EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 23rd day of January, 1997, by and between CROSS-CONTINENT AUTO
RETAILERS, INC., a Delaware corporation ("Purchaser"), and R. XXXXXXX XXXXXXXX
("Seller").
RECITALS
A. The Seller is or will be the owner of all of the issued and
outstanding shares of capital stock of (1) Toyota West Sales and Service, Inc.,
a Nevada corporation, and (2) Xxxxxxx Toyota, Inc., a Colorado corporation.
B. Toyota West Sales and Service, Inc. and Xxxxxxx Toyota, Inc. shall
hereinafter be referred to individually as a "Corporation" and collectively as
the "Corporations."
C. Purchaser desires to purchase all of the issued and outstanding
capital stock of each Corporation, and Seller desires to sell such stock to
Purchaser, for the consideration and upon the terms and conditions set forth in
this Agreement.
AGREEMENT
For and in consideration of the premises and the mutual covenants
contained herein, Purchaser and Seller agree as follows:
1. TRANSFER OF SHARES. Subject to the terms and conditions set forth in
this Agreement, on the Closing Date (hereinafter defined) Seller shall sell,
transfer, convey, assign, and deliver (a) 49,000 shares of common stock of
Toyota West Sales and Service, Inc. (the "Toyota West Shares"), and (b) 2,800
shares of common stock of Xxxxxxx Toyota, Inc. (the "Xxxxxxx Toyota Shares"), to
Purchaser by endorsing and delivering stock certificates representing the Shares
(hereinafter defined) in duly transferable form, and by executing and delivering
such other documents and instruments and taking such other actions as Purchaser
may reasonably request in order to vest in Purchaser good, absolute, and
marketable title to the Shares and to any and all other right, title, interest,
claim, or demand of any kind that Seller may have in the properties, assets, or
business of each Corporation. As used in this Agreement, "Shares" shall mean
the Toyota West Shares and the Xxxxxxx Toyota Shares.
2. PURCHASE PRICE. The total price to be paid by Purchaser to Seller
for the Shares shall be $40,000,000 (the "Purchase Price"), subject to the
adjustments set forth in Paragraph 3 of this Agreement. The Purchase Price
shall be allocated between the Toyota West Shares and the Xxxxxxx Toyota Shares
as follows:
(a) Toyota West Shares $28,000,000
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(b) Xxxxxxx Toyota Shares $12,000,000
3. ADJUSTMENTS TO THE PURCHASE PRICE. The Purchase Price shall be
adjusted as follows:
(a) In the event the Aggregate Adjusted Net Worth (hereinafter defined) is
less than $6,000,000, the Purchase Price shall be reduced by an amount
equal to the difference between $6,000,000 and the Aggregate Adjusted
Net Worth. As used in this Agreement, the term "Aggregate Adjusted
Net Worth" shall mean the aggregate net worth of the Corporations as
shown as total shareholder's equity on the consolidated balance sheet
of the Corporations in the Audited Financial Statements (hereinafter
defined), as (i) adjusted by the inventory adjustments set forth in
subparagraph 15(i), (ii) adjusted by the Post 1996 Adjustments
(hereinafter defined), and (iii) reduced by the net book value of any
intangible assets.
(b) In the event the Aggregate 1996 Earnings (hereinafter defined) are
less than $10,000,000, Purchaser and Seller shall mutually agree on
what adjustments, if any, shall be made to the Purchase Price. As
used in this Agreement, the term "Aggregate 1996 Earnings" shall mean
the aggregate amount of the Corporations' 1996 net profit before
income taxes as shown on the Corporations' consolidated income
statement for 1996 in the Audited Financial Statements.
4. PAYMENT OF PURCHASE PRICE. At Closing (hereinafter defined)
Purchaser shall pay the Purchase Price, as adjusted, as follows:
(a) $27,000,000, less the adjustments set forth in Paragraph 3 of this
Agreement, to Seller in immediately available funds.
(b) Purchaser shall issue to Seller the number of shares of restricted
common stock of Purchaser that, when multiplied by the closing price
for the stock of Purchaser quoted in the Wall Street Journal for the
first business day prior to the date that the transactions
contemplated by this Agreement are announced to the public by
Purchaser (the "Pricing Date"), will equal $12,000,000; provided,
however, that if the closing price for the stock of Purchaser quoted
in the Wall Street Journal for the Pricing Date is (i) less than
$18.00 per share, the price to be used in making the calculation shall
be $18.00, and (ii) greater than $24.00 per share, the price to be
used in making the calculation shall be $24.00. Purchaser shall not
issue any fractional shares and shall pay Seller cash in lieu of any
fractional shares based on the closing price for the stock of
Purchaser quoted in the Wall Street Journal for the Pricing Date.
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(c) $1,000,000 shall be paid into a joint interest-bearing account for
twelve (12) months under an escrow agreement (the "Escrow Agreement")
between Seller and Purchaser.
5. INDEPENDENT CONSIDERATION. Contemporaneously with the execution of
this Agreement, Purchaser shall pay Seller $50,000, (a) as independent
consideration for the execution of this Agreement by Seller, but shall be
applied as part of, and not in addition to, the Purchase Price for the Shares,
and (b) for Seller's standstill agreement set forth in subparagraph 9(f). Any
other provision of this Agreement to the contrary notwithstanding, in the event
of the termination of this Agreement prior to Closing for any reason other than
the default of Seller, such independent consideration shall be paid to, and
shall be retained by, Seller. Absent a default hereunder by Seller, such
independent consideration is deemed earned by Seller as of the date of this
Agreement and is non-refundable. In the event of the termination of this
Agreement prior to Closing as a result of a default by Seller, Seller shall
return such independent consideration to Purchaser.
6. CLOSING. Subject to the terms and conditions set forth in this
Agreement, the closing ("Closing") of the purchase and sale of the Shares shall
take place at the offices of Burg & Xxxxxxxx, P.C., or at such other place as
may be mutually agreed upon by Purchaser and Seller, as soon as practicable
following the date on which all conditions to the obligations of the parties
hereunder (other than those requiring the taking of action at the Closing) have
been satisfied or waived but no later than March 1, 1997. The date on which the
Closing is to occur is hereinafter referred to as the "Closing Date." Any other
provision of this Agreement to the contrary notwithstanding, if Seller and
Purchaser have not obtained the consents required by this Agreement, prior to
March 1, 1997, either Seller or Purchaser shall have the right to extend the
Closing Date 60 days by giving written notice to the other party.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller represents and
warrants to Purchaser as follows:
(A) AUTHORIZATION. Seller has the authority to execute and deliver this
Agreement and to perform Seller's obligations hereunder. This
Agreement is a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Xxxxxxx X. Xxxxxxxx owns 280
shares of Xxxxxxx Toyota, Inc. The shares of Xxxxxxx Toyota, Inc.
owned by Xxxxxxx X. Xxxxxxxx are subject to that certain Stock
Purchase and Re-Purchase Agreement (the "Buy-Sell Agreement") dated
December 31, 1992, by and between Seller and Xxxxxxx X. Xxxxxxxx, a
copy of which is attached hereto as Exhibit "A." Prior to Closing the
Seller will purchase the shares of Xxxxxxx Toyota, Inc.
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owned by Xxxxxxx X. Xxxxxxxx. The Seller will have at Closing (i)
good, absolute, and marketable title to the Shares, free and clear of
any liens, claims, encumbrances, or restrictions of any kind, and (ii)
the complete and unrestricted right, power, and authority to sell,
transfer, and assign the Shares in accordance with this Agreement.
(B) INCORPORATION AND GOOD STANDING. Each Corporation is duly organized,
validly existing and in good standing under the applicable laws of the
state of its incorporation and has all necessary power and authority
to own, lease, and operate its properties and assets and to conduct
its business as its business is now being conducted. Seller has
delivered to Purchaser complete and accurate copies of each
Corporation's articles of incorporation and bylaws, including all
amendments thereto. Each Corporation is qualified to do business and
is in good standing in each state in which it transacts business.
Neither Corporation has any subsidiaries nor any direct or indirect
equity interest in any corporation, partnership, or other entity.
Each Corporation has elected to be taxed as an "S" corporation under
Section 1362 of the Internal Revenue Code of 1986, as amended, and
Seller agrees to cause each Corporation to maintain it's "S"
corporation status.
(C) CAPITALIZATION. (i) Toyota West Sales and Service, Inc.. The
authorized capital stock of Toyota West Sales and Service, Inc.
consists of 49,000 shares of common stock, par value $0.01 per share.
