<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------- ---------
COMMISSION FILE NUMBER 1-12297
UNITED AUTO GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3086739
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
375 PARK AVENUE, NEW YORK, NEW YORK 10152
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 223-3300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON
STOCK AS OF AUGUST 6, 1997:
VOTING COMMON STOCK, $0.0001 PAR VALUE 18,239,992
NON-VOTING COMMON STOCK, $0.0001 PAR VALUE 605,454
<PAGE>
TABLE OF CONTENTS
PART I
PAGE
1. Financial Statements and Supplementary Data
Consolidated Condensed Balance Sheets as of June 30, 1997 and
December 31, 1996 1
Consolidated Condensed Statements of Income for the three months
and six months ended June 30, 1997 and 1996 3
Consolidated Condensed Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 4
Notes to Consolidated Condensed Financial Statements 6
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II
1. Legal Proceedings 17
2. Changes in Securities 17
4. Submission of Matters to a Vote Of Security Holders 18
6. Exhibits and Reports on Form 8-K 19
Signatures 32
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
AUTO DEALERSHIPS
Cash and cash equivalents $43,318 $66,875
Accounts receivable, net 80,883 52,018
Inventories 267,673 168,855
Other current assets 7,607 11,823
------------ ------------
Total current assets 399,481 299,571
Property and equipment, net 32,940 22,341
Intangible assets, net 288,445 177,194
Other assets 7,195 6,587
------------ ------------
TOTAL AUTO DEALERSHIP ASSETS 728,061 505,693
------------ ------------
AUTO FINANCE
Cash and cash equivalents 4,985 2,688
Finance receivables, net 20,928 9,723
Other assets 1,788 4,846
------------ ------------
TOTAL AUTO FINANCE ASSETS 27,701 17,257
------------ ------------
TOTAL ASSETS $755,762 $522,950
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
1
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
AUTO DEALERSHIPS
Floor plan notes payable $268,955 $170,170
Short-term debt 6,970 6,069
Accounts payable 29,707 22,187
Accrued expenses 21,831 17,585
Current portion of long-term debt 4,217 5,444
------------ ------------
Total current liabilities 331,680 221,455
Long-term debt 93,722 11,121
Due to related party 438 1,334
Deferred income taxes 8,362 4,867
------------ ------------
TOTAL AUTO DEALERSHIP LIABILITIES 434,202 238,777
------------ ------------
AUTO FINANCE
Short-term debt 301 1,001
Accounts payable and other liabilities 3,730 1,704
------------ ------------
TOTAL AUTO FINANCE LIABILITIES 4,031 2,705
------------ ------------
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Voting common stock 2 2
Additional paid-in capital 309,647 284,502
Retained earnings (accumulated deficit) 7,880 (3,036)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 317,529 281,468
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $755,762 $522,950
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
2
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AUTO DEALERSHIPS
Vehicle sales $463,381 $302,034 $804,214 $535,173
Finance and insurance 18,029 12,397 31,512 22,339
Service and parts 45,548 21,789 79,432 40,427
-------- -------- -------- --------
Total revenues 526,958 336,220 915,158 597,939
Cost of sales, including floor plan interest 458,308 299,058 798,896 531,560
-------- -------- -------- --------
Gross profit 68,650 37,162 116,262 66,379
Selling, general and administrative expenses 53,967 29,357 95,723 56,975
-------- -------- -------- --------
Operating income 14,683 7,805 20,539 9,404
Other interest expense (1,777) (868) (2,246) (2,005)
Other income (expense), net -- 570 297 1,579
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES -
AUTO DEALERSHIPS 12,906 7,507 18,590 8,978
-------- -------- -------- --------
AUTO FINANCE
Revenues 1,100 617 2,085 1,029
Interest expense (116) (90) (260) (176)
Operating and other expenses (1,087) (612) (2,024) (1,202)
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES - AUTO FINANCE (103) (85) (199) (349)
-------- -------- -------- --------
TOTAL COMPANY
Income before minority interests and
provision for income taxes 12,803 7,422 18,391 8,629
Minority interests (61) (1,234) (97) (1,734)
Provision for income taxes (5,143) (2,461) (7,378) (2,997)
-------- -------- -------- --------
Net income $7,599 $3,727 $10,916 $3,898
======== ======== ======== ========
Net income per common share $0.42 $0.42 $0.61 $0.46
======== ======== ======== ========
Shares used in computing net income
per common share 18,144 8,878 18,023 8,500
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
-------------------------------------------------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $11,035 ($119) $4,097 ($199)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,877 222 1,619 90
Deferred income tax expense 5,130 - - -
Related party interest income - - (1,548) -
Equity in loss of uncombined investee - - (75) -
Gain on sales of loans - (679) - (510)
Loans originated - (49,934) - (44,075)
Loans repaid or sold - 43,126 - 37,456
Minority interests portion of income 97 - 1,734 -
Changes in operating assets and liabilities:
Accounts receivable (13,803) (976) (16,091) -
Inventories (13,328) - (2,494) -
Floor plan notes payable 22,673 - 16,651 -
Accounts payable and accrued expenses 1,572 1,934 8,580 910
Other (2,270) 256 (598) 2,520
-------------------------------------------------------------
Net cash provided by (used in) operating
activities: 14,983 (6,170) 11,875 (3,808)
-------------------------------------------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
-------------------------------------------------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Purchase of equipment and improvements (5,774) (34) (1,916) (153)
Dealership acquisitions (68,338) - (20,803) -
Investment in auto finance subsidiary (9,300) 9,300 (9,400) 9,400
Funding for subsequent acquisition - - - -
Advances to related parties - - 400 -
Investment in and advances to uncombined investee - - (1,438) -
-------------------------------------------------------------
Net cash provided by (used in) investing activities (83,412) 9,266 (33,157) 9,247
-------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of stock 4,324 - 15,986 -
Repurchase of common stock (8,821) - - -
Proceeds from borrowings of long-term debt 53,780 - 13,220 -
Deferred financing costs (2,141) - (908) -
Net borrowings (repayments) of short-term debt 500 - (1,118) -
Payments of long-term debt and capitalized lease
obligations (1,874) - (1,376) -
Advances (to) from affiliates (896) - 82 -
Borrowings from warehouse credit line - 17,965 - 30,880
Payments of warehouse credit line - (18,764) - (35,320)
-------------------------------------------------------------
Net cash provided by (used in) financing activities 44,872 (799) 25,886 (4,440)
-------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (23,557) 2,297 4,604 999
Cash and cash equivalents, beginning of year 66,875 2,688 4,697 531
=============================================================
Cash and cash equivalents, end of year $43,318 $4,985 $9,301 $1,530
=============================================================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
5
<PAGE>
UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)
1. BASIS OF PRESENTATION
The information presented as of June 30, 1997 and 1996, and for the three and
six month periods then ended, is unaudited, but includes all adjustments
(consisting only of normal recurring accruals) which the management of United
Auto Group, Inc. (the "Company" or "UAG") believes to be necessary for the fair
presentation of results for the periods presented. The results for the interim
periods are not necessarily indicative of results to be expected for the year.
These consolidated condensed financial statements should be read in conjunction
with the Company's audited financial statements for the year ended December 31,
1996, which were included as part of the Company's Annual Report on Form 10-K.
2. NET INCOME PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 establishes standards for computing and presenting earnings per share for
periods ending after December 15, 1997. Basic and diluted earnings per share,
calculated pursuant to SFAS 128, are not expected to be materially different
from net income per common share as reflected in the accompanying Consolidated
Condensed Statements of Income.
3. INVENTORIES
Inventories consisted of the following at the balance sheet dates:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
--------------- -----------------
<S> <C> <C>
New vehicles $183,045 $109,414
Used vehicles 70,367 50,060
Parts, accessories and other 14,261 9,381
-------- --------
Total inventories $267,673 $168,855
======== ========
</TABLE>
4. BUSINESS COMBINATIONS
On April 22, 1997, the Company completed its acquisition of 100% of the capital
stock of Gary Hanna Nissan, Inc. for $13,740, consisting of $7,000 in cash,
$1,240 of promissory notes and $5,500 of UAG common stock. The acquisition
agreement provides for an additional contingent cash payment to the extent that
the UAG common stock has an aggregate market value of less than $6,000 on the
date it becomes freely tradable.
6
<PAGE>
UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)
4. BUSINESS COMBINATIONS (CONTINUED)
On April 30, 1997, the Company completed its acquisition of 100% of the capital
stock of the Staluppi Automotive Group (the "Staluppi Group") for $49,614,
consisting of $25,450 in cash, $21,864 of promissory notes and $2,300 of UAG
common stock. The acquisition agreement provides for an additional contingent
cash payment to the extent that the UAG common stock has an aggregate market
value of less than $3,000 on the date it becomes freely tradable. In addition,
if the Staluppi Group achieves certain levels of annual pre-tax earnings during
any of the next three years, UAG will be required to make additional payments.
On May 30, 1997, the Company completed its acquisition of 100% of the capital
stock of the Gene Reed Automotive Group (the "Reed Group") for $34,000,
consisting of $17,000 in cash, $4,000 of promissory notes and $13,000 of UAG
common stock. The acquisition agreement provides for an additional contingent
cash payment to the extent that the UAG common stock has an aggregate market
value of less than $13,000 on the date it becomes freely tradable.
Effective June 1, 1997, the Company completed its acquisition of 100% of the
capital stock of the Lance Landers dealerships for $2,800 in cash.
These acquisitions were accounted for using the purchase method. Accordingly,
the Company's financial statements reflect the results of operations of the
acquired entities only from the effective date of acquisition.
5. PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma summary presents the consolidated results of
operations of the Company for the six months ended June 30, 1997 and 1996 after
reflecting the pro forma adjustments that would be necessary to present those
results as if the acquisitions of Gary Hanna Nissan, Inc., the Staluppi Group,
the Reed Group and the Lance Landers dealerships had been consummated as of
January 1, 1996. The results of operations for the six months ended June 30,
1997 and 1996 also reflect acquisitions completed prior to March 31, 1997 as if
such acquisitions had been consummated as of January 1, 1996.
<TABLE>
<CAPTION>
PRO FORMA RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $1,173,236 $1,189,928
Income before minority interests and
provision for income taxes $21,340 $21,549
Net income $12,707 $12,929
Net income per common share $0.66 $0.67
</TABLE>
7
<PAGE>
UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)
5. PRO FORMA RESULTS OF OPERATIONS (CONTINUED)
The foregoing pro forma results are not necessarily indicative of results of
operations that would have been reported had the acquisitions been completed as
of January 1, 1996. The pro forma results do not reflect a reduction of cost of
sales related to reduced interest on floor plan notes payable resulting from
the application of unused proceeds from the Company's initial public sale of
common stock (the "IPO"). If the reduction of the floor plan interest expense
were reflected, pro forma net income (and net income per common share) would
have been $14,103 ($0.73 per share) for the six months ended June 30, 1996.
6. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents certain supplementary information to the
Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
---- ----
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
SUPPLEMENTAL INFORMATION:
Cash paid for interest $3,694 $124 $3,996 $153
Cash paid for income taxes 1,898 19 148 13
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Dealership acquisition costs paid by issuance of stock 28,150 - - -
Dealership acquisition costs financed by long-term debt 27,104 - 2,100 -
Capitalized lease obligations 274 100 247 -
Stock issuance costs amortized against proceeds from
issuance of common stock - - 577 -
Warrants issued - - 576 -
</TABLE>
7. LEGAL PROCEEDINGS
In May and June 1997, three complaints were filed in the United States District
Court for the Southern District of New York on behalf of a purported class
consisting of all persons who purchased UAG common stock issued in connection
with and/or traceable to the Company's IPO at any time up to and including
February 26, 1997 (the "Lawsuits"). The complaints name as defendants the
Company, Carl Spielvogel, Marshall S. Cogan, J.P. Morgan Securities Inc.,
Montgomery Securities and Smith Barney, Inc. The plaintiffs in the Lawsuits
seek unspecified damages in connection with their allegations that the
Prospectus and Registration Statement disseminated in connection with the IPO
contained material misrepresentations and omissions in violation of Sections
11, 12(a)(2) and 15 of the Securities Act. They also seek to have their actions
certified as class actions under the Federal Rules of Civil Procedure. The
Company believes that the plaintiffs' claims are without merit and intends to
defend the Lawsuits vigorously.
8
<PAGE>
UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands, Except Per Share Amounts)
(UNAUDITED)
8. SUBSEQUENT EVENTS
On July 23, 1997, the Company completed the sale of $150,000 aggregate
principal amount of 11% Senior Subordinated Notes due 2007 in a transaction
exempt from registration under the Securities Act of 1933 pursuant to Rule 144A
thereunder. The Notes were issued at 98.529% of their principal amount.
Proceeds from the offering, after issue discount, discount to initial
purchasers and estimated transaction costs amounted to approximately
$140,793.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company retails new and used automobiles and light trucks, operates service
and parts departments and sells various aftermarket products, including finance
and insurance contracts. For the quarter ended June 30, 1997, UAG had revenues
of approximately $527.0 million and retailed 13,006 new and 7,994 used
vehicles. Vehicle sales represented 87.9% of the Company's revenues for the
quarter ended June 30, 1997; service and parts accounted for 8.7% of revenues,
with finance and insurance representing the remaining 3.4%.
