1.57 Disclosure Materials. The Buyer has delivered to the Sellers'
Agent copies of (i) the Prospectus dated November 10, 1997 (the "1997
PROSPECTUS"), (ii) the Buyer's Annual Report on Form 10-K for the Fiscal Year
ended December 31, 1997, (iii) the Buyer's Quarterly Reports on Form 10-Q for
the three-month periods ended March 31, 1998, June 30, 1998, and September 30,
1998 and (iv) all Current Reports on Form 8-K, filed in 1998 or 1999, each in
the form (excluding exhibits) filed with the SEC (collectively, such Forms 10-K,
10-Q and 8-K being hereinafter referred to as its "REPORTS"). Neither the 1997
Prospectus nor any of the Reports contained, at the time of filing thereof with
the SEC, any untrue statement of any material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading.
1.58 Misstatements and Omissions. No representation and warranty
by the Buyer contained in this Agreement, and no statement contained in any
certificate or Schedule furnished or to be furnished by the Buyer to the Sellers
in connection with this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make such representation and warranty or such statement not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS OF THE SELLERS
38
The Sellers hereby jointly and severally covenant and agree that, from and
after the date hereof until the Closing:
1.59 Provide Access to Information; Cooperation with Buyer.
(a) ACCESS. The Sellers have delivered to the Buyer all of the
due diligence materials described on Schedule 5.1 hereto. The Sellers shall
afford, and cause the Company to afford, to the Buyer, its attorneys,
accountants, and representatives, free and full access at all reasonable times,
and upon reasonable prior notice, to the properties, books and records of the
Company, and to interview personnel, suppliers and customers of the Company, in
order that the Buyer may have a full opportunity to make such investigation
(including the Environmental Audit contemplated by Section 5.11) as it shall
reasonably desire of the assets, businesses and operations of the Company
(including, without limitation, any appraisals or inspections thereof), and
provide to the Buyer and its representatives such additional financial and
operating data and other information as to the businesses and properties of the
Company as the Buyer shall from time to time reasonably request. The Buyer's
representatives shall coordinate all visits to the Seller's business location
and all interviews with Seller's personnel with the Seller's principal officers
or their designee and shall use reasonable efforts to minimize any disruption of
Seller's business while conducting such visits and interviews. Buyer shall
provide the Sellers with copies of all reports and Environmental Audits that it
receives with respect to the Company or the Real Property.
(b) COOPERATION IN OBTAINING MANUFACTURER APPROVAL. The
Sellers shall promptly notify the Manufacturers of the execution and delivery of
this Agreement, and thereafter shall use reasonable best efforts in cooperating
with the Buyer in the preparation of and delivery to Manufacturers, as soon as
practicable after the date hereof, of an application and any other information
necessary to obtain the respective Manufacturers' consents to or the approval of
the transactions contemplated by this Agreement.
1.60 Operation of Businesses of the Company. Except as expressly
authorized in Sections 5.5(b) or 5.6, the Sellers shall cause the Company to (a)
maintain its corporate existence in good standing, (b) operate its business
substantially as presently operated and only in the ordinary course and
consistent with past operations and its obligations under any existing
agreements with all applicable automobile manufacturers or distributors, (c) use
its best efforts to preserve intact its present business organizations and its
relationships with persons having business dealings with them, including, but
not limited to, all applicable automobile manufacturers or distributors and any
floor plan financing creditors, (d) comply in all respects with all applicable
laws, rules and regulations, (e) maintain its
39
insurance coverages, (f) pay all Taxes, charges and assessments when due,
subject to any valid objection or contest of such amounts asserted in good faith
and adequately reserved against, (g) make all debt service payments when
contractually due and payable, (h) pay all accounts payable and other current
liabilities when due, (i) maintain the Employee Plans and each plan, agreement
and arrangement listed on Schedule 3.27, and (j) maintain its property, plant
and equipment in good operating condition in accordance with industry standards
taking into account the age thereof.
1.61 Books of Account. The Sellers shall cause the Company to
maintain its books and records of account in the usual, regular and ordinary
manner except that the Company will not be required to perform a review for its
tax year ending 1998.
1.62 Employees. The Sellers shall (i) use their reasonable best
efforts to encourage such personnel of the Company as the Buyer may designate in
writing to remain employees of the Company after the date of the Closing, and
(ii) not take any action, or permit the Company to take any action, to encourage
any of the personnel of the Company to leave their positions with the Company.
1.63 Certain Prohibitions.
(a) The Sellers shall not permit the Company to (i) except as
contemplated in Section 5.5(b), issue any equity securities, (ii) issue any debt
security or any options or warrants, (iii) enter into any subscriptions,
agreements, plans or other commitments pursuant to which the Company is or may
become obligated to issue any of debt securities or, except as contemplated in
Section 5.5(b), equity securities, (iv) otherwise change or modify its capital
structure, (v) except as contemplated by Section 1.7, engage in any
reorganization or similar transaction or sell or otherwise dispose of any of its
assets, other than sales of inventory in the ordinary course of business or (vi)
except as contemplated in Section 5.5(b), declare or make payment of any
dividend or other distribution in respect of its capital stock or redeem,
repurchase or otherwise acquire any of its capital stock.
(b) Buyer acknowledges that the Sellers may cause the Company
to declare and pay cash dividends, subject to the Company's obligations under
its agreements with the Manufacturer, to the Sellers prior to the Closing. The
Company shall not, however, declare or pay any such dividends without giving to
the Buyer prior written notice thereof, which notice shall set forth the amount
of such dividends and the anticipated date of payment thereof. Buyer
acknowledges that the Sellers may cause the Company to issue additional shares
of MAI Common Stock to Xxxx Xxxxx. The parties agree that Xxxxx will sell, and
Buyer will purchase, such additional shares pursuant to the merger
40
contemplated hereby, without any additional consideration, but otherwise upon
the terms and conditions hereof. As used herein, the term "SHARES" shall include
such additional shares. Prior to the issuance of any such additional shares, the
parties hereto shall execute an amendment hereto whereby Exhibit 3.1 will be
adjusted to reflect such issuance.
1.64 Other Changes. The Sellers shall not permit the Company to
take, cause, agree to take or cause to occur any of the actions or events set
forth in Section 3.20 other than the satisfaction or release of indebtedness
owed to the Company or the satisfaction or release of indebtedness owed by the
Company, each as contemplated by Section 7.8, or payments of bonuses to officers
and directors. The Sellers shall give Buyer prior written notice of any such
bonus payment.
1.65 Additional Information. The Sellers shall furnish and cause
the Company to furnish to the Buyer such additional information with respect to
any matters or events arising or discovered subsequent to the date hereof which,
if existing or known on the date hereof, would have rendered any representation
or warranty made by the Sellers or any information contained in any Schedule
hereto or in other information supplied in connection herewith then inaccurate
or incomplete. The receipt of such additional information by the Buyer shall not
operate as a waiver by Buyer of the conditions to Closing set forth in Section
7.1.