The Toyota West Shares constitute all of the issued and outstanding
shares of capital stock of Toyota West Sales and Service, Inc., have
been validly authorized and issued, are fully paid and nonassessable,
have not been issued in violation of any preemptive rights or of any
federal or state securities law. On the date hereof, the Toyota West
Shares are owned beneficially and of record by the Seller. There are
and will be on the Closing Date no outstanding subscriptions, options,
rights, warrants, convertible securities, or other agreements or
commitments obligating Toyota West Sales and Service, Inc. to issue
any additional shares of its capital stock of any class or any other
securities of any kind. There are no agreements that relate to the
voting or control of the Toyota West Shares.
(ii) Xxxxxxx Toyota, Inc.. The authorized capital stock of Xxxxxxx
Toyota, Inc. consists of 49,000 shares of common stock, having no par
value. The Xxxxxxx Toyota Shares constitute all of the issued and
outstanding shares of capital stock of Xxxxxxx Toyota, Inc., have been
validly authorized and issued, are fully paid and nonassessable, have
not been issued in violation of any preemptive rights or of any
federal or state securities law. On the date hereof, Seller owns
2,520 shares of Xxxxxxx Toyota, Inc. and Xxxxxxx X. Xxxxxxxx owns 280
shares of Xxxxxxx Toyota, Inc. The shares of Xxxxxxx Toyota, Inc.
owned by Xxxxxxx X. Xxxxxxxx are subject to the Buy-Sell Agreement.
All of the Xxxxxxx Toyota Shares are fully paid and non-assessable.
There are and will be on the Closing Date no outstanding
subscriptions, options, rights,
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warrants, convertible securities, or other agreements or commitments
obligating Xxxxxxx Toyota, Inc. to issue any additional shares of its
capital stock of any class or any other securities of any kind. Except
for the Buy-Sell Agreement, there are no agreements that relate to the
voting or control of the Xxxxxxx Toyota Shares.
(D) NO CONFLICTS. To the best of Seller's knowledge, neither the
execution and delivery of this Agreement nor the fulfillment of or
compliance with the terms and provisions hereof will violate, conflict
with, or result in a breach of the terms, conditions or provisions of,
or constitute a default or an event which, with notice or lapse of
time or both, would constitute a default under, the articles of
incorporation or bylaws of either of the Corporations, any contract,
agreement, mortgage, deed of trust, or other instrument or obligation
to which either of the Corporations or the Seller are parties or by
which any of them is bound, or violate any provision of any applicable
law or regulation or of any order, decree, writ or injunction of any
court or governmental body, or result in the creation or imposition of
any lien, charge, restriction, security interest or encumbrance of any
nature whatsoever on any property or asset of either of the
Corporations or on the Shares.
(E) CONSENTS. No consent from, or other approval of, any governmental
entity or agency or any other person or entity is necessary in
connection with the execution, delivery or performance of this
Agreement by Seller, other than consent from (i) the Colorado
Department of Transportation, (ii) Toyota Motor Corporation of
America, and (iii) the Department of Motor Vehicles of the State of
Nevada.
(F) REAL PROPERTY. Exhibit "B" will set forth a complete and accurate
(i) legal description of all real property owned by each Corporation,
(ii) legal description of all real property in which each Corporation
has a leasehold interest, (iii) description of each lease under which
each Corporation holds such leasehold interests, and (iv) legal
description of the real property owned by Seller that will be covered
by the Purchase Agreements (hereinafter defined). Each of the leases
is in full force and effect and constitutes a legal, valid and binding
obligation of the parties thereto. Each Corporation has performed the
covenants required to be performed by it under each of the leases to
which it is a party and is not in default under any of the leases to
which it is a party. To the best of Seller's knowledge, the zoning of
each tract of real property which will be described in Exhibit "B"
permits the presently existing improvements and the continuation of
the business presently being conducted on such real property. To the
best of Seller's knowledge, Seller is not aware of any pending or
proposed changes to such zoning. Exhibit "B" will also set forth (i)
a complete and accurate description of the real property to which each
Corporation intends to relocate its dealership, and (ii) the owner of
such real property.
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(G) TANGIBLE PERSONAL PROPERTY. Exhibit "C" will set forth a complete
and accurate description of all equipment, furniture, fixtures, and
other tangible personal property owned by, in possession of, or used
by each Corporation in connection with its business and a complete and
accurate description of all tangible personal property in which each
Corporation has a leasehold interest, together with a complete and
accurate description of each lease under which each Corporation holds
such leasehold interests. Each of the leases is in full force and
effect and constitutes a legal, valid, and binding obligation of the
parties thereto. Each Corporation has performed the covenants
required to be performed by it under each of the leases to which it is
a party and is not in default under any of the leases to which it is a
party.
(H) INVENTORIES. Exhibit "D" will set forth a complete and accurate
description of the inventory (new vehicles, used vehicles, and parts
and accessories) of each Corporation. To the best of Seller's
knowledge, the inventory of each Corporation consists of goods of a
quality and in quantities that are saleable in the ordinary course of
its business with normal xxxx-up at prevailing market prices. To the
best of Seller's knowledge, all parts and accessories in the inventory
of each Corporation are returnable and undamaged parts and accessories
that (i) are still in the original, resaleable merchandising package,
and in unbroken lots, (ii) were listed for sale in the then-current
dealer parts and accessories price schedule for the represented
manufacturers, (iii) were purchased directly from the represented
manufacturers, and (iv) are returnable under the terms of the
represented manufacturers' sales and service agreement for credit to
the account of the Corporation.
(I) LICENSES AND PERMITS. Exhibit "E" will set forth a complete and
accurate description of all permits, licenses, franchises,
certificates, and similar items and rights, owned or held by each
Corporation (hereinafter collectively referred to as the "Licenses and
Permits"). The Licenses and Permits are adequate for the operation of
each Corporation's business; are valid and in full force and effect,
except as set forth on Exhibit "E;" and will be transferred to the
Purchaser at the Closing, unless such transfer is prohibited by law or
by the terms of the item or right to be transferred. No additional
permit, license, franchise, certificate, or similar item or right is
required by either of the Corporations for the operation of its
business.
(J) INTELLECTUAL PROPERTY. Exhibit "F" will set forth a complete and
accurate description of all intellectual property presently in use by
each Corporation, which intellectual property includes (without
limitation) patents, trademarks, tradenames, service marks,
copyrights, trade secrets, customer lists, inventions, formulas,
methods, processes, advertising materials, Internet sites, and any
other proprietary information or property. There are no outstanding
licenses or consents to third parties granting the right to use any
intellectual property owned by either of the Corporations. To the
best
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of Seller's knowledge, each Corporation owns and has the exclusive
right to use its intellectual property free and clear of any claims
and without any conflict with the rights of others. No royalties or
fees are payable by either of the Corporations to any third party by
reason of the use of any intellectual property by the Corporation. No
additional intellectual property is required by either of the
Corporations for the operation of its business.
(K) TITLE TO PROPERTIES; ENCUMBRANCES. To the best of Seller's
knowledge, each Corporation has good, absolute, and marketable title
to (or, in the case of leased property, valid and subsisting leasehold
interests in) all of its properties and assets, including (without
limitation) the properties and assets that will be listed on Exhibits
"B", "C", "D", "E" and "F," except for properties and assets sold,
consumed, or otherwise disposed of by the Corporation in the ordinary
course of its business. To the best of Seller's knowledge, the
properties and assets of each Corporation are subject to no liens,
mortgages, encumbrances, conditional sales agreements, security
interests, claims, or restrictions of any kind or character, except
for (i) the encumbrances that will be listed on Exhibit "G," and (ii)
liens for current taxes not yet due and payable.
(L) FINANCIAL STATEMENTS. The Seller has delivered to the Purchaser
copies of a balance sheet for each Corporation dated December 31, 1996
(the "Balance Sheet Date"), and the related statement of income and
retained earnings for the period ending December 31, 1996
(hereinafter collectively referred to as the "Financial Statements").
The Financial Statements were prepared by Xxxx Xxxxx, CPA and are
unaudited. The Financial Statements fairly present the financial
condition of each Corporation at the dates mentioned and the results
of its operations for the periods specified, were prepared in
accordance with generally accepted accounting principles, and reflect
adequate reserves for all reasonably anticipated losses, claims, and
costs. Each balance sheet in the Financial Statements discloses all
of the debts, liabilities, and obligations of any nature (whether
absolute, accrued, contingent, or otherwise, and whether due or to
become due) of the Corporation as of the Balance Sheet Date and
includes appropriate reserves for all taxes and other liabilities
accrued or due at such dates but not yet paid.