New vehicle revenues include sales to retail customers and to leasing companies
providing consumer automobile leasing. Used vehicle revenues include amounts
received for used vehicles sold to retail customers, leasing companies
providing consumer leasing, other dealers and wholesalers. Finance and
insurance revenues are generated from sales of accessories such as radios,
cellular phones, alarms, custom wheels, paint sealants and fabric protectors,
as well as amounts received as fees for placing extended service contracts,
credit insurance policies, and financing and lease contracts. UAG dealerships
market a complete line of aftermarket automotive products and services through
the Company's wholly-owned subsidiary, United AutoCare. Service and parts
revenues include amounts paid by consumers for repair and maintenance service
and the purchase of replacement parts.
Through its automobile finance subsidiary, Atlantic Auto Finance, the Company
derives revenues from the purchase, sale and servicing of motor vehicle
installment contracts originated by both UAG and third-party dealerships.
The Company's selling expenses consist of advertising and compensation for
sales department personnel, including commissions and related bonuses. General
and administrative expenses include compensation for administration, finance
and general management personnel, depreciation, amortization, rent, insurance
and utilities. Interest expense consists of interest charges on all of the
Company's interest-bearing debt other than floor plan inventory financing.
Interest expense on floor plan debt is included in cost of sales.
During the three month period ended June 30, 1997, the Company completed the
acquisition of Gary Hanna Nissan, Inc., the Staluppi Automotive Group, the Gene
Reed Automotive Group and the Lance Landers dealerships. Each of these
acquisitions has been accounted for using the purchase method and, as a result,
the Company's financial statements include the results of operations of the
acquired dealerships only from the effective date of acquisition.
10
<PAGE>
RESULTS OF OPERATIONS
The following discussion and analysis relates to the Company's consolidated
historical results of operation for the six and three months ended June 30,
1997 and 1996.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Auto Dealerships
Revenues. Revenues increased by $317.2 million, or 53.1%, from $597.9 million
to $915.2 million due to acquisitions. Revenues at dealerships acquired
subsequent to June 30, 1996 amounted to $321.9 million, offset slightly by
a net decrease in sales at dealerships owned prior to June 30, 1996 due
primarily to (i) a reduction in revenues at Atlanta Toyota, impacted by
shortages of inventory of certain models, (ii) a reduction in sales volume at
the Company's DiFeo division resulting in part from the closure of
unprofitable dealerships and (iii) a decrease at Company Nissan dealerships in
the southeastern United States, which the Company believes mirrors an overall
decline in sales for Nissan in that region of the United States.
Sales of new and used vehicles increased by $269.0 million, or 50.3%, from
$535.2 million to $804.2 million. Revenues at dealerships acquired subsequent
to June 30, 1996 amounted to $278.9 million, offset by the net decrease in new
and used vehicle sales at dealerships owned prior to June 30, 1996 noted above.
Unit retail sales of new and used vehicles increased by 30.0% and 63.8%,
respectively, due principally to acquisitions. For the six months ended June
30, 1997, the Company sold 22,757 new vehicles (62.0% of total vehicle sales)
and 13,943 used vehicles (38.0% of total vehicle sales). For the six months
ended June 30, 1996, the Company sold 17,509 new vehicles (67.3% of total
vehicle sales) and 8,510 used vehicles (32.7% of total vehicle sales). The
increase in the relative proportion of used vehicle sales to total vehicle
sales was due principally to the expansion of used car operations in response to
the popularity of used cars. New vehicle selling prices increased by an average
of 13.3% due primarily to changes in the mix of models sold and changes in
manufacturer pricing. Used vehicle selling prices increased by an average of
11.9% due to changes in market conditions which resulted in a change in the mix
of used vehicles sold.
Finance and insurance revenues (aftermarket product sales) increased by $9.2
million, or 41.1%, from $22.3 million to $31.5 million due primarily to
acquisitions and the establishment of United AutoCare, offset to a degree by
a net decrease at dealerships owned prior to June 30, 1996 due to the
decrease in new and used vehicle sales noted above.
Service and parts revenues increased by $39.0 million, or 96.5%, from $40.4
million to $79.4 million due principally to acquisitions.
11
<PAGE>
Gross Profit. Gross profit increased by $49.9 million, or 75.2%, from $66.4
million to $116.3 million. Gross profit as a percentage of revenues increased
from 11.1% to 12.7%. The increase in gross profit and in gross profit as a
percentage of revenues is due to (i) acquisitions, (ii) increased finance
and insurance and service and parts revenues, which yield higher margins, as
a percentage of total revenues, (iii) improved gross profit margins on vehicle
sales and service and parts revenues and (iv) the establishment of United
AutoCare.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $38.7 million, or 68.0%, from $57.0
million to $95.7 million due principally to acquisitions and an increase in the
infrastructure required to manage the substantial increase in the Company's
operations and the planned expansion of its business in the future. Such
expenses as a percentage of revenue increased from 9.5% to 10.5%.
Other Interest Expense. Other interest expense increased by $0.2 million, from
$2.0 million to $2.2 million due principally to an increase in interest expense
arising from the issuance of acquisition-related debt, offset by a reduction in
interest expense due to the retirement of the Company's Senior Notes in October
1996.
Other Income (Expense), Net. Other income (expense), net decreased by $1.3
million, from $1.6 million to $0.3 million due principally to a reduction in
related party interest income resulting from the disposition of the minority
interests in certain dealerships in October 1996.
Total Company
Provision for Income Taxes. The 1997 provision for income taxes increased $4.4
million from $3.0 million to $7.4 million. The increase is due to the increase
in taxable income and a change in the Company's estimated effective tax rate.
12
<PAGE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Auto Dealerships
Revenues. Revenues increased by $190.7 million, or 56.7%, from $336.2 million
to $527.0 million due to acquisitions. Revenues at dealerships
acquired subsequent to June 30, 1996 amounted to $215.8 million, offset
slightly by a net decrease in sales at dealerships owned prior to June 30, 1996
due primarily to (i) a reduction in revenues at Atlanta Toyota, impacted by
shortages of inventory of certain models, (ii) a reduction in sales volume
at the Company's DiFeo division resulting in part from the closure of
unprofitable dealerships and (iii) a decrease at Company Nissan dealerships
in the southeastern United States, which the Company believes mirrors an
overall decline in sales for Nissan in that region of the United States.
Sales of new and used vehicles increased by $161.3 million, or 53.4%, from
$302.0 million to $463.4 million. Revenues at dealerships acquired subsequent
to June 30, 1996 amounted to $187.4 million, offset by the net decrease in new
and used vehicle sales at dealerships owned prior to June 30, 1996 noted above.
Unit retail sales of new and used vehicles increased by 29.8% and 78.2%,
respectively, due principally to acquisitions. For the three months ended June
30, 1997, the Company sold 13,006 new vehicles (61.9% of total vehicle sales)
and 7,994 used vehicles (38.1% of total vehicle sales). For the three months
ended June 30, 1996, the Company sold 10,019 new vehicles (69.1% of total
vehicle sales) and 4,485 used vehicles (30.9% of total vehicle sales). The
increase in the relative proportion of used vehicle sales to total vehicle
sales was due principally to the expansion of used car operations in response
to the popularity of used cars. New vehicle selling prices increased by an
average of 14.1% due primarily to changes in the mix of models sold and changes
in manufacturer pricing. Used vehicle selling prices increased by an average of
8.9% due to changes in market conditions which resulted in a change in the mix
of used vehicles sold.
Finance and insurance revenues (aftermarket product sales) increased by $5.6
million, or 45.4%, from $12.4 million to $18.0 due primarily to acquisitions
and the establishment of United AutoCare, offset to a degree by a net decrease
at dealerships owned prior to June 30, 1996 due to the decrease in new and
used vehicle sales noted above.
Service and parts revenues increased by $23.8 million, or 109.0%, from $21.8
million to $45.5 million due principally to acquisitions.
Gross Profit. Gross profit increased by $31.5 million, or 84.7%, from $37.2
million to $68.7 million. Gross profit as a percentage of revenues increased
from 11.1 % to 13.0 %. The increase in gross profit and in gross profit as a
percentage of revenues is due to (i) acquisitions, (ii) increased finance and
insurance and service and parts revenues, which yield higher margins, as a
percentage of total revenues, (iii) improved gross profit margins on vehicle
sales and service and parts revenues and (iv) the establishment of United
AutoCare.
13
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $24.6 million, or 83.8%, from $29.4
million to $54.0 million due principally to acquisitions and an increase in the
infrastructure required to manage the substantial increase in the Company's
operations and the planned expansion of its business in the future. Such
expenses as a percentage of revenue increased from 8.7% to 10.2%.
Other Interest Expense. Other interest expense increased by $0.9 million, from
$0.9 million to $1.8 million due principally to an increase in interest expense
arising from the issuance of acquisition related debt, offset by a reduction in
interest expense due to the retirement of the Company's Senior Notes in October
1996.
Other Income (Expense), Net. Other income (expense), net decreased by $0.7
million due principally to a reduction in related party interest income
resulting from the disposition of the minority interests in certain dealerships
in October 1996.
Total Company
Provision for Income Taxes. The 1997 provision for income taxes increased $2.6
million from $2.5 million to $5.1 million. The increase is due to the increase
in taxable income and a change in the Company's estimated effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND LIQUIDITY REQUIREMENTS
The cash requirements of the Company are primarily for acquisitions of new
dealerships, working capital and the expansion of existing facilities.
Historically, these cash requirements have been met through issuances of
equity, borrowings under various credit agreements and cash flow from
operations. At June 30, 1997, the Company's dealership operations had working
capital of $67.8 million.
During the six months ended June 30, 1997, dealership activities resulted in
net cash provided by operations of $15.0 million. Net cash used by dealerships
in investing activities during the six months ended June 30, 1997 totaled $83.4
million, relating primarily to dealership acquisitions, funding provided to
Atlantic Auto Finance and capital expenditures. Dealership financing activities
provided $44.9 million of cash during the six months ended June 30, 1997
principally from the issuance of long-term debt.
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The Company finances substantially all of its new and used vehicle inventory
under revolving floor plan financing arrangements with various lenders. The
floor plan lenders pay the manufacturer directly with respect to new vehicles.
The Company makes monthly interest payments on the amount financed, but is not
required to make loan principal repayments prior to the sale of new and used
vehicles. Substantially all of the assets of the Company's dealerships are
subject to security interests granted to their floor plan lending sources.
At June 30, 1997, the Company had approximately $48.3 million of cash available
to fund operations and future acquisitions. In addition, the Company is party
to a $50.0 million Senior Credit Facility, dated March 20, 1997 (as amended)
(the "Senior Credit Facility"), with a group of banks, which is to be used
principally for acquisitions. At June 30, 1997 the Company was fully borrowed
under this facility. During July 1997, the Company issued $150.0 million
aggregate principal amount of its 11% Senior Subordinated Notes due 2007
(the "Notes"). Net proceeds from the sale of the Notes amounted to $140.8
million. $50.0 million of such net proceeds were used to repay amounts
outstanding under the Senior Credit Facility. The balance of such proceeds have
been deposited with the Company's floor plan lenders, which deposits are
earning interest at floor plan rates. The Company has such deposits, as well as
borrowing capacity under the Senior Credit Facility, to use for working capital
and general corporate purposes, including acquisitions. The Company's principal
source of growth has come, and is expected to continue to come, from
acquisitions of automobile dealerships. The Company believes that its existing
capital resources will be sufficient to fund its current acquisition
commitments. To the extent the Company pursues additional significant
acquisitions, it may need to raise additional capital either through the public
or private issuance of equity or debt securities or through additional bank
borrowings. A public equity offering would require the prior approval of
certain automobile manufacturers.
CYCLICALITY
Unit sales of motor vehicles, particularly new vehicles, historically have been
cyclical, fluctuating with general economic cycles. During economic downturns,
the automotive retailing industry tends to experience similar periods of
decline and recession as the general economy. The Company believes that the
industry is influenced by general economic conditions and particularly by
consumer confidence, the level of personal discretionary spending, interest
rates and credit availability.
SEASONALITY
The Company's combined business is modestly seasonal overall. The greatest
seasonalities exist with the dealerships in the New York metropolitan area, for
which the second and third quarters are the strongest with respect to vehicle
related sales. The service and parts business at all dealerships experiences
relatively modest seasonal fluctuations.
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EFFECTS OF INFLATION
The Company believes that the relatively moderate rates of inflation over the
last few years have not had a significant impact on revenue or profitability.
The Company does not expect inflation to have any near-term material effects on
the sale of its products and services. However, there can be no assurance that
there will be no such effect in the future.
The Company finances substantially all of its inventory through various
revolving floor plan arrangements with interest rates that vary based on the
prime rate or LIBOR. Such rates have historically increased during periods of
increasing inflation. The Company does not believe that it would be placed at a
competitive disadvantage should interest rates increase due to increased
inflation since most other automobile dealers have similar floating rate
borrowing arrangements.
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PART II
ITEM 1 - LEGAL PROCEEDINGS
In May and June, 1997, three complaints were filed in the United States
District Court for the Southern District of New York on behalf of a purported
class consisting of all persons who purchased the Company's Voting Common Stock
issued in connection with and/or traceable to the Company's initial public
offering (the "IPO") at any time up to and including February 26, 1997 (the
"Lawsuits"). The complaints name as defendants the Company, Carl Spielvogel,
Marshall S. Cogan, J.P. Morgan Securities Inc., Montgomery Securities and Smith
Barney Inc. The plaintiffs in the Lawsuits seek unspecified damages in
connection with their allegations that the prospectus and the related
registration statement disseminated in connection with the IPO contained
material misrepresentations and omissions in violation of Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933, as amended (the "Securities Act"). They
also seek to have their actions certified as class actions under Federal Rules
of Civil Procedure. The Company believes that the plaintiffs' claims are
without merit and intends to defend the Lawsuits vigorously.