1.66 Publicity. Except as may be required by law or the applicable
rules or regulations of any securities exchange, the Sellers shall not (i) make
or permit the Company to make any press release or other public announcement
relating to this Agreement or the transactions contemplated hereby, without the
prior written approval of the Buyer, and (ii) otherwise disclose the existence
and nature of their discussions or negotiations regarding the transactions
contemplated hereby to any person or entity other than their accountants,
attorneys and similar professionals, and employees of the Company as
appropriate, all of whom shall be subject to this nondisclosure obligation as
agents of the Sellers, as the case may be. The Sellers shall cooperate with the
Buyer in the preparation and dissemination of any public announcements of the
transactions contemplated by this Agreement. Buyer approves of the Company
making its employees aware of this Agreement upon execution thereof. Buyer
recognizes that the presence of its representatives at the Company's dealership
location will cause speculation by the Company's employees concerning the
transactions contemplated hereby and that Sellers have no control over such
speculation.
1.67 Other Negotiations. The Sellers shall not pursue, initiate,
encourage or engage in, nor shall any of their respective Affiliates or agents
pursue, initiate, encourage or engage in, and the Sellers shall cause the
Company and their
41
Affiliates, directors, officers and agents not to pursue, initiate, encourage or
engage in, any negotiations or discussions with, or provide any information to,
any other person or entity (other than the Buyer and its representatives and
Affiliates) regarding the sale of the assets or capital stock of the Company or
any merger or similar transaction involving the Company.
1.68 Closing Conditions. The Sellers shall use all reasonable best
efforts to satisfy promptly the conditions to Closing set forth in Articles 7
and 8 required herein to be satisfied by the Sellers prior to the Closing.
1.69 Environmental Audit. The Sellers shall cause the Company to
allow an environmental consulting firm selected by the Buyer (the "ENVIRONMENTAL
AUDITOR") to have prompt access to the Real Property in order to conduct an
environmental investigation, satisfactory to the Buyer in scope (such scope
being sufficient to result in a Phase I environmental audit report and a Phase
II environmental audit report, if desired by the Buyer), of, and to prepare a
report with respect to, the Real Property (the "ENVIRONMENTAL AUDIT"). The
Sellers shall cause the Company to provide to the Environmental Auditor: (i)
reasonable access to all its existing records concerning the matters which are
the subject of the Environmental Audit; and (ii) reasonable access to the
employees of the Company and the last known addresses of former employees of the
Company who are most familiar with the matters which are the subject of the
Environmental Audit (the Sellers agreeing to use reasonable efforts to have such
former employees respond to any reasonable requests or inquiries by the
Environmental Auditor). The Sellers shall otherwise cooperate and cause the
Company to cooperate with the Environmental Auditor in connection with the
Environmental Audit. The Environmental Auditor shall coordinate all visits to
the Real Property and conversations with the employees of the Company, with the
principal officers of the Company or their designee and shall use reasonable
efforts to minimize any disruption of the Company's business while conducting
such investigations and conversations. The Buyer shall pay all of the costs,
fees and expenses incurred in connection with the Environmental Audit.
1.70 Audited Financial Statements. The Sellers shall allow,
cooperate with and assist Buyer's accountants, and shall instruct the Company'
accountants to cooperate, in the preparation of audited financial statements of
the Company as necessary for any required filings by the Buyer with the SEC or
with the Buyer's lenders; PROVIDED that the expense of such audit shall be borne
by the Buyer.
1.71 Xxxx-Xxxxx-Xxxxxx. Subject to the determination by the Buyer
that any of the following actions are not required, the Sellers shall promptly
prepare and file Notification and Report Forms under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR ACT") with the Federal
Trade
42
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "ANTITRUST DIVISION"), and respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation. Buyer shall pay the filing fee payable with
respect to the filing of such forms.
ARTICLE 6
PRE-CLOSING COVENANTS OF BUYER
The Buyer hereby covenants and agrees that, from and after the date hereof
until the Closing:
1.72 Publicity. Except as may be required by law or by the rules of the
New York Stock Exchange, or as necessary in connection with the transactions
contemplated hereby, the Buyer shall not (i) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior written approval of the Sellers' Agent, or (ii)
otherwise disclose the existence and nature of its discussions or negotiations
regarding the transactions contemplated hereby to any person or entity other
than its accountants, attorneys and similar professionals, all of whom shall be
subject to this nondisclosure obligation as agents of the Buyer.
1.73 Closing Conditions. The Buyer shall use all reasonable best efforts
to satisfy promptly the conditions to Closing set forth in Articles 7 and 8
required herein to be satisfied by the Buyer prior to the Closing.
1.74 Application to Manufacturer. Subject to the reasonable cooperation
of the Sellers, the Buyer shall provide to Manufacturer as promptly as
practicable after the execution and delivery of this Agreement any application
or other information with respect to such application necessary in connection
with the seeking of the consent of Manufacturer to the transactions contemplated
by this Agreement.
1.75 Xxxx-Xxxxx-Xxxxxx. Subject to the determination by the Buyer that
any of the following actions is not required, the Buyer shall promptly prepare
and file Notification and Report Forms under the HSR Act with the FTC and the
Antitrust Division, respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division for additional information or
documentation, and the Buyer shall pay all filing fees in connection therewith.
1.76 Access. The Buyer shall afford to the Sellers, their attorneys,
accountants, and representatives, free and full access at all reasonable times,
and upon reasonable prior notice, to the properties, books and records of the
Buyer, and to interview personnel, suppliers and customers of the Buyer, in
order that
43
the Sellers may have a full opportunity to make such investigation as
they shall reasonably desire of the assets, business and operations of the
Buyer.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING
The obligations of the Buyer to perform this Agreement at the Closing are
subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Buyer:
1.77 Representations and Warranties. The representations and warranties
made by the Sellers in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing. 1.1
1.78 Performance of Obligations of the Sellers. The Sellers shall have
performed all obligations required to be performed by the Sellers under this
Agreement, and complied with all covenants for which compliance by the Sellers
is required under this Agreement, prior to or at the Closing, including, without
limitation, delivery of the stock certificates and stock powers for the Shares
described in Section 1.3.
1.79 Closing Documentation. The Buyer shall have received the following
documents, agreements and instruments from the Sellers:
(a) a certificate signed by the Sellers and dated the date of
the Closing certifying as to the satisfaction of the conditions set forth in
Sections 7.1 and 7.2;
(b) [Intentionally Deleted]
(c) an opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxx L.L.P., counsel
for the Sellers, dated the date of the Closing and addressed to the Buyer, in
the form attached hereto as Exhibit 7.3(c);
(d) copies of all authorizations, approvals, consents,
notices, registrations and filings referred to in Schedules 3.2(b), 3.10 and
3.29(b), other than from the Manufacturers,
(e) certificates dated as of a recent date from (i) the
Secretary of State of the State of Delaware to the effect that MAI is duly
incorporated and in good standing in such state and, if available, stating that
the Company owes no franchise taxes in such state and listing all documents of
the Company on file with said Secretary of State, and (ii) the Secretary of
State of the State of Virginia to the effect that the Company is
44
duly qualified as a foreign corporation and is in good standing in such
jurisdiction;
(f) a copy of the Articles of Incorporation of MAI, including
all amendments thereto, certified as of a recent date by the Secretary of State
of the State of Delaware;
(g) evidence, reasonably satisfactory to the Buyer, of the
authority and incumbency of the persons acting on behalf of the Company in
connection with the execution of any document delivered in connection with this
Agreement;
(h) Uniform Commercial Code Search Reports on Form UCC-11 or
its equivalent with respect to the Company from the states and local
jurisdictions where the principal places of business of the Company and its
assets are located;
(i) a certificate of each of the Sellers as to such Seller's
non-foreign status in appropriate form;
(j) the corporate minute books and stock record books of MAI,
and all other books and records of, or pertaining to, the business and
operations of the Company;
(k) (i) estoppel letters of lenders to the Company, in form
and substance reasonably satisfactory to the Buyer, with respect to amounts
owing by the Company as of the Closing; (ii) estoppel letters of Marco LP and
OGTR II LP, as landlords of the Leased Premises, in form and substance
reasonably satisfactory to the Buyer; and (iii) the Company, Marco LP and OGTR
II LP shall have executed and delivered to Buyer the termination agreements
contemplated by Section 1.4(c).