(M) INDEBTEDNESS FOR BORROWED MONEY; GUARANTIES. Seller has delivered to
the Purchaser complete and accurate copies of all instruments
evidencing or relating to each Corporation's indebtedness for borrowed
money. To the best of Seller's knowledge, neither of the Corporations
is in default or violation of any provision of any agreement
evidencing or relating to its indebtedness for borrowed money.
Exhibit "H" will set forth a complete and accurate description of all
guaranties by each Corporation of any obligation or liability of any
person or entity, including (without limitation) any guaranties of
installment sales contracts or leases.
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(N) TAX MATTERS. To the best of Seller's knowledge, each Corporation has
duly filed all federal, state, and local tax returns required to be
filed by it. All federal, state, local, and foreign income, ad
valorem, excise, sales, use, payroll, unemployment, and other taxes
and assessments that are due and payable by Seller, each Corporation,
or by Seller on behalf of either of the Corporations have been
properly computed, duly reported, fully paid, and discharged to the
best of Seller's knowledge. Seller is not aware of any unpaid taxes
that require payment by either of the Corporations, except for current
taxes not yet due and payable. To the best of Seller's knowledge, all
current taxes not yet due and payable by each Corporation have been
properly accrued and are accurately reflected in the Corporation's
balance sheet in the Financial Statements. To the best of Seller's
knowledge, neither of the Corporations has been delinquent in the
payment of any tax, assessment, or governmental charge. To the best
of Seller's knowledge, neither of the Corporations has had any tax
deficiencies proposed or assessed against it nor has executed any
waiver of the statute of limitations on the assessment or collection
of any tax. The Seller agrees to indemnify and hold harmless the
Purchaser with respect to any income or other tax liabilities,
penalties and interest which arise from the operation of either of the
Corporations prior to Closing or arise as a result of the transactions
contemplated by this Agreement.
(O) TRANSACTIONS SINCE BALANCE SHEET DATE. Since the Balance Sheet Date,
(i) neither of the Corporations has incurred any debts, liabilities,
or obligations except current liabilities in the ordinary course of
business; discharged or satisfied any liens or encumbrances, or paid
any debts, liabilities, or obligations, except in the ordinary course
of business; mortgaged, pledged, or otherwise subjected to any lien
or other encumbrance any of its properties or assets; canceled any
debt or claim; sold or transferred any properties or assets except
sales from inventory in the ordinary course of business; nor entered
into any transaction other than in the ordinary course of business;
(ii) there has not been any change in the financial condition, net
income, assets, liabilities, operations, or business of either of the
Corporations other than changes in the ordinary course of business,
none of which, individually or in the aggregate, has been material;
(iii) there has not been any declaration, setting aside or payment of
any dividend or other distribution in respect of, or any repurchase or
acquisition of, the capital stock of either of the Corporations; (iv)
none of the Corporations has issued any securities or options to
purchase any securities of any nature whatsoever; (v) neither of the
Corporations has increased the compensation, commissions, bonuses, or
other remuneration payable to any officer, director, employee, or to
any other person or entity, whether now or hereafter payable; (vi)
there has not been any damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting the assets,
properties or business of either of the Corporations; (vii) neither of
the Corporations has made any capital expenditure or commitment in
excess of $50,000.00 for additions to property, plant, or equipment;
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(viii) neither of the Corporations has made any loan or advance to any
person or entity; guaranteed any obligation or liability of any person
or entity, including (without limitation) any guaranties of any
installment sales contracts or leases, other than as will be set forth
on Exhibit "H;" or given any indemnification to any person or entity;
(ix) neither of the Corporations has made any sale, assignment or
transfer of, additions to or transactions involving any of its
tangible assets other than in the ordinary course of business; (x)
neither of the Corporations has made any change in its method of
accounting or accounting practices, including (without limitation) any
change in depreciation or amortization policies or rates; (xi) neither
of the Corporations has granted any waiver or release of any claim or
right, or canceled any debt or claim held by it; (xii) neither of the
Corporations has amended or terminated any material contract,
agreement, or license to which it is a party; or (xiii) neither of the
Corporations has agreed, in writing or otherwise, to do or permit any
of the foregoing.
(P) LITIGATION. Exhibit "I" will set forth a complete and accurate
description of all legal actions, suits, arbitrations, condemnation
actions, or other proceedings pending or threatened against either of
the Corporations, or any of their properties, assets, or business, and
all orders, decrees, writs or injunctions of any court or governmental
body applicable to Seller or to either of the Corporations. Neither
the Seller nor either of the Corporations is aware of any facts that
might result in any other action, suit, arbitration, or proceeding.
(Q) COMPLIANCE WITH LAWS. To the best of Seller's knowledge, there are
no existing violations of federal, state, or local laws, ordinances,
rules, codes, regulations, or orders by either of the Corporations
which might materially affect the properties, assets, or business of
the Corporation, except for the closure order issued by the State of
Colorado, which has been appealed to the Colorado Court of Appeals,
which is described on Exhibit "E." To the best of Seller's knowledge,
neither of the Corporations is subject to any restriction, judgment,
order, writ, injunction, decree, or award, which materially or
adversely affects or is likely to materially or adversely affect the
business, operations, properties, assets, or condition (financial or
otherwise) of the Corporation.
(R) CONTRACTS AND AGREEMENTS. Exhibit "J" will set forth a complete and
accurate description of all material contracts and agreements to which
each Corporation is a party or by which it or any of its property is
bound. All such contracts and agreements are in full force and effect
and are binding upon the parties thereto, and none of the parties
thereto is in breach of any of the provisions thereof. Except as set
forth on Exhibit "J," neither of the Corporations is a party to any
contract or agreement which materially or adversely affects or is
likely to materially or adversely affect the
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business, operations, properties, assets, or condition (financial or
otherwise) of the Corporation.
(S) EMPLOYEE BENEFIT PLANS. Exhibit "K" will set forth a complete and
accurate description of all pension, profit-sharing, bonus, deferred
compensation, percentage compensation, severance pay, retirement,
health, stock option, insurance and other employee benefit plans and
arrangements binding upon each Corporation. Each Corporation has
complied with the provisions of and has performed the obligations
required of it under such plans and arrangements, and neither of the
Corporations is in default under any provision thereof in any manner.
To the best of Seller's knowledge, there have been no material
defaults, breaches, or omissions by either of the Corporations or any
fiduciary under any of these plans or arrangements. Neither of the
Corporations has incurred any liability of any nature whatsoever under
any employee benefit plan or arrangement.
(T) INSURANCE. Exhibit "L" will set forth a complete and accurate
description of all insurance, including (without limitation) worker's
compensation, maintained by each Corporation and summarizes the
substantive terms of each of the insurance policies, including
(without limitation) whether the insurance policies are "claims made"
or "occurrence" policies. Each Corporation is carrying insurance that
is reasonable in light of the risks attendant to the business and
activities in which the Corporation is engaged. All of the insurance
is in full force and effect, and Seller will cause each Corporation to
keep such insurance in full force and effect until the Closing Date.
(U) PERSONNEL. Exhibit "M" will set forth a complete and accurate list
of all current employees of each Corporation and all independent
contractors regularly performing services on behalf of each
Corporation and their respective rates of compensation, including any
salary, bonus or other payment arrangement made with any of them.
Neither of the Corporations has any employment agreements or contracts
between the Corporation and any person or entity. Neither of the
Corporations is a party to or bound by any collective bargaining
agreement, nor has either of the Corporations experienced any strikes,
grievances, claims of unfair labor practices, or other collective
bargaining disputes. Neither of the Corporations has, to the Seller's
knowledge, committed any unfair labor practice. There are no unions
representing any employees of either of the Corporations. The Seller
has no knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of either of the Corporations. To the best of Seller's
knowledge, each Corporation has paid or has made provision for the
payment of all compensation due any person or entity and has complied
in all material respects with all applicable laws, rules, and
regulations relating to the employment of labor, including those
related to wages, hours, collective bargaining and the payment and
withholding
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of taxes, and has withheld and paid to the appropriate governmental
authority, or is holding for payment not yet due to such authority,
all amounts required by law or agreement to be withheld from the
compensation of its employees.
