EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 10, 1999 (this
"New Agreement"), by and among Xxxxx Dealership Group, Inc., a Texas corporation
(the "Company"), the Xxxxx Business Continuation Trust, a trust settled under
the laws of the State of California (the "LBC Trust"), Xxxxx X. Xxxxx, an
individual resident in the State of California ("Xxxxx"), Xxxxxxxx X. Xxxxx, an
individual resident in the State of California ("Xxxxx," together with the LBC
Trust and Xxxxx, the "Shareholders"), Xxxxxx X. Xxxxx, an individual resident in
the State of California, as agent for the Shareholders (the "Shareholders'
Representative"), FirstAmerica Automotive, Inc., a Delaware corporation (the
"Purchaser"), and Xxxxx Acquisition Corp., a Texas corporation and a wholly
owned subsidiary of the Purchaser ("Merger Sub").
WHEREAS, (a) the parties entered into an Agreement and Plan of Merger,
dated as of May 3, 1999 (the "Original Agreement"), (b) on July 29, 1999, the
parties amended and restated the Original Agreement in its entirety, with the
effect of superseding and extinguishing any obligations under the Original
Agreement (the "Amended Agreement"), (c) on August 31, 1999, the Purchaser
failed to perform its obligations under the Amended Agreement, and the Company
terminated the Amended Agreement pursuant to Section 11.1(d) thereof and (d) the
parties desire to complete the merger contemplated by the Amended Agreement with
certain amendments to its terms and conditions; and
WHEREAS, it is the intention of the parties that if the Merger (as
defined in the Amended Agreement) is not consummated on or before September 30,
1999, the parties will possess all of the rights which they would have had under
the Amended Agreement as well as any rights they may have under this New
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
1. The parties agree to consummate the Merger upon the terms and subject to
the conditions contained in the Amended Agreement, which is attached as
Annex A hereto and incorporated by reference, except for such amendments as
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are set forth in paragraphs 2 through 5 below. Capitalized terms used but
not defined or amended in this New Agreement shall have the respective
meanings ascribed to them in the incorporated Amended Agreement.
2. The terms and conditions contained in the Amended Agreement shall be
amended as follows:
a. Section 1.1(k) shall be deleted in its entirety and replaced with the
following definition:
"(k) "Closing Consideration" shall be equal to the sum of (i)
$68,019,191, (ii) the Honda Renovation Costs and (iii) the Preliminary
Consolidated Working Capital."
b. Section 1.1(l) is deleted in its entirety and replaced with the
following definition:
"(l) "Closing Date" shall mean 10:00 a.m. local time on September 30,
1999 subject to the satisfaction or waiver of all conditions to the
obligations of the parties as set forth in Article X."
c. Section 1.1(r) shall be amended by deleting the text "and (iv)" and
adding the text ", (iv) the Deposit and (v)."
d. Section 1.1(s) shall be amended by deleting the amount "$26,696" and
replacing it with "$35,545".
e. Section 1.1(v) shall be amended by deleting the amount "$250,000" and
replacing it with "$1,125,000".
f. Section 1.1(gg) shall be deleted in its entirety.
g. Section 1.1 shall be amended by adding the following definition:
"Preliminary Consolidated Working Capital" shall equal (i) the
estimated Consolidated Actual Working Capital as set forth in a
certificate of the Chief Financial Officer of the Company,
substantially in the form attached as Annex B hereto, delivered to the
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Purchaser on the Business Day immediately prior to the day during
which the Closing Date occurs, minus (ii) $10,000,000.
h. Section 3.1 shall be deleted in its entirety and replaced with the
following text:
"3.1 Deposit. On September 14, 1999, the Purchaser shall deliver the
Deposit, which shall be non-refundable, to the Shareholders'
Representative. The deposit delivered on May 5, 1999, pursuant to the
Amended Agreement, shall be delivered by the Escrow Agent to the
Purchaser as soon as practicable."
i. Section 3.3(b) shall be amended by deleting the second sentence
thereof and adding the following text:
"Any adjustments to the Consideration pursuant to this Section 3.3(b),
net of the Preliminary Consolidated Working Capital, shall be paid
within ten Business Days of the final determination of the Difference
in Consolidated Working Capital pursuant to Section 3.3(a), together
with interest accrued thereon, from the Closing Date, at the average
three month LIBOR rate published during such period in The Wall Street
Journal, to the Shareholders by wire transfer of immediately available
funds to the accounts designated by the Shareholders."
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j. Section 3.3(c) shall be amended by deleting the second sentence
thereof and adding the following text:
"Any adjustments to the Consideration pursuant to this Section 3.3(c),
net of the Preliminary Consolidated Working Capital, shall be paid
within ten Business Days of the final determination of the Difference
in Consolidated Working Capital pursuant to Section 3.3(a), together
with interest accrued thereon, from the Closing Date, at the average
three month LIBOR rate published during such period in The Wall Street
Journal, to the Purchaser by wire transfer of immediately available
funds to the account designated by the Purchaser."
k. Section 7.2 shall be amended by adding the following to the end of the
section:
"The Company may supplement any of the Schedules to the Disclosure
Schedule by delivering to the Purchaser a written supplement to such
Schedule or Schedules ("Schedule Supplements") at any time on or prior
to the Business Day prior to the Closing Date; provided, however, the
modifications reflected on the Schedule Supplements shall not have
material economic effect unless such modifications have been approved
in advance by the Purchaser. From and after the delivery of the
Schedule Supplements, the Schedule Supplements shall form a part
hereof, and, to the extent the representations, warranties and
covenants contained herein are qualified by reference to any such
Schedule Supplement, any such Schedule Supplements thereto shall have
the effect of modifying the representation, warranty or covenant so
qualified as if it had been set forth on the corresponding Schedule of
the Disclosure Schedule delivered by the Company to the Purchaser on
July 29, 1999."
l. Section 8.3 shall be deleted in its entirety and replaced with the
following text:
"8.3 Car Allowance. The Purchaser hereby agrees to sell, once a year,
to each of the Shareholders, through and including the tenth
anniversary of the Closing Date, one vehicle of such Shareholder's
choice, provided that, in the case of Xxxxx and Xxxxx, such vehicle is
a model that the Purchaser's subsidiary is allocated not less than
twelve vehicles of such model by such manufacturer in a twelve month
period provided, further, that, in the case of LBC Trust or its
nominee, such vehicle is a model that the Purchaser's subsidiary is
allocated not less than three vehicles of such model by such
manufacturer in a twelve month period. The purchase price of each
vehicle purchased pursuant to this Section 8.3 shall be equal to the
dealer invoice less holdbacks and allowances."
m. Section 8.6 shall be added as follows:
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"8.6 Employee Retention. For a period of ninety days following the
Closing Date (the "Guaranteed Employment Period"), neither the
Purchaser nor the Surviving Corporation shall terminate or otherwise
modify the terms relating to the employment of any of the persons
(except for Xxxxxx X. Xxxxx and Xxxxx) employed by the Company (up to
a maximum of twelve persons) on the date immediately prior to the date
on which the Closing Date occurs (the "Transition Employees"). In
addition, for each thirty day period (within the Guaranteed Employment
Period) during which a Transition Employee maintains employment with
the Surviving Corporation or the Purchaser, the Surviving Corporation
shall pay each such Transition Employee, in addition to the
compensation, incentive and other benefits which the Transition
Employee normally receives, a bonus equal to 3/52nds of such
employee's annual compensation."
n. Section 9.7 shall be amended by adding the following sentence to the
end of the section:
"Schedule 9.7 of the Schedule Supplements shall list monthly base
rental then in effect with respect to each such lease."
o. Section 10.3(g) shall be amended by deleting the text "manufacturer or
third-party consents for the indirect transfer of control of
Franciscan Motors to the Purchaser as a result of the Merger" and
replacing it with "those consents required by the manufacturers which
have granted dealership franchises to the Company Subsidiaries."
p. Section 11.1(b) shall be amended by deleting the text "August 31,
1999" and replacing it with "September 30, 1999".
q. Section 11.2 shall be amended by adding the following text to the end
of the section:
"In the event of any termination of the Merger Agreement, the Deposit
shall be retained by the Shareholders."
3. The Disclosure Schedules shall be amended as follows:
a. Footnotes 1 and 8 of Schedule 1.1(ccc) are amended by adding the text
"(other than factory warranty, rebate and other payments)" after "May
1, 1999".
b. Schedule 8.2 is deleted in its entirety and is replaced by the text
set forth in Annex C.
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4. The Confidentiality Agreement and this New Agreement, including the annexes
hereto and the Disclosure Schedules, constitute the entire agreement and
understanding of the parties
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hereto in respect of the transactions contemplated by this New Agreement
and supercede all (both written and oral) agreements, including, but not
limited to, the Amended Agreement, understandings, restrictions, promises,
representations, warranties, covenants or undertakings, of the parties
with respect to the subject matter of this New Agreement; provided, that if
the Merger is not consummated on or before September 30, 1999, the parties
will possess all of the rights which they would have had under the Amended
Agreement as well as any rights they may have under this New Agreement.
5. EXCEPT FOR THE MANDATORY PROVISIONS OF THE TBCA, THIS NEW AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO ANY APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
6. This New Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has caused this New Agreement
to be signed as of the date first above written.
XXXXX DEALERSHIP GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
___________________________________
Xxxxxx X. Xxxxx
Chief Executive Officer
XXXXX BUSINESS CONTINUATION TRUST
By: /s/ Xxxxxx X. Xxxxx
___________________________________
Xxxxxx X. Xxxxx
Co-Trustee
By: /s/ Xxxxx X. Xxxxx
___________________________________
Xxxxx X. Xxxxx
Co-Trustee
/s/ Xxxxx X. Xxxxx
______________________________________
XXXXX X. XXXXX
/s/ Xxxxxxxx X. Xxxxx
______________________________________
XXXXXXXX X. XXXXX
SHAREHOLDERS' REPRESENTATIVE
/s/ Xxxxxx X. Xxxxx
______________________________________
XXXXXX X. XXXXX
FIRSTAMERICA AUTOMOTIVE, INC.
By: /s/ Xxxxxx X. Price
___________________________________
Name: Xxxxxx X. Price
Title: President
XXXXX ACQUISITION CORP.
By: /s/ Xxxxxx X. Price
___________________________________
Name: Xxxxxx X. Price
Title: President
ANNEX A
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXX DEALERSHIP GROUP, INC.,
THE SHAREHOLDERS NAMED HEREIN,
THE SHAREHOLDERS' REPRESENTATIVE NAMED HEREIN,
FIRSTAMERICA AUTOMOTIVE, INC.
AND
XXXXX ACQUISITION CORP.
Dated as of July 29, 1999
================================================================================
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
-----------
1.1 Definitions....................................................................... 2
ARTICLE II
THE MERGER
----------
2.1 The Merger........................................................................ 11
2.2 Articles of Merger................................................................ 11
2.3 Effects of the Merger............................................................. 11
2.4 The Closing....................................................................... 11
2.5 Directors......................................................................... 11
2.6 Officers.......................................................................... 11
2.7 Articles of Incorporation and Bylaws.............................................. 12
2.8 Dissenting Shareholders........................................................... 12
ARTICLE III
CONVERSION OF SHARES
--------------------
3.1 Deposit........................................................................... 13
3.2 Conversion of Shares.............................................................. 13
3.3 Adjustments to Consideration...................................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
AND THE SHAREHOLDERS
--------------------
4.1 Organization, Standing and Qualification of the Company and
the Company Subsidiaries.......................................................... 16
4.2 Authority......................................................................... 17
4.3 Capitalization.................................................................... 17
4.4 Consents and Approvals; No Violation.............................................. 18
4.5 Financial Statements.............................................................. 19
4.6 Undisclosed Liabilities........................................................... 19
4.7 Absence of Certain Changes or Events.............................................. 19
4.8 Title and Related Matters......................................................... 20
4.9 Certain Contracts................................................................. 20
4.10 Legal Proceedings, etc............................................................ 21
4.11 Employee Benefit Plans; ERISA..................................................... 22
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Page
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4.12 Taxes............................................................................. 23
4.13 Intellectual Property............................................................ 24
4.14 Environmental Matters............................................................ 24
4.15 Compliance with Laws............................................................. 26
4.16 Labor Matters..................................................................... 26
4.17 Employment Matters................................................................ 27
4.18 Brokers........................................................................... 27
4.19 Restrictions on Business Activities............................................... 28
4.20 Interested Party Transactions..................................................... 28
4.21 Minute Books...................................................................... 28
4.22 Insurance......................................................................... 28
4.23 No Pending Acquisition Proposals.................................................. 29
4.24 Representations Complete.......................................................... 29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
--------------------------------------------------
5.1 Authority......................................................................... 30
5.2 Consents and Approvals; No Violation.............................................. 30
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
AND MERGER SUB
--------------
6.1 Organization...................................................................... 32
6.2 Authority......................................................................... 32
6.3 Merger Sub's Operations........................................................... 33
6.4 Consents and Approvals; No Violation.............................................. 33
6.5 Financing......................................................................... 33
6.6 Brokers........................................................................... 34
ARTICLE VII
COVENANTS OF THE SHAREHOLDERS AND THE COMPANY
---------------------------------------------
7.1 Conduct of Business of the Company................................................ 35
7.2 Current Information............................................................... 38
7.3 Access to Information............................................................. 38
7.4 Acquisition of Autocorp........................................................... 39
7.5 Affiliate Transactions............................................................ 39
7.6 No Solicitation................................................................... 39
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7.7 Non-Current Asset Inventory....................................................... 40
ARTICLE VIII
COVENANTS OF THE PURCHASER AND MERGER SUB
-----------------------------------------
8.1 Directors' and Officers' Indemnification......................................... 41
8.2 Charitable Contributions......................................................... 42
8.3 Car Allowance.................................................................... 42
8.4 Tax Returns...................................................................... 42
8.5 Use of LDG Name.................................................................. 42
ARTICLE IX
MUTUAL COVENANTS
----------------
9.1 Further Actions.................................................................. 43
9.2 Consents......................................................................... 43
9.3 Filings.......................................................................... 43
9.4 Notification of Certain Matters.................................................. 44
9.5 Public Announcements............................................................. 44
9.6 Further Assurances............................................................... 44
9.7 Leases........................................................................... 45
9.8 Termination of All 401(k) Plans.................................................. 45
ARTICLE X
CLOSING CONDITIONS
------------------
10.1 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby................................................. 46
10.2 Conditions to the Obligations of the Company to Effect
the Transactions Contemplated Hereby............................................. 46
10.3 Conditions to the Obligations of the Purchaser and Merger
Sub to Effect the Transactions Contemplated Hereby............................... 47
ARTICLE XI
TERMINATION AND ABANDONMENT
---------------------------
11.1 Termination...................................................................... 49
11.2 Procedure and Effect of Termination.............................................. 50
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Page
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ARTICLE XII
INDEMNITY
---------
12.1 Survival.......................................................................... 51
12.2 Indemnity by the Shareholders..................................................... 51
12.3 Indemnity by the Purchaser........................................................ 52
12.4 Shareholders' Representative...................................................... 53
12.5 Third Party Claims................................................................ 54
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
13.1 Expenses.......................................................................... 56
13.2 Amendment and Modification........................................................ 56
13.3 Waiver of Compliance; Consents.................................................... 56
13.4 Investigations.................................................................... 56
13.5 Notices........................................................................... 57
13.6 Assignment........................................................................ 58
13.7 Third Party Beneficiaries......................................................... 58
13.8 Jurisdiction...................................................................... 58
13.9 Governing Law..................................................................... 58
13.10 Severability...................................................................... 58
13.11 Interpretation.................................................................... 58
13.12 Entire Agreement.................................................................. 59
13.13 Counterparts...................................................................... 59
Annex A - Form of Lease Amendments
Annex B - Form of Opinions of Counsel to Company
iv
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
July 29, 1999 (the "Agreement"), by and among Xxxxx Dealership Group, Inc.,
a Texas corporation (the "Company"), the Xxxxx Business Continuation Trust,
a trust settled under the laws of the State of California (the "LBC
Trust"), Xxxxx X. Xxxxx, an individual resident in the State of California
("Xxxxx"), Xxxxxxxx X. Xxxxx, an individual resident in the State of
California ("Xxxxx," together with the LBC Trust and Xxxxx, the
"Shareholders"), Xxxxxx X. Xxxxx, an individual resident in the State of
California, as agent for the Shareholders (the "Shareholders'
Representative"), FirstAmerica Automotive, Inc., a Delaware corporation
(the "Purchaser"), and Xxxxx Acquisition Corp., a Texas corporation and a
wholly owned subsidiary of the Purchaser ("Merger Sub").