In addition, the Company and its subsidiaries are involved in litigation that
has arisen in the ordinary course of business. None of these matters, either
individually or in the aggregate, are expected to have a material adverse
effect on the Company's results of operations or financial condition.
ITEM 2 - CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
On March 6, 1997, the Company acquired a dealership group located in Houston,
Texas for a purchase price of $7.0 million in cash and 297,872 shares of Voting
Common Stock. In connection with such transaction, the Company issued 14,894
shares of Voting Common Stock to the party that brokered the transaction. On
April 25, 1997, the Company issued an additional 37,457 shares of Voting Common
Stock to the sellers as an adjustment to the purchase price. This information
supersedes that contained in the Company's Form 10-Q for the quarter ended
March 31, 1997.
On April 22, 1997, the Company acquired a dealership located in Las Vegas,
Nevada for a purchase price of approximately $7.0 million in cash, notes in the
aggregate principal amount of $1.2 million and 302,094 shares of Voting Common
Stock.
On April 30, 1997, the Company acquired a dealership group located in West Palm
Beach, Florida and Long Island, New York for a purchase price of approximately
$25.5 million in cash, notes in the aggregate principal amount of $21.9 million
and 127,660 shares of Voting Common Stock.
On May 30, 1997, the Company acquired a dealership group located in
Fayetteville, North Carolina and North Charleston and Summerville, South
Carolina for a purchase price of approximately $17.0 million in cash, notes in
the aggregate principal amount of $4.0 million and 717,241 shares of Voting
Common Stock.
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All such shares were issued in reliance on Section 4(2) of the Securities Act,
as a transaction not involving any public offering.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on April 17, 1997.
b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended. There were no
solicitations in opposition to management's nominees listed in the proxy
statement. Both of the nominees listed in the proxy statement were elected.
c) The following matters were voted upon at the Annual Meeting:
1. The election of two Class I directors. The number of votes cast for
and withheld for each nominee was as set forth below:
Nominee For Withheld
------- --- --------
Marshall S. Cogan 15,171,123 11,925
John M. Sallay 15,171,123 11,925
2. Ratification of Coopers & Lybrand L.L.P. as the Company's independent
accountants for the year ending December 31, 1997. The votes were as
follows:
For Against Abstain
--- ------- -------
15,031,344 3,800 147,904
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ITEM 6 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits
*** 3.1 Third Restated Certificate of Incorporation.
* 3.2 Restated Bylaws.
* 4.1 Specimen Common Stock certificate.
* 10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993,
among the Company and the investors listed therein.
* 10.1.1.2 Amendment to Registration Rights Agreement, dated as of July
31, 1996, among the Company and the investors listed
therein.
* 10.1.2 Waiver, Consent and Modification Agreement, dated as of
September 22, 1995, among the Company and its stockholders.
* 10.1.3 Letter Agreement, dated September 22, 1996, between the
Company and J.P. Morgan Capital Corporation.
* 10.1.4 Form of Warrant.
* 10.1.5 Form of Additional Warrant.
* 10.1.6 Employment Agreement, dated as of June 21, 1996, between the
Company and Carl Spielvogel.
* 10.1.7 Severance Agreement, dated April 5, 1996, among the Company,
Trace and Ezra P. Mager.
* 10.1.8 Stock Option Plan of the Company.
* 10.1.9 Registration Rights Agreement, dated as of August 1, 1995,
among the company and the parties listed on Schedule I
thereto.
* 10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc.
and the Company.
* 10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to
the Company.
* 10.1.12 Agreement, dated July 24, 1996, between the Company and
Toyota Motor Sales U.S.A., Inc.
* 10.1.13 Non-employee Director Compensation Plan of the Company.
* 10.1.14 Form of Agreement among the Company, certain of its
affiliates and American Honda Motor Co., Inc.
* 10.1.15 Form of Option Certificate of the Company in favor of Samuel
X. DiFeo and Joseph C. DiFeo.
* 10.1.16 Form of Registration Rights Agreement among the Company and
the parties listed on Schedule U thereto.
**** 10.1.17 Registration Rights Agreement, dated March 6, 1997, between
the Company and Kevin J. Coffey.
**** 10.1.18 Consulting Agreement, dated March 3, 1997, between the
Company and Carl Spielvogel.
**** 10.1.19 Credit Agreement, dated as of March 20, 1997, among the
Company, the Guarantors party thereto, the Banks party
thereto, The Bank of Nova Scotia, as Administrative Agent,
and Morgan Guaranty Trust Company of New York, as
Documentation Agent.
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**** 10.1.20 Pledge Agreement, dated as of March 20, 1997, among the
Company, the pledgors named therein and The Bank of Nova
Scotia, as Administrative Agent.
10.1.21 Registration Rights Agreement, dated May 31, 1997, among the
Company, Gene Reed, Jr., Michael L. Reed, Michael G.
Lallier, Deborah B. Lallier, John P. Jones, Charles J.
Bradshaw, Charles J. Bradshaw, Jr., Julia D. Bradshaw and
William B. Bradshaw.
10.1.22 Registration Rights Agreement, dated April 30, 1997, among
the Company and John A. Staluppi.
* 10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated
October 5, 1995, between American Honda Motor Co. Inc. and
Danbury Auto Partnership.
* 10.2.1.2 American Honda Motor Co. Standard Provisions.
* 10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between
Lexus, a division of Toyota Motor Sales, U.S.A., Inc, and
Somerset Motors Partnership.
* 10.2.2.2 Lexus Dealer Agreement Standard Provisions.
* 10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement, dated August 29, 1994, between Mitsubishi
Motor Sales of America, Inc. and Rockland Motors
Partnership, as amended August 20, 1996.
* 10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement Standard Provisions.
* 10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January
1, 1994, between BMW of North America, Inc. and DiFeo BMW
Partnership, as amended October 21, 1996.
* 10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions
Applicable to Dealer Agreement.
* 10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996,
between American Suzuki Motor Corporation and Fair Hyundai
Partnership, as amended September 6, 1996.
* 10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard
Provisions.
* 10.2.6.1 Toyota Dealer Agreement, dated May 5, 1995, between Toyota
Motor Distributors, Inc. and Hudson Motors Partnership.
* 10.2.6.2 Toyota Dealer Agreement Standard Provisions.
* 10.2.7.1 Oldsmobile Division Dealer Sales and Service Agreement,
dated October 2, 1992, between General Motors Corporation,
Oldsmobile Division and J&F Oldsmobile-Isuzu Partnership, as
amended December 20, 1993 and July 23, 1996.
* 10.2.7.2 General Motors Dealer Sales and Service Agreement Standard
Provisions.
* 10.2.8.1 Chevrolet-Geo Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation,
Chevrolet Motor Division and Fair Chevrolet-Geo Partnership.
* 10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
DiFeo Nissan Partnership.
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* 10.2.9.2 Nissan Dealer Sales and Service Agreement Standard
Provisions.
* 10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, dated
August 16, 1995, between Fair Chrysler Plymouth Partnership
and Chrysler Corporation.
* 10.2.10.2 Chrysler Corporation Sales and Service agreement Additional
Terms and Provisions
* 10.2.11 Chrysler Corporation Eagle Sales and Service Agreement,
dated October 8, 1992, between DiFeo Jeep-Eagle Partnership
and Chrysler Corporation.
* 10.2.12 Chrysler Corporation Chrysler Sales and Service Agreement,
dated August 16, 1995, between DiFeo Chrysler Plymouth Jeep
Eagle Partnership and Chrysler.
* 10.2.13 Chrysler Corporation Plymouth Sales and Service Agreement,
dated November 13, 1992, between DiFeo Chrysler Plymouth
Jeep Eagle Partnership and Chrysler Corporation.
* 10.2.14 Toyota Dealer Agreement, dated May 5, 1995, between Toyota
Motor Distributors, Inc. and County Auto Group Partnership.
* 10.2.15.1 Hyundai Motor America Dealer Sales and Service Agreement,
dated October 12, 1992, between Hyundai Motor America and
Fair Hyundai Partnership as amended November 22, 1993,
October 12, 1995, March 14, 1996 and September 18, 1996.
* 10.2.15.2 Hyundai Motor America Dealer Sales and Service Agreement
Standard Provisions.
* 10.2.16 Hyundai Motor America Dealer Sales and Service Agreement,
dated November 22, 1993, as amended April 1, 1994, and
November 3, 1995, between Hyundai Motor America and DiFeo
Hyundai Partnership.
* 10.2.17 Toyota Dealer Agreement, dated August 23, 1995, between
Toyota Motor Distributors, Inc. and OCT Partnership.
* 10.2.18 Mitsubishi Motor Sales of America, Inc. Sales and Service
Agreement, dated June 30, 1994, between Mitsubishi Motor
Sales of America, Inc. and OCM Partnership.
* 10.2.19 Chrysler Corporation Jeep Sales and Service Agreement, dated
October 8, 1992, between DiFeo Jeep-Eagle Partnership and
Chrysler Corporation.
* 10.2.20 Chevrolet-Geo Dealer Sales and Service Agreement, dated
November 1, 1995 between General Motors Corporation,
Chevrolet Motor Division and DiFeo Chevrolet-Geo Partnership
* 10.2.21 Isuzu Dealer Sales and Service Agreement, dated as of
September 16, 1996 between American Isuzu Motors, Inc. and
Fair Cadillac-Oldsmobile-Isuzu Partnership.
* 10.2.22 Isuzu Dealer Sales and Service Agreement Additional
Provisions.
* 10.2.26 Settlement Agreement, dated as of October 3, 1996, among the
Company and certain of its affiliates, on the one hand, and
Samuel X. DiFeo, Joseph C. DiFeo and certain of their
affiliates, on the other hand.
* 10.2.27 Form of Agreement and Plan of Merger used in the Minority
Exchange of the DiFeo Group.
* 10.2.28 Form of Lease of certain facilities in the DiFeo Group.
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<PAGE>
* 10.2.29 Lease Agreement, dated September 27, 1990, between J&F
Associates and TJGHCC Associates.
* 10.2.30 Lease Agreement, dated October 1, 1992, between Manly
Chevrolet, Inc. and County Toyota, Inc.
* 10.2.31 Sublease, dated October 1, 1992, between DiFeo BMW, Inc. and
DiFeo BMW Partnership.
10.2.32 Security Agreement and Master Credit Agreement, dated
November 22, 1996, between DiFeo Nissan Partnership and
Chrysler Credit Corporation (substantially similar to
exhibit 10.4.16 to the Company's Registration Statement on
Form S-1, Registration No. 333-09429) (a substantially
similar agreement exists with each dealership in the DiFeo
Group).
* 10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995,
between Atlantic Auto Funding Corporation and Atlantic Auto
Finance Corporation.
* 10.3.2 Loan and Security Agreement, dated as of June 28, 1995,
among Atlantic Auto Funding Corporation, Atlantic Auto
Finance Corporation and Citibank, N.A.
* 10.3.3 Support Agreement of the Company, dated as of June 28, 1995,
in favor of Atlantic Auto Funding Corporation.
* 10.3.4 Purchase Agreement, dated as of June 14, 1996, between
Atlantic Auto Finance Corporation and Atlantic Auto Second
Funding Corporation.
* 10.3.5 Transfer and Administration Agreement, dated as of June 14,
1996, among Atlantic Auto Second Funding Corporation,
Atlantic Auto Finance Corporation and Morgan Guaranty Trust
Company of New York.
* 10.3.6 Support Agreement of the Company, dated as of June 18, 1996,
in favor of Atlantic Auto Second Funding Corporation.
* 10.3.7 Pooling and Servicing Agreement relating to Atlantic Auto
Grantor Trust 1996-A, dated as of June 20, 1996, among
Atlantic Auto Third Funding Corporation, Atlantic Auto
Finance Corporation and The Chase Manhattan Bank.
* 10.3.8 Insurance and Indemnity Agreement, dated as of June 20,
1996, among Financial Security Assurance Inc., Atlantic Auto
Third Funding Corporation and Atlantic Auto Finance
Corporation.
* 10.3.9 Master Spread Account Agreement, dated as of June 20, 1996,
among Atlantic Auto Third Funding Corporation, Financial
Security Assurance Inc. and The Chase Manhattan Bank.
* 10.3.10 Lease Agreement, dated as of March 18, 1994, between
Perinton Hills and the Company, including guaranty of lease
of Atlantic Auto Finance Corporation.
* 10.4.1 Amended and Restated Stock Purchase Agreement, dated as of
July 1, 1995, among the Company, Landers Auto Sales, Inc.,
Steve Landers, John Landers and Bob Landers.
* 10.4.2 Promissory Note of the Company, dated August 1, 1995, in
favor of Steve Landers and John Landers.
* 10.4.3 Promissory Note of the Company, dated August 1, 1995, in
favor of Steve Landers and John Landers.
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<PAGE>
* 10.4.4 Guarantee of the Company, dated as of August 1, 1995, in
favor of Steve Landers and John Landers.
* 10.4.5 Employment Agreement, dated as of August 1, 1995, between
Landers Auto Sales, Inc. and Steve Landers.
* 10.4.6 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Jeep-Eagle premises.
* 10.4.7 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Oldsmobile-GMC premises.
* 10.4.8 Shareholders' Agreement, dated as of August 1, 1995, among
the Company, United Landers, Inc., Landers Auto Sales, Inc.,
Steve Landers and John Landers.
* 10.4.9 Chrysler Corporation Eagle Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.