(V) ACCOUNTS RECEIVABLE. Exhibit "N" will set forth a complete and
accurate list of all accounts receivable and notes receivable of each
Corporation and an aging analysis of the accounts receivable. To the
best of Seller's knowledge, all receivables of each Corporation are
valid and enforceable claims, arose in the ordinary course of
business, require no further performance by the Corporation, and are
collectable without resort to litigation. To the best of Seller's
knowledge, no material objection, claim, or offset has been made
regarding the receivables. Except as will be set forth on Exhibit
"N," all of the receivables are current. There are and at Closing
there will be no intercompany payables or intercompany receivables due
or owing between (i) Seller and either of the Corporations, or (ii)
the Corporations.
(W) BROKERS AND FINDERS. The Seller has not employed, directly or
indirectly, any broker or finder, or incurred any liability for any
brokerage fees or commissions or finders' fees, and no broker or
finder has acted directly or indirectly for the Seller in connection
with this Agreement or the transactions contemplated by this
Agreement.
(X) DELIVERY OF DOCUMENTS. Complete and accurate copies of all written
instruments listed or described on the exhibits attached hereto have
been or will be furnished to Purchaser. Each Corporation will make
available to Purchaser, to the extent requested by Purchaser, all
books, records, and facilities of the Corporation.
(Y) POWERS OF ATTORNEY; AUTHORIZED SIGNATORIES. EACH CORPORATION HAS
provided to Purchaser (i) the names and addresses of all persons
holding a power of attorney on behalf of the Corporation, and (ii) the
account numbers and names of all banks or other financial institutions
in which the Corporation currently has an account, deposit, or safe
deposit box, with the names of all persons authorized to draw on the
accounts or deposits or to have access to the boxes.
(Z) FULL DISCLOSURE. No representation or warranty by Seller in this
Agreement or in any of the exhibits attached hereto, or other
statement in writing or certificate furnished or to be furnished to
Purchaser by or on behalf of Seller or either of the Corporations in
connection with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the
statements contained herein not misleading.
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(AA) ENVIRONMENTAL.
(i) To the best of Seller's knowledge, there are no past or present
events, conditions, circumstances, activities, practices, incidents,
plans or actions, based on or resulting from the conduct of the
business of either of the Corporations, including the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release, or
threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial toxic or hazardous material,
substance or waste, which will violate any laws currently in effect
relating to pollution or protection of the environment (the
"Environmental Laws") or any plan, order, decree, judgment,
injunction, notice or demand letter from a governmental entity
applicable to the Corporation, or which will give rise to any common
law or other legal liability, including, without limitation, liability
under the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA") or similar state or local laws in effect as
of the date hereof. To the best of Seller's knowledge, the real
property currently owned, leased or otherwise utilized by each
Corporation contains no spill, deposit, or discharge of any hazardous
substance (as that term is currently defined under CERCLA or any
applicable state law), as a result of which there would be a
materially adverse effect on the Corporation.
(ii) Exhibit "O" will set forth a complete and accurate description
of each underground storage tank of any kind or nature located on any
real property currently owned, leased or otherwise utilized by each
Corporation.
(iii) Each Corporation has delivered to Purchaser copies of all
existing environmental site audits on any real property currently
owned, leased, or otherwise utilized by the Corporation.
(BB) CONTINUATION OF BUSINESS. Seller knows of no reason why each
Corporation cannot continue its business in the same manner following
the execution of this Agreement and the Closing as it has been
operated prior thereto, except to the extent that Purchaser causes the
business of the Corporation to change following the Closing. Seller
has no reason to believe that at any time in the foreseeable future
the business of either of the Corporations shall be materially or
adversely affected by any event, except to the extent that the
Purchaser causes the business of the Corporation to change following
the Closing.
(CC) CONTRACTS IN TRANSIT. Exhibit "P" will set forth a complete and
accurate description of all contracts in transit for each Corporation.
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(DD) WARRANTIES. Exhibit "Q" will set forth a complete and accurate list
of all of the warranties that have been sold on all vehicles sold by
either of the Corporations for the last three (3) years.
8. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to Seller as follows:
(A) INCORPORATION. Purchaser has been duly incorporated, is validly
existing, and is in good standing under the laws of the State of
Delaware. At Closing Purchaser will be qualified to do business and
will be in good standing in the States of Colorado and Nevada.
(B) AUTHORIZATION. Purchaser has the authority to execute and deliver
this Agreement and to perform its obligations hereunder. This
Agreement is a valid and legally binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
(C) NO CONFLICTS. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement will
not result in any breach or violation of or default under any
agreement or other instrument to which Purchaser is a party or by
which it is bound.
(D) BROKERS AND FINDERS. The Purchaser has not employed, directly or
indirectly, any broker or finder, or incurred any liability for any
brokerage fees or commissions or finders' fees, and no broker or
finder has acted directly or indirectly for the Purchaser in
connection with this Agreement or the transactions contemplated
hereby.
9. PRE-CLOSING COVENANTS. The Seller agrees that prior to the Closing
Date:
(A) NOTICES AND CONSENTS. The Seller shall use Seller's best efforts to
obtain any required approvals or consents to this Agreement and the
transactions contemplated by this Agreement from all (i) lenders, (ii)
lessors, (iii) manufacturers represented by each Corporation, and (iv)
the FTC (hereinafter defined) and the Justice Department (hereinafter
defined) under the Xxxx-Xxxxx-Xxxxxx Act ("HSR Act") and all
regulations promulgated thereunder.
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(B) CONDUCT OF BUSINESS BY THE CORPORATIONS PRIOR TO THE CLOSING DATE.
The Seller shall cause each Corporation to conduct its operations
according to the ordinary and usual course of business reasonably
consistent with past and current practices, to maintain and preserve
its assets, properties, insurance policies, business organization, and
advantageous business relationships, and to retain the services of its
officers, employees, agents, and independent contractors, and shall
not allow either of the Corporations to engage in any practice, take
any action, or enter into any transaction outside of the ordinary
course of business. From the date of the execution of this Agreement
to the date of Closing of the transaction contemplated hereby, Seller
will not commit to or make any obligation which binds either
Corporation to an expense in excess of $50,000.00 without Purchaser's
prior consent.
(C) PURCHASER'S EXAMINATION. The Seller shall cause each Corporation to
permit representatives of the Purchaser to have full access to and to
examine, at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Corporation, the
books, records, properties, and assets of the Corporation.
(D) AUDIT. Seller shall cause each Corporation to permit an audit to be
conducted under generally accepted auditing standards, of the books,
records, and financial statements of the Corporation for 1995, 1996,
and any additional years if required by applicable law, and shall
cause Audited Financial Statements (hereinafter defined) to be
prepared in accordance with generally accepted accounting principles,
which shall include reserves for any deferred warranties, charge-
backs, inventory write downs, repossessions, contracts in transit, and
any other appropriate reserves. The audits shall hereinafter be
referred to individually as an "Audit" and collectively as the
"Audits." As used in this Agreement, "Audited Financial Statements"
shall mean an audited (i) consolidated balance sheet dated December
31, 1996, for the Corporations, and (ii) consolidated income statement
for the year ending December 31, 1996 for the Corporations. The
Audits will be conducted by Purchaser's accountants, Price Waterhouse,
assisted by Seller's accountant, Xxxx Xxxxx, CPA. Seller agrees to
cause the full cooperation of the officers, directors and employees of
each Corporation in the Corporation's Audit as requested by Purchaser.
The start date of the Audits will be January 23, 1997. Each
Corporation's accounting staff will assist in gathering information
and providing schedules and analyses in order to have the
Corporation's Audit completed by February 23, 1997. In addition, as
near as possible to the Closing Date, Price Waterhouse shall review
the activities of each Corporation for the period after December 31,
1996, and shall prepare a letter setting forth the unaudited
adjustments that should be made to the Aggregate Adjusted Net Worth
(the "Post 1996 Adjustments").
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(E) NOTICE OF CHANGES. The Seller shall give prompt written notice to
Purchaser of any material adverse change in the financial condition,
net income, assets, liabilities, operations, or business of either of
the Corporations.