WHEREAS, the Company, the Shareholders, the Shareholders'
Representative, the Purchaser and Merger Sub have previously entered into
an Agreement and Plan of Merger, dated as of May 3, 1999 (the "Original
Agreement"), and the parties thereto now wish to amend and restate the
Original Agreement in its entirety, with the effect of superseding and
extinguishing any obligations under the Original Agreement;
WHEREAS, it is the intention of the parties that Merger Sub merge
with and into the Company (the "Merger"), with the Company surviving as a
wholly owned subsidiary of the Purchaser (the "Surviving Corporation");
WHEREAS, the board of directors of each of the Company, the
Purchaser and Merger Sub has determined that it is advisable and in the
best interests of its respective corporation and its shareholders to engage
in a transaction whereby the Purchaser will acquire the Company on the
terms and subject to the conditions set forth in the Agreement;
WHEREAS, the requisite approval has been obtained from the
shareholders of the Company; and
WHEREAS, the Company, the Shareholders, the Purchaser and Merger
Sub wish to make certain representations, warranties, covenants and
agreements in connection with the Merger and also to prescribe various
conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context clearly requires
otherwise:
(a) "401(k) Plan" shall mean a Plan subject to section 401(k) of
the Code sponsored, prior to the Closing Date, by the Company or any
Company Subsidiary.
(b) "Acquisition Proposal" shall mean any tender or exchange
offer, any proposal for a merger, consolidation or other business
combination involving such person or any subsidiary of such person, any
proposal or offer to acquire in any manner a substantial equity interest
in, or a substantial portion of the business or assets of, such person or
any subsidiary of such person, any proposal or offer with respect to any
recapitalization or restructuring with respect to such person or any
subsidiary of such person or any proposal or offer with respect to any
other transaction similar to any of the foregoing; provided, however, that,
as used in the Agreement, the term "Acquisition Proposal" shall not apply
to any transaction of the type described in this definition involving the
Purchaser, Merger Sub or their Affiliates.
(c) "Affiliate" shall have the shall meaning set forth in Rule
12b-2 of the Exchange Act.
(d) "Agreement" or "this Agreement" shall mean this Agreement
and Plan of Merger, as it may be amended in accordance with the terms
hereof, together with the Disclosure Schedule.
(e) "Articles of Merger" shall mean the articles of merger
required by Section 5.04 of the TBCA to be delivered to the Secretary of
State of the State of Texas in order to effect the Merger.
(f) "Audited Balance Sheets" shall mean the audited consolidated
balance sheets of the Company and the Company Subsidiaries as of December
31 in each of the years 1997 and 1998.
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(g) "Audited Financial Statements" shall mean the Audited
Balance Sheets together with the audited consolidated statements of income,
shareholders' equity and cash flows for the Company and the Company
Subsidiaries for the years ended December 31, 1996, 1997 and 1998.
(h) "Autocorp" shall mean Autocorp, Inc. dba Autocorp, a
California corporation.
(i) "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in The City of New York or
San Francisco, California are not required to be open.
(j) "Closing" shall mean the closing of the transactions
contemplated by this Agreement.
(k) "Closing Consideration" shall be equal to (i) the sum of (A)
$68,019,191 and (B) the Honda Renovation Costs, minus (ii) the sum of (X)
the Deposit and (Y) any interest accrued thereon.
(l) "Closing Date" shall mean, assuming that all conditions to
the obligations of the parties as set forth in Article X have been
satisfied or waived, 10:00 a.m. local time on such date as Purchaser shall
designate (such designation shall be made at least three Business Days
prior to the Closing Date), but in no event later than August 31, 1999.
(m) "Closing Date Balance Sheet" shall mean the Preliminary
Closing Date Balance Sheet after the acceptance thereof by the Shareholders
pursuant to Section 3.3(a)(i) or the resolution of all disputes in
connection therewith pursuant to Section 3.3(a)(ii).
(n) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(o) "Company Common Stock" shall mean shares of Common Stock,
par value $0.01 per share, of the Company.
(p) "Company Subsidiaries" shall mean Autobahn, Inc. dba
Autobahn Motors, a California corporation; Xxx Xxxxx International, Inc.
dba Stevens Creek BMW, a California corporation; Santa Xxxxx Imported Cars,
Inc. dba Stevens Creek Honda, a California corporation; Stevens Creek
Cadillac, Inc., dba St. Xxxxxx Xxxxx-
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lac/Oldsmobile, a California corporation; Windward, Inc. dba Hayward Honda,
a Hawaii corporation; and Franciscan Motors.
(q) "Confidentiality Agreement" shall mean a letter agreement,
dated March 3, 1999, by and between the Company and the Purchaser.
(r) "Consideration" shall be equal to the sum of (i)
$68,019,191, (ii) the Difference in Consolidated Working Capital, (iii) to
the extent not included in Consolidated Actual Working Capital, the
Proceeds from the Contingent Assets and (iv) the Honda Renovation Costs, in
each case as provided for in Section 3.3.
(s) "Consolidated Actual Working Capital" shall be equal to the
sum of (i) the consolidated Working Capital of the Company and the Company
Subsidiaries (other than Franciscan Motors) derived from the Closing Date
Balance Sheet and (ii) the positive difference, if any, between (A) the
product of (1) $26,696 and (2) the number of days elapsed from, but not
including, July 31, 1999 through, and including, the day on which the
Closing Date occurs and (B) the actual net profit before Taxes for the days
which have elapsed from, but not including, July 31, 1999 through, and
including, the day on which the Closing Date occurs.
(t) "Consolidated Required Working Capital" shall be equal to
the aggregate amount of working capital, as of May 3, 1999, required by the
manufacturers which have granted dealership franchises to the Company
Subsidiaries (other than Franciscan Motors) as calculated as provided on
Schedule 1.1(t) of the Disclosure Schedule.
(u) "Contracts" shall mean any contracts of the Company or any
of the Company Subsidiaries, including, but not limited to: (i) employment,
consulting or severance agreement, collective bargaining agreement, or
pension, profit-sharing, incentive compensation with respect to new and
used automobile sales staff and department managers, deferred compensation,
stock purchase, stock option, stock appreciation right, group insurance,
severance pay, or retirement plan or agreement; (ii) indenture, mortgage,
note, installment obligation, agreement or other instrument relating to the
borrowing of money by the Company or the Company Subsidiaries or the
guaranty of any obligation for the borrowing of money by the Company or the
Company Subsidiaries; (iii) agreement which (A) is not terminable by the
Company or any Company Subsidiary on less than ninety days' notice without
penalty, (B) is over one year in length of obligation by the Company or the
Company Subsidiaries, or (C) involves an obligation of more than $100,000;
(iv) agreement with or for the benefit,
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directly or indirectly, of any shareholder or Affiliate of the Company or
members of such persons immediate family which will remain in effect
following the Closing Date; or (v) agreement containing covenants limiting
the freedom of the Company or any Company Subsidiary to compete in any line
of business with any person or in any area or territory.
(v) "Deposit" shall be equal to $250,000.
(w) "Difference in Consolidated Working Capital" shall be equal
to Consolidated Actual Working Capital minus Consolidated Required Working
Capital.
(x) "Disclosure Schedule" shall mean the disclosure schedules
dated the same date as this Agreement and delivered simultaneously with the
execution hereof, which schedules shall contain appropriate references to
identify the specific section herein to which the information in such
schedule relates.
(y) "Dispute" shall mean any disagreement or dispute between the
parties hereto arising out of or related to this Agreement or the breach
hereof or the transactions contemplated hereby.
(z) "DOJ" shall mean the Antitrust Division of the United States
Department of Justice.
(aa) "Effective Time" shall mean the day and time on which the
Secretary of State of the State of Texas issues the certificate of merger
pursuant to Section 5.05 of the TBCA.
(bb) "Environment" shall mean soil, groundwater, surface water,
air, natural resources, flora and fauna.
(cc) "Environmental Law" shall mean all applicable federal,
state, and local Laws governing pollution or the protection of human health
or the Environment.
(dd) "Environmental Permits" shall mean Hazardous Substances-
related enforceable approvals, permits, licenses, orders and consents
required under Environmental Law to use, recycle, dispose of, discharge,
generate, transport, store or otherwise handle Hazardous Substances.
5
(ee) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(ff) "ERISA Affiliate" shall mean any trade or business, whether
or not incorporated, that together with the Company and the Shareholders
would be deemed a "single employer" within the meaning section 414(b), (c),
(m) or (o) of the Code or of section 4001(a)(14) or 4001(b) of ERISA.
(gg) "Escrow Agent" shall mean Xxxx Xxxxx Xxxx & Freidenrich LLP.
(hh) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(ii) "Franciscan Motors" shall mean Franciscan Motors, Inc. dba
Golden Gate Cadillac/Acura, a California corporation.
(jj) "FTC" shall mean the United States Federal Trade Commission.
(kk) "GAAP" shall mean United States generally accepted
accounting principles as in effect on the date hereof.
(ll) "Government Entity" shall mean a court, arbitral tribunal,
administrative agency or commission or other governmental or other
regulatory authority or agency or any other person exercising powers
granted to the foregoing.
(mm) "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
(nn) "Hazardous Substances" shall mean (i) any material,
chemical, compound, substance, mixture or by-product that is regulated
under Environmental Laws as a "hazardous substance," "hazardous waste,"
"hazardous material," "contaminant," "pollutant," or otherwise regulated
substance or waste pursuant to applicable Environmental Laws, including
without limitation, due to ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, and reproductive toxicity; and (ii) any
regulated asbestos or asbestos-containing construction material, any
regulated polychlorinated biphenyl, and any regulated petroleum or
hydrocarbonic substance, fraction, distillate or by-product.
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(oo) "Honda Renovation Costs" shall mean the aggregate out-of-
pocket costs reasonably incurred by the Company and the Company
Subsidiaries as documented by invoices delivered to the Purchaser not less
than two Business Days prior to the Closing Date with respect to the
repairs and renovation of Stevens Creek Honda.
(pp) "Indemnified Party" shall mean any party entitled to be
indemnified pursuant to this Agreement.
(qq) "Indemnifying Party" shall mean the party which must
indemnify any Indemnified Party pursuant to this Agreement.
(rr) "Intellectual Property" shall mean domestic and foreign
letters patent, patents, patent applications, patent licenses, logos,
trademark licenses, software licenses and know-how licenses, proprietary
and confidential information, trade names, trade dress, trademarks,
copyrights, service marks, trademark registrations and applications,
service xxxx registrations and applications and copyright registrations and
applications currently used by the Company or the Company Subsidiaries.
(ss) "IRS" shall mean the Internal Revenue Service or any
successor organization performing similar functions.
(tt) "Law" shall mean any constitution, law (including common
law), regulation, rule, order or decree of any Government Entity.
(uu) "Losses" shall mean any and all actual losses, liabilities,
damages, judgments, settlements and expenses (including (i) interest and
penalties recovered by a third party with respect thereto, (ii) reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of the rights of Indemnified Party
arising under Article XII and (iii) any amounts paid in respect of post-
closing indemnification of directors and officers as contemplated by
Section 8.1) sustained or incurred by any Indemnified Parties.