* 10.4.10 Chrysler Corporation Jeep Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
* 10.4.11 Chrysler Corporation Dodge Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.
* 10.4.12 Chrysler Corporation Plymouth Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.
* 10.4.13 Chrysler Corporation Chrysler Sales and Service Agreement,
dated August 16, 1995, between United Landers Auto Sales,
Inc. and Chrysler Corporation.
* 10.4.14 Oldsmobile Division Dealer Sales and Service Agreement,
dated November 1, 1995, between General Motors Corporation,
Oldsmobile Division and United Landers Auto Sales, Inc.
* 10.4.15 GMC Truck Division Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation, GMC
Truck Division and United Landers Auto Sales, Inc.
* 10.4.16 Security Agreement and Master Credit Agreement, dated
October 25, 1993, between Landers Oldsmobile-GMC Inc. and
Chrysler Credit Corporation.
* 10.4.17 Security Agreement and Master Credit Agreement, dated May
17, 1989, between Landers Jeep-Eagle, Inc. and Chrysler
Credit Corporation.
* 10.4.18 Continuing Guaranty of United Landers, Inc., dated August
15, 1994, in favor of Chrysler Credit Corporation.
* 10.4.19 Commercial Loan Agreement, dated December 5, 1994, between
Landers Oldsmobile-GMC, Inc. and The Benton State Bank.
* 10.4.20 Commercial Security Agreement, dated December 5, 1994,
between Landers Oldsmobile-GMC, Inc. and The Benton State
Bank.
* 10.4.21 Agreement, dated July 31, 1995, between the Company and
General Motors Corporation, Oldsmobile Division.
* 10.5.1 Stock Purchase Agreement, dated as of November 17, 1995,
among the Company, UAG Atlanta, Inc., Atlanta Toyota, Inc,
and Carl H. Westcott.
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<PAGE>
* 10.5.2 Promissory Note of UAG Atlanta, Inc., dated January 16,
1996, in favor of Carl H. Westcott.
* 10.5.3 Guaranty of the Company, dated as of January 16, 1996, in
favor of Carl H. Westcott.
* 10.5.4 Promissory Note of Atlanta Toyota, Inc., dated January 16,
1996, in favor of First Extended Service Corporation.
* 10.5.5 Guaranty of the Company, dated as of January 16, 1996, in
favor of Carl H. Westcott.
* 10.5.61 Lease Agreement, dated as of January 3, 1996, between Carl
Westcott and Atlanta Toyota, Inc.
* 10.5.7 Lease Guaranty of the Company, dated as of January 16, 1995,
in favor of Carl Westcott.
* 10.5.8 Toyota Dealer Agreement, dated January 16, 1996, between
Southeast Toyota Motor Distributors, Inc. and Atlanta
Toyota, Inc.
* 10.5.9 Wholesale Floor Plan Security Agreement, dated May 24, 1996,
between World Omni Financial Corp. and Atlanta Toyota, Inc.
* 10.5.10 Continuing Guaranty of the Company in favor of World Omni
Financial Corp. and certain affiliates.
* 10.5.11 Inventory Financing Payment Agreement, dated May 24, 1996,
among Atlanta Toyota, Inc., Fidelity Warranty Services, Inc.
and World Omni Financial Corp.
* 10.5.12 Shareholders' Agreement, dated as of July 31, 1996, among
the Company, UAG Atlanta, Inc., Atlanta Toyota and John
Smith.
* 10.5.13 Employment Agreement, dated as of January 16, 1996, among
the Company, UAG Atlanta, Inc. and John Smith.
* 10.6.1 Stock Purchase Agreement, dated as of March 1, 1996, among
the Company, UAG Atlanta II, Inc., Steve Rayman Nissan,
Inc., Steven L. Rayman and Richard W. Keffer, Jr.
* 10.6.2 Employment Agreement, dated as of May 1, 1996, among the
Company, UAG Atlanta II, In., Steve Rayman Nissan, Inc. and
Bruce G. Dunker.
* 10.6.3 Lease Agreement, dated as of May 1, 1996, among Steven L.
Rayman, Richard W. Keffer, Jr. and Steve Rayman Nissan, Inc.
* 10.6.4 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
United Nissan, Inc.
* 10.6.5 Wholesale Floor Plan Security Agreement, dated April 29,
1996, between World Omni Financial Corp. and United Nissan,
Inc.
* 10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in
favor of World Omni Financial Corp. and certain affiliates.
* 10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among
the Company, UAG Atlanta III, Inc. Hickman Nissan, Inc.,
Lynda Jane Hickman and Lynda Jane Hickman as Executrix under
the will of James Franklin Hickman, Jr., deceased.
* 10.7.2 Nissan Dealer Term Sales and Service Agreement, between the
Nissan Division of Nissan Motor Corporation in U.S.A. and
Peachtree Nissan, Inc.
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<PAGE>
* 10.7.3 Automotive Wholesale Financing and Security Agreement, dated
July 12, 1996, between Nissan Motor Acceptance Corporation
and Peachtree Nissan, Inc.
* 10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated
July 12, 1996, in favor of Nissan Motor Acceptance
Corporation.
* 10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12,
996, in favor of Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr.
* 10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12,
1996, in favor of Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr.
* 10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in
favor of Lynda Jane Hickman, as Executrix under the will of
James Franklin Hickman, Jr.
* 10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane
Hickman, as Executrix under the will of James Franklin
Hickman, Jr., and Hickman Nissan, Inc.
* 10.7.9 Lease Agreement, dated July 12, 1996, between Argonne
Enterprises, Inc. and Hickman Nissan, Inc.
* 10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in
favor of Lynda Jane Hickman, Jr.
* 10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in
favor of Argonne Enterprises, Inc.
* 10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among
the Company, UAG West, Inc., Scottsdale Jaguar, LTD., SA
Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD.,
LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD.,
6725 Dealership LTD., Steven Knappenberger Revocable Trust
Dated April 15, 1983, as amended, Brochick 6725 Trust dated
December 29, 1992, Beskind 6725 Trust dated December 29,
1992, Steven Knappenberger, Jay P. Beskind December 29,
1992, Knappenberger 6725 Trust dated and George W. Brochick,
as amended on October 21, 1996 by Amendment No. 1, Amendment
No. 2 and Amendment No. 3.
* 10.8.2 Purchase and Sale Agreement, 6905 E. McDowell Road, dated
June 6, 1996, among Steven Knappenberger, as Trustee of the
Steven Knappenberger Revocable Trust II, Bruce
Knappenberger, as Trustee of the Bruce Knappenberger Trust
and UAG West, Inc. and Steven Knappenberger.
* 10.8.3 Form of Employment Agreement between the Company, UAG West,
Inc., and Steven Knappenberger.
* 10.8.4 Form of Broker's Agreement between UAG West, Inc. and KBB,
Inc.
* 10.8.5.1 Form of Audi Dealer Agreement.
* 10.8.5.2 Audi Standard Provisions.
* 10.8.6.1 Form of Acura Automobile Dealer Sales and Service Agreement.
* 10.8.6.2 Acura Standard Provisions.
* 10.8.7.1 Form of BMW of North America Dealer Agreement.
* 10.8.8.1 Form of Porsche Sales and Service Agreement.
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* 10.8.8.2 Form of Addendum to Porsche Sales and Service Agreement.
* 10.8.9.1 Form of Land Rover North America, Inc. Dealer Agreement.
* 10.8.9.2 Land Rover Standard Provisions.
* 10.8.10 Sublease, dated June 7, 1988, between Max of Switzerland and
Scottsdale Porsche & Audi, Ltd.
* 10.8.11 Lease, dated October 1990, between Lisa B. Zelinsky and R.J.
Morgan Corporation of America and Scottsdale Hyundai, Ltd.
* 10.8.12 Sublease, dated July 1, 1995, between Camelback Automotive,
Inc. and LRP Ltd.
* 10.8.13 Lease, dated February 27, 1995, between Lee S. Maas and Sun
BMW Ltd.
* 10.8.14 Form of Shareholders' Agreement among UAG West, Inc., SK
Motors, Ltd., and the Knappenberger Revocable Trust.
* 10.8.15 Form of Management Agreement among the Company, UAG West,
Inc. and Scottsdale Jaguar, Ltd.
* 10.8.16 Form of Lease Agreement between 6725 Agent and Scottsdale
Jaguar, Ltd.
* 10.8.17 Form of Indemnification Agreement among the Company, UAG
West, Inc., Scottsdale Jaguar, Ltd., Steven Knappenberger,
and certain other individuals and trusts.
* 10.8.18 Form of Real Estate Loan and Security Agreement, made by SA
Automotive, Ltd. for the benefit of Chrysler Financial
Corporation.
* 10.8.19 Form of Security Agreement and Master Credit Agreement of
Chrysler Credit Corporation.
* 10.8.20 Form of Continuing Guaranty of each of the Company and UAG
West, Inc. in favor of Chrysler Credit Corporation.
10.8.21 Dealer Agreement, dated as of February 28, 1997, between
Rolls-Royce Motor Cars Inc. and Scottsdale Audi, Ltd.
* 10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the
Company, UAG Atlanta IV, Inc., Charles Evans BMW, Inc. and
Charles F. Evans.
* 10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the
Company, UAG Atlanta IV, Inc., Charles Evans Nissan, Inc.
and Charles F. Evans.
* 10.9.3 Form of Dealer Agreement between BMW North America, Inc. and
Charles Evans BMW Inc.
* 10.9.4 Form of Nissan Dealer Term Sales and Service Agreement
between Nissan Motor Corporation in U.S.A. and Charles Evans
Nissan, Inc.
* 10.9.5 Form of Lease Agreement between Charles F. Evans and Charles
Evans BMW, Inc.
* 10.9.6 Form of Lease Guaranty of the Company in favor of Charles F.
Evans.
* 10.9.7 Form of Lease Agreement between Charles F. Evans and Charles
Evans Nissan, Inc.
* 10.9.8 Form of Lease Guaranty of the Company in favor of Charles F.
Evans.
* 10.9.9 Form of Purchase and Sale Agreement for Charles Evans BMW
Property between Charles F. Evans and the Company.
* 10.9.10 Form of Purchase and Sale Agreement for Charles Evans Nissan
Property between Charles F. Evans and the Company.
26
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* 10.9.11 Form of Inventory Financing and Security Agreement between
BMW Financial Services NA, Inc. and UAG Atlanta IV Motors
Inc.
* 10.9.12 Form of Guaranty of the Company in favor of BMW Financial
Services NA, Inc.
* 10.9.13 Form of Inventory Financing and Security Agreement between
BMW Financial Services NA, Inc. and Conyers Nissan, Inc.
* 10.9.14 Form of Guaranty of the Company in favor of BMW Financial
Services NA, Inc.
* 10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the
Company, UAG Tennessee, Inc., Standefer Motor Sales, Inc.,
Charles A. Standefer and Charles A. Standefer and Karen S.
Nicely, trustees under the Irrevocable Trust Agreement of
Charles B. Standefer for the primary benefit of children,
dated December 21, 1992.
* 10.10.2 Form of Nissan Dealer Term Sales and Service Agreement
between Nissan Motor Corporation in U.S.A. and Conyers
Nissan, Inc.
* 10.10.3 Form of Lease Agreement between Standefer Investment Company
and Standefer Motor Sales, Inc.
* 10.10.4 Form of Lease Guaranty of the Company in favor of Standefer
Investment Company.
* 10.10.5 Form of Security Agreement and Master Credit Agreement
between Chrysler Credit Corporation and Standefer Motor
Sales, Inc.
* 10.10.6 Form of Continuing Guaranty of each of the Company and UAG
Tennessee, Inc. in favor of Chrysler Credit Corporation.
** 10.11.1 Agreement and Plan of Merger, dated December 16, 1996, among
Crown Jeep Eagle, Inc., Berylson, Inc., Shannon Automotive,
Ltd., Kevin J. Coffey, Paul J. Rhodes, the Company, UAG
Texas, Inc. and UAG Texas II, Inc.
**** 10.11.2 Chrysler Corporation Dodge Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
**** 10.11.3 Chrysler Corporation Jeep Sales and Service Agreement, dated
April 2, 1997, between Shannon Automotive, Ltd. and Chrysler
Corporation (substantially similar to exhibit 10.2.10.1 to
the Company's Registration Statement on Form S-1,
Registration No. 333-09429).
**** 10.11.4 Chrysler Corporation Eagle Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
**** 10.11.5 Chrysler Corporation Chrysler Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
27
<PAGE>
**** 10.11.6 Chrysler Corporation Plymouth Sales and Service Agreement,
dated April 2, 1997, between Shannon Automotive, Ltd. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
10.12.1 Stock Purchase Agreement, dated February 7, 1997, among the
Company, UAG Nevada, Inc., Gary Hanna Nissan, Inc., The Gary
W. Hanna Family Trust Restated December 18, 1990 and Gary W.
Hanna, as amended April 22, 1997.
10.12.2 Nissan Dealer Term Sales and Service Agreement, dated April,
22 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and Gary Hanna Nissan, Inc.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.12.3 Security Agreement and Master Credit Agreement, dated April
22, 1997, between Gary Hanna Nissan, Inc. and Chrysler
Credit Corporation (substantially similar to exhibit 10.4.16
to the Company's Registration Statement on Form S-1,
Registration No. 333-09429).