(F) STANDSTILL. Except for the transactions contemplated by this
Agreement, from the date hereof to the Closing Date, the Seller shall
not, directly or indirectly, through any officer, director, employee,
or otherwise, solicit or initiate the submission of any proposal or
offer from any person or entity (including any officers or employees
of either of the Corporations) relating to any liquidation,
dissolution, recapitalization, merger, consolidation, acquisition, or
purchase of all or a material portion of the assets and properties of
either of the Corporations, or the acquisition or purchase of any
equity interest in either of the Corporations, or participate in any
negotiations regarding, or furnish to any other person or entity any
information with respect to, or otherwise cooperate in any manner
with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other person or entity to do or seek any of the
foregoing. Seller has agreed to this standstill provision in
consideration for a portion of the independent consideration set forth
in Paragraph 5.
(G) FURTHER ASSURANCES. Seller shall from time to time, upon the request
of Purchaser, execute and deliver to Purchaser such further
instruments and take such other action as Purchaser may reasonably
request, in order to more effectively transfer, convey, assign, and
deliver, or place Purchaser in possession and control of, the Shares
and the assets and properties of each Corporation, or to enable
Purchaser to exercise and enjoy all rights and benefits with respect
thereto.
(H) INVESTMENT LETTER. Seller agrees to execute and deliver to Purchase
an investment letter (the "Investment Letter") in form and substance
reasonably satisfactory to Purchaser and Purchaser's counsel.
(I) STOCK OF XXXXXXX X. XXXXXXXX Seller shall exercise Seller's rights
under the Buy-Sell Agreement and purchase the stock owned by Xxxxxxx
X. Xxxxxxxx in Xxxxxxx Toyota, Inc.
(J) ENVIRONMENTAL SITE AUDITS. Seller shall obtain an environmental site
audit on all real property owned, leased, or otherwise utilized by
each Corporation in order to determine whether there exists any
environmental condition which could reasonably be expected to result
in any liability, cost, or expense to the owner, occupier, or operator
of such real property arising under any Environmental Laws.
(K) AMENDMENTS TO REAL PROPERTY LEASES. Seller shall cause each
Corporation to amend each real property lease held by the Corporation
(the "Amendments") to
15
provide (i) that the lease shall have a term of no less than one (1)
year from the Closing Date, and (ii) for rental in the amount set
forth on Exhibit "R." The amendments of the real property leases held
by the Corporations shall be referred to collectively in this
Agreement as the "Amendments."
10. CONDITIONS PRECEDENT TO OBLIGATION OF PURCHASER. The obligation of
Purchaser to effect the transactions contemplated by this Agreement is subject
to the satisfaction on or prior to the Closing Date of the following conditions,
each of which may be waived by the Purchaser:
(A) REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER. All
representations and warranties of Seller contained in this Agreement
shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and
warranties were made on the Closing Date, except to the extent that
such representations and warranties expressly relate to any earlier
date, and Seller shall have performed and complied with all the
covenants and agreements and satisfied all the conditions required by
this Agreement to be performed, complied with or satisfied by Seller
on or prior to the Closing Date. The Seller must have delivered to
the Purchaser a certificate dated as of the Closing Date certifying
that this condition has been fulfilled.
(B) NO ADVERSE CHANGE. Purchaser shall have determined, to its
satisfaction, that as of the Closing Date, there has been no material
adverse change in the financial condition, net income, assets,
liabilities, operations, or business of either of the Corporations.
(C) STOCK OF XXXXXXX X. XXXXXXXX Seller shall have acquired all of the
stock of Xxxxxxx Toyota, Inc. owned by Xxxxxxx X. Xxxxxxxx
(D) TRANSFER OF SHARES. The certificates representing the Shares shall
have been transferred and conveyed by Seller to Purchaser in a manner
and by instruments acceptable to Purchaser and its counsel, free and
clear of all liens, claims, encumbrances, or restrictions of any kind.
Contemporaneously with the consummation of the transfer, Seller shall
put Purchaser in full possession and enjoyment of all properties and
assets of each Corporation.
(E) ENVIRONMENTAL SITE AUDITS. Purchaser shall have received
environmental site audits on each tract of real property owned,
leased, or otherwise utilized by each Corporation. If any of the
environmental site audits discloses an environmental condition which
could reasonably be expected to result in any liability, cost, or
expense to the owner, occupier, or operator of the property arising
under any Environmental Laws, then Seller shall have cured such
environmental condition and received a "no
16
further action" letter from the Environmental Protection Agency and
any comparable state agency.
(F) EMPLOYMENT CONTRACTS. (i) Seller shall have executed and delivered an
employment contract with Purchaser that has a term of three (3) years
commencing on the Closing Date and is otherwise in form and substance
reasonably satisfactory to Purchaser and Purchaser's counsel.
(ii) Xxxxxxx X. Xxxxxxxx shall have executed and delivered an
employment contract with Xxxxxxx Toyota, Inc. that has a term of three
(3) years commencing on the Closing Date and is otherwise in form and
substance reasonably satisfactory to Purchaser and Purchaser's
counsel.
(iii) Xxx Xxxxxxxxx shall have executed and delivered an employment
contract with Toyota West Sales and Service, Inc. that has a term of
three (3) years commencing on the Closing Date and is otherwise in
form and substance reasonably satisfactory to Purchaser and
Purchaser's counsel.
(iv) Xxxxx Xxxxxx shall have executed and delivered an employment
contract with Toyota West Sales and Service, Inc. that has a term of
three (3) years commencing on the Closing Date and is otherwise in
form and substance reasonably satisfactory to Purchaser and
Purchaser's counsel.
(G) THIRD PARTY APPROVALS. This Agreement and the transactions
contemplated by this Agreement shall have received all required
approvals and consents from all (i) lenders, (ii) lessors, (iii)
manufacturers represented by each Corporation, (iv) the FTC and the
Justice Department under the HSR Act and the regulations promulgated
thereunder, (v) the New York Stock Exchange, and (vi) Xxxxxx Xxxxxxx &
Co. Incorporated.
(H) COMPLIANCE WITH SECURITIES LAWS. Purchaser shall have (i) received
the Investment Letter, and (ii) determined that all state and federal
securities laws have been fully satisfied relating to the purchase of
the Shares by Purchaser and the issuance of restricted stock of
Purchaser to Seller. In addition, Seller shall have executed and
delivered to Purchaser the Registration Rights Agreement (hereinafter
defined).
(I) AMENDMENTS. The Amendments shall have been executed and delivered to
Purchaser.
(J) PHYSICAL INVENTORIES. Purchaser shall have conducted the Physical
Inventories.
17
(K) PURCHASER'S REVIEW. Based on such examinations and inquiries as
Purchaser shall have made or shall have caused to be made, the
financial condition, net income, assets, liabilities, operations, and
business of each Corporation shall be satisfactory to Purchaser, in
Purchaser's sole judgment and discretion.
(L) APPROVAL OF DOCUMENTATION. The form and substance of all opinions,
certificates, instruments and other documents delivered to Purchaser
in connection with this Agreement shall be satisfactory in all
reasonable respects to Purchaser and Purchaser's counsel.
(M) RESIGNATION OF DIRECTORS AND OFFICERS. Seller shall have delivered to
Purchaser the written resignations of the directors and officers of
each Corporation, except (i) Xxxxxxx X. Xxxxxxxx as General Manager of
Xxxxxxx Toyota, Inc., and (ii) Xxx Xxxxxxxxx as General Manager of
Toyota West Sales and Service, Inc.
(N) OPINIONS OF COUNSEL. Seller shall have delivered to Purchaser (i) an
opinion of Seller's counsel, Burg & Xxxxxxxx, P.C., dated as of the
Closing Date, that contains such opinions that are reasonably
requested by Purchaser, including (without limitation) an opinion that
the issued and outstanding capital stock of Xxxxxxx Toyota, Inc. was
issued in compliance with all state and federal securities laws, and
(ii) an opinion of counsel reasonably satisfactory to Purchaser, dated
as of the Closing Date, that contains such opinions that are
reasonably requested by Purchaser, including (without limitation) an
opinion that the issued and outstanding capital stock of Toyota West
Sales and Service, Inc. was issued in compliance with all state and
federal securities laws.
(O) XXXX-XXXXX-XXXXXX WAITING PERIOD. The applicable waiting period
under the HSR Act, and the regulations promulgated thereunder, shall
have expired.
(P) AGGREGATE ADJUSTED NET WORTH AND AGGREGATE 1996 EARNINGS. The
Aggregate Adjusted Net Worth, as adjusted by the Post 1996
Adjustments, shall not be less than $6,500,000, and the Aggregate 1996
Earnings shall not be less than $10,000,000.