(vv) "Material Adverse Effect" shall mean a material adverse
effect on the condition (financial or otherwise), business, assets,
properties, prospects or results of operations of the Company and the
Company Subsidiaries, taken as a whole.
7
(ww) "Permitted Exceptions" shall mean and include (i) with
respect to real property, all liens, encumbrances, easements, covenants,
conditions, restrictions and other matters of record in the official
records of the county recorder for the county in which such real property
is located; (ii) mortgages, liens, pledges, charges, encumbrances and
restrictions which secure debt that is reflected as a liability on the
Audited Balance Sheet and which enumerated encumbrances are specifically
identified in the Audited Balance Sheet or disclosed in the notes thereto;
(iii) liens, charges and encumbrances incurred in connection with the
purchase of assets by the Company or any Company Subsidiary in the ordinary
course of business after the date of the latest Audited Balance Sheet
securing all or a portion of the purchase price therefor; (iv) statutory
liens for current taxes or assessments not yet due or delinquent; (v)
mechanics', carriers', workers', repairers' and other similar liens arising
or incurred in the ordinary course of business consistent with past
practice relating to obligations as to which there is no default on the
part of the Company or the Company Subsidiaries; and (vi) such other liens,
imperfections in title, charges, easements, restrictions, and encumbrances
which do not in the aggregate materially detract from the value of or
interfere with the present use of the properties subject thereto or
affected thereby.
(xx) "Per Share Consideration" shall be equal to the
Consideration divided by the number of Shares.
(yy) "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, an unincorporated organization and a government or any department or
agency thereof.
(zz) "Plan" shall mean each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, employment,
consulting, severance or termination pay, hospitalization or other medical,
life or other insurance, supplemental unemployment benefits, profit-
sharing, pension or retirement plan, program, agreement or arrangement, and
each other "employee benefit plan" (within the meaning of Section 3(3) of
ERISA), whether formal or informal, written or oral and whether legally
binding or not, that is sponsored, maintained or contributed to by the
Company or any ERISA Affiliate for the benefit of any employee, former
employee, consultant, officer, or director of the Company and any ERISA
Affiliate.
(aaa) "Pre-Close Tax Return" shall mean the Tax Return for any
taxable year that ends on or prior to the Closing Date.
8
(bbb) "Preliminary Closing Date Balance Sheet" shall mean an
unaudited consolidated balance sheet of the Company and the Company
Subsidiaries as of the close of business on the day on which the Closing
Date occurs. The Preliminary Closing Date Balance Sheet shall be prepared
on a basis consistent with the latest Audited Balance Sheet, including, but
not limited to, the methodology used in the preparation of estimates
(including, but not limited to, allowances for chargebacks of finance
revenue and extended service warranty chargebacks), the selection and
application of accounting principles and shall not give effect to any
"purchase accounting" adjustments arising from the transactions
contemplated by this Agreement.
(ccc) "Proceeds from the Contingent Assets" shall mean any
amounts realized, net of Taxes directly applicable to the realization of
the contingent assets listed on Schedule 1.1(ccc) on the Disclosure
Schedule
(ddd) "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing.
(eee) "Shares" shall mean all of the shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time.
(fff) "Tax" or "Taxes" shall mean any United States federal,
state, local, or foreign taxes, and assessments of a similar nature
(whether imposed directly or through withholding), including any interest,
penalty, or addition thereto imposed by the United States or any state,
county, local, or foreign government or subdivision or agency thereof.
(ggg) "Tax Return" shall mean any United States federal, state,
local and foreign tax return, declaration, statement, report, schedule,
form and information return including any amendment thereof.
(hhh) "TBCA" shall mean the Texas Business Corporation Act.
(iii) "Third Party Claim" shall mean any claim or demand made by
any third party against an Indemnified Party.
(jjj) "Voting Debt" shall mean bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities
having such rights).
9
(kkk) "WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act.
(lll) "Working Capital" shall be defined and calculated in
accordance with Schedule 1.1(lll) of the Disclosure Schedule.
(mmm) "Working Capital Statements" shall mean a statement
calculating the Difference in Consolidated Working Capital and a statement
calculating the adjustment, if any, to the Consideration pursuant to
Section 3.3(a) of this Agreement.
10
ARTICLE II
THE MERGER
----------
2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement and pursuant to TBCA, at the Effective Time, the Company and
Merger Sub shall consummate the Merger pursuant to which (a) Merger Sub
shall be merged with and into the Company and the separate corporate
existence of Merger Sub shall thereupon cease, (b) the Company shall be the
successor or surviving corporation in the Merger and shall continue to be
governed by the Laws of the State of Texas and (c) the separate corporate
existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger.
2.2 Articles of Merger. On the date of the Closing, the parties shall
cause Articles of Merger and any other appropriate documents to be executed
and filed with the Secretary of State of the State of Texas as provided in
Section 5.04 of the TBCA.
2.3 Effects of the Merger. The Merger shall have the effects set
forth in the TBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
2.4 The Closing. Upon the terms and subject to the conditions
contained in this Agreement, the Closing will take place on the Closing
Date at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000
Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx, Xxxxxxxxxx 00000 at 10:00 A.M.
(local time).
2.5 Directors. The directors of Merger Sub at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
such position from the Effective Time in accordance with the articles of
incorporation and bylaws of the Surviving Corporation and until his or her
successor is duly elected and qualified or until his or her earlier death,
resignation or removal in accordance with the bylaws of the Surviving
Corporation and the TBCA.
2.6 Officers. The officers of Merger Sub at the Effective Time shall
be the initial officers of the Surviving Corporation, each to hold office
from the Effective Time in accordance with the articles of incorporation
and bylaws of the Surviving Corporation and until his or her successor is
duly appointed and qualified or until his or her earlier
11
death, resignation or removal in accordance with the bylaws of the
Surviving Corporation and the TBCA.
2.7 Articles of Incorporation and Bylaws. (a) The articles of
incorporation of Merger Sub as in effect immediately prior to the Effective
Time shall be the articles of incorporation of the Surviving Corporation
until amended in accordance with the terms thereof or as provided by
applicable Law.
(b) The bylaws of Merger Sub as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with the terms thereof, the articles of
incorporation, or as provided by applicable Law.
2.8 Dissenting Shareholders. The shareholders of each of the Company
and Merger Sub have approved this Agreement and the Merger; therefore, no
shareholder will be entitled to dissenters rights under the TBCA in
connection with the transactions contemplated by this Agreement.
12
ARTICLE III
CONVERSION OF SHARES
--------------------
3.1 Deposit. (a) On May 5, 1999, the Purchaser delivered the Deposit
to the Escrow Agent. The Deposit shall be held in escrow by the Escrow
Agent in an interest-bearing demand deposit account.
(b) If the Merger is consummated in accordance with the
provisions of this Agreement, at Closing, the Deposit, together with all
interest earned thereon, shall be delivered pro rata to the Shareholders by
the Escrow Agent.
(c) In the event of the termination of this Agreement
pursuant to Section 11.1(d), following the expiration of five Business
Days, the Shareholders shall receive the Deposit, together with all
interest earned thereon. Receipt of the Deposit pursuant to this Section
3.1(c) shall be in addition to any other remedies at Law or in equity that
the Shareholders may have. If this Agreement is terminated pursuant to
Section 11.1(a), (b), (c) or (e), the Deposit, together with all interest
earned thereon, shall be delivered by the Escrow Agent to the Purchaser.
3.2 Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holder thereof:
(a) Each of the Shares shall be converted into the right to
receive the Per Share Consideration. At the Closing, the Shareholders shall
deliver the certificates formerly representing the Shares to the Surviving
Corporation. Upon delivery thereof, the Closing Consideration shall be paid
pro rata by the Purchaser to the Shareholders by wire transfer of
immediately available funds to accounts designated by the Shareholders to
the Purchaser at least two Business Days prior to the Closing.
(b) Each share of common stock, par value $0.01 per share, of
Merger Sub, issued and outstanding immediately prior to the Effective Time
shall be converted into and become one fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving Corporation.
3.3 Adjustments to Consideration. (a) Within ninety days following
the Closing Date, the Purchaser shall cause the Preliminary Closing Date
Balance Sheet and the Working Capital Statements to be prepared, each at
the Purchaser's expense, and to be delivered to the Shareholders'
Representative.
13
(i) Upon receipt of the Preliminary Closing Date Balance
Sheet, the Shareholders' Representative and his representatives shall
during the succeeding thirty-day period have the right to examine, at the
Shareholders' expense, the Preliminary Closing Date Balance Sheet, the
Working Capital Statement and all records used to prepare the Preliminary
Closing Date Balance Sheet and Working Capital Statement. The Shareholders'
Representative shall give written notice to the Purchaser, on or before the
close of business on the last day of such thirty-day period, of any good
faith objections to the Preliminary Closing Date Balance Sheet, the
proposed calculation of the Difference in Consolidated Working Capital or
the proposed adjustment, if any, to the Consideration, setting forth a
reasonably specific description of the Shareholders' Representative's
objections and the dollar amount of each objection. If the Shareholders'
Representative does not deliver such notice within such thirty-day period,
the Preliminary Closing Date Balance Sheet and the Working Capital
Statement shall be deemed to have been accepted by the Shareholders.
(ii) If the Shareholders' Representative in good faith
objects to the Preliminary Closing Date Balance Sheet or the Working
Capital Statement, the Shareholders' Representative and the Purchaser shall
attempt to resolve the issues in dispute within ten Business Days of
receipt of the Shareholders' Representative's objections. If the
Shareholders' Representative and the Purchaser are unable to resolve the
matter within such ten-Business Day period, they shall jointly appoint
Price WaterhouseCoopers LLP (or, if Price WaterhouseCoopers LLP shall not
agree to so serve, they shall cause their respective accounting firms to
promptly select a replacement for such firm). Such firm shall be instructed
to, within fifteen Business Days, reach a conclusion solely as to whether
(A) the amounts proposed by the Shareholders' Representative or (B) the
amounts proposed by the Purchaser more accurately reflect the Difference in
Consolidated Working Capital calculated in accordance with the terms of
this Agreement. Any such resolution shall be conclusive and binding on the
Purchaser and all of the Shareholders. The fees of such firm of independent
public accountants shall be divided equally between the Shareholders, on
the one hand, and the Purchaser, on the other hand. The Shareholders and
the Purchaser shall, and shall cause the Company and the Company
Subsidiaries to, provide full cooperation to such firm.
(b) If the amount of Consolidated Actual Working Capital exceeds
the amount of Consolidated Required Working Capital, then the Consideration
shall be increased by the amount of such excess. Any adjustments to the
Consideration pursuant to this Section 3.3(b) shall be paid within ten
Business Days of the final determination of the Difference in Consolidated
Working Capital pursuant to Section 3.3(a), together with interest accrued
thereon, from the Closing Date, at the average three month LIBOR
14
rate published during such period in The Wall Street Journal, to the
Shareholders by wire transfer of immediately available funds to the
accounts designated by the Shareholders. Each Shareholder's share of the
Consideration increase pursuant to this Section 3.3(b) shall be equal to
the aggregate amount of such increase multiplied by such Shareholder's
percentage share of the Consideration paid on the Closing Date.
(c) If the amount of Consolidated Actual Working Capital is less
than the amount of Consolidated Required Working Capital, then the
Consideration shall be reduced by the amount of such deficit. Any
adjustments to the Consideration pursuant to this Section 3.3(c) shall be
paid within ten Business Days of the final determination of the Difference
in Consolidated Working Capital pursuant to Section 3.3(a), together with
interest accrued thereon, from the Closing Date, at the average three month
LIBOR rate as published during such period in The Wall Street Journal, to
the Purchaser by wire transfer of immediately available funds to an account
designated by the Purchaser. Each Shareholder shall be jointly and
severally obligated to pay to the Purchaser an amount equal to the
aggregate amount of the Consideration reduction pursuant to this Section
3.3(c).
(d) The Purchaser shall pay any Proceeds from the Contingent
Assets that are realized after the close of business on the day on which
the Closing Date occurs to the Shareholders in the same manner provided for
payments pursuant to Section 3.3(b); provided that interest thereon shall
accrue from the date after the Closing Date such Proceeds from the
Contingent Assets were received by the Surviving Corporation.
15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
AND THE SHAREHOLDERS
--------------------
The Company and each of the Shareholders, jointly and severally,
represent and warrant to the Purchaser and Merger Sub, except as disclosed
in the Disclosure Schedule, as follows:
4.1 Organization, Standing and Qualification of the Company and the
Company Subsidiaries. (a) Schedule 4.1(a) of the Disclosure Schedule
contains a complete and accurate list, as of May 3, 1999, with respect to
the Company and each of the Company Subsidiaries of its name, its
jurisdiction of incorporation, other jurisdictions in which it was
qualified or authorized to do business, and its capitalization (including
the identity of each shareholder and the number of shares held by each such
shareholder).
(b) As of May 3, 1999, the Company and each of the Company
Subsidiaries was a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and each
had all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it was being conducted on
May 3, 1999 and as it was proposed to be conducted on May 3, 1999. As of
May 3, 1999, the Company and each of the Company Subsidiaries was duly
qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it made such qualification or licensure
necessary, except in those jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have reasonably been
expected to have a Material Adverse Effect.
(c) The Company has previously made available to the
Purchaser complete and correct copies of the articles of incorporation and
bylaws (or other similar organizational documents) of the Company and of
each of the Company Subsidiaries, as currently in effect. As of May 3,
1999, none of the Company or any of the Company Subsidiaries was in default
in any respect in the performance, observation or fulfillment of any
provision of its respective articles of incorporation or bylaws.