(l) such other instruments and documents as the Buyer shall
reasonably request not inconsistent with the provisions hereof.
1.80 Approval of Legal Matters. The form of all instruments, certificates
and documents to be executed and delivered by the Sellers to the Buyer pursuant
to this Agreement and all legal matters in respect of the transactions as herein
contemplated shall be reasonably satisfactory to the Buyer and its counsel, none
of whose approval shall be unreasonably withheld or delayed.
1.81 No Litigation. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain damages in respect thereof,
or involving a claim that consummation thereof would result in the violation of
any law, decree or regulation of any governmental authority having appropriate
jurisdiction, and no
45
order, decree or ruling of any governmental authority or court shall have been
entered challenging the legality, validity or propriety of, or otherwise
relating to, this Agreement or the transactions contemplated hereby, or
prohibiting, restraining or otherwise preventing the consummation of the
transactions contemplated hereby.
1.82 No Material Adverse Change or Undisclosed Liability. Other than as
contemplated in Sections 5.5(b), 5.6 and 7.8, there shall have been no material
adverse change or development in the business, prospects, properties, earnings,
results of operations or financial condition of the Company, or any of its
assets. This provision does not relate to general business and economic
conditions generally effecting the industry and markets in which the respective
companies participate.
1.83 No Adverse Laws. There shall not have been enacted, adopted or
promulgated any statute, rule, regulation or order which materially adversely
affects the business or assets of the Company.
1.84 Affiliate and Other Transactions. All amounts owed to the Company
from, and all amounts owed by the Company to, any of the following: (a) any
Seller, Waldorf, LOR, Manhattan Imported Cars, Inc., a Maryland corporation
("MIC"), the Leasing Subsidiary, Rockville Rent A Car, Inc., a Maryland
corporation, Marco, OGTR or WAI Limited Partnership, (b) any shareholder or
limited or general partner of any of the foregoing entities, (c) any Affiliate
of any person or entity referred to in clauses (a) and (b) or (d) any of the
Company's officers and employees shall have been paid in full or otherwise
released and forgiven on or prior to the Closing Date.
1.85 Escrow Agreement. The Sellers and the Escrow Agent shall have duly
executed and delivered to the Buyer the Escrow Agreement. 1.1
1.86 Manufacturer Approvals. The Manufacturer shall have given any
required approvals of the transfer of the Shares to the Buyer and shall have
given any required approval of O. Xxxxxx Xxxxx or his designee as the authorized
dealer operator of the Company's dealership franchise with the Manufacturer, and
the Manufacturer shall have executed any required dealer agreements and/or
amendments or supplements thereto in connection with the foregoing.
1.87 Non-Competition and Employment Agreement. Each of the Sellers (other
than Xxxx Xxxxx and Xxxxxxx Xxxxx) shall have executed and delivered to the
Buyer and the Surviving Company the Non-Competition Agreement. Xxxx Xxxxx shall
have executed and delivered to the Buyer the Employment Agreement.
46
1.88 Cancellation of Stock Options. All outstanding options, warrants,
"phantom" stock options and other plans, agreements or arrangements of the
Company with respect to the purchase, or the issuance of, any capital stock or
other securities of the Company shall have been canceled and terminated prior to
the Closing at no expense to the Buyer, and the Buyer shall have received
reasonably satisfactory evidence thereof.
1.89 Audited Financial Statements. The Buyer shall have completed
preparation of such audited financial statements of the Company as may be
required by applicable regulations of the SEC or by any of the Buyer's lenders.
1.90 Xxxx-Xxxxx-Xxxxxx Waiting Period. All applicable waiting periods
under the HSR Act shall have expired without any indication by the Antitrust
Division or the Federal Trade Commission that either of them intends to
challenge the transactions contemplated hereby or, if any such challenge or
investigation is made or commenced, the conclusion of such challenge or
investigation permits the transactions contemplated hereby in all material
respects.
1.91 Other Basic Agreements. All conditions to the Buyer's obligations to
close under the Marco Real Property Purchase Agreement - Fairfax shall have been
satisfied or waived by the Buyer and the closing under the Marco Real Property
Purchase Agreement - Fairfax shall have occurred or shall be occurring
contemporaneously with the Closing. All conditions to the Buyer's obligations to
close under the OGTR Real Property Purchase Agreement shall have been satisfied
or waived by the Buyer and the closing under the OGTR Real Property Purchase
Agreement shall have occurred or shall be occurring contemporaneously with the
Closing.
7.16 [INTENTIONALLY DELETED]
7.17 DEFERRED COMPENSATION AND STOCKHOLDER AGREEMENTS. At or prior to
Closing, each Seller shall have waived all rights he or she has arising under or
with respect to any deferred compensation agreements he or she has with the
Company, including without limitation, the Employment Contract dated January 10,
1982 between the Company and Xxxxxxx Xxxxx and the Employment Contract dated
January 10, 1980 between the Company and Xxxxxx Xxxxxx (collectively, the
"DEFERRED COMPENSATION AGREEMENTS"), and the Buyer shall have received
reasonably satisfactory evidence thereof. At or prior to the Closing, the
Company and the Sellers shall have terminated, and released all parties from any
obligations with respect to the following agreements: (a) the Voting Trust
Agreement dated as of December 15, 1984 among Manhattan Auto, Inc., Xxxxxx X.
Xxxxxx, Xxxxxx Xxxxx, Xxxx Xxxxx and Xxxxxxx X. Xxxxx; (b) the Stock Purchase
Agreement between Stockholders and Corporation dated as of 1982 among Manhattan
Porsche-Audi, Inc. (as predecessor to the Company), Xxxxxx X.
47
Xxxxxx and Xxxxxx Xxxxx, as amended by the Amendment to Stock Purchase Agreement
dated as of August 27, 1992 among MIC, Xxxxxx X. Xxxxxx and Xxxxxx Xxxxx, and
(c) the Stockholders Agreement dated as of December 30, 1983 among Xxxxxx X.
Xxxxxx, Xxxxxx Xxxxx, Xxxx Xxxxx and Xxxxxxx X. Xxxxx, and Buyer shall have
received reasonably satisfactory evidence thereof (collectively, the
"STOCKHOLDER AGREEMENTS").
7.18 APPRAISAL/DISSENTERS' RIGHTS. No holder of capital stock of the
Company shall have any appraisal or dissenters' rights under applicable law.