10.13.1 Stock Purchase Agreement, dated February 19, 1997, among the
Company, UAG East, Inc., Amity Auto Plaza Ltd., Massapequa
Imports Ltd., Westbury Nissan Ltd., Westbury Superstore
Ltd., J&S Auto Refinishing Ltd., Florida Chrysler Plymouth
Jeep Eagle Inc., Palm Auto Plaza Inc., West Palm Infiniti
Inc., West Palm Nissan Inc., Northlake Auto Finish Inc.,
John A. Staluppi and John A. Staluppi, Jr., as amended April
7, 1997 and April 30, 1997
10.13.2 Chrysler Corporation Eagle Sales and Service Agreement,
dated May 2, 1997, between Florida Chrysler Plymouth, Inc.
and Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
10.13.3 Chrysler Corporation Chrysler Sales and Service Agreement,
dated May 2, 1997, between Florida Chrysler Plymouth, Inc.
and Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
10.13.4 Chrysler Corporation Jeep Sales and Service Agreement, dated
May 2, 1997, between Florida Chrysler Plymouth, Inc. and
Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
10.13.5 Chrysler Corporation Plymouth Sales and Service Agreement,
dated May 2, 1997, between Florida Chrysler Plymouth, Inc.
and Chrysler Corporation (substantially similar to exhibit
10.2.10.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-09429).
10.13.6 Toyota Dealer Agreement, dated June 16, 1997, between
Southeast Toyota Distributors, Inc. and Palm Auto Plaza,
Inc. (substantially similar to exhibit 10.2.10.1 to the
Company's Registration Statement on Form S-1, Registration
No. 333-09429).
28
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10.13.7 Toyota Dealer Agreement, dated June 18, 1997, between Toyota
Motor Sales, U.S.A., Inc. and Westbury Superstore, Ltd.
(substantially similar to exhibit 10.2.10.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.13.8 Toyota Dealer Agreement, dated June 18, 1997, between Toyota
Motor Sales, U.S.A., Inc. and Amity Auto Plaza, Ltd.
(substantially similar to exhibit 10.2.10.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.13.9 Nissan Dealer Term Sales and Service Agreement, dated April
30, 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and Amity Nissan of Massapequa, Ltd.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.13.10 Nissan Dealer Term Sales and Service Agreement, dated April
30, 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and West Palm Nissan, Inc.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.13.11 Nissan Dealer Term Sales and Service Agreement, dated April
30, 1997, between the Nissan Division of Nissan Motor
Corporation in U.S.A. and Westbury Nissan, Ltd.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.13.12 Infiniti Dealer Term Sales and Service Agreement, dated
April 30, 1997, between the Infiniti Division of Nissan
Motor Corporation in U.S.A. and West Palm Infiniti, Inc.
(substantially similar to exhibit 10.2.9.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.13.13 Wholesale Floor Plan Security Agreement, dated April 30,
1997, between World Omni Financial Corp. and Florida
Chrysler Plymouth, Inc. (substantially similar to exhibit
10.5.9 to the Company's Registration Statement on Form S-1,
Registration No. 333-09429)(a substantially similar
agreement exists with each dealership in the Staluppi
Group).
**** 10.14.1 Stock Purchase Agreement, dated March 5, 1997, among the
Company, Marshal Mize Ford, Inc., Wade Ford, Inc., Wade Ford
Buford, Inc., Marshal D. Mize, Alan K. Arnold, Lewis J. Dyer
and Gary R. Billings.
10.15.1 Stock Purchase Agreement, dated April 12, 1997, among the
Company, Gene Reed Chevrolet, Inc., Michael
Chevrolet-Oldsmobile, Inc., Reed-Lallier Chevrolet, Inc.,
Gene Reed, Jr., Michael L. Reed, Michael G. Lallier, Deborah
B. Lallier, John P. Jones, Charles J. Bradshaw, Charles J.
Bradshaw, Jr., Julia D. Bradshaw and William B. Bradshaw, as
amended May 31, 1997.
29
<PAGE>
10.15.2 Chevrolet-Geo Dealer Sales and Service Agreement, dated June
1, 1997, between General Motors Corporation, Chevrolet Motor
Division and Gene Reed Chevrolet, Inc. (substantially
similar to exhibit 10.2.8.1 to the Company's Registration
Statement on Form S-1, Registration No. 333-09429).
10.15.3 Chevrolet-Geo Dealer Sales and Service Agreement, dated June
1, 1997, between General Motors Corporation, Chevrolet Motor
Division and Reed-Lallier Chevrolet, Inc. (substantially
similar to exhibit 10.2.8.1 to the Company's Registration
Statement on Form S-1, Registration No. 333-09429).
10.15.4 Chevrolet-Geo Dealer Sales and Service Agreement, dated June
1, 1997, between General Motors Corporation, Chevrolet Motor
Division and Michael Chevrolet-Oldsmobile, Inc.
(substantially similar to exhibit 10.2.8.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.15.5 Wholesale Security Agreement, dated April 1, 1981, between
General Motors Acceptance Corporation and Gene Reed
Chevrolet, Inc., as amended September 3, 1992, April 3, 1995
and September 27, 1996 (a substantially similar agreement
exists with each dealership in the Reed Group).
10.16.1 Stock Purchase Agreement, dated January 8, 1997, by and
among the Company, Landers Auto Sales, Inc., Landers United
Auto Group No. 4, Inc., Landers Buick Pontiac, Inc. and
Lance Landers, as amended January 8, 1997.
10.16.2 Isuzu Dealer Sales and Service Agreement, dated as of June
6, 1997, between American Isuzu Motors, Inc. and Landers
Auto Sales, Inc. (substantially similar to exhibit 10.2.2.1
to the Company's Registration Statement on Form S-1,
Registration No. 333-09429).
10.16.3 Pontiac-GMC Division Dealer Sales and Service Agreement,
dated June 6, 1997, between General Motors Corporation,
Pontiac and Landers Buick-Pontiac, Inc. (substantially
similar to exhibit 10.2.7.1 to the Company's Registration
Statement on Form S-1, Registration No. 333-09429).
10.16.4 Security Agreement and Master Credit Agreement, dated June
13, 1997, between Landers Buick-Pontiac, Inc. and Chrysler
Credit Corporation (substantially similar to exhibit 10.4.16
to the Company's Registration Statement on Form S-1,
Registration No. 333-09429).
27.1 Financial Data Schedule.
- -------------------
* Incorporated herein by reference to the identically numbered exhibit to
the Company's Registration Statement on Form S-1, Registration No.
333-09429.
** Incorporated herein by reference to the identically numbered exhibit to
the Company's Current Report on Form 8-K filed on December 24, 1996,
File No. 1-12297.
*** Incorporated herein by reference to the identically numbered exhibit to
the Company's Annual Report on Form 10-K for the year ended December
31, 1996, File No. 1-12297.
**** Incorporated herein by reference to the identically numbered exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, File No. 1-12297.
30
<PAGE>
(b) Reports on Form 8-K.
The Company filed the following Current Reports on Form 8-K during the quarter
ended June 30, 1997:
1. April 21, 1997, reporting under Items 5 and 7 (announcement of Reed
Group acquisition).
2. April 30, 1997, reporting under Item 7 (Crown Automotive financial
information).
3. May 9, 1997, reporting under Item 5 (consummation of Hanna Nissan
acquisition).
4. May 15, 1997, reporting under Items 2 and 7 (consummation of Staluppi
Group acquisition).
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED AUTO GROUP, INC.
By: /s/ Marshall S. Cogan
---------------------------------
Marshall S. Cogan
Chairman of the Board,
Chief Executive Officer and
President
Date: August 14, 1997
By: /s/ James R. Davidson
---------------------------------
James R. Davidson
Senior Vice President-Finance and
Treasurer
(Chief Accounting Officer)
Date: August 14, 1997
32
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into this 31st day of May, 1997, by and among United Auto Group,
Inc., a Delaware corporation (the "Company") and Gene Reed, Jr., Michael L.
Reed, Michael G. Lallier, Deborah B. Lallier, John P. Jones, Charles J.
Bradshaw, Charles J. Bradshaw, Jr., Julia D. Bradshaw and William B. Bradshaw
(collectively, the "Stockholders").
IN CONSIDERATION of the mutual promises and covenants set forth
herein, and intending to be legally bound, the parties hereto hereby agree as
follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1. CERTAIN DEFINITIONS. The following terms shall have the
meanings set forth below:
(a) "Holder" shall mean the Stockholders and any holder of
Registrable Securities to whom the rights conferred by this Agreement have
been transferred in compliance with Section 1.2 hereof.
(b) "Other Stockholders" shall mean persons who, by virtue
of agreements with the Company other than this Agreement, are entitled to
include their securities in certain registrations hereunder.
(c) "Prior Holder" shall mean any person or entity who has
previously been granted rights pursuant to an agreement with the Company (the
"Prior Registration Rights Agreements") to have shares of UAG Stock (as
defined below) registered under the Securities Act of 1933, as amended (the
"Securities Act").
(d) "Registrable Securities" shall mean shares of the
Company's common stock, $.0001 par value per share (the "UAG Stock") issued to
the Stockholders pursuant to that certain Stock Purchase Agreement dated April
12, 1997, between UAG, Gene Reed Chevrolet, Inc., Michael
Chevrolet-Oldsmobile, Inc., Reed-Lallier Chevrolet, Inc., and the Stockholders
(the "Stock Purchase Agreement"), provided that Registrable Securities shall
not include any shares of UAG Stock which have previously been registered or
which have been sold to the public or which have been sold in a private
transaction in which the transferor's rights under this Agreement are not
assigned.
(e) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and applicable rules and
regulations
<PAGE>
thereunder and the declaration or ordering of the effectiveness of such
registration statement.
(f) "Registration Expenses" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and expenses of any regular or special audits incident
to or required by any such registration, but shall not include (i) Selling
Expenses (as hereafter defined), (ii) fees and disbursements of counsel for
the Holders, (iii) the compensation of regular employees of the Company, which
shall be paid in any event by the Company, and (iv) blue sky fees and expenses
incurred in connection with the registration or qualification of any
Registrable Securities in any state, province or other jurisdiction in a
registration pursuant to Section 1.3 hereof to the extent that the Company
shall otherwise be making no offers or sales in such state, province or other
jurisdiction in connection with such registration.
(g) "Restricted Securities" shall mean any Registrable
Securities required to bear the legend set forth in Section 1.2(c) hereof.
(h) "Rule 144" shall mean Rule 144 as promulgated by the SEC
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
(i) "Rule 145" shall mean Rule 145 as promulgated by the SEC
under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
(j) "Selling Expenses" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to the sale
of Registrable Securities.
1.2. RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Registrable Securities unless and until (i) there is then
in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement, or (ii) the transferee has agreed in writing for the
benefit of the Company to be bound by this Section 1.2 (unless waived by the
Company) and (A) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition and (B) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably
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<PAGE>
satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act, it being understood that
the Company will not require opinions of counsel for transactions made
pursuant to Rule 144 except in unusual circumstances.
(b) Notwithstanding the provisions of subparagraphs (i) and
(ii) of paragraph (a) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder which is (A) a
partnership to its partners in accordance with partnership interests, or (B)
to the Holder's family member or a trust for the benefit of an individual
Holder or one or more of his family members, provided the transferee will be
subject to the terms of this Section 1.2 to the same extent as if he were an
original Holder hereunder.
(c) Each certificate representing Registrable Securities
shall (unless otherwise permitted by the provisions of this Agreement) be
stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
(d) The Company shall be obligated to promptly reissue
certificates without legends at the request of any Holder thereof if the
Holder shall have obtained an opinion of counsel (which counsel may be counsel
to the Company) reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of in
compliance with the Securities Act without registration, qualification or
legend.
(e) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with
respect to such securities shall be removed upon receipt by the Company of an
order of the appropriate blue sky authority authorizing such removal or if the
Holder shall request such removal and shall have obtained and delivered to the
Company an opinion of counsel reasonably acceptable to the Company to the
effect that such legend and/or stop-transfer instructions are no longer
required pursuant to applicable state securities laws.
1.3. COMPANY REGISTRATION.
(a) Right to Piggyback. If, at any time after the date
hereof, the Company shall determine to register any of
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<PAGE>
its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than
a registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction, or a registration on any
registration form that does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice
thereof, which notice briefly describes the Holders' rights under
this Section 1.3 (including notice deadlines); and
(ii) use its best efforts to include in such
registration (and any related filing or qualification under
applicable blue sky laws), except as set forth in Section 1.3(b)
below, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests,
made by any Holder and received by the Company within twenty (20)
days after the written notice from the Company described in clause
(i) above is mailed or delivered by the Company, provided that
such Holders shall have requested for inclusion in such
registration at least twenty-five (25%) of the aggregate number of
the Registrable Securities which have been issued to the Holder
prior to the date of such written request. Such written request
may specify all or a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders of securities of the
Company with registration rights to participate therein distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting.
The Company shall so advise all Holders of securities requesting registration,
and the number of shares of securities that are entitled to be included in the
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<PAGE>
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in
Section 1.9. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the
Company or the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
If shares are so withdrawn from the registration and if the number
of shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such
shares to be allocated among the persons requesting additional inclusion in
accordance with Section 1.9 hereof.
1.4. EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof shall be borne by the Company. All Selling Expenses
relating to securities so registered shall be borne by the holders of such
securities pro rata on the basis of the number of shares of securities so
registered on their behalf.