(d) Except as would not have reasonably been expected to
have a Material Adverse Effect, as of May 3, 1999, each of the Company
Subsidiaries had taken all appropriate action and made all appropriate
filings with respect to their
16
respective "dba" names set forth in the definition of "Company
Subsidiaries" in this Agreement, and the Company Subsidiaries do not use
any other "dba" names.
4.2 Authority. The Company has full corporate power and authority to
execute and deliver the Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of the Agreement and the
consummation of the transactions contemplated hereby on the part of the
Company have been duly and validly authorized by the Company's board of
directors and the Shareholders, and no other corporate proceedings on the
part of the Company are necessary, as a matter of Law or otherwise, to
authorize the Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
each of the Shareholders, the Purchaser and Merger Sub, is a valid and
binding agreement of the Company, enforceable against it in accordance with
its terms, except to the extent that the enforcement thereof may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditor's rights, (b) general principles of equity (regardless of whether
such enforcement is considered in a proceeding at Law or in equity), (c)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought and (d)
public policy underlying the securities Laws which may limit the
indemnification provisions hereof.
4.3 Capitalization. (a) As of May 3, 1999, the authorized capital
stock of the Company consisted of 2,000,000 shares of Company Common Stock,
of which 1,082,509 shares were issued and outstanding. As of May 3, 1999,
all of the issued and outstanding shares of Company Common Stock were owned
by the Shareholders as set forth on Schedule 4.1(a) of the Disclosure
Schedule. As of May 3, 1999, all of the issued and outstanding shares of
Company Common Stock were duly authorized and validly issued, fully paid,
nonassessable and were not issued in violation of any preemptive rights. As
of May 3, 1999, there was no subscription, option, warrant, call, right,
agreement or commitment relating to the issuance, sale, delivery, transfer,
voting or redemption by the Company (including any right of conversion or
exchange under any outstanding security or other instrument) of the Company
Common Stock. As of May 3, 1999, none of the Company or any Company
Subsidiary had any Voting Debt outstanding. As of May 3, 1999, all shares
of outstanding Company Common Stock were issued in transactions exempt from
the registration requirements of applicable federal and state securities
Law.
17
(b) As of May 3, 1999, all of the issued and outstanding shares
of capital stock of each of the Company Subsidiaries (i) were owned by the
Company and (ii) were duly authorized and validly issued, fully paid,
nonassessable and were not issued in violation of preemptive rights. As of
May 3, 1999, there was no subscription, option, warrant, call, right,
agreement or commitment relating to the issuance, sale, delivery, transfer,
voting or redemption by the Company or any of the Company Subsidiaries
(including any right of conversion or exchange under any outstanding
security or other instrument) of any shares of capital stock of any Company
Subsidiary. As of May 3, 1999, the Company had, and, upon consummation of
the transactions contemplated hereby, the Purchaser will indirectly,
acquire title to all of the issued and outstanding shares of capital stock
of all of the Company Subsidiaries free and clear of all pledges, security
interests, liens, charges, encumbrances or claims of whatever nature,
except for restrictions on transfer arising under securities Laws.
(c) Except as set forth in Schedule 4.3(c) of the Disclosure
Schedule, other than the Company's interest in the Company Subsidiaries and
short-term investments made in the ordinary course of business, as of May
3, 1999, neither the Company nor any Company Subsidiary had any equity or
debt investment or interest, directly or indirectly, in any person.
4.4 Consents and Approvals; No Violation. (a) There is no requirement
applicable to the Company or the Company Subsidiaries to make any filing
with, or to obtain any permit, authorization, consent or approval of, any
Government Entity or third party as a condition to the consummation by the
Company of the transactions contemplated by this Agreement, except for (i)
those consents and approvals listed on Schedule 4.4(a) of the Disclosure
Schedule, (ii) applicable requirements of the HSR Act, (iii) the filing of
the Articles of Merger with the Secretary of State of the State of Texas
and the issuance of a certificate of merger by the Secretary of State of
the State of Texas and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings which if not
obtained or made would not reasonably be expected to have a Material
Adverse Effect or a material adverse effect on the Company's ability to
consummate the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 4.4(b) of the Disclosure
Schedule, neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions
contemplated hereby nor compliance by the Company with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the articles of incorporation or bylaws (or other similar
organizational documents) of the Company or the Company Subsidiaries, (ii)
result in
18
a breach of or default or event of default (or give rise to any right of
payment, termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any Contract to which the Company or any of the
Company Subsidiaries is a party or by which any of their respective
properties or assets may be bound or (iii) assuming compliance with the HSR
Act, violate any order, judgment, writ, injunction, decree or Law
applicable to the Company, any of the Company Subsidiaries or any of their
respective properties or assets, excluding from the foregoing clauses (ii)
and (iii), such breaches, defaults (or rights of termination, cancellation
or acceleration) and violations which would not reasonably be expected to
have a Material Adverse Effect or a material adverse effect on the ability
of the Company to consummate the transactions contemplated by this
Agreement.
4.5 Financial Statements. The Company has previously furnished the
Audited Financial Statements to the Purchaser. As of May 3, 1999, the
Audited Financial Statements were prepared in conformity with GAAP and in
all material respects fairly presented, in accordance with GAAP
consistently applied, the consolidated financial position of the Company
and the Company Subsidiaries as of such dates and the consolidated results
of their operations and their consolidated cash flows for such fiscal
periods.
4.6 Undisclosed Liabilities. (a) Except as set forth on Schedule 4.6
of the Disclosure Schedule, as of May 3, 1999, neither the Company nor any
of the Company Subsidiaries had any material liability or obligation,
secured or unsecured (whether absolute, accrued, contingent or otherwise,
and whether due or to become due), of a nature required by GAAP to be
reflected on its balance sheet, except such liabilities and obligations
which (i) were incurred after the date of the latest Audited Balance Sheet
in the ordinary course of business consistent with past practice or (ii)
would not have reasonably been expected to have a Material Adverse Effect.
(b) Except as set forth as a current liability on books and
records to be used to prepare the Preliminary Closing Date Balance Sheet,
as of May 3, 1999, the Company and each of the Company Subsidiaries had no
material liability or obligation, secured or unsecured (whether absolute,
accrued, contingent or otherwise, and whether due or to become due) arising
out of the sale or other disposition of any division or subsidiary.
19
4.7 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.7 of the Disclosure Schedule or except as otherwise contemplated
by this Agreement, between the date of the latest Audited Balance Sheet and
May 3, 1999, there had not occurred; (i) any change, event or condition
(whether or not covered by insurance) that has resulted in, or would have
reasonably been expected to have a Material Adverse Effect; (ii) any
acquisition, sale or transfer of any material asset of the Company or any
of the Company Subsidiaries, other than in the ordinary course of business
and consistent with past practice; (iii) any change in accounting methods
or practices (including any change in depreciation or amortization policies
or rates) by the Company or any revaluation by the Company of any of its or
any of the Company Subsidiaries' assets; (iv) any declaration, setting
aside, or payment of a dividend or other distribution with respect to the
shares of Company Common Stock or any direct or indirect redemption,
purchase or other acquisition by the Company of any shares of Company
Common Stock; (v) any Contract entered into by the Company or any Company
Subsidiary, other than in the ordinary course of business and as provided
to the Purchaser, or any amendment or termination of, or default under, any
Contract which would have reasonably been expected to have a Material
Adverse Effect; (vi) any amendment or change to the Articles of
Incorporation or Bylaws of the Company; or (vii) any increase in or
modification, other than in the ordinary course of business, of the
compensation or benefits payable or to become payable by the Company to any
of its directors or employees. At the Effective Time, there will be no
accrued but unpaid dividends on the Shares.
4.8 Title and Related Matters. Except as set forth on Schedule 4.8 of
the Disclosure Schedule and except for Permitted Exceptions, as of May 3,
1999, the Company or one of the Company Subsidiaries had good and
marketable title to, or a valid leasehold interest in, free of all liens,
claims and encumbrances, (a) all properties and assets (personal and mixed,
tangible and intangible), reflected in the latest Audited Balance Sheet or
acquired thereafter, (b) all properties or assets which were subject to
operating leases as defined in Financial Accounting Standards Board
Statement No. 13 and were not reflected in the latest Audited Balance Sheet
and (c) all other properties and assets owned or leased by the Company or
any of the Company Subsidiaries, except in each of the foregoing clauses
for any of such properties or assets sold or otherwise disposed of, or with
respect to which the lease has expired or has been terminated, since
December 31, 1998 in the ordinary course of business.
20
4.9 Certain Contracts. (a) Schedule 4.9(a) of the Disclosure Schedule
sets forth a complete and accurate list of the Contracts, which were
material to the Company and the Company Subsidiaries, taken as a whole, as
of May 3, 1999. Complete and correct copies of all Contracts listed on
Schedule 4.9(a) of the Disclosure Schedule have been made available to the
Purchaser.
(b) As of May, 3, 1999, there was not, under any of the
Contracts, any existing default or event of default which, with or without
due notice or lapse of time or both, would have constituted a default or
event of default on the part of the Company or the Company Subsidiaries,
except such defaults, events of default and other events which would not
have reasonably been expected to have a Material Adverse Effect. As of May
3, 1999, the Contracts which were material to the Company and the Company
Subsidiaries, taken as a whole, were (i) valid and binding obligations of
the Company or the relevant Company Subsidiary and, to the knowledge of the
Company and the Company Subsidiaries, the other parties thereto, (ii) in
full force and effect and (iii) enforceable in accordance with their
respective terms, except to the extent that the enforcement thereof may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar Laws now or hereafter in effect
relating to creditor's rights, (B) general principles of equity (regardless
of whether such enforcement is considered in a proceeding at Law or in
equity) and (C) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(c) To the knowledge of the Company and the Company Subsidiaries,
as of May 3, 1999, no other party to any of the Contracts was in default in
the performance of any covenant or obligation to be performed by it
pursuant to any such Contract or had given notice that it intended to
terminate, or alter in any way adverse to the Company or such Company
Subsidiary, its performance under such Contract, excluding from the
foregoing all defaults and notices of termination or alterations which
would not have reasonably been expected to have a Material Adverse Effect.
(d) As of May 3, 1999, no automobile manufacturer from whom any
Company Subsidiary holds a dealership franchise had notified the Company or
any Company Subsidiary of any plans which would have reasonably been
expected to have a Material Adverse Effect (other than such plans, if any,
which adversely affect all dealership franchisees of such manufacturer in a
similar manner).
21
4.10 Legal Proceedings, etc. Except as set forth on Schedule 4.10 of
the Disclosure Schedule, as of May 3, 1999, there were no legal,
administrative, arbitration or other proceedings or governmental
investigations pending or, to the knowledge of the Company or the Company
Subsidiaries, threatened against the Company or the Company Subsidiaries.
As of May 3, 1999, neither the Company nor any Company Subsidiary was
subject to any order, judgment or decree of any Government Entity.
4.11 Employee Benefit Plans; ERISA. (a) Schedule 4.11(a) of the
Disclosure Schedule sets forth a true and complete list of each Plan, as of
May 3, 1999.
(b) The Company has made available to the Purchaser copies
of each of the Plans including all amendments thereto to date and related
documents, including trust agreements, annuity contracts and service
agreements, or summaries thereof and, where applicable, the three most
recent Form 5500s and the three most recent discrimination tests for each
Plan; and certified copies of the most recent actuarial statements with
respect to each Plan which is a pension plan subject to Title IV of ERISA,
all IRS determination letters, opinion letters, advisory letters and
rulings relating to the Plans and all material written agreements and
contracts related to each Plan. Except as disclosed on Schedule 4.11(b) of
the Disclosure Schedule, as of May 3, 1999, (i) the Company was not a
participant in any multiemployer plan within the meaning of section 3(37)
of ERISA; (ii) no withdrawal liability had been incurred by or asserted
against the Company with respect to a multiemployer plan; and (iii) the
amount of the withdrawal liability that would have been incurred if the
Company were to withdraw in the ordinary course of business from all such
multiemployer plans would not have reasonably been expected to have a
Material Adverse Effect.
(c) As of May 3, 1999, all Plans complied in all material
respects with and were and had been operated in material accordance with
their terms and each applicable provision of ERISA, the Code, other federal
statutes, state law, and the regulations and rules promulgated pursuant
thereto or in connection therewith. Except as disclosed on Schedule
4.11(c), as of May 3, 1999, there were no actions, suits or claims pending,
or to the knowledge of the Company, threatened or reasonably anticipated
(other than routine claims for benefits) against any Plan. As of May 3,
1999, there were no audits, inquiries or proceedings pending by the IRS or
Department of Labor with respect to any Plan. As of May 3, 1999, there was
no "prohibited transaction" as such term is defined in section 406 of ERISA
or section 4975 of the Code. Except as disclosed on Schedule 4.11(a) of the
Disclosure Schedule, as of May 3, 1999, none of the Plans promised or
provided retiree medical or other retiree benefits to any person. As of May
3, 1999, no "reportable event" within the meaning of section
22
4043 of ERISA (excluding any such event for which the 30 day notice
requirement has been waived) nor any event described under section 4062,
4063 or 4041 of ERISA had occurred with respect to any Plan. As of May 3,
1999, each Plan which was a group health plan (within the meaning of
section 5000(b)(1) of the Code) complied with and had been maintained and
operated in accordance with each of the requirements of section 4980B of
the Code and Parts 6 and 7 of Subtitle B of Title I of ERISA. As of May 3,
1999, neither the Company nor any ERISA Affiliate was subject to any
liability or penalty under sections 4976 through 4980 of the Code or Title
I of ERISA.
(d) With respect to the Plans, individually and in the
aggregate, as of May 3, 1999, there were no funded benefit obligations for
which contributions had not been or will not be timely made or properly
accrued, and there were no unfunded benefit obligations which had not been
accounted for by reserves on the Audited Financial Statements or in the
books and records of the Company and the Company Subsidiaries.