7.19 RELEASE FROM DISTRIBUTED LIABILITIES. The Company shall have been
released from all Distributed Liabilities by the respective holders thereof.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE SELLERS AT THE CLOSING
The obligations of the Sellers to perform this Agreement at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Sellers:
1.92 Representations and Warranties. The representations and warranties
made by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
1.93 Performance of Obligations of the Buyer. The Buyer shall have
performed all obligations required to be performed by it under this Agreement,
and complied with all covenants for which compliance by it is required under
this Agreement, prior to or at the Closing, including, without limitation,
payment of the Merger Consideration pursuant to Section 1.2(b).
1.94 Closing Documentation. The Sellers shall have received the following
documents, agreements and instruments from the Buyer:
(a) a certificate signed by a duly authorized signatory of the
Buyer and dated as of the Closing Date certifying as to the satisfaction of the
conditions set forth in Sections 8.1 and 8.2;
(b) an opinion of Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P.,
counsel for the Buyer, dated as of the Closing Date and addressed to the
Sellers, with respect to the matters identified on Exhibit 8.3(b);
48
(c) certificates dated as of a recent date from the Secretary
of State of the State of Delaware to the effect that the Buyer is duly
incorporated and in good standing in such State;
(1) certificates dated as of a recent date from the Secretary
of State of the State of the Sub's organization to the effect that the Sub is
duly incorporated and in good standing in such State;
(d) a copy of the Buyer's Certificate of Incorporation,
including all amendments thereto, certified by the Secretary of State of the
State of Delaware;
(e) evidence, reasonably satisfactory to the Sellers, of the
authority and incumbency of the persons acting on behalf of the Buyer in
connection with the execution of any document delivered in connection with this
Agreement;
(f) such other instruments and documents as the Sellers shall
reasonably request not inconsistent with the provisions hereof; and
(g) a copy of the Sub's Articles of Incorporation including
all amendments thereby certified by the Secretary of State of the State of
Maryland.
1.95 Approval of Legal Matters. The form of all certificates, instruments
and documents to be executed or delivered by the Buyer to the Sellers pursuant
to this Agreement and all legal matters in respect of the transactions as herein
contemplated shall be reasonably satisfactory to the Sellers and their counsel,
none of whose approval shall be unreasonably withheld or delayed.
1.96 No Litigation. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction, and no order, decree or ruling of any
governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement or
the transactions contemplated hereby, or prohibiting, restraining or otherwise
preventing the consummation of the transactions contemplated hereby.
1.97 Escrow Agreement. The Buyer and the Escrow Agent shall have duly
executed and delivered the Escrow Agreement to the Sellers.
49
8.7 XXXX-XXXXX-XXXXXX WAITING PERIOD. All applicable waiting periods under
the HSR Act shall have expired without any indication of the Antitrust Division
or the Federal Trade Commission that either of them intends to challenge the
transactions contemplated hereby, or, if any such challenge or investigation is
made or commenced, the conclusion of such challenge or investigation permits the
transactions contemplated hereby in all material respects.
8.8 ANCILLARY AGREEMENTS. All conditions to the Seller's (as defined in
the Marco Real Property Purchase Agreement - Fairfax) obligations under the
Marco Real Property Purchase Agreement - Fairfax shall have been satisfied or
waived by such Seller and the closing under the Marco Real Property Purchase
Agreement - Fairfax shall have occurred or shall be occurring contemporaneously
with the Closing. All conditions to the Seller's (as defined in the OGTR Real
Property Purchase Agreement) obligations to close under the OGTR Real Property
Purchase Agreement shall have been satisfied or waived by such Seller and the
closing under the OGTR Real Property Purchase Agreement shall have occurred or
shall be occurring contemporaneously with the Closing.
8.9 [INTENTIONALLY DELETED]
8.10 EMPLOYMENT AGREEMENT. The Buyer shall have executed and delivered to
Xxxx Xxxxx the Employment Agreement.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
1.98 Survival. All statements contained in any Schedule or certificate
delivered hereunder or in connection herewith by or on behalf of any of the
parties pursuant to this Agreement shall be deemed representations and
warranties by the respective parties hereunder unless otherwise expressly
provided herein. The representations and warranties of the Sellers or the Buyer
contained in this Agreement, including those contained in any Schedule or
certificate delivered hereunder or in connection herewith, shall survive the
Closing for a period of two years with the exception of (i) the representations
and warranties of the Sellers contained in Section 3.21, which shall survive the
Closing for seven years except that, in the case of fraud, such representations
and warranties shall survive indefinitely; (ii) the representations and
warranties of the Sellers contained in Sections 3.22 and 3.36, which shall
survive the Closing for a period of three years, and (iii) the representations
and warranties of the Sellers contained in Sections 3.1 and 3.11, which shall
survive the Closing indefinitely. As to each representation and warranty of the
parties hereto, the date to
50
which such representation and warranty shall survive is hereinafter referred to
as the "SURVIVAL DATE".
1.99 Agreement to Indemnify by the Sellers. Subject to the terms and
conditions of this Article 9, the Sellers hereby, jointly and severally, agree
to indemnify and save the Buyer, the Surviving Company, their respective
shareholders, officers, directors and employees, and the successors and assigns
of each of the foregoing (each, a "BUYER INDEMNITEE") harmless from and against,
for and in respect of, any and all damages, losses, obligations, liabilities,
demands, judgments, injuries, penalties, claims, actions or causes of action,
encumbrances, costs, and expenses (including, without limitation, reasonable
attorneys' fees and expert witness fees), suffered, sustained, incurred or
required to be paid by any Buyer Indemnitee (collectively, "BUYER'S DAMAGES")
arising out of, based upon, in connection with, or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Sellers contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith, excluding any breach of representation and warranty contained in
Section 3.19; PROVIDED, HOWEVER, that with respect to the foregoing
indemnification obligation of the Sellers contained in this Section 9.2(a), the
Sellers shall not have any indemnification obligation until (and only to the
extent that) Buyer's Damages in respect of all claims for indemnity pursuant to
this Section 9.2(a) shall exceed a cumulative aggregate total of $150,000;
(b) the untruth, inaccuracy or breach of any representation and
warranty of the Sellers contained in or made pursuant to Section 3.19, including
in any Schedule or certificate delivered hereunder in connection therewith;
(c) the breach or nonfulfillment of any covenant or agreement of any
Seller contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;
(d) any loss of life, injury to persons or property, or damage to
natural resources caused by the actual, alleged, or threatened release, storage,
transportation, treatment or generation, of Hazardous Materials generated,
stored, used, disposed of, treated, handled or shipped by the Company on or
before the Closing Date;
(e) any cleanup of Hazardous Materials released, disposed of or
discharged: (i) on, in, beneath or around to the Real Property prior to or on
the date of the Closing; or (ii) at any other location if such substances were
generated, used,
51
stored, treated, transported or released by the Company prior to or on the
Closing Date;
(f) (i) all known or unknown environmental liabilities and claims of
the Company or arising out of the ownership the Shares prior to the Closing,
including, without limitation, the presence, release or threatened release of
Hazardous Materials and any liabilities or obligations arising under any
Environmental Law, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), as amended; or (ii) any
matter, item, circumstance or condition listed, contained or otherwise referred
to on Schedules 3.36(d), 3.36(f), 3.36(j), 3.36(k), or 3.36(l);
(g) any and all costs of installing pollution control equipment or
other equipment to bring any of the Real Property into compliance with any
Environmental Law if such equipment is installed because any of the Real
Property was not in compliance with any Environmental Laws as of the date of the
Closing;
(h) any and all Taxes arising out of or based upon the Distributed
Assets or the Distributed Liabilities or the distribution thereof as
contemplated by Section 1.7; or
(i) any actions, suits, claims, investigations or proceedings
disclosed, or required to be disclosed, on Schedule 3.23.