(Q) ADDITIONAL INFORMATION. Seller shall have furnished to Purchaser and
Purchaser's counsel such additional information, certificates, and
other documents as Purchaser shall have reasonably requested.
(R) ESCROW AGREEMENT. Seller shall have executed and delivered to
Purchaser the Escrow Agreement.
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(S) AUDITS. Price Waterhouse shall have performed the Audit, prepared the
Audited Financial Statements, and delivered a copy of the Audited
Financial Statements to Purchaser.
(T) PURCHASE AGREEMENTS. Purchaser shall have purchased the property
covered by the Purchase Agreements (hereinafter defined).
CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of
Seller to effect the transactions contemplated by this Agreement is subject to
the satisfaction on or prior to the Closing Date of the following conditions,
each of which may be waived by Seller:
(A) REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER. All
representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and
warranties were made on the Closing Date, except to the extent that
such representations and warranties expressly relate to an earlier
date, and Purchaser shall have performed and complied with all of the
covenants and agreements and satisfied all the conditions required by
this Agreement to be performed, complied with or satisfied by
Purchaser on or prior to the Closing Date. The Purchaser must have
delivered to the Seller a certificate dated as of the Closing Date
certifying that this condition has been fulfilled.
(B) DELIVERY OF PURCHASE PRICE. The Purchaser shall have delivered (i)
the cash provided for in subparagraph 4(a) of this Agreement, and (ii)
the shares of restricted common stock of Purchaser provided for in
subparagraph 4(b) of this Agreement.
(C) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates and other documents required to be delivered to Seller in
connection with this Agreement shall be satisfactory in all reasonable
respects to Seller and Seller's counsel.
(D) ADDITIONAL INFORMATION. Purchaser shall have furnished to Seller and
Seller's counsel such additional information, certificates, and other
documents as Seller shall have reasonably requested.
(E) ELECTION TO PURCHASER'S BOARD OF DIRECTORS. Seller shall have been
elected as a member of the Board of Directors of Purchaser.
(F) PURCHASE AGREEMENTS. Purchaser shall have purchased the property
covered by the Purchase Agreements.
19
(G) BOARD APPROVAL. The Board of Directors of Purchaser shall have
approved the consummation of the transactions contemplated by this
Agreement.
(H) AGGREGATE ADJUSTED NET WORTH. The Aggregate Adjusted Net Worth, as
adjusted by the Post 1996 Adjustments, shall not be less than
$6,000,000.
(I) REGISTRATION RIGHTS AGREEMENT. Purchaser shall have executed and
delivered to Seller the Registration Rights Agreement.
(J) EMPLOYMENT CONTRACTS. (i) Purchaser shall have executed and
delivered an employment contract with Seller that has a term of three
(3) years commencing on the Closing Date and is otherwise in form and
substance reasonably satisfactory to Seller and Seller's counsel.
(ii) Xxxxxxx Toyota, Inc. shall have executed and delivered an
employment contract with Xxxxxxx X. Xxxxxxxx that has a term of
three (3) years commencing on the Closing Date and is otherwise
in form and substance reasonably satisfactory to Xxxxxxx X.
Xxxxxxxx and his counsel.
(iii) Toyota West Sales and Service, Inc. shall have executed and
delivered an employment contract with Xxx Xxxxxxxxx that has a
term of three (3) years commencing on the Closing Date and is
otherwise in form and substance reasonably satisfactory to Xxx
Xxxxxxxxx and his counsel.
(iv) Toyota West Sales and Service, Inc. shall have executed and
delivered an employment contract with Xxxxx Xxxxxx that has a
term of three (3) years commencing on the Closing Date and is
otherwise in form and substance reasonably satisfactory to
Xxxxx Xxxxxx and his counsel.
(K) APPROVAL OF PURCHASER AS THE DEALER. Purchaser shall have been
approved as the dealer by the manufacturers represented by each
Corporation.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Agreement or in any certificate, schedule, document, or
instrument furnished in connection with this Agreement shall survive the
Closing; provided, however, that no claim or cause of action for indemnification
under paragraph 13 of this Agreement for breaches of the representations and
warranties made in this Agreement or in any certificate, schedule, document, or
instrument furnished in connection with this Agreement shall be made twelve (12)
months after the Closing Date. Notwithstanding any investigation or examination
conducted before or after the Closing or the decision of any party to complete
the Closing, each party shall be entitled to rely upon the representations and
warranties set forth in this Agreement.
20
13. INDEMNIFICATION.
(A) GENERAL INDEMNITY. Seller agrees that Seller shall indemnify, defend
and hold harmless the Purchaser and its respective successors and
assigns (the "Purchaser Indemnified Parties") from and against any
Claims (hereinafter defined). Claims, as used in this Agreement,
include any claims, damages, liabilities, penalties, actions, suits,
proceedings, demands, assessments, costs and expenses, including
reasonable attorneys' fees and expenses of investigation, incurred by
any Purchaser Indemnified Party arising from or related to (i) any
breach of any representation, warranty, covenant or agreement made by
the Seller in this Agreement, (ii) any debts, liabilities, or
obligations of any nature (whether absolute, accrued, contingent, or
otherwise and whether due or to become due) of either of the
Corporations at the Balance Sheet Date that are not reflected in the
Financial Statements, (iii) any condition, activity, or event, caused
in whole or in part by, or engaged in, by either of the Corporations
and that existed or occurred prior to the Closing Date, (iv) the
infringement or claimed infringement by either of the Corporations on
the rights or claimed rights of any person or entity under or in
respect to any intellectual property, and (v) any tax audit of the
Seller or either of the Corporations by any federal, state, or local
taxing authority for any time period prior to the Closing Date.
(B) ENVIRONMENTAL INDEMNIFICATION. With respect to any existing or
potential liability arising out of any condition, activity, or event
existing or occurring prior to the Closing Date with respect to any
property comprising part of the properties or assets of either of the
Corporations for which there is any material risk of liability to any
governmental entity or agency or any other person or entity for the
violation of any Environmental Laws or for which there may be
liability in tort, or otherwise, and which is related to or arises out
of an environmental condition, the Seller agrees that Seller shall
indemnify, defend, and hold harmless the Purchaser Indemnified Parties
from and against all claims, damages, liabilities, penalties, actions,
suits, proceedings, demands, assessments, costs and expenses,
including reasonable attorneys' fees and expenses of investigation,
incurred by any Purchaser Indemnified Party as a result of such
environmental condition and further including, if necessary, the costs
and expenses of any remediation, transportation, incineration,
treatment, or other necessary and appropriate disposition or
mitigation of such environmental condition. In the event that any
claim relating to a violation of Environmental Laws shall arise,
Seller, upon notice from Purchaser, shall have the first right to
address and implement remediation of the environmental condition.
(C) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any other
indemnification
21
provisions in this Agreement, or any contractual, statutory, equitable
or common law remedy any party may have for the breach of any
representation, warranty or covenant.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(A) SELLER'S NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Seller
acknowledges that Seller has in the past, currently has, and in the
future may possibly have access to certain confidential information of
each Corporation, including, but not limited to, list of accounts,
operational policies, and pricing and cost policies that are valuable,
special and unique assets of the Corporation (the "Confidential
Information"). Seller agrees that Seller will not disclose such
Confidential Information to any person or entity for any purpose or
reason whatsoever except to authorized representatives of the
Purchaser, or as required by law, unless the Confidential Information
becomes known to the public generally through no fault of the Seller.
In the event of a breach or threatened breach by the Seller of this
subparagraph, the Purchaser shall be entitled to an injunction
restraining the Seller from disclosing, in whole or in part, such
Confidential Information. Nothing herein shall be construed as
prohibiting the Purchaser from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
(B) PURCHASER'S NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Purchaser
acknowledges that it has in the past, currently has, and in the future
may possibly have access to Confidential Information. The Purchaser
agrees that it will not disclose such Confidential Information to any
person or entity for any purpose or reason whatsoever, except to
authorized representatives of the Purchaser, or as required by law,
unless such Confidential Information becomes known to the public
generally through no fault of the Purchaser. In the event of a breach
or threatened breach by Purchaser of the provisions of this
subparagraph, the Seller shall be entitled to an injunction
restraining the Purchaser from disclosing, in whole or in part, such
Confidential Information. Nothing herein shall be construed as
prohibiting the Seller from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
Any other provision of this Agreement to the contrary notwithstanding,
Purchaser's obligations not to disclose the Confidential Information
shall terminate at Closing.