4.12 Taxes. (a) As of May 3, 1999, the Company and each Company
Subsidiary had (i) timely filed (or there has been filed on its behalf) or
will timely file or cause to be timely filed all material Tax Returns
required to be filed by it on or prior to the Closing Date and (ii) paid or
made provision in accordance with GAAP (or there had been paid or provision
had been made on their behalf) for the payment of all Taxes for all periods
ending through May 3, 1999. As of May 3, 1999, all such Tax Returns were
true and correct in all material respects and were prepared in the manner
required by applicable Law.
(b) Except as set forth on Schedule 4.12(b) of the
Disclosure Schedule, with respect to the Company and the Company
Subsidiaries, as of May 3, 1999, (i) there was no material action, suit,
proceeding, audit, claim or assessment pending or proposed in writing with
respect to Taxes or with respect to any Tax Return; (ii) there were no
waivers or extensions of any applicable statute of limitations for the
assessment or collection of Taxes with respect to any Tax Return which
remain in effect; (iii) there were no material liens for Taxes upon the
assets of the Company or any of the Company Subsidiaries, except for liens
for Taxes not yet delinquent or liens for Taxes being contested in good
faith; and (iv) there had been no examinations of any material Tax Returns
by any Government Entity within the four years preceding May 3, 1999.
(c) As of May 3, 1999, all material Taxes that the Company
or any Company Subsidiary had been required to collect or withhold had been
duly
23
collected or withheld and, to the extent required, had been paid to the
proper taxing authority.
(d) At no time prior to May 3, 1999, had the Company or any
Company Subsidiary been included in the federal consolidated income Tax
Return of any affiliated group of corporations (other than the consolidated
income Tax Return of the Company).
(e) As of May 3, 1999, none of the Company or any Company
Subsidiary was obligated to make any "parachute payment," as defined in
section 280G of the Code.
4.13 Intellectual Property. (a) Except as set forth on Schedule
4.13(a) of the Disclosure Schedule and except as would not have reasonably
been expected to have a Material Adverse Effect, as of May 3, 1999, all
Intellectual Property was free and clear of any liens, security interests
and other charges and encumbrances, and the Company or one of the Company
Subsidiaries was the exclusive owner or licensee of or had a valid right to
use such Intellectual Property.
(b) As of May 3, 1999, (i) no Intellectual Property,
product, process, method, substance, part or other material that was being
sold or employed by the Company or any Company Subsidiary infringed on the
rights of any other person, (ii) there was no claim or litigation pending
or, to the knowledge of the Company or the Company Subsidiaries, threatened
against any of them contesting the right of the Company or the Company
Subsidiaries to sell or to use any of the Intellectual Property and (iii)
to the knowledge of the Company and the Company Subsidiaries, no product,
license, patent, trade name, trade dress, trademark, process, method,
substance, part or other material that was being sold or employed by any
person infringed any rights of the Company or the Company Subsidiaries with
respect to the Intellectual Property, other than, in the case of clauses
(i), (ii) and (iii) above, such infringements, claims and litigation which
would not have reasonably been expected to have a Material Adverse Effect.
As of May 3, 1999, none of the Intellectual Property had been declared
unenforceable or otherwise invalid.
4.14 Environmental Matters. (a) Except as set forth on Schedule
4.14(a) of the Disclosure Schedule or except as would not have reasonably
been expected to have a Material Adverse Effect, as of May 3, 1999:
24
(i) the Company and the Company Subsidiaries were in
compliance with Environmental Laws;
(ii) neither the Company nor any of the Company
Subsidiaries had received any written notice which was outstanding with
respect to the operations of, or any property owned or leased on May 3,
1999 by the Company or any of the Company Subsidiaries from any Government
Entity or third party alleging that the Company or any of the Company
Subsidiaries was not in compliance with any Environmental Law;
(iii) there was no Release of a Hazardous Substance for
which the Company or the Company Subsidiaries would have reasonably been
expected to have liability under Environmental Laws on any real property
owned or leased on May 3, 1999 by the Company or any of the Company
Subsidiaries;
(iv) to the Company's knowledge, the Company and the
Company Subsidiaries were in compliance with environmental provisions of
applicable federal, state, and local worker health and safety laws, rules
and regulations;
(v) the Company and the Company Subsidiaries each
held all Environmental Permits related to their respective operations and
each was in compliance with such Environmental Permits;
(vi) no real property that the Company or any Company
Subsidiary owned or leased on May 3, 1999 was listed or was proposed for
listing on the National Priorities List, CERCLIS or any similar state list
of sites;
(vii) to the knowledge of the Company and the Company
Subsidiaries, there was no asbestos-containing construction material on, in
or part of any real property or structure thereon owned or leased on May 3,
1999 by the Company or any Company Subsidiary;
(viii) no formal or written claim was pending by any
person against the Company or any Company Subsidiaries on the alleged
ground of personal injury resulting from exposure to a Hazardous Substance;
(ix) neither the Company nor any Company Subsidiary
had received any written notice of actual or potential responsibility or
liability for
25
investigatory, response or cleanup costs, or natural resource or property
damages relating to a Release of Hazardous Substances which was
outstanding; and
(x) there were no underground Hazardous Substances
storage tanks on any of the real properties owned or leased on May 3, 1999
by the Company or any Company Subsidiaries.
(b) The Company has delivered to the Purchaser copies of all
environmental assessment reports prepared on behalf of the Company or
otherwise in the possession of the Company or any of the Company
Subsidiaries pertaining to property owned or leased on May 3, 1999 by the
Company or any of the Company Subsidiaries.
4.15 Compliance with Laws. Except for Environmental Laws (which are
addressed in Section 4.14) or except as would not have reasonably been
expected to have a Material Adverse Effect, on May 3, 1999, the Company and
the Company Subsidiaries (a) were, and the businesses of the Company and
the Company Subsidiaries had been, conducted in compliance with all
domestic and foreign Laws, orders, licenses, concessions and permits
relating to any of their properties or applicable to their businesses,
including, but not limited to, labor, civil rights, and occupational safety
and health Laws and (b) had all governmental licenses and permits necessary
to conduct their businesses as conducted on May 3, 1999. As of May 3, 1999,
such licenses and permits were in full force and effect, no violation
existed in respect of any such licenses or permits, and no proceeding was
pending or, to the knowledge of the Company or the Company Subsidiaries,
threatened looking toward revocation or limitation of any such licenses or
permits.
4.16 Labor Matters. Except as set forth on Schedule 4.16 of the
Disclosure Schedule, as of May 3, 1999, (a) neither the Company nor any
Company Subsidiary was a party to or bound by any collective bargaining or
similar agreement with any labor organization, or work rules or practices
agreed to with any labor organization or employee association applicable to
employees of the Company or any Company Subsidiary; (b) none of the
employees of the Company or any Company Subsidiary were represented by any
labor organization, and the Company did not know of any union organizing
activities among the employees of the Company or any Company Subsidiary,
nor did any question concerning representation exist concerning such
employees; (c) there was no labor strike, dispute, slowdown, stoppage or
lockout actually pending, or to the knowledge of the Company or the Company
Subsidiaries, threatened against or affecting the Company or any Company
Subsidiary and, during the
26
three years prior to and ending on May 3, 1999, there has not been any such
action; and (d) there was no grievance or arbitration proceeding arising
out of any collective bargaining agreement or other grievance procedure
relating to the Company or any Company Subsidiary.
4.17 Employment Matters. (a) Except as set forth on Schedule 4.17(a)
of the Disclosure Schedule, as of May 3, 1999, (i) there were no employment
contracts or severance agreements with any employees of the Company or any
Company Subsidiary, (ii) there were no written personnel policies, rules or
procedures applicable to employees of the Company or any Company Subsidiary
and (iii) to the knowledge of the Company or the Company Subsidiaries, no
key employee or group of employees had any plans to terminate their
employment with the Company or any Company Subsidiary as a result of any of
the transactions contemplated by this Agreement or otherwise.
(b) Between the enactment of the WARN Act and May 3, 1999,
neither the Company nor any Company Subsidiary had effectuated
(i) a "plant closing" (as defined in the WARN Act) affecting any site
of employment or one or more facilities or operating units within any site
of employment or facility of the Company or any Company Subsidiary or (ii)
a "mass layoff " (as defined in the WARN Act) affecting any site of
employment or facility of the Company or any Company Subsidiary; nor had
the Company or any Company Subsidiary been affected by any transaction or
engaged layoffs or employment terminations sufficient in number to trigger
application of any similar state or local Law.
(c) Except as set forth on Schedule 4.17(c) of the Disclosure
Schedule or as would not have reasonably been expected to have a Material
Adverse Effect, to the Company's knowledge, as of May 3, 1999, the Company
and each of the Company Subsidiaries (i) was in compliance with all
currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages,
hours and occupational safety and health, and employment practices, and
were not engaged in any unfair labor practice, (ii) had no pending workers
compensation claims or any uninsured claims for long term disability, and
(iii) had no obligation under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, the Family and Medical Leave Act of
1993, as amended, or the Health Insurance Portability and Accountability
Act of 1996.
27
4.18 Brokers. As of May 3, 1999, other than BancBoston Xxxxxxxxx
Xxxxxxxx, Inc., no broker, finder or investment banker was entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company. Any such fees shall be paid by the
Shareholders or accrued for as a current liability on the books and records
to be used to prepare the Preliminary Closing Date Balance Sheet.
4.19 Restrictions on Business Activities. Except as set forth on
Schedule 4.19 of the Disclosure Schedule, as of May 3, 1999, there was no
agreement, judgment, injunction, order or decree binding upon the Company
or any Company Subsidiary which had or could have reasonably been expected
to have the effect of prohibiting or materially impairing any current or
future business practice of the Company or any Company Subsidiary, any
acquisition of property by the Company or any Company Subsidiary or the
conduct of business by the Company or any Company Subsidiary as it was
conducted on May 3, 1999 or as it was proposed to be conducted by the
Company or any Company Subsidiary on May 3, 1999.
4.20 Interested Party Transactions. As of May 3, 1999, neither the
Company nor any Company Subsidiary had incurred any outstanding
indebtedness to any director, officer, employee or agent of the Company or
any Company Subsidiary, and no such person had any incurred any outstanding
indebtedness to the Company or any Company Subsidiary.
4.21 Minute Books. As of May 3, 1999, the minute books of the Company
and the Company Subsidiaries made available to the Purchaser contained a
complete and accurate summary of all meetings of directors and shareholders
or actions by written consent since the time of incorporation of the
Company and the Company Subsidiaries and reflected all transactions
referred to in such minutes accurately in all material respects.
4.22 Insurance. (a) Schedule 4.22(a) of the Disclosure Schedule sets
forth the Company's and the Company Subsidiaries' policies of insurance and
bonds in force as of May 3, 1999.
(b) Except as set forth in Schedule 4.22(b) of the Disclosure
Schedule, as of May 3, 1999, there was no claim pending under any of such
policies or bonds as to which coverage had been questioned, denied or
disputed by the underwriters of such policies or bonds. As of May 3, 1999,
all premiums due and payable under all such policies and bonds had been
paid. Except as would not have reasonably been expected
28
to have a Material Adverse Effect, as of May 3, 1999, the Company and the
Company Subsidiaries were in compliance with the terms of such policies and
bonds. As of May 3, 1999, the Company and the Company Subsidiaries had no
knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies.
4.23 No Pending Acquisition Proposals. As of May 3, 1999, there were no
pending negotiations, understandings or arrangements with respect to any
Acquisition Proposal except for the sales of Franciscan Motors' Acura
franchise and Cadillac franchise and transactions contemplated by this
Agreement.
4.24 Representations Complete. None of the representations or
warranties made by the Company herein or in the Disclosure Schedule or any
Annex hereto, or certificate required to be furnished by the Company
pursuant to this Agreement, when all such documents are read together in
their entirety, contained, as of May 3, 1999, or will contain, as of the
Closing, any untrue statement of a material fact, or omitted, as of May 3,
1999, or will omit, as of the Closing, to state any material fact necessary
in order to make the statements contained herein or therein, in the light
of the circumstances under which made, not misleading.
29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
--------------------------------------------------
The Shareholders, jointly and severally, represent and warrant
to the Purchaser and Merger Sub as follows:
5.1 Authority. Each of Xxxxx and Xxxxx is an individual resident of
the State of California and has the requisite competence and authority to
execute and deliver this Agreement, to perform his or her obligations
hereunder and to consummate the transactions contemplated hereby. The LBC
Trust is a trust settled under the laws of the State of California and has
the requisite trust power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The Shareholders have
acted by written consent to approve and adopt the Merger and this Agreement
in accordance with the TBCA. This Agreement has been duly and validly
executed and delivered by each of the Shareholders and, assuming the due
authorization, execution and delivery by the Purchaser, Merger Sub and the
Company, constitutes a legal, valid and binding obligation of each
Shareholder, enforceable against each Shareholder in accordance with its
terms, except to the extent that the enforcement thereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar Laws now or hereafter in effect relating to
creditor's rights, (b) general principles of equity (regardless of whether
such enforcement is considered in a proceeding at law or in equity), (c)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought and (d)
public policy underlying the securities Laws which may limit the
indemnification provisions hereof.
5.2 Consents and Approvals; No Violation. (a) Except for applicable
requirements of the HSR Act, there is no requirement applicable to any
Shareholder to make any filing with, or to obtain any permit,
authorization, consent or approval of, any Government Entity or other
person as a condition to consummation by the Shareholders of the
transactions contemplated by this Agreement.