1.100 Agreement to Indemnify by Buyer. Subject to the terms and conditions of
this Article 9, the Buyer hereby agrees to indemnify and save the Sellers and
their heirs and permitted assigns (each, a "SELLER INDEMNITEE") harmless from or
against, for and in respect of, any and all damages, losses, obligations,
liabilities, demands, judgments, injuries, penalties, claims, actions or causes
of action, encumbrances, costs and expenses (including, without limitation,
reasonable attorneys' fees and expert witness fees) suffered, sustained,
incurred or required to be paid by any Seller Indemnitee arising out of, based
upon or in connection with or as a result of:
(a) the untruth, inaccuracy or breach of any representation
and warranty of the Buyer contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith;
(b) the breach or nonfulfillment of any covenant or agreement
of the Buyer contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto; or
(c) any liabilities or obligations of the Company accrued or
incurred after the Closing Date but only to the extent that Buyer is not
entitled to indemnification from any of the
52
persons or entities referred to in Section 7.8 with respect to such liabilities
or obligations.
1.101 Claims for Indemnification. No claim for indemnification with
respect to a breach of a representation and warranty shall be made under this
Agreement after the applicable Survival Date unless prior to such Survival Date
the Buyer Indemnitee or the Seller Indemnitee, as the case may be, shall have
given the Sellers or the Buyer, as the case may be, written notice of such claim
for indemnification based upon actual loss sustained, or potential loss
anticipated, as a result of the existence of any claim, demand, suit, or cause
of action against such Buyer Indemnitee or Seller Indemnitee, as the case may
be.
1.102 Procedures Regarding Third Party Claims. The procedures to be
followed by the Buyer and the Sellers with respect to indemnification hereunder
regarding claims by third persons which could give rise to an indemnification
obligation hereunder shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action or
proceeding (including, without limitation, any notice relating to a tax audit)
or the assertion of any claim by a third person which the person receiving such
notice has reason to believe may result in a claim by it for indemnity pursuant
to this Agreement, such person (the "INDEMNIFIED PARTY") shall give a written
notice of such action, proceeding or claim to the party against whom
indemnification pursuant hereto is sought (the "INDEMNIFYING PARTY"), setting
forth in reasonable detail the nature of such action, proceeding or claim,
including copies of any documents and written correspondence from such third
person to such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at its own
expense, to participate in the defense of such action, proceeding or claim, and,
if (i) the action, proceeding or claim involved seeks (and continues to seek)
solely monetary damages, (ii) the Indemnifying Party confirms, in writing, its
obligation hereunder to indemnify and hold harmless the Indemnified Party with
respect to such damages in their entirety pursuant to Sections 9.2 or 9.3, as
the case may be, and (iii) the Indemnifying Party shall have made provision
which, in the reasonable judgment of the Indemnified Party, is adequate to
satisfy any adverse judgment as a result of its indemnification obligation with
respect to such action, proceeding or claim, then the Indemnifying Party shall
be entitled to assume and control such defense with counsel chosen by the
Indemnifying Party and approved by the Indemnified Party, which approval shall
not be unreasonably withheld or delayed. The Indemnified Party shall be entitled
to participate therein after such assumption, the costs of such participation
following such assumption to be at its own expense. Upon assuming such defense,
the Indemnifying Party
53
shall have full rights to enter into any monetary compromise or settlement which
is dispositive of the matters involved; PROVIDED, that such settlement is paid
in full by the Indemnifying Party and will not have any direct or indirect
continuing material adverse effect upon the Indemnified Party. Notwithstanding
the foregoing, the Indemnified Party shall have the right to pay, settle or
compromise any such action, proceeding or claim, provided that in such event the
Indemnified Party shall waive any right to indemnity therefor hereunder unless
the Indemnified Party shall have sought the consent of the Indemnifying Party to
such payment, settlement or compromise and such consent was unreasonably
withheld or delayed, in which event no claim for indemnity therefor hereunder
shall be waived.
(c) With respect to any action, proceeding or claim as to
which (i) the Indemnifying Party does not have the right to assume the defense
or (ii) the Indemnifying Party shall not have exercised its right to assume the
defense, the Indemnified Party shall assume and control the defense of and
contest such action, proceeding or claim with counsel chosen by it and approved
by the Indemnifying Party, which approval shall not be unreasonably withheld.
The Indemnifying Party shall be entitled to participate in the defense of such
action, proceeding or claim, the cost of such participation to be at its own
expense. The Indemnifying Party shall be obligated to pay the reasonable
attorneys' fees and expenses of the Indemnified Party to the extent that such
fees and expenses relate to claims as to which indemnification is due under
Sections 9.2 or 9.3, as the case may be. The Indemnified Party shall have full
rights to dispose of such action, proceeding or claim and enter into any
monetary compromise or settlement; PROVIDED, HOWEVER, in the event that the
Indemnified Party shall settle or compromise any action, proceeding or claim for
which indemnification is due under Sections 9.2 or 9.3, as the case may be, it
shall act reasonably and in good faith in doing so.
(d) Both the Indemnifying Party and the Indemnified Party
shall cooperate fully with one another in connection with the defense,
compromise or settlement of any such action, proceeding or claim, including,
without limitation, by making available to the other all pertinent information
and witnesses within its control.
1.103 Effectiveness. The provisions of this Article 9 shall be effective
upon consummation of the Closing, and prior to the Closing, shall have no force
and effect.
54
1.104 LIMITATIONS ON INDEMNITY. Notwithstanding any provision herein to
the contrary:
(1) The aggregate amount of liability for indemnification obligations
under Section 9.2 for each of the Sellers shall not exceed an amount equal to
the product of the Merger Consideration multiplied by his or her percentage
equity ownership of the Company at the Closing.
(2) Provided the transactions contemplated hereby are consummated,
each Indemnified Party's rights under this Article 9 (as specifically limited
hereby) shall be the exclusive means (other than with respect to fraud) by which
such party shall seek money damages against another party in connection with the
transactions contemplated hereby.
(3) In the event a Buyer Indemnitee has a claim against a Seller
Indemnitee hereunder, such Buyer Indemnitee shall first proceed against the
Escrowed Shares, if any, held pursuant to the Escrow Agreement.
(4) Indemnity obligations of the Sellers hereunder may, at their
election, be satisfied through the payment of cash or the delivery of Common
Stock. For purposes of calculating the value of Common Stock paid as
contemplated under this Section 9.7(d), the value of a share of Common Stock
shall be the Market Price as of the date of Closing for indemnity obligations of
the Sellers which are satisfied during the period of "market protection" for
Common Stock as provided pursuant to Section 1.2(f), after which time the value
shall be the Market Price as of the date of such payment. Indemnity obligations
of the Buyer shall be satisfied through the payment of cash.