1.5. REGISTRATION PROCEDURES. In the case of each
registration effected by the Company pursuant to Section 1.3 hereof, the
Company will keep each Holder advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company
will use its best efforts to:
(a) keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs, provided that such 120-day period shall be extended
for a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of any underwriter;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus,
as a Holder from time to time may reasonably request;
-5-
<PAGE>
(d) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light of
the circumstances then existing, and at the request of any such Holder,
prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing; provided, however, that the Company shall not be
obligated to prepare and furnish any such prospectus supplements or amendments
relating to any material nonpublic information at any such time as the Board
of Directors of the Company has determined that, for good business reasons,
the disclosure of such material nonpublic information at that time is contrary
to the best interests of the Company in the circumstances and is not otherwise
required under applicable law (including applicable securities laws);
(e) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange and/or included in
any national quotation system on which similar securities issued by the
Company are then listed or included;
(f) provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and
a CUSIP number for all such Registrable Securities, in each case not later
than the effective date of such registration;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act; and
(h) in connection with any underwritten offering pursuant to
a registration statement filed pursuant to Section 1.3 hereof, the Company
will enter into an underwriting agreement reasonably necessary to effect the
offer and sale of Registrable Securities, provided such underwriting agreement
contains customary underwriting provisions and provided further that if
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<PAGE>
the underwriter so requests, the underwriting agreement will contain customary
indemnity and contribution provisions.
1.6. INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors and partners, legal counsel, and accountants and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification, or
compliance has been effected pursuant to this Section 1, and each underwriter,
if any, and each person who controls within the meaning of Section 15 of the
Securities Act any underwriter, against all expenses, claims, losses, damages,
and liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular, or other
document (including any related registration statement, notification, or the
like) incident to any such registration, qualification, or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule
or regulation thereunder applicable to the Company or relating to action or
inaction required of the Company in connection with any such registration,
qualification, or compliance, and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and accountants and each person
controlling such Holder, each such underwriter, and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending or settling any such claim,
loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such
Holder or underwriter and stated to be specifically for use therein. It is
agreed that the indemnity agreement contained in this Section 1.6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him
are included in the securities as to which such registration, qualification,
or compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if
any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other
Stockholders, and each of their officers, directors, and partners, and each
person controlling
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<PAGE>
such Holder or Other Stockholders, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and such Holders, Other
Stockholders, directors, officers, partners, legal counsel, and accountants,
persons, underwriters, or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld) and (ii) that in no
event shall any indemnity under this Section 1.6 exceed the gross proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this
Section 1.6 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of
such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1, to the extent such failure is not prejudicial. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and litigation
resulting therefrom.
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<PAGE>
(d) If the indemnification provided for in this Section 1.6
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the conduct, statements or
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Indemnifying Party or by the Indemnified Party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
1.7. INFORMATION BY HOLDER. Each Holder of Registrable
Securities shall furnish to the Company such information regarding such Holder
and the distribution proposed by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 1.
1.8. RULE 144 REPORTING. With a view to making available
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities and Exchange Act of 1934 (the "Exchange Act"); and
(c) so long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request
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<PAGE>
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a Holder to sell
any such securities without registration.
1.9. ALLOCATION OF REGISTRATION OPPORTUNITIES. Subject to the
rights of the Prior Holders contained in the Prior Registration Rights
Agreements, notwithstanding any other provision of this Section 1.9, in any
circumstance in which all of the Registrable Securities and other shares of
the Company with registration rights (the "Other Shares") requested to be
included in a registration on behalf of the Holders or Other Stockholders
cannot be so included as a result of limitations of the aggregate number of
shares of Registrable Securities and Other Shares that may be so included, the
number of shares of Registrable Securities and Other Shares that may be so
included shall be allocated among the Holders and Other Stockholders
requesting inclusion of shares pro rata on the basis of the number of shares
of Registrable Securities and Other Shares held by such Holders and Other
Stockholders; provided, however, that such allocation shall not operate to
reduce the aggregate number of Registrable Securities and Other Shares to be
included in such registration, if any Holder or Other Stockholders does not
request inclusion of the maximum number of shares of Registrable Securities
and Other Shares allocated to him pursuant to the above-described procedure,
the remaining portion of his allocation shall be reallocated among those
requesting Holders and Other Stockholders whose allocations did not satisfy
their requests pro rata on the basis of the number of shares of Registrable
Securities and Other Shares which would be held by such Holders and Other
Stockholders, assuming conversion, and this procedure shall be repeated until
all of the shares of Registrable Securities and Other Shares which may be
included in the registration on behalf of the Holders and Other Stockholders
have been so allocated.
1.10. DELAY OF REGISTRATION. No Holder shall have any
right to take any action to restrain, enjoin, or otherwise delay any
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Stockholders as follows:
(a) The execution, delivery and performance of this
Agreement by the Company has been duly authorized by all
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<PAGE>
requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or Bylaws of the Company, or any provision of any material
indenture, agreement or other instrument to which it or any of its properties
or assets is bound, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any such material
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon
any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and public policy
considerations.
2.2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The
Stockholders represents and warrants to the Company as follows:
(a) The execution, delivery and performance of this
Agreement by the Stockholders will not violate any provision of law, any order
of any court or any agency or government, or any provision of any material
indenture or agreement or other instrument to which he or any of his
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
material indenture, agreement or other instrument, or result in the creation
or imposition of any lien, charge, or encumbrance of any nature whatsoever
upon any of the properties or assets of the Stockholders.
(b) This Agreement has been duly executed and delivered by
the Stockholders and constitutes the legal, valid and binding obligation of
the Stockholders, enforceable against the Stockholders in accordance with its
terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforceability of creditors' rights generally, general equitable
principles, the discretion of courts in granting equitable remedies and public
policy considerations.
3. MISCELLANEOUS
3.1. LOCKUP AGREEMENT. In consideration for the Company's
agreeing to its obligations under this Agreement, each Holder agrees that upon
prior notice by the Company to such Holder and effective upon the request of
the underwriters managing a public offering for sale by the Company of its
securities, such Holder shall be obligated for the lesser of 120
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<PAGE>
days or the length of time the Company has agreed to be bound not to sell,
loan, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those included in the registration and
other than to any transferee which agrees to be bound by this Section 3.1)
without the prior written consent of such underwriters.
3.2. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Delaware, as if entered into by and
between Delaware residents exclusively for performance entirely within
Delaware.
3.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
3.4. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
constitutes the full and entire understanding and agreement between the
parties with regard to the subject hereof and thereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except
by a written instrument signed by the Company and the Holders of at least
fifty-one percent (51%) of the Registrable Securities and any such amendment,
waiver, discharge or termination shall be binding on all the Holders, but in
no event shall the obligation of any Holder hereunder be materially increased,
except upon the written consent of such Holder.
3.5. NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
United States first-class mail, postage prepaid, or delivered personally by
hand or nationally recognized courier addressed (a) if to a Holder, as
indicated in the stock records of the Company or at such other address as such
Holder shall have furnished to the Company in writing, or (b) if to the
Company, at United Auto Group, Inc., 375 Park Avenue, Suite 2201, New York,
New York 10152 or at such other address as the Company shall have furnished to
each Holder in writing. All such notices and other written communications
shall be effective on the date of mailing or delivery.
3.6. DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any Holder, upon any breach or default of
the Company under this Agreement shall impair any such right, power or remedy
of such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions
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<PAGE>
of this Agreement must be made in writing and shall be effective only to the
extent specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
3.7. RIGHTS; SEVERABILITY. Unless otherwise expressly provided
herein, a Holder's rights hereunder are several rights, not rights jointly
held with any of the other Holders. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
3.8. INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its
use only, and it will not use such confidential information in violation of
the Exchange Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with
the exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or such Holder is required to
disclose such information by a governmental body.
3.9. TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
3.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.11. PRIOR REGISTRATION RIGHTS AGREEMENTS. To the extent that
any of the provisions herein conflict with any provisions of the Prior
Registration Rights Agreements, such conflicts shall be resolved in favor of
the rights granted in the Prior Registration Rights Agreements.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
sealed this Agreement or have caused this Agreement to be duly executed under
seal on its behalf by an officer or representative thereto duly authorized,
all as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ George Gl Lowrance
----------------------------------------
George G. Lowrance
Executive Vice President
/s/ Gene Reed, Jr.
-------------------------------------------
Gene Reed, Jr.
/s/ Gene Reed, Jr.
-------------------------------------------
Michael L. Reed, by Gene Reed, Jr.
as attorney-in-fact
/s/ Gene Reed, Jr.
-------------------------------------------
Michael G. Lallier, by Gene Reed, Jr.
as attorney-in-fact
/s/ Gene Reed, Jr.
-------------------------------------------
Deborah B. Lallier, by Gene Reed, Jr.
as attorney-in-fact
[Signatures continued on following page]
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<PAGE>
/s/ Gene Reed, Jr.
-------------------------------------------
John P. Jones, by Gene Reed, Jr.
as attorney-in-fact
/s/ Gene Reed, Jr.
-------------------------------------------
Charles J. Bradshaw, by Gene Reed, Jr.
as attorney-in-fact
/s/ Gene Reed, Jr.
-------------------------------------------
Charles J. Bradshaw, Jr., by Gene Reed,
Jr. as attorney-in-fact
/s/ Gene Reed, Jr.
-------------------------------------------
Julia D. Bradshaw, by Gene Reed, Jr.
as attorney-in-fact
/s/ Gene Reed, Jr.
-------------------------------------------
William B. Bradshaw, by Gene Reed, Jr.
as attorney-in-fact
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<PAGE>
TABLE OF CONTENTS
Page
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS..................................................... 1
1.1. Certain Definitions............................................. 1
1.2. Restrictions on Transfer........................................ 2
1.3. Company Registration............................................ 3
1.4. Expenses of Registration........................................ 5
1.5. Registration Procedures........................................ 5
1.6. Indemnification................................................. 7
1.7. Information by Holder........................................... 9
1.8. Rule 144 Reporting.............................................. 9
1.9. Allocation of Registration Opportunities........................10
1.10. Delay of Registration..........................................10
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE STOCKHOLDERS.......................................................10
2.1. Representations and Warranties of the Company...................10
2.2. Representations and Warranties of the Stockholders..............11
3. MISCELLANEOUS...........................................................11
3.1. Lockup Agreement................................................11
3.2. Governing Law...................................................12
3.3. Successors and Assigns..........................................12
3.4. Entire Agreement; Amendment; Waiver.............................12
3.5. Notices, etc....................................................12
3.6. Delays or Omissions.............................................12
3.7. Rights; Severability............................................13
3.8. Information Confidential........................................13
3.9. Titles and Subtitles............................................13
3.10. Counterparts...................................................13
3.11. Prior Registration Rights Agreements...........................13
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into this 30th day of April, 1997, by and among UNITED AUTO GROUP, INC., a
Delaware corporation (the "Company") and JOHN A. STALUPPI, an individual
resident of the State of Florida (the "Stockholder").
IN CONSIDERATION of the mutual promises and covenants set forth herein,
and intending to be legally bound, the parties hereto hereby agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1. CERTAIN DEFINITIONS. The following terms shall have the meanings
set forth below:
(a) "Holder" shall mean the Stockholder and any holder of
Registrable Securities to whom the rights conferred by this Agreement have
been transferred in compliance with Section 1.2 hereof.
(b) "Other Stockholders" shall mean persons who, by virtue of
agreements with the Company other than this Agreement, are entitled to include
their securities in certain registrations hereunder.
(c) "Prior Holder" shall mean any person or entity who has
previously been granted rights pursuant to an agreement with the Company (the
"Prior Registration Rights Agreements") to have shares of UAG Stock (as
defined below) registered under the Securities Act of 1933, as amended (the
"Securities Act").
(d) "Registrable Securities" shall mean shares of the Company's
common stock, $.0001 par value per share (the "UAG Stock") issued to the
Stockholder pursuant to that certain Stock Purchase Agreement between UAG, UAG
East, Inc., Stockholder [add all other parties] (the "Stock Purchase
Agreement"), provided that Registrable Securities shall not include any shares
of UAG Stock which have previously been registered or which have been sold to
the public or which have been sold in a private transaction in which the
transferor's rights under this Agreement are not assigned.
(e) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and applicable rules and
regulations thereunder and the declaration or ordering of the effectiveness of
such registration statement.
(f) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of
<PAGE>
counsel for the Company, blue sky fees and expenses, and expenses of any
regular or special audits incident to or required by any such registration,
but shall not include (i) Selling Expenses (as hereafter defined), (ii) fees
and disbursements of counsel for the Holders, (iii) the compensation of
regular employees of the Company, which shall be paid in any event by the
Company, and (iv) blue sky fees and expenses incurred in connection with the
registration or qualification of any Registrable Securities in any state,
province or other jurisdiction in a registration pursuant to Section 1.3
hereof to the extent that the Company shall otherwise be making no offers or
sales in such state, province or other jurisdiction in connection with such
registration.
(g) "Restricted Securities" shall mean any Registrable Securities
required to bear the legend set forth in Section 1.2(c) hereof.
(h) "Rule 144" shall mean Rule 144 as promulgated by the SEC under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
(i) "Rule 145" shall mean Rule 145 as promulgated by the SEC under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
(j) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
1.2. RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until (i) there is then in
effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement, or (ii) there is an exemption from the registration
requirements of the Securities Act and applicable state securities laws or the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 1.2 (unless waived by the Company) and (A) such Holder shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances surrounding the
proposed disposition and (B) if reasonably requested by the Company, such
Holder shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act, it being understood that
the Company will not require opinions of counsel for transactions made
pursuant to Rule 144 except in unusual circumstances.