(b) None of the execution and delivery of this Agreement by
any Shareholder, the consummation by any Shareholder of the transactions
contemplated hereby or compliance by any Shareholder with any of the
provisions hereof will (i) conflict with or result in a breach of any
provision of the certificate of incorporation or bylaws (or other similar
charter documents) of any Shareholder, (ii) result in a breach of or
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture,
30
license, agreement, lease or other similar instrument or obligation to
which any Shareholder is a party or by which any of their respective
properties or assets may be bound, except for such breaches or defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained, or (iii) assuming compliance with
the HSR Act, violate any order, judgment, writ, injunction, decree or Law
applicable to any shareholder or any of their respective properties or
assets, excluding from the foregoing clauses (ii) and (iii) such breaches,
defaults and violations which would not reasonably be expected to have a
material adverse effect on the ability of the Shareholders to consummate
the transactions contemplated by or perform their respective obligations
under, this Agreement.
31
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
AND MERGER SUB
--------------
The Purchaser and Merger Sub, jointly and severally, represent
and warrant to the Company and the Shareholders as follows:
6.1 Organization. As of May 3, 1999, each of the Purchaser and Merger
Sub was a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation and had all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as it was being conducted on May 3, 1999, except
where the failure to be so existing and in good standing or to have such
power and authority would not have individually or in the aggregate have
had a material adverse effect on the business, operations or financial
condition of the Purchaser and its subsidiaries, taken as a whole, or the
ability of the Purchaser and Merger Sub to consummate any of the
transactions contemplated by this Agreement.
6.2 Authority. Each of the Purchaser and Merger Sub has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by each of the Purchaser and Merger Sub and the
consummation of the transactions contemplated hereby by each of the
Purchaser and Merger Sub have been duly and validly authorized by the board
of directors of each of the Purchaser and Merger Sub, and no other
corporate proceedings on the part of the Purchaser or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of the Purchaser and Merger Sub and, assuming the due
authorization, execution and delivery by the Company and the Shareholders,
constitutes a legal, valid and binding obligation of the Purchaser and of
Merger Sub, enforceable against each of the Purchaser and Merger Sub in
accordance with its terms, except to the extent that the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws now or hereafter in
effect relating to creditor's rights, (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding at
law or in equity), (iii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor may
be brought and (iv) public policy underlying the securities Laws which may
limit the indemnification provisions hereof.
32
6.3 Merger Sub's Operations. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and, as of May
3, 1999, had not engaged in any business activities or conducted any
operations other than in connection with the transaction contemplated
hereby.
6.4 Consents and Approvals; No Violation. (a) Except as set forth on
Schedule 6.4(a) of the Disclosure Schedule or except for applicable
requirements of the HSR Act, there is no requirement applicable to the
Purchaser or Merger Sub to make any filing with, or to obtain any permit,
authorization, consent or approval of, any Government Entity or other third
party as a condition to consummation by the Purchaser and Merger Sub of the
transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.4(b) of the
Disclosure Schedule, none of the execution and delivery of this Agreement
by the Purchaser or Merger Sub, the consummation by the Purchaser or Merger
Sub of the transactions contemplated hereby or the compliance by the
Purchaser or Merger Sub with any of the provisions hereof will (i) conflict
with or result in a breach of any provision of the certificate of
incorporation or bylaws (or other similar charter documents) of the
Purchaser or Merger Sub, (ii) result in a breach of or default (or give
rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other similar instrument or
obligation to which the Purchaser or any of its subsidiaries is a party or
by which any of their respective properties or assets may be bound, except
for such breaches or defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained,
or (iii) assuming compliance with the HSR Act, violate any order, judgment,
writ, injunction, decree, statute, rule or regulation applicable to the
Purchaser, any of its subsidiaries or any of their respective properties or
assets, excluding from the foregoing clauses (ii) and (iii) such breaches,
defaults and violations which, in the aggregate, would not reasonably be
expected to have a material adverse effect on the ability of the Purchaser
or Merger Sub to consummate the transactions contemplated by, or perform
their respective obligations under, this Agreement.
6.5 Financing. As of May 3, 1999, the Purchaser had, or will have prior
to the Closing Date, funds sufficient to pay the Consideration, to
otherwise satisfy its obligations under this Agreement and to pay all of
its expenses in connection therewith. A copy of a binding commitment letter
evidencing the availability of such funds, which,
33
at the Purchaser's option, may be used to pay the Consideration, is set
forth on Schedule 6.5 of the Disclosure Schedule.
6.6 Brokers. As of May 3, 1999, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of
the Purchaser or Merger Sub.
34
ARTICLE VII
COVENANTS OF THE SHAREHOLDERS AND THE COMPANY
---------------------------------------------
7.1 Conduct of Business of the Company. Except as contemplated by
this Agreement or as would not result in any liability (whether absolute,
contingent or otherwise) of the Company or any of the Company Subsidiaries
(other than amounts accrued as a current liability on the books and records
to be used to prepare the Preliminary Closing Date Balance Sheet), during
the period from May 3, 1999 to the Closing Date, the Company and each
Company Subsidiary shall conduct its businesses and operations according to
its ordinary course of business consistent with policies as currently in
effect, including without limitation, pricing and discounting, preserve
substantially intact its business organization and preserve its current
relationships with customers, suppliers and other persons with which it has
significant business relations. Without limiting the generality of the
foregoing, prior to the Closing Date, except as otherwise expressly
provided in this Agreement, as would not result in any liability to the
Purchaser (other than amounts accrued as a current liability on the books
and records to be used to prepare the Preliminary Closing Date Balance
Sheet) or as previously consented to in writing by the Purchaser (which
consent will not be unreasonably withheld or delayed), none of the Company
nor any Company Subsidiary shall:
(a)(i) create, incur or assume any long-term debt (including
obligations in respect of capital leases), (ii) except in the ordinary
course of business consistent with past practice, create, incur, assume,
maintain or permit to exist any short-term debt; or (iii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person; provided that the Company and the Company Subsidiaries may endorse
negotiable instruments in the ordinary course of business and the Company
may provide guarantees of the obligations of the Company Subsidiaries in
the ordinary course of business consistent with past practice;
(b) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or redeem or otherwise acquire
any shares of its capital stock, unless (i) after giving effect to such
dividend or distribution, the Company Subsidiaries have sufficient working
capital to comply with the working capital requirements then applicable of
any automobile manufacturers from whom such Company Subsidiary holds a
franchise or (ii) the redemption is done in connection with the acquisition
of Autocorp or the disposal of the assets listed on Schedule 7.1(o) of the
Disclosure Schedule.
35
(c)(i) increase in any manner the compensation of any of its
directors, officers or other employees, except such increases as are (A)
granted in the ordinary course of business consistent with past practice
(which shall include normal periodic performance reviews and related
compensation and benefit increases but not any general across-the-board
increases) or (B) necessary, as determined by the Company and approved by
the Purchaser (which approval shall not be unreasonably withheld or
delayed), to retain employees necessary to continue to operate the
businesses of the Company and the Company Subsidiaries in the ordinary
course of business consistent with past practice; (ii) pay or agree to pay
any pension, retirement allowance or other employee benefit not required or
permitted by any Plans in existence on May 3, 1999; (iii) commit itself to
any additional Plans, employment agreements or consulting agreements,
except to the extent required to comply with applicable Law; (iv) grant any
severance or termination pay or benefits to any director, officer or any
other employee except (A) payments made pursuant to written agreements
outstanding on May 3, 1999 or (B) grants which are made in the ordinary
course of business in accordance with past practices; or (v) amend any of
such Plans or any of such agreements in existence on May 3, 1999, except to
the extent required to comply with applicable Law;
(d) except as set forth on Schedule 7.1(d) of the Disclosure
Schedule, except as contemplated by this Agreement or except in the
ordinary course of business, (i) sell, transfer, or otherwise dispose of,
or agree to sell, transfer, or otherwise dispose of, any properties or
assets, real, personal or mixed, which have a book or fair market value in
the aggregate in excess of $100,000, (ii) mortgage or encumber any property
or asset, real, personal or mixed, which has a book or fair market value in
excess of $100,000 or (iii) cancel or compromise any debt or claim;
(e) enter into or amend Contracts, except Contracts entered into
or amended in the ordinary course of business consistent with past
practice;
(f) amend, alter or otherwise change the articles of
incorporation or the bylaws of the Company or any Company Subsidiary;
(g) issue additional shares of capital stock of the Company or
any Company Subsidiary, or issue, grant, create or enter into securities
convertible into, or subscriptions, options, rights, warrants, commitments
or agreements relating to the capital stock of the Company or any Company
Subsidiary;
36
(h) merge or consolidate with any other corporation or acquire
all or substantially all of the business or assets of any other person;
acquire ownership or control of any capital stock, bonds or other
securities of, or any property interest in, any corporation, partnership,
firm, association or business organization, entity or enterprise or acquire
control of the management or policies thereof; or enter into any
negotiations with respect to any of the foregoing; provided that the
foregoing shall not prohibit the investment of excess cash consistent with
prior practice or the receipt of any stock, bonds or other securities in
the bona fide settlement of any claims held by the Company or any Company
Subsidiary;
(i) make, change or revoke any material election with respect to
Taxes or enter into or amend any material agreement or settlement with any
taxing authority;
(j) settle or compromise any litigation, other than matters
involving only monetary recovery or except in the ordinary course of
business;
(k) except as set forth on Schedule 7.1(k) of the Disclosure
Schedule, commence a lawsuit other than (i) for the routine collection of
bills, (ii) in such cases where it in good faith determines that failure to
commence suit would result in the material impairment of a valuable aspect
of its business, provided that it consults with the Purchaser prior to the
filing of such a suit or (iii) for a breach of this Agreement;
(l) transfer to any person or entity any rights to its
Intellectual Property other than in the ordinary course of business
consistent with past practice;
(m) enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing or other exclusive rights of any
type or scope with respect to the business of the Company;
(n) reduce the amount of any insurance coverage provided by
existing insurance policies;
(o) except as contemplated by or required pursuant to this
Agreement or except as set forth on Schedule 7.1(o) of the Disclosure
Schedule, engage in any transaction (i) with any person other than on an
arm's length basis or (ii) with any Affiliate or shareholder of the Company
or any Company Subsidiary or any member of such person's immediate family;
or
37
(p) enter into any agreement with respect to any of the
foregoing.
Notwithstanding the provisions of this Section 7.1, nothing in
this Agreement shall be construed or interpreted to prevent the Company and
the Company Subsidiaries from (i) making, accepting or settling
intercompany advances to, from or with one another so long as such
activities have no adverse Tax or other effects on the Company or any
Company Subsidiary that are not adequately reflected on the books and
records used to prepare the Preliminary Closing Date Balance Sheet; or (ii)
engaging in any other transaction incidental to the normal cash management
procedures of the Company and the Company Subsidiaries not involving the
incurrence of any liability by the Company or any Company Subsidiary, which
procedures shall include, without limitation, short-term investments in
time deposits, certificates of deposit, banker's acceptances and money
market funds made in the ordinary course of business consistent with past
practice.
7.2 Current Information. During the period from May 3, 1999 to the
Closing Date, the Company and the Company Subsidiaries will notify the
Purchaser of (a) any significant change in the normal course of business or
operations of the Company and the Company Subsidiaries and (b) any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), and (c) the institution or
threat or settlement of significant litigation, in each case involving the
Company or the Company Subsidiaries.
7.3 Access to Information. Between May 3, 1999 and the Closing Date,
the Company and the Company Subsidiaries agree to (a) give the Purchaser
and its authorized representatives reasonable access to all management
personnel, auditors, books, records, plants, offices, warehouses and other
facilities and properties of the Company and the Company Subsidiaries,
including, but not limited to the conduct of a physical inventory and
review of used cars during the week prior to the Closing; (b) permit the
Purchaser to make such inspections thereof, during regular business hours,
as the Purchaser may reasonably request (including, but not limited to, the
taking of a parts inventory at (i) as of July 31, 1999 or (ii) the
beginning of the week during which the Purchaser reasonably expects the
Closing to occur); and (c) cause their officers to furnish the Purchaser
with such financial and operating data and other information with respect
to the business and properties of the Company and the Company Subsidiaries
as the Purchaser may from time to time reasonably request; provided,
however, that any such investigation shall be conducted in such a manner as
not to interfere unreasonably with the operation of the business of the
Company and the Company Subsidiaries.
38
7.4 Acquisition of Autocorp. Immediately prior to the Effective Time,
the Shareholders shall acquire the business and operations of Autocorp.
7.5 Affiliate Transactions. Except as set forth on Schedule 7.5 of
the Disclosure Schedule, as of the Closing Date, (a) all amounts payable to
the Shareholders or their Affiliates (other than the Company and the
Company Subsidiaries) by the Company and the Company Subsidiaries shall
have been repaid; (b) all amounts payable to the Company or any Company
Subsidiary by the Shareholders or any of their Affiliates (other than the
Company and the Company Subsidiaries) shall have been repaid; and (c)
except as contemplated by this Agreement, all Contracts (including, but not
limited to, any guaranty by the Company or Company Subsidiaries of
obligations of the Shareholders or their Affiliates (other than the Company
and the Company Subsidiaries)) between the Company or the Company
Subsidiaries and the Shareholders or their Affiliates (other than the
Company and the Company Subsidiaries) shall have been terminated.
7.6 No Solicitation. (a) From and after May 3, 1999 until the
Effective Time, except for (i) the negotiations with respect to the
abandoned the sale of Franciscan Motors' Acura dealership and the completed
sale of Franciscan Motors' Cadillac dealership and (ii) the transactions
contemplated by this Agreement, none of the Company or any Shareholder
shall, directly or indirectly through any officer, director, employee,
representative or agent of the Company or otherwise, (A) solicit, initiate,
or encourage any inquiries or proposals that constitute, or could
reasonably be expected to lead to, an Acquisition Proposal, (B) engage or
participate in negotiations or discussions concerning, or provide any non-
public information to any person or entity relating to, any Acquisition
Proposal or (C) agree to, enter into, accept, approve or recommend any
Acquisition Proposal.