(5) Except as specifically set forth in this Agreement, no party
shall be entitled to indemnity for claims or conditions which have been waived
by such party. In the event that (i) the certificate referenced in Section 7.1,
as delivered at Closing, accurately and comprehensively discloses any breach, as
of the date of this Agreement, of any of the Sellers' representations and
warranties contained herein and (ii) the Closing nonetheless occurs, Buyer shall
be deemed to have waived its indemnification rights arising under Section 9.2(a)
and 9.2(b) but only to the extent of the disclosure of such breach. In the event
that (i) the certificate referenced in Section 8.1, as delivered at Closing,
accurately and comprehensively discloses any breach, as of the date of this
Agreement, of any of the Buyer's representations and warranties contained herein
and (ii) the Closing nonetheless occurs, the Sellers shall be deemed to have
waived their respective indemnification rights arising under Section 9.3(c) but
only to the extent of the disclosure of such breach.
55
(6) Upon making a claim for indemnification, the Indemnifying Party
shall be subrogated, to the extent of such payment, to any rights that the
Indemnified Party may have against any third parties with respect to the subject
matter underlying such indemnified claim.
ARTICLE 10
TERMINATION
1.105 Termination. Notwithstanding any other provision herein contained
to the contrary, this Agreement may be terminated at any time prior to the
Closing Date:
(a) By the written mutual consent of the Buyer and the
Sellers;
(b) At any time prior to the Closing Date Deadline (as the
same may have been extended pursuant to Article 2) by the Buyer or the Sellers,
as the case may be, in the event of a material breach by the Sellers or the
Buyer, respectively, as the case may be, of any of their or its, as the case may
be, representations, warranties or covenants contained in this Agreement;
(c) At any time after the Closing Date Deadline (as the same
may have been extended pursuant to Article 2), by written notice by the Buyer or
the Sellers to the other party(ies) hereto if the Closing shall not have been
completed on or before the Closing Date Deadline (as the same may have been
extended pursuant to Article 2);
(d) By written notice by the Buyer to the Sellers' Agent if,
after any initial HSR Act filing, the FTC makes a "second request" for
information, or if the FTC or the Antitrust Division challenges the transactions
contemplated hereby;
(e) By the Buyer, by written notice to the Sellers, in the
event that approval by the Manufacturer is not received by the Closing Date
Deadline (as the same may have been extended pursuant to Article 2);
(1) By the Buyer, by written notice to the Sellers, in the
event that any Manufacturer (or any person claiming by, through or under any
Manufacturer) shall exercise any right of first refusal, preemptive right or
other similar right, with respect to the dealership business of the Company;
(2) By the Buyer (by written notice to the Sellers) or by the
Sellers (by written notice to the Buyer), in the event that any of the following
occur: (i) the Marco Real Property Purchase Agreement - Fairfax is terminated on
or prior
56
to the Closing; or (ii) the OGTR Real Property Purchase Agreement is terminated
on or prior to the Closing; or
(f) By the Buyer (by written notice to the Sellers) or by the
Sellers (by written notice to the Buyer) if either Buyer or the Sellers
terminate the Asset Purchase Agreement pursuant to Section 10.13(a)(v) thereof.
PROVIDED, HOWEVER, no party may terminate this Agreement pursuant to Section
10.1(b) or (c) above if such party is in material breach of any representation,
warranty or covenant of such party contained in this Agreement.
1.106 Procedure and Effect of Termination. In the event of termination of
this Agreement pursuant to Section 10.1, this Agreement shall, subject to
Section 1.10, be of no further force or effect; PROVIDED, HOWEVER, that any
termination pursuant to Section 10.1 shall not relieve (i) the Buyer of any
liability under Section 10.3 below, (ii) the Sellers of any liability under
Section 10.4 below, or (iii) except as provided in Section 10.5 below, any party
hereto of any liability for breach of any representation and warranty, covenant
or agreement hereunder occurring prior to such termination. In addition, in the
event of any such termination, all filings, applications and other submissions
made pursuant to this Agreement or prior to the execution of this Agreement in
contemplation thereof shall, to the extent practicable, be withdrawn from the
agency or other entity to which made.
1.107 Payment of Buyer's Termination Fee. If this Agreement is terminated
by the Sellers pursuant to Section 10.1(c) above and the failure to complete the
Closing on or before the Closing Date Deadline shall have been due to the
Buyer's material breach of its representations and warranties or its covenants
or obligations under this Agreement, then the Buyer shall, within ten days after
receipt by the Buyer of written notice from the Seller's Agent, promptly pay to
the Sellers in immediately available funds, as liquidated damages for the loss
of the transaction and not as a penalty, a termination fee of One Million
Dollars ($1,000,000) (the "BUYER'S TERMINATION FEE"); PROVIDED, HOWEVER, that if
the Sellers are paid the Buyer Termination Fee (as defined in the Asset Purchase
Agreement) pursuant to the Asset Purchase Agreement, then the Sellers shall not
be entitled to payment of the Buyer's Termination Fee hereunder.
1.108 Payment of the Sellers' Termination Fee. If this Agreement is
terminated by the Buyer pursuant to Section 10.1(c) above and the failure to
complete the Closing on or before the Closing Date Deadline shall have been due
to the Sellers' material breach of any of their representations and warranties
or any of their covenants or obligations under this Agreement, then the Sellers,
jointly and severally, shall, within ten days after
57
receipt by the Sellers' Agent of written notice by the Buyer, promptly pay to
the Buyer in immediately available funds, as liquidated damages for the loss of
the transaction and not as a penalty, a termination fee of One Million Dollars
($1,000,000) (the "SELLERS' TERMINATION FEE"); PROVIDED, HOWEVER, that if the
Buyer is paid the Seller Termination Fee (as defined in the Asset Purchase
Agreement) pursuant to the Asset Purchase Agreement, then the Buyer shall not be
entitled to payment of the Sellers' Termination Fee hereunder.
1.109 Termination Fees Exclusive Remedies for Damages. In the case of a
termination of this Agreement pursuant to 10.1(c) above, the rights of the
terminating party to be paid the Sellers' Termination Fee or the Buyer's
Termination Fee, as the case may be, shall be such party's sole and exclusive
remedies for damages; in the event of such termination by either party, such
party shall have no right to equitable relief for any breach or alleged breach
of this Agreement, other than for specific performance for the payment of the
Sellers' Termination Fee or the Buyers' Termination Fee, as the case may be.
Nothing contained in this Agreement shall prevent any party from electing not to
exercise any right it may have to terminate this Agreement and, instead, seeking
any equitable relief to which it would otherwise be entitled in the event of
breach by any other party hereto.
ARTICLE 11
OTHER COVENANTS
1.110 Certain Taxes and Expenses.
(1) All sales, use, transfer, intangible, excise, documentary stamp,
recording, gross income, gross receipts and other similar taxes or fees which
may be due or payable in connection with the consummation of the transactions
contemplated hereby shall be paid by the Sellers.
(2) Except as otherwise herein provided, the Sellers and the Buyer
shall be responsible for the payment of their respective fees, costs and
expenses incurred in connection with the negotiation and consummation of the
transactions contemplated hereby and shall not be liable to the other party or
parties for the payment of any such fees, costs and expenses.