(C) INSIDER LIABILITY. The Seller acknowledges that trading in the
Purchaser's securities by persons possessing material non-public
information may result in private lawsuits for damages or to civil or
criminal proceedings by the Securities and Exchange Commission.
Seller also acknowledges that liability may be imposed on insiders who
privately disclose otherwise non-public material information where
such disclosure
22
coincide with trading Purchaser's securities by such insiders or by
the recipients of such information.
15. ADDITIONAL AGREEMENTS OF PURCHASER AND SELLER.
(A) INSURANCE. In the event the transactions contemplated by this
Agreement cause any of the insurance policies of either of the
Corporations to lapse and the insurance policy is a "claims made"
policy, Seller agrees to purchase a "tail" policy that will cover any
condition, activity, or event that would have been covered under the
"claims made" policy had the claim been made prior to the Closing
Date. All such "tail" policies shall be purchased at the Seller's
cost and expense.
(B) ESCROW AGREEMENT. The Escrow Agreement shall provide (among other
terms) that Purchaser shall be reimbursed out of the amount held in
escrow for (i) any accounts receivable listed on Exhibit "N" that are
not collected within 120 days of invoice date, and (ii) any contracts
in transit listed on Exhibit "P" that are not collected within 30 days
of the contract date. In the event any account receivable is not
collected within 120 days of invoice date, upon receiving credit for
such receivable from the Escrow Account, Purchaser will assign the
account receivable to Seller.
(C) PURCHASE AGREEMENTS. Seller has acquired certain real property in Las
Vegas, Nevada, and RDS, Inc., a Colorado corporation, has acquired
certain real property in Denver, Colorado; which will be described on
Exhibit "B," for the relocation of each Corporation's dealership.
Seller agrees to cause RDS, Inc. to execute and deliver to Purchaser a
purchase and sale agreement covering the Denver real property, which
will contain a purchase price of $2,000,000 and such other terms and
conditions as RDS, Inc. and Purchaser shall mutually agree. Seller
agrees to execute and deliver to Purchaser a purchase and sale
agreement covering the Las Vegas real property, which will contain a
purchase price of $5,500,000 and such other terms as Seller and
Purchaser shall mutually agree. The above described purchase and sale
agreements shall be referred to in this Agreement as the "Purchase
Agreements." Purchaser and Seller agree that the purchase of the real
property in Denver, Colorado and in Las Vegas, Nevada will occur
simultaneous with the Closing of the transaction contemplated by this
Agreement, or as soon thereafter as practicable.
(D) STOCK OF THE PURCHASER. The certificates representing the restricted
common stock of Purchaser that is issued to the Seller shall bear a
restrictive legend that the stock has not been registered under
applicable federal and state securities laws. It is understood and
agreed that Purchaser has not agreed to register the restricted common
stock of Purchaser that is to be issued to Seller.
23
(E) TERMINATION.
(i) Mutual Consent. This Agreement may be terminated by the written
consent of the parties.
(ii) By the Purchaser. This Agreement may be terminated by written
notice of termination given by the Purchaser to the Seller if a
material default should be made by the Seller in the observance
of or in the due and timely performance by Seller of any of the
agreements and covenants herein contained, or if there shall
have been a material breach by the Seller of any of the
warranties and representations herein contained, or if the
conditions of this Agreement to be complied with or performed by
Seller at or before Closing shall not have been complied with or
performed at the time required for such compliance or
performance and such noncompliance or nonperformance shall not
have been waived by the Purchaser.
(iii) By the Seller. This Agreement may be terminated by written
notice of termination given by the Seller to the Purchaser if a
material default should be made by the Purchaser in the
observance of or in the due and timely performance by the
Purchaser of any agreements and covenants of the Purchaser
herein contained, or if there shall have been a material breach
by the Purchaser of any of the warranties and representations of
the Purchaser, of if the conditions of this Agreement to be
complied with or performed by the Purchaser at or before Closing
shall not have been complied with or performed at the time
required for such compliance or performance and such
noncompliance or nonperformance shall not have been waived by
the Seller.
(F) REGISTRATION RIGHTS AGREEMENT. Seller and Purchaser agree to execute
and deliver a Registration Rights Agreement (the "Registration Rights
Agreement") covering the restricted common stock of the Purchaser that
will be acquired by Seller at Closing.
(G) ASSIGNMENT OF CAUSE OF ACTION. Xxxxxxx Toyota, Inc. and Seller are
currently plaintiffs in Civil Action 96-B-2543, R. Xxxxxxx Xxxxxxxx
and Xxxxxxx Toyota, Inc. v. Colorado Motor Vehicle Dealer Board, et
al., in the United States District Court for the District of
Colorado. Purchaser and Seller agree that as soon as possible after
the Closing, Xxxxxxx Toyota, Inc. will withdraw from the lawsuit and
that Xxxxxxx Toyota, Inc. will assign its cause of action to Seller.
In the event that Xxxxxxx Toyota, Inc. commences, prior to closing,
any State Court actions arising out
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of the same or similar causes of action, upon closing , Xxxxxxx
Toyota, Inc. will assign all right, title and interest to Seller in
such State Court action.
(H) XXXX-XXXXX-XXXXXX NOTIFICATION. Prior to the Closing Date, the
parties shall, if and to the extent required by law, file all reports
or other documents required or requested by the Federal Trade
Commission ("FTC") or the United States Department of Justice
("Justice Department") under the HSR Act, and all regulations
promulgated thereunder, concerning the transactions contemplated by
this Agreement, and comply promptly with any request by the FTC or the
Justice Department for additional information concerning such
transactions, so that the waiting period specified in the HSR Act will
expire as soon as reasonably possible after the execution and delivery
of this Agreement. The parties agree to furnish to one another such
information concerning the Purchaser, the Seller, and the Corporations
as the parties need to perform their obligations hereunder. The
Purchaser agrees to pay all filing fees and costs due governmental
agencies with regard to the HSR Act notification and compliance.
(I) PHYSICAL INVENTORY. Prior to the Closing Date, Purchaser or
Purchaser's representatives shall conduct a physical inventory of all
parts, accessories, new vehicles, and used vehicles owned by each
Corporation. The Seller shall have the right to have an agent present
during each physical inventory. The physical inventories shall be
collectively referred to in this Agreement as the "Physical
Inventories." The following adjustments shall be made to the
Aggregate Adjusted Net Worth after the Physical Inventories:
(i) Seller and Purchaser shall agree to the value of the used vehicle
inventory. The net book value of the used vehicle inventory in the
Audited Financial Statements shall be adjusted to the agreed value in
determining the Aggregate Adjusted Net Worth. If Seller and Purchaser
fail to agree on the value of any used vehicles, the Seller shall
retain ownership of such used vehicles and the net book value of such
used vehicles shall be deducted from the net book value of the used
vehicle inventory in the Audited Financial Statements in determining
the Aggregate Adjusted Net Worth.
(ii) Seller and Purchaser shall calculate the value of the new vehicle
inventory for each Corporation. The value of each new vehicle shall
be the cash sum equal to the factory invoice price to the Corporation,
less any factory hold-back rebate, any other factory rebates which the
Corporation may have received, or to which the Corporation is or may
become entitled to receive, advertising, interest credits, and PDI,
plus options added at dealer cost and any freight and handling
charges. All 1995 and 1996 demonstrators shall be valued for a cash
sum equal to an amount as calculated above, less $0.30 per mile over
1,000 miles on the odometer as depreciation for demo service.
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The value of any new vehicle shall be decreased by an amount equal to
the Corporation's actually incurred internal cost of repair for any
physically damaged vehicle. The net book value of the new vehicle
inventory in the Audited Financial Statements shall be adjusted to the
value as calculated above in determining the Aggregate Adjusted Net
Worth.
(iii) Seller and Purchaser shall agree to the value of the parts and
accessories inventory. The net book value of the parts and
accessories inventory in the Audited Financial Statements shall be
adjusted to the agreed value in determining the Aggregate Adjusted Net
Worth. If Seller and Purchaser fail to agree on the value of any
parts or accessories, the Seller shall retain ownership of such parts
or accessories and the net book value of such parts or accessories
shall be deducted from the net book value of the parts and accessories
inventory in the Audited Financial Statements in determining the
Aggregate Adjusted Net Worth.