(b) The Company shall notify the Purchaser promptly (and no
later than forty eight hours) after receipt by the Company or any
Shareholder (or by their respective advisors) of any Acquisition Proposal
or any request for nonpublic information in connection with an Acquisition
Proposal or for access to the properties, books or records of the Company
by any person or entity that informs the Company that it is considering
making, or has made, an Acquisition Proposal. Such notice shall be made
orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact.
39
7.7 Non-Current Asset Inventory. The Company shall, prior to the
fourth Business Day prior to the Closing Date, deliver to the Purchaser a
third party appraisal, prepared by Xxxxxxxx & Xxxxxxx, of the non-current
assets of the Company (other than its investment in the Company
Subsidiaries) which are expected to be held by the Company at the Closing
Date.
40
ARTICLE VIII
COVENANTS OF THE PURCHASER AND MERGER SUB
-----------------------------------------
8.1 Directors' and Officers' Indemnification. (a) The Purchaser and
Merger Sub acknowledge that all rights to indemnification or exculpation
existing as of May 3, 1999 in favor of the directors, officers, employees
and agents of the Company and the Company Subsidiaries as provided in the
articles of incorporation or bylaws of each with respect to matters
occurring prior to the Effective Time shall survive the Merger and shall
continue in full force and effect for six years thereafter. After the
Effective Time, the Surviving Corporation shall indemnify, defend and hold
harmless the present and former officers, directors, employees and agents
of the Company and the Company Subsidiaries against all losses, claims,
damages, liabilities, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities
and amounts paid in settlement (provided, that any such settlement is
effected with the prior written consent of the Purchaser or the Surviving
Corporation)) arising out of actions or omissions occurring at or prior to
the Effective Time to the full extent permitted under the laws of such
entity's state of incorporation, the articles of incorporation or the
bylaws, in each case, as in effect as of May 3, 1999, including provisions
therein relating to the advancement of expenses incurred in the defense of
any action or suit.
(b) In the event the Surviving Corporation, the Purchaser or any
of their successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in
each such case, proper provisions shall be made so that the successors and
assigns of the Surviving Corporation and/or the Purchaser, as the case may
be, shall assume its obligations set forth in this Section 8.1.
(c) The provisions of this Section 8.1 are intended to be for the
benefit of, and shall be enforceable by, any party indemnified pursuant to
this Section 8.1, his or her heirs and his or her personal representatives.
(d) Amounts paid pursuant to this Section 8.1 may be included in
Losses claimed by the Purchaser when making a claim for Losses
indemnifiable pursuant to Section 12.2.
41
8.2 Charitable Contributions. From and after the Effective Time, the
Purchaser shall cause the Surviving Corporation and the Company
Subsidiaries to timely pay all contributions set forth on Schedule 8.2 of
the Disclosure Schedule.
8.3 Car Allowance. The Purchaser hereby agrees to sell, once a year,
to each of the Shareholders, through and including the tenth anniversary of
the Closing Date, one vehicle of such Shareholder's choice, provided that
such vehicle is a model that the Purchaser subsidiary from which such
Shareholder selects the vehicle is allocated not less than twelve vehicles
of such model by such manufacturer in a twelve month period. The purchase
price of each vehicle purchased pursuant to this Section 8.3 shall be equal
to the dealer invoice less holdbacks and allowances.
8.4 Tax Returns. The Purchaser shall cause the Company and the
Company Subsidiaries to file any outstanding Pre-Close Tax Returns, but
such Pre-Close Tax Returns shall not be filed without the prior consent of
the Shareholders (which consent shall not be unreasonably withheld or
delayed).
8.5 Use of LDG Name. As promptly as possible following the Closing,
but in no event later than ninety days following the Closing, the
Purchaser, the Surviving Corporation and the Company Subsidiaries shall
discontinue the use of the "Xxxxx Dealership Group" name.
42
ARTICLE IX
MUTUAL COVENANTS
----------------
9.1 Further Actions. Subject to the terms and conditions of this
Agreement, from and after May 3, 1999, each of the parties hereto will use
its commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement.
9.2 Consents. From and after May 3, 1999, each of the Company, the
Purchaser and Merger Sub will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on any of
them with respect to the Agreement and the transactions contemplated hereby
(which actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection with approvals of
or filings with any other Government Entity) and will promptly cooperate
with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their respective
subsidiaries in connection with the Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing, from and after May 3,
1999, the Purchaser and Merger Sub will be responsible for obtaining any
consent, authorization, order or approval of, or any exemption by, any
Government Entity or other public or private third party which is listed on
Schedule 4.4(a) or Schedule 6.4(b) to the Disclosure Schedule. From and
after May 3, 1999, the Company and each of the Company Subsidiaries shall
cooperate with and give reasonable assistance to the Purchaser and Merger
Sub, if so requested, in connection with obtaining those consents,
authorizations, orders, approvals or exemptions listed on Schedule 4.4(a)
or Schedule 6.4(b) to the Disclosure Schedule.
9.3 Filings. As promptly as practicable after May 3, 1999, the
Company and the Purchaser or its "ultimate parent entity" will file with
the FTC and the DOJ pursuant to the HSR Act all requisite documents and
notifications in connection with the transactions contemplated by this
Agreement. From and after May 3, 1999, the Company and the Purchaser shall
use their commercially reasonable efforts to make or cause to be made all
such other filings and submissions as may be required under applicable
Laws, if any, for the consummation of the transactions contemplated by this
Agreement. From and after May 3, 1999, the Purchaser and the Company will
coordinate and cooperate with one another in exchanging such information
and reasonable assistance as another may request in connection with all of
the foregoing.
43
9.4 Notification of Certain Matters. From and after May 3, 1999, the
Company and the Shareholders shall give prompt notice to the Purchaser, and
the Purchaser shall give prompt notice to the Company and the Shareholders,
of the occurrence (or non-occurrence) of any event of which they have
knowledge, the occurrence (or non-occurrence) of which would be reasonably
likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect and of the occurrence of
any material failure of any party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that delivery of any notice pursuant to this Section 9.4
shall not (a) limit or otherwise affect the remedies available to either
party hereunder; (b) modify any representation, warranty or covenant under
this Agreement; nor (c) constitute an admission by the party delivering
such notice that any such representation or warranty has been breached.
9.5 Public Announcements. From and after May, 3, 1999, no party to
this Agreement shall issue any statement or communication to any third
party (other than its respective agents) regarding the subject matter of
this Agreement or the transactions contemplated hereby, including, if
applicable, the termination of this Agreement and the reasons therefor,
without the consent of the other party, which consent shall not be
unreasonably. Notwithstanding the foregoing, from and after May 3, 1999,
the Purchaser may make disclosure as required by the securities Law;
provided that the Company, its independent accountants and its counsel
shall be given not less than two Business Days to review and approve such
disclosure, which approval shall not be unreasonably withheld or delayed.
9.6 Further Assurances. From time to time and without further
consideration, the Shareholders, the Company and the Company Subsidiaries
will, at their own expense, execute and deliver such documents to the
Purchaser as the Purchaser may reasonably request in order more effectively
to consummate the transactions contemplated hereby. From time to time and
without further consideration, the Purchaser and Merger Sub will, at their
own expense, execute and deliver such documents as the Shareholders, the
Company and the Company Subsidiaries may reasonably request in order more
effectively to consummate the transactions contemplated hereby. In case at
any time after the Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement, each party to this
Agreement will take or cause its proper officers and directors or trustees
to take all such necessary action.
44
9.7 Leases. Prior to the Closing, the Company Subsidiaries, the
Purchaser and the Xxxxx Living Trust, a trust settled under the laws of the
State of California, shall execute and deliver amendments, substantially in
the form as attached hereto as Annex A, to the leases listed on Schedule
-------
9.7 of the Disclosure Schedule.
9.8 Termination of All 401(k) Plans. Prior to the Closing Date, the
Company and each Company Subsidiary shall terminate each 401(k) Plan, and
after the Closing Date, no further contributions shall be made by the
Company or any Company Subsidiary to any 401(k) Plan. Prior to the Closing
Date, the Company and each such Company Subsidiary shall provide to the
Purchaser (i) executed resolutions by the appropriate board of directors
authorizing the termination of each 401(k) Plan and (ii) an executed
amendment to each 401(k) Plan sufficient to assure compliance with all
applicable requirements of the Code and regulations thereunder so that the
tax-qualified status of each 401(k) Plan shall be maintained at the time of
termination. Following the Closing Date, the Purchaser shall be responsible
for, and shall indemnify and hold harmless the Company, Company
Subsidiaries, the Shareholders and the fiduciaries of each 401(k) Plan from
and against liability, arising solely from any actions the Purchaser may
take with respect to the distribution of assets from each 401(k) Plan in
connection with such termination. This limited indemnification does not
extend to any representation or warranty made by the Company, any Company
Subsidiary or any Shareholder pursuant to any other provision of this
Agreement.
45
ARTICLE X
CLOSING CONDITIONS
------------------
10.1 Conditions to Each Party's Obligations to Effect the Transactions
Contemplated Hereby. The respective obligations of each party to effect the
transactions contemplated hereby shall be subject to the fulfillment on or
prior to the Closing Date of the following conditions:
(a) All material authorizations, consents, orders or approvals
of, or declarations or filings with, or expiration or termination of
waiting periods imposed by, any Federal, state, local or foreign Government
Entity necessary for the consummation of the Merger and the transactions
contemplated by the Agreement shall have been filed, occurred or been
obtained and shall be in effect at the Effective Time.
(b) No temporary restraining order, preliminary injunction or
permanent injunction or other order precluding, restraining, enjoining,
preventing or prohibiting the consummation of the Merger shall have been
issued by any Federal, state or foreign court or other Government Entity
and remain in effect.
(c) No Law shall have been enacted which prohibits the
consummation of the Merger or would make the consummation of the Merger
illegal.
(d) There shall not be pending any legal proceeding which (i)
would reasonably be expected to challenge, restrain or prohibit
consummation of the transactions contemplated by this Agreement or (ii)
affects the right of the Purchaser, the Company or any Company Subsidiary
to own or operate the assets or the business of the Company and the Company
Subsidiaries in a manner which would reasonably be expected to have a
Material Adverse Effect.
10.2 Conditions to the Obligations of the Company to Effect the
Transactions Contemplated Hereby. The obligations of the Company to effect
the transactions contemplated hereby shall be further subject to the
fulfillment at or prior to the Closing Date of the following conditions,
any of which may be waived by the Company:
(a) The representations and warranties of the Purchaser and
Merger Sub in this Agreement shall be true and correct on and as of May 3,
1999 and/or the date of this Agreement, as applicable, and on and as of the
Closing as though such representations and warranties were made on and as
of such time (except for such representations
46
and warranties that are made specifically as of the date hereof or as of
another date (other than May 3, 1999), which shall be true and correct as
of such date).
(b) The Purchaser and Merger Sub shall have performed and
complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by
either of them as of the Closing.
(c) The Company shall have received from the Purchaser an
officer's certificate certifying to the fulfillment of the conditions
specified in Section 10.2(a) and 10.2(b).
(d) The amendments to leases, substantially in the form attached
hereto as Annex A, shall have been executed and delivered by the Purchaser
-------
and shall be in full force and effect.
10.3 Conditions to the Obligations of the Purchaser and Merger Sub to
Effect the Transactions Contemplated Hereby. The obligations of the
Purchaser and Merger Sub to effect the transactions contemplated hereby
shall be further subject to the fulfillment at or prior to the Closing Date
of the following conditions, any of which may be waived by the Purchaser:
(a) The representations and warranties of the Company and
Shareholders in this Agreement shall be true and correct on and as of May
3, 1999 and/or the date of this Agreement, as applicable, and on and as of
the Closing as though such representations and warranties were made on and
as of such time (except for such representations and warranties that are
made specifically as of the date hereof or as of another date (other than
May 3, 1999), which shall be true and correct as of such date).
(b) The Company and Shareholders shall have performed and
complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by
any of them as of the Closing.
(c) From May 3, 1999 through the Effective Time, there shall not
have occurred any event, circumstance or condition which had or would
reasonably be expected to have a Material Adverse Effect (other than
events, circumstances or conditions which affect the economy in general,
the automobile retailing business in general or arise out of or relate to
the transactions contemplated by this Agreement).
47
(d) The Purchaser shall have received from the Company an
officer's certificate certifying to the fulfillment of the conditions
specified in Sections 10.3(a) and 10.3(b), insofar as they relate to the
Company, and Section 10.3(c).
(e) The Purchaser shall have received from the Shareholders a
certificate, executed by each Shareholder, certifying to the fulfillment of
the conditions specified in Sections 10.3(a) and 10.3(b), insofar as they
relate to the Shareholders.
(f) The Purchaser shall have received opinions of counsel to the
Company, substantially to the effect set forth in Annex B attached hereto.
-------
(g) All material permits, authorizations, consents, and
approvals required for the Company and the Shareholders to perform their
respective obligations under, and consummate the transactions contemplated
by, this Agreement shall have been obtained, except for (i) those permits,
authorizations, consents and approvals the absence of which would not have
a Material Adverse Effect and (ii) manufacturer or third-party consents for
the indirect transfer of control of Franciscan Motors to the Purchaser as a
result of the Merger.