1.111 Renovations.
(1) DEVELOPMENT OF REAL PROPERTY. The Buyer acknowledges that, prior
to the Closing, the Company plans to commence the renovation of certain
improvements ("RENOVATIONS") located on the Real Property as described on the
Schedule of Work
58
attached hereto as Schedule 11.2 (the "SCHEDULE OF WORK"). The Sellers have
delivered, or promptly after the date hereof will deliver, a complete set of
plans and specifications (the "PLANS AND SPECIFICATIONS") for the Renovations.
The Sellers shall cause the Plans and Specifications to be in full compliance
with all laws, building codes, ordinances and statutes of the City and County in
which the Real Property is located. The Sellers shall cause the Company to
commence the Renovations in accordance with the Schedule of Work and the Plans
and Specifications and diligently pursue the completion of the Renovations
through Closing. The Sellers shall cause the Renovations to be constructed in
accordance with the Plans and Specifications and all applicable laws, building
codes, ordinances and statutes. The Sellers shall cause the Company to obtain
all necessary building, land disturbing and other permits required by any
applicable governmental agency to commence and complete the Renovations
(collectively, the "PERMITS"). The Sellers have delivered, or will deliver, to
Buyer a copy of all Permits obtained in connection with the Renovations. The
Sellers shall cause the Company to construct the Renovations: (i) entirely on
the Real Property and not encroach upon or overhang any easement, right-of-way
or upon the land of others; and (ii) wholly within applicable building
restriction and setback lines. The Sellers shall cause the Company to promptly
correct any defects in the Renovations which are discovered during the
construction of the Renovations.
(2) COOPERATION WITH BUYER. Buyer may elect to inspect the Real
Property and the Renovations from time to time and at all reasonable times
during construction of the Renovations. The Sellers shall cause the Company to
permit Buyer and its representatives and agents to enter upon the Real Property
and to inspect the progress of the Renovations and the materials to be used in
the construction thereof. The Sellers shall cause the Company to cooperate, and
cause any contractor or sub-contractor to cooperate, with Buyer and its
representatives and agents during such inspections.
(3) APPROVALS REQUIRED OF BUYER. The Sellers shall cause the Company
to provide Buyer with a reasonable opportunity to review and comment on the
following documents prior to the finalization thereof: (i) the Plans and
Specifications; (ii) the construction contract ("CONSTRUCTION CONTRACT") with
the general contractor ("GENERAL CONTRACTOR") who will construct the
Renovations; and (iii) any contracts ("CONTRACTS"), other than the Construction
Contract, which relate to the construction of the Renovations. Neither the
Sellers nor the Company may modify or amend the Plans and Specifications (as
finally approved by the local authorities), the Construction Contract or the
Contracts without the prior written consent of Buyer, which consent shall not be
unreasonably withheld. The Sellers will cause the Company
59
to give reasonable consideration to Buyer's comments and suggestions.
(4) PAYMENTS WITH RESPECT TO THE RENOVATIONS. The Sellers shall
cause the Company to be responsible for: (i) all payments and advances, if any,
with respect to the Construction Contract and the Contracts which are due and
payable prior to the Closing; and (ii) all other costs and expenses associated
with the Renovations which are due and payable prior to the Closing. Before any
such payment or advance, if any, is made with respect to the Renovations, the
Sellers shall advise the Buyer. If, prior to being advised of an intended
payment, Buyer has requested any or all of the following, the Sellers, as
appropriate, shall obtain same prior to making such payment or advance.
(1) CERTIFICATES OF COMPLETION. An architect's and/or engineer's
certificate of progress describing the nature and extent of all work done,
including the state to which construction has progressed, and certification that
all work has been done and materials installed in substantial compliance with
the Plans and Specifications.
(2) PROOF OF PAYMENT, LIEN WAIVERS, ETC. Proof as to payment of
construction bills, lien waivers for work completed and paid for, statements
showing itemization of present and prospective expenditures, a statement of
items due and unpaid.
(5) NO LIABILITY FOR INSPECTIONS AND APPROVALS. No inspection made
or approval given by Buyer shall be deemed to impose upon Buyer any duty or
obligation to correct any defects in the Plans and Specifications and/or the
Renovations or to notify any person or entity with respect thereto. No liability
shall be imposed upon Buyer or deemed or construed to arise by reason of any
inspection of the Real Property or approval by Buyer. No warranties (either
express or implied) are made by Buyer as to the quality or fitness of the Plans
and Specifications and/or the Renovations.
(6) INSURANCE. The Sellers shall cause the Company to maintain with
respect to the Real Property the following insurance policies, copies of which
the Sellers shall furnish to Buyer:
(1) Insurance against loss or damage by fire and other casualties
and hazards by insurance written on an "all risks" basis, including specifically
windstorm and/or hail damage (and flood and earthquake coverage, where
available), in an amount not less than the replacement cost thereof, naming
Buyer as an additional insured.
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(2) Liability insurance providing coverage in such amount as
Buyer may require but in no event less than $3,000,000 combined single limit,
naming Buyer as an additional insured.
(7) CLOSING DELIVERIES. At the Closing, the Sellers shall deliver to
Buyer:
(1) ASSIGNMENT OF CONTRACTS. An assignment to Buyer of all of the
rights, title and interest of Marco LP and OGTR II LP in and to: (A) the
Construction Contract; (B) all Contracts to which Buyer consents; (C) the
Permits; and (D) the Renovations.
(2) ESTOPPEL CERTIFICATES. An estoppel certificate executed by
the General Contractor and any sub-contractor with which any of Sellers or the
Company have contracted stating: (A) that the Construction Contract or Contract
(as the case may be) to which they are a party is in full force and effect and
neither party (including the Sellers or the Company) is in default thereunder;
(B) the amount that has been paid by any of Sellers or the Company under such
contract; (C) that such contract is current, with no payments outstanding beyond
the due date on any uncontested amount due; (D) the amount and a brief
description of any contested matters; and (E) the amount (or if unavailable an
estimate of the amount) which will be payable upon completion of the work done
pursuant to such contract.
(3) OWNER'S AFFIDAVIT/LIEN WAIVERS. An affidavit of Marco LP and
OGTR II LP stating that all contractors have been paid any uncontested amounts
due to them and the amount and a brief description of any contested matters and
an affidavit/lien waiver from the General Contractor with respect to payments
received.
1.112 Deferred Compensation and Stockholder Agreements. At or prior to
Closing, (a) the Company and appropriate Sellers shall terminate the Deferred
Compensation Agreement, (b) each Seller shall waive all rights he or she has
arising under or with respect to the Deferred Compensation Agreements and (c)
the Company and the Sellers shall terminate, and release all parties from any
obligations with respect to, the Stockholder Agreements.
1.113 Profit Sharing Plan. The profit sharing plan in which the Company
participates is maintained by MIC. The Sellers will take the necessary action to
cause a partial termination of the MIC plan and distribution of assets pursuant
to Section 401(k)(10) of the Code with respect to the employees of the Company.
The Buyer shall not assume any sponsorship of the profit sharing plan, nor shall
any contributions be made to the plan with respect to compensation earned on or
after the Closing.