(j) EXCESS NET WORTH DISTRIBUTION. In the event that the Aggregate
Adjusted Net Worth should exceed $6,000,000, Seller, prior to Closing,
may receive a distribution equaling the excess of Aggregate Adjusted
Net Worth.
(k) LIMITATIONS ON SELLER'S LIABILITY. Notwithstanding anything herein to
the contrary, the liability of Seller hereunder relating to any and
all representations, warranties, indemnifications and matters set
forth in Section 15(b) hereof, shall not exceed the sum of $1,000,000.
(l) SECTION 338(H)(10) ELECTIONS.
i) Seller agrees to make elections under Section 338(h)(10) of the
Internal Revenue Code and all comparable elections under state and
local tax law with respect to the Corporations.
ii) Purchaser and Seller shall jointly file Form 8023-A with the
Internal Revenue Service in accordance with Section 338 of the
Internal Revenue Code and the regulations thereunder no later than the
15th day of the ninth month beginning after the month that includes
the Closing Date in accordance with Internal Revenue Code Section
338(g) and Treasury Regulation Section 1.338(h)(10) - 1(d)(2).
iii) Purchaser and Seller shall allocate the Purchase Price to the
assets conveyed pursuant to this Agreement using a reasonable asset
valuation which will be agreed to by Purchaser and Seller no later
than ninety (90) days after the Closing Date. In all events, however,
Purchaser and Seller agree to conformity of treatment of all asset
allocations with respect to the Section 338(h)(10) elections.
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16. GENERAL PROVISIONS.
(A) ENTIRE AGREEMENT. This Agreement contains and constitutes the entire
agreement between the parties regarding the subject matter hereof and
supersedes all prior agreements and understandings between the parties
relating to the subject matter of this Agreement. There are no
agreements, understandings, restrictions, warranties or
representations between the parties relating to the subject matter
hereof other than those set forth in this Agreement. This Agreement
is not intended to have any legal effect whatsoever, or to be a
legally binding agreement, or any evidence thereof, until it has been
signed by the Seller and the Purchaser.
(B) EXHIBITS. The following exhibits shall be initialed by the parties and
attached to this Agreement prior to or at Closing. When attached to
this Agreement, the exhibits shall be made a part of this Agreement by
reference.
Exhibit "A" - The Buy-Sell Agreement
Exhibit "B" - Real Property and Leases
Exhibit "C" - Tangible Personal Property
Exhibit "D" - Inventories
Exhibit "E" - Permits and Licenses
Exhibit "F" - Intellectual Property
Exhibit "G" - Encumbrances
Exhibit "H" - Guaranties
Exhibit "I" - Legal Actions
Exhibit "J" - Contracts and Agreements
Exhibit "K" - Employee Benefit Plans
Exhibit "L" - Insurance
Exhibit "M" - Personnel
Exhibit "N" - Accounts and Notes Receivable
Exhibit "O" - Underground Storage Tanks
Exhibit "P" - Contracts in Transit
Exhibit "Q" - Warranties
Exhibit "R" - Rentals on Real Property Leases
(C) THIRD PARTY CONSENTS. The Seller and the Purchaser mutually agree to
cooperate and use reasonable, good faith efforts to prepare all
documentation, to effect all filings and to obtain all permits,
consents, approvals, and authorizations of all third parties and
governmental bodies as may be necessary to consummate the transactions
contemplated by this Agreement.
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(D) FURTHER ACTIONS. From time to time, as and when requested by any
party hereto, the other party shall execute and deliver, or cause to
be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further or other actions as
such other party may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
(E) PUBLICITY. The parties hereto agree that no public release or
announcement concerning the terms of the transactions contemplated by
this Agreement shall be issued by any party without the prior written
consent of the other party (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by
law, in which case the party required to make the release or
announcement shall allow the other party reasonable time to comment on
such release or announcement in advance of such issuance.
(F) AMENDMENT. This Agreement may not be amended, modified, or
terminated except by an instrument in writing signed by all parties to
this Agreement.
(G) CONSTRUCTION. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter gender thereof or
to the plurals of each, as the identity of the person or persons or
the context may require. The descriptive headings contained in this
Agreement are for reference purposes only and are not intended to
describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision contained in this Agreement.
(H) INVALIDITY. If any provision contained in this Agreement shall for
any reason be held to be invalid, illegal, void or unenforceable in
any respect, such provision shall be deemed modified so as to
constitute a provision conforming as nearly as possible to such
invalid, illegal, void or unenforceable provision while still
remaining valid and enforceable; and the remaining terms or provisions
contained herein shall not be affected thereby.
(I) PAYMENT OF EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated, each of the parties to this Agreement
shall be responsible for its own costs and expenses incurred in
connection with the preparation and negotiation of this Agreement and
the transactions contemplated hereby.
(J) BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns.
Only with the prior written consent of the Seller, which consent shall
not be unreasonably withheld, the Purchaser may assign its rights
28
under this Agreement to a related entity, and the Purchaser and its
assignee shall be fully obligated, responsible and liable for the
performance of the Purchaser's obligations hereunder regardless of any
such assignment. The Seller may not assign any of the Seller's rights
or delegate any of the Seller's obligations hereunder. Any assignment
in violation hereof shall be void.
(K) ATTORNEYS' FEES. In the event any party instigates litigation to
enforce or protect its rights under this Agreement, the party
substantially prevailing in any such litigation shall be entitled, in
addition to all other relief, to reasonable attorneys' fees, out-of-
pocket costs and disbursements relating to such litigation.
(L) NOTICES. All notices and other communications hereunder shall be (i)
in writing, dated with the current date of such notice, and signed by
the party giving such notice, and (ii) mailed, postpaid, registered or
certified, return receipt requested, addressed to the party to be
notified, or delivered by personal delivery or by overnight courier.
Notice shall be deemed given when received by the party to be notified
or when the party to be notified refuses to accept delivery of the
notice. The initial addresses of the parties shall be as follows:
If to Purchaser:
Cross-Continent Auto Retailers, Inc.
0000 X. Xxxxxx
X.X. Xxx 000
Xxxxxxxx, Xxxxx 00000-0000
ATTENTION: XXXXXX X. XXXX
With a copy to:
Sprouse, Mozola, Xxxxx & Xxxxxx, P.C.
X.X. Xxx 00000
Xxxxxxxx, Xxxxx 00000-0000
ATTENTION: R. XXXXX XXXXX
If to Seller:
R. Xxxxxxx Xxxxxxxx
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
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With a copy to:
Burg & Xxxxxxxx, P.C.
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
ATTENTION: XXXXXXX X. XXXX
The parties hereto shall have the right from time to time to change
their respective addresses by not less than ten (10) days prior
written notice to the other parties.
(M) DEFINITION OF KNOWLEDGE. As used in this Agreement, Seller's
"knowledge" shall include the knowledge of Seller and the employees
and agents of the applicable Corporation. Each representation and
warranty that is limited to Seller's "knowledge" is made with the
understanding that Seller has examined whatever sources of information
as are in the actual possession or control of Seller or the applicable
Corporation in order to verify the truth and accuracy of such
representation and warranty.
(N) TIME IS OF THE ESSENCE. Time shall be of the essence with respect to
this Agreement and the consummation of the transactions contemplated
hereby.
(O) REMEDIES. None of the remedies provided for in this Agreement shall
be the exclusive remedy of either party for a breach of this
Agreement. The parties hereto shall have the right to seek any other
remedy at law or in equity in lieu of or in addition to any remedies
provided for in this Agreement.
(P) SURVIVAL OF OBLIGATIONS. To the extent necessary to carry out the
terms and provisions of this Agreement, the obligations and rights
arising from or related to this Agreement shall survive the Closing
and shall not be merged into the various documents executed and
delivered at the time of the Closing.
(Q) WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or similar nature.
(R) GOVERNING LAW. This Agreement shall be construed, enforced, and
governed in accordance with the laws of the State of Texas, except for
matters related to any real property owned or leased by either of the
Corporations, which shall be construed, enforced, and governed in
accordance with the laws of the state in which such real property is
located.
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(S) VENUE. The obligations of the parties to this Agreement are
performable, and venue for any legal action arising out of this
Agreement shall lie in Potter County, Texas.
(T) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PURCHASER: CROSS-CONTINENT AUTO RETAILERS, INC.,
a Delaware corporation
By: ______________________________
Xxxx Xxxxxxxxx,
Chairman and Chief Executive Officer
SELLER: _________________________________________
R. Xxxxxxx Xxxxxxxx
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