48
ARTICLE XI
TERMINATION AND ABANDONMENT
---------------------------
11.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time:
(a) by written consent duly authorized by the board of directors
of each of the Company, the Purchaser, Merger Sub and executed by each of
the Company, the Purchaser, Merger Sub and the Shareholders;
(b) by the Company or the Shareholders, on one hand, or the
Purchaser or Merger Sub, on the other hand, if the Merger shall not have
been consummated on or prior to August 31, 1999; provided, however, that
the right to terminate this Agreement under this Section 11.1(b) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Merger to be consummated on or prior to such date;
(c) by the Company or the Shareholders, on the one hand, or the
Purchaser or Merger Sub, on the other hand, if a court of competent
jurisdiction or other Government Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and non-appealable;
(d) by the Company or the Shareholders, if (i) there has been a
material breach by the Purchaser or Merger Sub of any representation,
warranty or covenant contained in this Agreement or (ii) an event has
occurred which would cause a failure of the conditions set forth in Section
10.2(a) and such breach or condition (A) cannot be cured or (b) has not
been cured within thirty days after the giving of written notice thereof to
the Purchaser; or
(e) by the Purchaser or Merger Sub, if (i) there has been a
material breach by the Company or the Shareholders of any representation,
warranty or covenant contained in this Agreement or (ii) an event has
occurred which would cause a failure of the conditions set forth in Section
10.3(a) and such breach or condition (A) cannot be cured or (B) has not
been cured within thirty days after the giving written notice thereof to
the Company.
49
11.2 Procedure and Effect of Termination. In the event of termination
of this Agreement as provided in Section 11.1, written notice thereof shall
promptly be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
become null and void and there shall be no liability or obligation on the
part of the Purchaser and Merger Sub, the Shareholders, the Company, or
their respective officers, directors, trustees or employees, except for (a)
fraud or for willful material breach of this Agreement which serves as the
basis for such termination of this Agreement and (b) the provisions of
Sections 3.1, 11.2 and 13.1 and the Confidentiality Agreement which shall
survive such termination.
50
ARTICLE XII
INDEMNITY
---------
12.1 Survival. Except for the representations and warranties in
Section 4.3 which shall survive the Closing indefinitely and the
representations and warranties in Section 4.12 which shall survive the
Closing until termination of the applicable statue of limitations, all of
the representations and warranties of the Company and the Shareholders
shall survive the Closing and continue in full force and effect for a
period of one year after consummation of the Merger. All of the
representations and warranties of the Purchaser and Merger Sub shall
survive the Closing and continue in full force and effect for a period of
one year after consummation of the Merger.
12.2 Indemnity by the Shareholders. (a) The Shareholders hereby agree
to, jointly and severally, indemnify and hold harmless the Purchaser and
the Company against and with respect to any and all Losses (after Taxes and
net of any insurance proceeds or payments from responsible parties)
sustained or incurred by the Purchaser, the Company or the Company
Subsidiaries relating to, resulting from, arising out of or otherwise by
virtue of:
(i) any breach of any representation or warranty made by
the Shareholders or the Company contained in this Agreement, the Disclosure
Schedule; any other certificate or document required to be delivered by the
Company pursuant to this Agreement;
(ii) any non-fulfillment of any covenant or agreement made
by the Shareholders or the Company contained in this Agreement;
(iii) the litigation described in Schedule 12.2(a) of the
Disclosure Schedule; and
(iv) the conduct of business by or disposition of
Franciscan Motors' Cadillac dealership.
(b) (i) The Shareholders shall not be liable to the Purchaser
for amounts payable under Section 12.2(a) until the total of all Losses
exceeds $500,000 and then only for Losses in excess of $500,000; provided,
that Losses relating to, resulting from, arising out of or otherwise by
virtue of the litigation and claims described in Schedule 12.2(a) of
Disclosure Schedule shall not be subject to such $500,000 basket.
51
(ii) In no event shall the Shareholders be liable to the
Purchaser and the Company for an amount greater than the Consideration.
(iii) The Shareholders shall not be required to make any
payment with respect to indemnifiable Losses under this Section 12.2 if
such payment is in an amount less than $25,000; provided that such
limitation shall not apply to (A) the first $25,000 of indemnifiable Losses
under this Section 12.2 or (B) Losses relating to, resulting from, arising
out of or otherwise by virtue of the litigation and claims described in
Schedule 12.2(a) of the Disclosure Schedule.
(iv) Losses subject to indemnification for a matter that
was also the subject of an adjustment made pursuant to Section 3.3 shall be
reduced by the amount of the corresponding reduction in Consideration.
(c) The indemnification provisions contained in this Section 12.2
are the sole post-Closing remedy of the Purchaser and the Surviving
Corporation for any claims relating to this Agreement and the transactions
contemplated hereby.
(d) The Shareholders waive any right to contribution from the
Company with respect to Losses indemnifiable under this Section 12.2.
12.3 Indemnity by the Purchaser. (a) The Purchaser hereby agrees to
indemnify and hold harmless the Shareholders against and with respect to
any and all Losses (after Taxes and net of any insurance proceeds or
payments from responsible parties) sustained or incurred by any of the
Shareholders relating to, resulting from, arising out of or otherwise by
virtue of:
(i) any breach of any representation or warranty of the
Purchaser or Merger Sub contained in this Agreement, the Disclosure
Schedule or any other certificate or document required to be delivered by
the Purchaser or Merger Sub pursuant to this Agreement;
(ii) any non-fulfillment of any covenant or agreement made
by the Purchaser or Merger Sub contained in this Agreement;
(iii) any operations, actions or omissions of the Purchaser,
the Surviving Corporation or any Company Subsidiary after the Effective
Time; and
52
(iv) any amounts which become payable as a portion of the
Consideration after the Effective Time.
(b) (i) The Purchaser shall not be liable for amounts payable
under Section 12.3(a), until the total of all Losses exceeds $500,000 and
then only for Losses in excess of $500,000; provided, that such limitation
shall not apply to any Losses indemnifiable pursuant to Section
12.3(a)(iv).
(ii) In no event shall the Purchaser be liable to the
Shareholders for an amount greater than the Consideration.
(iii) The Purchaser shall not be required to make any
payment with respect to indemnifiable Losses under this Section 12.3 if
such payment is in an amount less than $25,000; provided that such
limitation shall not apply to the first $25,000 of indemnifiable Losses
under this Section 12.3.
(c) The indemnification provisions in this Section 12.3 are the
sole post-Closing remedy of the Shareholders for any claims related to this
Agreement and the transactions contemplated hereby.
(d) The Purchaser, Merger Sub, the Company Subsidiaries and the
Surviving Corporation waive any right to indemnification or contribution
from the directors and officers of the Company or the Company Subsidiaries
with respect to actions or omissions prior to the Effective Time; provided,
that nothing in this Section 12.3(d) shall be deemed a waiver of any rights
to indemnification under Section 12.2.
12.4 Shareholders' Representative. (a) Each of the Shareholders hereby
appoints Xxxxxx X. Xxxxx, its agent and attorney-in-fact, as the
Shareholders' Representative for and on behalf of the Shareholders, to give
and receive notices and communications, to object to the calculation of the
Consideration, to agree to, negotiate, enter into settlements and
compromises of and comply with orders of courts with respect to claims for
indemnification pursuant to this Article XII, and to take all other actions
that are either (i) necessary or appropriate in the judgment of the
Shareholders' Representative for the accomplishment of the foregoing or
(ii) specifically mandated by the terms of this Agreement. Such agency may
be changed or terminated by the Shareholders from time to time upon not
less than thirty days prior written notice to the Purchaser. No bond shall
be required of the Shareholders' Representative, and the Shareholders'
Representative shall not receive compensation for his services. Notices
53
or communications to or from the Shareholders' Representative shall
constitute notice to or from the Shareholders.
(b) A decision, act, consent or instruction of the Shareholders'
Representative, including but not limited to an amendment, extension or
waiver of this Agreement pursuant to Sections 13.2 and 13.3 hereof, shall
constitute a decision of the Shareholders and shall be final, binding and
conclusive upon the Shareholders, and the Purchaser may rely upon any such
decision, act, consent or instruction of the Shareholders' Representative
as being the decision, act, consent or instruction of the Shareholders. The
Purchaser is hereby relieved from any liability to any person for any acts
done by it in accordance with such decision, act, consent or instruction of
the Shareholders' Representative.
12.5 Third Party Claims. (a) In order for an Indemnified Party to be
entitled to any indemnification provided for under this Agreement in
respect of, arising out of or involving a Third Party Claim, such
Indemnified Party shall notify the Indemnifying Party in writing of the
Third Party Claim, and deliver to the Indemnifying Party copies of all
notices and documents accompanying or constituting the Third Party Claim,
within ten Business Days after obtaining notice thereof; provided, however,
that failure to give such notification shall not affect the right to
indemnification provided hereunder, except and to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure. Thereafter, the Indemnified Party shall deliver to the
Indemnifying Party, within five Business Days after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the Third Party
Claim; provided, however, that failure to deliver such copies shall not
affect the right to indemnification provided hereunder except and to the
extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure.
(b) The Indemnifying Party will be entitled to participate in
the defense thereof and, if it so chooses, to assume the defense of any
Third Party Claim with counsel selected by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party. Should the Indemnifying
Party so elect to assume the defense of a Third Party Claim, which election
must be made within ten Business Days after the Indemnifying Party receives
notice of the Third Party Claim from the Indemnified Party, the
Indemnifying Party will not be liable to the Indemnified Party for legal
expenses incurred by the Indemnified Party in connection with the defense
thereof unless such expenses are incurred at the request of the
Indemnifying Party. If the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right, but not the
54
obligation, to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party shall control such
defense. If the Indemnifying Party has not assumed the defense of a Third
Party Claim or if the Indemnifying Party shall have been advised by its
counsel that the joint defense of the Indemnifying Party and the
Indemnified Party is prohibited by applicable rules of professional
conduct, the Indemnifying Party shall thereafter be liable for the
reasonable fees and expenses of counsel employed by the Indemnified Party.
If the Indemnifying Party chooses to defend or prosecute any Third Party
Claim, the Indemnified Party shall cooperate in the defense or prosecution
thereof with reimbursement by the Indemnifying Party of the out-of-pocket
expenses of the Indemnified Party incurred in connection therewith. Such
cooperation shall include the retention and (upon the Indemnifying Party's
request) the provision to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any materials provided hereunder. Whether or
not the Indemnifying Party shall have assumed the defense of a Third Party
Claim, the Indemnified Party shall not admit any liability with respect to,
or settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent, which consent shall not be
unreasonably withheld or delayed.
55
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
13.1 Expenses. Except as otherwise provided in this Agreement, each
party to this Agreement shall bear its respective expenses incurred in
connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated thereby, including all fees and
expenses of agents, representations, counsel and accountants. The Purchaser
shall pay one-half and the Shareholders shall pay one-half of the HSR Act
filing fee. The Purchaser shall pay all fees and out-of-pocket, expenses
reasonably incurred by the Company and the Company Subsidiaries in
connection with the Purchaser's filings under the securities Law,
including, but not limited to, the preparation of financial statements and
accountants comfort letters. The Company shall use its commercially
reasonable efforts, in cooperation with the Purchaser, to secure the
preparation of such financial statements and comfort letters in an
expeditious and cost effective manner.
13.2 Amendment and Modification. Subject to applicable Law, the
Agreement may be amended, modified and supplemented in any and all
respects, by written agreement of the parties hereto at any time prior to
the Effective Time with respect to any of the terms contained herein.
13.3 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the
party or parties entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 13.3.
13.4 Investigations. The respective representations and warranties of
the Company, the Shareholders, the Purchaser and Merger Sub contained
herein or in any certificates, schedules or other documents delivered prior
to or at the Closing shall not be deemed waived or otherwise affected by
any investigation made by any party hereto.
56
13.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, by nationally
recognized courier service or by facsimile transmission to the parties to
the following addresses (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address
shall be effective only upon receipt thereof):
(a) if to any of the Shareholders, the Shareholders'
Representative or the Company, to:
c/o Xxxxxx X. Xxxxx
00000 Xxxxxxx Xxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
and to:
Olimpia, Xxxxxx & Lively
0000 Xxxxxxx Xxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx
Fax No.: (000) 000-0000
(b) if to the Purchaser or Merger Sub, to:
FirstAmerica Automotive, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Fax No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
57
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxx X. Xxxxx
Fax No.: (000) 000-0000
13.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other parties.
13.7 Third Party Beneficiaries. Except as provided in Section 8.1,
nothing expressed or referred to in this Agreement will be construed to
give any person other than the parties to this agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement
or any provision of this Agreement.
13.8 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the federal or state courts sitting
in the State of California, The City of San Francisco, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection
to venue laid therein.
13.9 Governing Law. EXCEPT FOR THE MANDATORY PROVISIONS OF THE TBCA,
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW.
13.10 Severability. If any term or provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction or any
other authority, the other provisions of this Agreement will remain in full
force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect
to the extent not held invalid or unenforceable.
13.11 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
58
13.12 Entire Agreement. The Confidentiality Agreement and this
Agreement, including the annexes hereto and the Disclosure Schedules,
constitute the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement and supercede
all (both written and oral) agreements, including, but not limited to, the
Original Agreement, understandings, restrictions, promises,
representations, warranties, covenants or undertakings, of the parties with
respect to the subject matter of this Agreement.
13.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
59
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be signed as of the date first above written.
XXXXX DEALERSHIP GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
___________________________________
Xxxxxx X. Xxxxx
Chief Executive Officer
XXXXX BUSINESS CONTINUATION TRUST
By: /s/ Xxxxxx X. Xxxxx
___________________________________
Xxxxxx X. Xxxxx
Co-Trustee
By: /s/ Xxxxx X. Xxxxx
___________________________________
Xxxxx X. Xxxxx
Co-Trustee
/s/ Xxxxx X. Xxxxx
______________________________________
XXXXX X. XXXXX
/s/ Xxxxxxxx X. Xxxxx
______________________________________
XXXXXXXX X. XXXXX
SHAREHOLDERS' REPRESENTATIVE
/s/ Xxxxxx X. Xxxxx
______________________________________
XXXXXX X. XXXXX
FIRSTAMERICA AUTOMOTIVE, INC.
By: /s/ Xxxxxx X. Price
___________________________________
Name: Xxxxxx X. Price
Title: President
XXXXX ACQUISITION CORP.
By: /s/ Xxxxxx X. Price
___________________________________
Name: Xxxxxx X. Price
Title: President