61
1.114 Asset Purchase Agreement. Although the transactions contemplated
hereby are not subject to the consummation of the transactions contemplated by
the Asset Purchase Agreement, the parties hereto nonetheless fully intend and,
to the extent practicable, will coordinate the consummation of the transactions
contemplated hereby with the consummation of the transactions contemplated by
the Asset Purchase Agreement in such a manner as to close both transactions on
the same date.
ARTICLE 12
MISCELLANEOUS
1.115 Certain Tax Returns. The Sellers shall cooperate with and provide
assistance to the Buyer and the Surviving Company in connection with the
preparation and filing of all federal, state, local and foreign income tax
returns which relate to the Surviving Company and to periods prior to Closing
but which are not required to be filed until after the Closing.
1.116 Parties in Interest; No Third-Party Beneficiaries. Subject to
Section 12.4, this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the respective successors and assigns of the parties hereto.
Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any employee of the Company or the Buyer, or
any other person, firm, corporation or legal entity, other than the parties
hereto and their respective heirs, successors and permitted assigns, any rights,
remedies or other benefits under or by reason of this Agreement.
1.117 Entire Agreement; Amendments. This Agreement (including all
Exhibits and Schedules hereto which Exhibits and Schedules are hereby
incorporated herein by this reference) and the other writings referred to herein
or delivered pursuant hereto contain the entire understanding of the parties
hereto with respect to its subject matter. There are no representations,
promises, warranties, covenants or undertakings other than as expressly set
forth herein or therein. This Agreement supersedes all prior agreements and
understandings between the parties hereto with respect to its subject matter.
This Agreement may be amended or modified only by a written instrument duly
executed by the parties hereto. Unless expressly stated herein to the contrary,
any reference herein to (a) a Section or Article shall refer to a Section or
Article hereof, respectively, and (b) a Schedule or Exhibit shall refer to a
Schedule or Exhibit hereto, respectively.
1.118 Assignment. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties; PROVIDED,
HOWEVER, the Buyer may, without the consent of the other parties, assign its
rights and obligations hereunder to
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any Affiliate of the Buyer presently existing or hereafter formed and to any
person or entity that shall acquire all or substantially all of the assets of
the Buyer or the Surviving Company (including any such acquisition by merger or
consolidation); PROVIDED, FURTHER, that no such assignment shall release the
Buyer from its obligations hereunder without the consent of the Sellers. Nothing
contained in this Agreement shall prohibit its assignment by the Buyer as
collateral security and the Sellers hereby agree to execute any acknowledgment
of such assignment by the Buyer as may be required by any lender to the Buyer.
1.119 Remedies. Except as expressly provided in this Agreement to the
contrary, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to, specific performance.
1.120 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
1.121 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally, sent by telecopier or sent by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally for next business day delivery, or when telecopier receipt
is acknowledged or one (1) Business Day after the date of deposit with such
nationally recognized overnight courier. All such notices, claims, certificates,
requests, demands and other communications shall be addressed to the respective
parties at the addresses set forth below or to such other address as the person
to whom notice is to be given may have furnished to the others in writing in
accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
0000 X. Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Chief Financial Officer
Telecopier No.: (000) 000-0000
With a copy to:
Parker, Poe, Xxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx III
Telecopier No.: (000) 000-0000
63
If to the Sellers or the Company, to the Sellers' Agent at:
Personal and Confidential
Xx. Xxxxxx Xxxxxx
Manhattan Auto, Inc.
00000 Xxx Xxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
With a copy to:
Xxxxxxxxx, Xxxxxx & Xxxxxxx, L.L.P.
0000 Xxxxxxxxxxx Xxxxxx, X.X. #000
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
1.122 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
1.123 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Virginia, without giving effect to its
rules governing conflict of laws.
1.124 Waivers. Any party to this Agreement may, by written notice to the
other parties hereto, waive any provision of this Agreement from which such
party is entitled to receive a benefit. The waiver by any party hereto of a
breach by another party of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach by such other party of such
provision or any other provision of this Agreement.
1.125 Severability. In the event that any provision, or part thereof, in
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions, or parts
thereof, shall not in any way be affected or impaired thereby.
1.126 Knowledge. Whenever any representation or warranty of any Seller
contained herein or in any other document executed and delivered in connection
herewith is based upon the knowledge of such Seller, (i) such knowledge shall be
deemed to include (A) the best actual knowledge, information and belief of such
Seller and (B) any information which such Seller would reasonably be expected to
be aware of in the prudent discharge of his or her duties in the ordinary course
of business (including consultation with legal counsel) on behalf of the
Company, and (ii) the knowledge of any Seller shall be deemed to be the
knowledge of all of the Sellers.
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1.127 Jurisdiction; Arbitration.
(a) Subject to the other provisions of this Section 12.13, any
judicial proceeding brought with respect to this Agreement must be brought in
any court of competent jurisdiction in the State of North Carolina, and, by
execution and delivery of this Agreement, each party hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, and (ii) irrevocably waives
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such court or that such court is an inconvenient
forum.
(b) Any dispute, claim or controversy arising out of or
relating to this Agreement (except for accounting matters provided for in
Section 1.2(e) hereto), or the interpretation or breach hereof (including,
without limitation, any of the foregoing based upon a claim to any termination
fee hereunder), shall be resolved by binding arbitration under the commercial
arbitration rules of the American Arbitration Association (the "AAA RULES") to
the extent such AAA Rules are not inconsistent with this Agreement. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof or such court may be asked to judicially confirm the award
and order its enforcement, as the case may be. The demand for arbitration shall
be made by any party hereto within a reasonable time after the claim, dispute or
other matter in question has arisen, and in any event shall not be made after
the date when institution of legal proceedings, based on such claim, dispute or
other matter in question, would be barred by the applicable statute of
limitations. The arbitration panel shall consist of three (3) arbitrators, one
of whom shall be appointed by each party hereto within thirty (30) days after
any request for arbitration hereunder. The two arbitrators thus appointed shall
choose the third arbitrator (who shall not be currently nor have been during the
last ten years living in, or practicing his or her profession from a base in,
North Carolina) within thirty (30) days after their appointment; PROVIDED,
HOWEVER, that if the two arbitrators are unable to agree on the appointment of
the third arbitrator within 30 days after their appointment, either arbitrator
may petition the American Arbitration Association to make the appointment. The
place of arbitration shall be Charlotte, North Carolina. The arbitrators shall
be instructed to render their decision within sixty (60) days after their
selection and to allocate all costs and expenses of such arbitration (including
legal and accounting fees and expenses of the respective parties) to the parties
in the proportions that reflect their relative success on the merits (including
the successful assertion of any defenses).
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(c) Nothing contained in this Section 12.13 shall prevent any
party hereto from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed and delivered on the date first above written.
SONIC AUTOMOTIVE, INC.
By: /s/ O. Xxxxxx Xxxxx
----------------------------------------------
Name: O. Xxxxxx Xxxxx
Title: Chief Executive Officer
MANHATTAN AUTO, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------------------------
Name: Xxxxxx Xxxxxx
------------------------
Title: President
------------------------
/s/ Xxxxxx Xxxxxx
----------------------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxxx
----------------------------------------------------
Xxxxxx Xxxxx
/s/ Xxxx Xxxxx
---------------------------------------------------
Xxxx Xxxxx
/s/ Xxxxxxx Xxxxx
---------------------------------------------------
Xxxxxxx Xxxxx
67