(b) Notwithstanding the provisions of subparagraphs (i) and (ii)
of paragraph (a) above, no such registration statement or opinion of counsel
shall be necessary for a transfer by a Holder which is (A) a partnership to
its partners in accordance with partnership interests, or (B) to the Holder's
family member or a trust for the benefit of an in-
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<PAGE>
dividual Holder or one or more of his family members, provided the transferee
will be subject to the terms of this Section 1.2 to the same extent as if he
were an original Holder hereunder.
(c) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
(d) The Company shall be obligated to promptly reissue
certificates without legends at the request of any Holder thereof if the
Holder shall have obtained an opinion of counsel (which counsel may be counsel
to the Company) reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of in
compliance with the Securities Act without registration, qualification or
legend.
(e) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal or if the Holder shall
request such removal and shall have obtained and delivered to the Company an
opinion of counsel reasonably acceptable to the Company to the effect that
such legend and/or stop-transfer instructions are no longer required pursuant
to applicable state securities laws.
1.3. COMPANY REGISTRATION.
(a) Right to Piggyback. If, at any time after the New Facility
Lease Date (as defined in the Stock Purchase Agreement), the Company shall
determine to register any of its securities either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Rule 145 transaction, or
a registration on any registration form that does not permit secondary sales,
the Company will:
(i) promptly give to each Holder written notice thereof,
which notice briefly describes the Holders' rights under this Section 1.3
(including notice deadlines); and
(ii) use its best efforts to include in such registration
(and any related filing or qualification under applicable blue sky laws),
except as set forth in Section 1.3(b) below, and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder and received by the Company within twenty
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<PAGE>
(20) days after the written notice from the Company described in clause (i)
above is mailed or delivered by the Company, provided that such Holders shall
have requested for inclusion in such registration at least twenty-five (25%)
of the aggregate number of the Registrable Securities which have been issued
to the Holder prior to the date of such written request. Such written request
may specify all or a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders of securities of the
Company with registration rights to participate therein distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting.
The Company shall so advise all Holders of securities requesting registration,
and the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in
Section 1.9. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the
Company or the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such
shares to be allocated among the persons requesting additional inclusion in
accordance with Section 1.9 hereof.
1.4. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof shall be borne by the Company. All Selling Expenses
relating to securities so registered shall be borne by the holders of such
securities pro rata on the basis of the number of shares of securities so
registered on their behalf.
1.5. REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to Section 1.3 hereof, the Company will keep
each Holder advised in
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<PAGE>
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs, provided that such 120-day period shall be extended
for a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of any underwriter;
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities covered
by such registration statement;
(c) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus,
as a Holder from time to time may reasonably request;
(d) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light of
the circumstances then existing, and at the request of any such Holder,
prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing; provided, however, the Company shall not be
obligated to prepare and furnish any such prospectus supplements or amendments
relating to any material nonpublic information at any such time as the Board
of Directors of the Company has determined that, for good business reasons,
the disclosure of such material nonpublic information at that time is contrary
to the best interests of the Company in the circumstances and is not otherwise
required under applicable law (including applicable securities laws);
(e) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange and/or included in any
national quotation system on which similar securities issued by the Company
are then listed or included;
(f) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such registration;
(g) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders,
as soon as reasonably
-5-
<PAGE>
practicable, an earnings statement covering the period of at least twelve (12)
months, but not more than eighteen months, beginning with the first month
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(h) in connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.3 hereof, the Company will
enter into an underwriting agreement reasonably necessary to effect the offer
and sale of Registrable Securities, provided such underwriting agreement
contains customary underwriting provisions and provided further that if the
underwriter so requests the underwriting agreement will contain customary
indemnity and contribution provisions.
1.6. INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities
Act, with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including
any related registration statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company or relating to action or inaction
required of the Company in connection with any such registration,
qualification, or compliance, and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and accountants and each person
controlling such Holder, each such underwriter, and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending or settling any such claim,
loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such
Holder or underwriter and stated to be specifically for use therein. It is
agreed that the indemnity agreement contained in this Section 1.6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if
any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter within the
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<PAGE>
meaning of Section 15 of the Securities Act, each other such Holder and Other
Stockholder, and each of their officers, directors, and partners, and each
person controlling such Holder or Other Stockholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holders, Other Stockholders, directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holder hereunder shall not
apply to amounts paid in settlement of any such claims, losses, damages, or
liabilities (or actions in respect thereof) if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld) and (ii) that in no event shall any indemnity under this Section 1.6
exceed the gross proceeds from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified of a release from all liability in respect to
such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred
to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying
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<PAGE>
Party on the one hand and of the Indemnified Party on the other in connection
with the conduct, statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
1.7. INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 1.
1.8. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees
to use its best efforts to:
(a) make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
and Exchange Act of 1934 (the "Exchange Act"); and
(c) so long as a Holder owns any Restricted Securities, furnish to
the Holder forthwith upon written request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without
registration.
1.9. ALLOCATION OF REGISTRATION OPPORTUNITIES. Subject to the rights of
the Prior Holders contained in the Prior Registration Rights Agreements,
notwithstanding any other provision of this Section 1.9, in any circumstance
in which all of the Registrable Securities and other shares of the Company
with registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or Other Stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included
shall be allocated among the Prior Holders, the Holders and
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<PAGE>
the Other Stockholders requesting inclusion of shares, first to the Prior
Holders and then to the Holders and the Other Stockholders pro rata on the
basis of the number of shares of Registrable Securities held by such Holders
and Other Stockholders; provided, however, that, if any Holder or Other
Stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to him pursuant to the
above-described procedure, the remaining portion of his allocation shall be
reallocated among those requesting Holders and Other Stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by
such Holders and Other Stockholders, assuming conversion, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the Holders and
Other Stockholders have been so allocated.
1.10. DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Stockholder as follows:
(a) The execution, delivery and performance of this Agreement by
the Company has been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency
of government, the Certificate of Incorporation or Bylaws of the Company, or
any provision of any material indenture, agreement or other instrument to
which it or any of its properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such material indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and public policy
considerations.
2.2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder represents and warrants to the Company as follows:
(a) The execution, delivery and performance of this Agreement by
the Stockholder will not violate any provision of law, any order of any court
or any agency or government, or any provision of any material indenture or
agreement or other instrument to
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<PAGE>
which he or any of his properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such material indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, or encumbrance of
any nature whatsoever upon any of the properties or assets of the Stockholder.
(b) This Agreement has been duly executed and delivered by the
Stockholder and constitutes the legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
subject to applicable bankruptcy, insolvency and other similar laws affecting
the enforceability of creditors' rights generally, general equitable
principles, the discretion of courts in granting equitable remedies and public
policy considerations.
3. MISCELLANEOUS
3.1. LOCKUP AGREEMENT. In consideration for the Company's agreeing to
its obligations under this Agreement, each Holder agrees that upon prior
notice by the Company to such Holder and effective upon the request of the
underwriters managing a public offering for sale by the Company of its
securities, such Holder shall be obligated for the lesser of 120 days or the
length of time the Company has agreed to be bound not to sell, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration and other than to any
transferee which agrees to be bound by this Section 3.1) without the prior
written consent of such underwriters.
3.2. GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of Delaware, as if entered into by and between
Delaware residents exclusively for performance entirely within Delaware.
3.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.4. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject hereof and thereof. Neither this Agreement nor any term hereof may
be amended, waived, discharged or terminated, except by a written instrument
signed by the Company and the Holders of at least fifty-one percent (51%) of
the Registrable Securities and any such amendment, waiver, discharge or
termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
3.5. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated in
the stock records of the Company or at such other address as such Holder shall
have furnished to the Company in writing, or (b) if to the Company, at United
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<PAGE>
Auto Group, Inc., 375 Park Avenue, Suite 2201, New York, New York 10152 or at
such other address as the Company shall have furnished to each Holder in
writing. All such notices and other written communications shall be effective
on the date of mailing or delivery.
3.6. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
3.7. RIGHTS; SEVERABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
3.8. INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its
use only, and it will not use such confidential information in violation of
the Exchange Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with
the exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or such Holder is required to
disclose such information by a governmental body.
3.9. TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
3.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.11. PRIOR REGISTRATION RIGHTS AGREEMENT. To the extent that any of the
provisions herein conflict with any provisions of the Prior Registration
Rights Agreements, such conflicts shall be resolved in favor of the rights
granted in the Prior Registration Rights Agreements.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed
this Agreement or have caused this Agreement to be duly executed under seal on
its behalf by an officer or representative thereto duly authorized, all as of
the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ George Lowarance
---------------------------------
George Lowrance
Executive Vice President
/s/ John A. Staluppi
-------------------------------------
JOHN A. STALUPPI
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<PAGE>
DEALER AGREEMENT
AGREEMENT made effective as of the 28th day of February, 1997, between
ROLLS-ROYCE MOTOR CARS INC., a Delaware Corporation, Post Office Box 476, 120
Chubb Avenue, Lyndhurst, New Jersey 07071 (the "Company"), and 140 East
Ridgewood Avenue, Paramus, New Jersey 07652
SCOTTSDALE AUDI, LTD.
("Dealer").
WHEREAS, the Company is the sole authorized importer into the United
States of new Rolls-Royce and Bentley motor cars; and
WHEREAS, Dealer has expressed a desire to engage in the retail sale and
service of new Rolls-Royce and Bentley motor cars; and
WHEREAS, the Company has agreed to appoint Dealer to act as such, but
only on the terms and conditions set forth in this Agreement; and
WHEREAS, the parties recognize that the relationship between them can be
enduring and successful only if both parties conduct themselves in accordance
with the following declaration of purpose and principle:
(a) The names and marks "Rolls-Royce" and "Bentley" and the other tradenames,
trademarks and service marks collectively hereinafter defined as the
"Trademarks" have been universally recognized symbols of excellence for many
years. Consumers who purchase Rolls-Royce and Bentley motor cars from
authorized dealers, and have their motor cars serviced by authorized
establishments bearing the Trademarks, correctly expect superior products and
service in all respects. Dealer pledges to conduct itself in a manner which
assures the greatest possible satisfaction to consumers, wherever located.
(b) It is essential that the integrity of the Trademarks under which
Rolls-Royce and Bentley motor cars are sold and serviced be upheld by Dealer
and that Dealer not engage in any act or practice which might tarnish or
impair the outstanding reputation Rolls-Royce and Bentley motor cars enjoy in
the automotive world.
(c) The Company has the right and obligation to formulate and implement sales,
service, parts, marketing and related standards and policies which serve the
interests of all consumers and dealers and to which all dealers must adhere.
These
<PAGE>
standards and policies are set forth in Sections 8, 9, 10, 11 and 13 of
Exhibit A Attached hereto.
(d) To all the above ends, the parties affirm that the relationship between
them must be courteous, cooperative and amicable at all times and in every
respect.
NOW, THEREFORE, in consideration of the agreements herein contained, the
Company and the Dealer agree as follows:
(I) The Company appoints Dealer as an authorized Rolls-Royce and Bentley
dealer for the period commencing on the above date and ending on September 30,
1997, or on any earlier date upon which termination of this Agreement may
become effective (the "term of this Agreement"), and Dealer accepts this
appointment. Such appointment shall apply only to Dealer's showroom and
facilities located at:
6725 E. McDowell Road
Scottsdale, Arizona 85257-3103
and to no other location.
(II) Dealer will develop the retail sale of Rolls-Royce and Bentley
motor cars to the maximum potential pursuant to guidelines set forth in the
Company's Sales Goal Letter as it may be amended from time to time in the
following territory:
Phoenix ADI (see Paragraph IV)
(III) Dealer represents that it is currently an authorized dealer in the
following makes of motor vehicles:
Jaguar, Aston Martin, Porsche, Audi
Dealer agrees to notify the Company in writing of any change in such list
within thirty (30) days of any such change. Any such notice shall be addressed
to the attention of the Company's legal department.
(IV) Dealer agrees to the following additional provisions:
This agreement to be superseded upon issuance by the Company of a
revised form of Dealer Agreement, including new definition of
territory.
<PAGE>
(V) The foregoing appointment and acceptance are subject in all respects
to the provisions of the Rolls-Royce Motor Cars Inc. Terms and Conditions of
Dealer Agreement annexed hereto as Exhibit A.
By their signatures hereto, the parties agree that they have read and
understand this Agreement, including the Rolls-Royce Motor Cars Inc. Terms and
Conditions of Dealer Agreement annexed hereto as Exhibit A and incorporated
herein, are committed to its purposes and principles and agree to abide by all
of its terms and conditions, in good faith for their mutual benefit. This
Agreement shall not become effective for any purpose until signed by Dealer
and countersigned below by the President of the Company.
SCOTTSDALE AUDI, LTD.
By: /s/ Steven Knappenberger
----------------------------------------
Name and Title: Steven Knappenberger,
Chairman
ROLLS-ROYCE MOTORS CARS INC.
By:
----------------------------------------
Title: President
<PAGE>
EXHIBIT "A"
ROLLS-ROYCE MOTOR CARS INC.
TERMS AND CONDITIONS OF DEALER AGREEMENT
1. DEFINITIONS.
As used in this Exhibit A and the foregoing Dealer Agreement:
(a) "This Agreement" means this Exhibit A and the Rolls-Royce Motor Cars
Inc. Dealer Agreement to which this Exhibit A is annexed.
(b) "Manufacturer" means Rolls-Royce Motor Cars Limited, Pym's Lane,
Crewe, Cheshire, England.
(c) "Motor cars" means complete motor cars made by Manufacturer which
bear any of the Trademarks.
(d) "Products" means Motor cars and new and remanufactured assemblies,
parts, tools, accessories and overhaul and maintenance equipment therefor, all
as supplied by the Company.
(e) "Company's Warranty" means the written warranty or warranties in use
by Company for Products from time to time.
(f) "Trademarks" means the trademarks, tradenames and service marks
which the Company and the Manufacturer either own or are licensed to use from
time to time, including, but not limited to the following:
U.S. Reg. No. U.S. Reg. No.
- ------------- -------------
ROLLS-ROYCE 325,316 SILVER SHADOW 831,345
ROLLS-ROYCE 1,257,391 SILVER CLOUD 832,105
ROLLS-ROYCE 912,848 PHANTOM 856,912
ROLLS-RR-ROYCE design 197,089 SILVER SPIRIT 1,124,699
ROLLS-RR-ROYCE design 1,160,411 SILVER SPUR 1,251,086
ROLLS-RR-ROYCE design 1,275,757 CAMARGUE 1,045,862
<PAGE>
Rolls-Royce radiator CORNICHE 1,021,031
grille design 1,063,799 BENTLEY 645,703
SILVER WRAITH 1,082,440 Bentley radiator
SILVER WRAITH 1,067,641 grille design 1,246,990
ROLLS 1,185,662 "B" and design 1,093,195
"B" and design 363,400
"Flying Lady" hood 850,902 "B" and design 344,524
ornament design
FLYING LADY 1,150,352 MULSANNE 1,238,195
SPIRIT OF ECSTASY 1,150,353 TURBO R 1,557,852
SILVER GHOST 1,067,640 BENTLEY EIGHT 1,551,811
Interlinked "RR" design 343,053 The Rolls-Royce Motor
Cars Royal Warrant
Interlinked "RR" design 344,372
2. OBLIGATIONS OF DEALER.
(a) Dealer acknowledges an obligation to maintain the high standards
associated with the Trademarks, to safeguard the interests of the Company and
the owners of the Trademarks and to refrain from any conduct which would
lessen the prestige of the Trademarks. Dealer acknowledges also an obligation
to give high quality, timely and effective service at rates reasonable for
Dealer's market area to every owner of a Motor car regardless of the place and
time of purchase of the Motor car.
(b) The Company is entering into this Agreement in reliance upon the
representations, warranties and agreements of Dealer that (i) the persons who
on the date of this Agreement participate in the ownership of Dealer will be
the only persons who have any interest, of record or beneficially, in Dealer;
(ii) no other person, firm or corporation has or will have any right, option
or privilege under any circumstances to acquire any interest, of record or
beneficially, in Dealer; (iii) Dealer shall complete Exhibit B bearing the
date of this Agreement setting forth the names, addresses and ownership
interests of all persons with ownership interests in Dealer and identifying
each person having authority and responsibility for the management of Dealer's
business; (iv) Dealer will provide written notice to the Company not less than
sixty (60) days prior to any contemplated change in the ownership or interest
in Dealer, or in the identities of the persons who have authority and
responsibility for the management of Dealer's business and will not enter into
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any agreement to effect any such change without the prior written approval of
the Company; and (v) Dealer will obtain and maintain all licenses, permits and
approvals required by the state and locality in which Dealer is located.
3. SALES OF PRODUCTS.
(a) The Company will sell Products to Dealer. Dealer shall purchase all
Products, other than tools and overhaul and maintenance equipment, for resale
to end users.
(b) The Company may sell Products to any person, firm or corporation in
North or South America. In the event that the Company sells a new Motor car to
anyone other than one of the Company's authorized dealers, the Company will
(except in the case of sales to its officers, employees, or representatives
for their personal use) credit one commission to one of its authorized
dealers. Such commission shall be in an amount to be determined by the Company
in accordance with Company policy as amended from time to time. The Company
shall in its sole discretion determine the dealer who should receive this
commission, having in mind the place of sale, the location of the Motor car
purchased, and any contact its dealers may have had with the customer prior to
such sale.
(c) In no event shall Dealer sell new Motor cars to any purchaser whose
permanent residence is outside the United States.
4. PAYMENT FOR PRODUCTS.
(a) The Company will sell Products to Dealer at such prices as may be
announced from time to time by the Company. Product prices shall be based upon
the suggested retail selling price less a discount allowed to Dealer (except
in the case of tools and overhaul and maintenance equipment).
(b) Dealer agrees to pay in addition any reasonable charge by the
Company for the preparation of a Motor car, if any, including warehousing,
handling for distribution and delivery, plus a sum equivalent to any tax
imposed by any law of the United States, or any state, municipality or other
taxing authority, on the manufacture, ownership, distribution, use or sale of
any Motor car if the same is not included in the price payable to the Company
by Dealer, plus a market promotion contributed as provided in Section 13
hereof in an amount to be determined from time to time by the Company. The
Company will keep Dealer informed of any changes or additions made from time
to time in suggested United States retail prices, discount schedules and
market promotion contributions, and the Company reserves the right to change
such prices, discounts and contributions from time to time, upon notice to
Dealer to that effect, by telegram, facsimile or letter, but no change in
amounts charged to Dealer shall apply to Products which have been delivered to
Dealer prior to the effective date of such change.
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(c) The Company agrees to grant special allowances for demonstrator
Motor cars according to the Company's demonstrator policy in effect from time
to time.
(d) The Company may require Dealer to pay a deposit of a minimum of five
percent (5%) of the suggested retail price in effect at time of order for each
Motor car ordered by Dealer. Payment of the balance for Motor cars, or of the
full purchase price for all other Products, shall be made by Dealer prior to
delivery, by cash, bank or certified check, by irrevocable and confirmed
bankers' media, or by such other means as may be agreed upon between the
parties. The amount of such payment shall include any additional charges
payable under the foregoing Subsection 4(b).
(e) Dealer agrees at all times to obtain, maintain and increase as the
Company may require, adequate flooring and lines of credit from reputable
financial institutions or other credit sources approved by the Company.
(f) Should Dealer fail to pay for, or fail to comply with any agreed
financing arrangement in respect of, any Motor cars which have been ordered by
Dealer upon notice by the Company that such Motor cars are ready for delivery
to Dealer, the Company may: (i) cause the Motor cars to be stored at the risk
and expense of Dealer; (ii) cause the Motor cars to be shipped elsewhere
(including return to the Company or Manufacturer), and Dealer shall pay to the
Company promptly upon demand the expense sustained by the Company or
Manufacturer for storing, handling and shipping occasioned thereby; or (iii)
sell the Motor cars directly to any other person, firm or corporation without
obligation to pay any sum to Dealer. Dealer agrees that in the event of any
such non-payment or failure the Company shall be entitled to set off any
deposit paid in respect of the Motor cars involved against any claims the
Company may then or thereafter have against Dealer. The Company may exercise
all remedies it may have by law as an unpaid seller, whether or not such
rights are referred to above.
(g) Products other than Motor cars shall be billed to Dealer's parts
account with the Company. If Dealer fails to pay amounts due and owing to the
Company as set forth on Dealer's statement of account within thirty (30) days
after receipt of a statement of account from the Company, the Company may
require Dealer to order Products other than Motor cars on a cash basis only
until Dealer pays to the Company all amounts due and owing to the Company.
(h) Where erroneous payments or credits by the Company are found to have
been made to Dealer or Dealer's employees, either directly or through Dealer's
parts account, Dealer agrees that the Company shall have the right to charge
such erroneous payments or credits against Dealer's parts account.
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(i) Dealer shall execute and deliver, and shall where appropriate
cooperate with the Company in causing to be filed with the appropriate
authorities, any and all statements and documents required or permitted by the
Uniform Commercial Code and any other local laws for the protection of an
unpaid seller.
(j) The Company shall at all times have the right to retain or retake
possession of Products until paid in full therefor. The cost of such retention
or repossession shall be paid by Dealer.
(k) In the event that the Company shall commence an action against
Dealer to collect the purchase price, or to recover possession, of Products or
otherwise to exercise its rights as an unpaid seller, the Company shall be
entitled to recover the expenses of any such action, including costs and
reasonable attorneys' fees.
5. ORDERS AND REPORTS FROM DEALER.
The Company requires information provided by its dealers to develop
composite statistics which are used to assess Dealer's progress in meeting its
obligations hereunder; to provide a basis for recommendations which the
Company may make from time to time to assist Dealer in improving its
operations; to evaluate market conditions and the collective progress of all
of the Company's dealers; and to plan its operations and strategies. It is
necessary, therefore, that dealers provide information to the Company which is
clear and accurate and based upon generally accepted accounting principles.
Dealer acknowledges that the Company must rely upon such information and
agrees to use its best efforts to insure that such information is accurate.
(a) Dealer shall furnish to the Company a report at 14-day intervals as
specified by the Company showing new and used Motor cars delivered to
customers (including customer names and addresses and the dates of delivery),
and such other reports as the Company may reasonably require from time to
time.
(b) Dealer shall provide to the Company by the 15th day of each month a
complete monthly financial statement, including balance sheet and profit and
loss statement, certified as accurate by Dealer's chief executive or financial
officer. Such financial statement may be in the form required by any other
franchisor of Dealer.
(c) Dealer shall provide to the Company by the 15th day of each month,
in a format prescribed by the Company, a complete and accurate financial and
operating statement covering activities in the preceding month and calendar
year to date in connection with Motor car sales, service and parts.
(d) Within sixty (60) days after the close of Dealer's fiscal year,
Dealer shall provide to the Company a complete
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financial statement, certified as accurate by Dealer's regularly employed
accountants.
(e) Dealer will, at the time of executing and delivering this Agreement,
provide to the Company copies of (i) its certificate of incorporation, with
its by-laws and shareholder agreement, if any; (ii) a certificate from the
Secretary of State or other appropriate governmental authority that it is in
good standing in the jurisdiction in which it is incorporated or otherwise
constituted; and (iii) any license or permit which Dealer is required to
obtain and maintain in the state, county, and city in which Dealer is doing
business. Dealer will provide to the Company copies of all renewals of such
licenses and permits.
(f) Dealer will promptly report to the Company any change in its
corporate name or trading style and any change in its articles of
incorporation, by-laws or similar documents which could affect the
relationship between the parties created by this Agreement and the course of
dealings contemplated by it.
6. THE COMPANY'S RIGHT OF REJECTION OR MODIFICATION OF ORDERS;
ALLOCATIONS; LIMITATION OF LIABILITY.
(a) The Company will give careful consideration to each Product order
received from Dealer, but the Company shall have the unqualified right to
accept or reject each order as received, or to reduce the quantities of any
particular model or type which may be ordered by Dealer.
(b) The decision of the Company as to the allocation of Products among
the Company's dealers shall be final and binding upon Dealer, who shall have
no claim of any kind against the Company for its failure to fill orders
previously received or accepted by the Company.
(c) In no event will the Company be deemed to have assumed any
obligation except to fill orders as quickly as practicable in accordance with
the foregoing principles, and Dealer expressly agrees that neither the Company
nor Manufacturer shall be liable for any direct or consequential loss or
damage caused by the failure or inability of either of them, whether or not
the same shall have been caused by any act or omission of the Company,
Manufacturer, or any other person, to make delivery of any Products to Dealer,
Dealer's sole remedy being to cancel the purchase and to recover the deposit
in respect of Products so delayed or remaining undelivered for more than six
months after the agreed delivery date. In the event, however, that any
delivery is delayed by a strike, lock-out or by an act of God or by some other
cause beyond the Company's and Manufacturer's control, the Company shall have
the option to extend the time for the delivery for the period of delay so
caused.
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(d) Neither the Company nor Manufacturer shall be required to continue
to make available for sale any particular lines or models of Motor cars, or
parts, assemblies and accessories therefor.
(e) All orders placed by Dealer and all sales to it shall be subject to
the provisions of this Agreement, and any provision of any order placed by
Dealer which is inconsistent herewith shall be null and void unless specific
reference is made to such inconsistent provision in such order and unless such
inconsistent provision is accepted by a duly authorized officer of the Company
in writing.
7. CHANGE OF SPECIFICATION; ALTERATION OF PRODUCTS.
(a) The Company or Manufacturer may at any time without notice make
changes in the design or materials of Products. The Company shall not be
liable to Dealer on account of any such changes; nor shall the Company be
required to install the same on Products previously purchased by Dealer.
Models of Products may be discontinued at any time, and the Company shall not
be liable to Dealer on account of such changes.
(b) Dealer shall not alter any Products, whether new or used, or do
anything which will in any way tend to infringe, impeach or lessen the
validity of the patents or trademarks under which the Products may be made or
sold or which will in any way tend to impair the reputation of the Company or
Manufacturer. Dealer shall not do anything which will impair or terminate the
applicability of the Company's Warranty to any Products.
8. SALES RESPONSIBILITIES.
(a) Dealer shall establish and maintain suitable facilities for the sale
of Motor cars and assemblies, parts and accessories therefor. Dealer shall use
its best efforts to promote the sale of Motor cars. Dealer shall operate a
suitable showroom to house, protect and exhibit Motor cars and accessories to
best advantage.
(b) Dealer shall employ qualified sales and other personnel in numbers
sufficient to handle the sale of Motor cars and accessories. The number of
personnel required shall be determined by the Company based on an analysis of
market potential in Dealer's sales territory. If the Company or Manufacturer
shall from time to time conduct sales training schools, Dealer, at its own
expense, shall send all sales personnel to such schools for training in the
proper sale and representation of Motor cars and other Products.
(c) Dealer agrees to fulfill its obligations as set forth in the Sales
Goal Letter sent to Dealer from time to time, including but not limited to the
maintenance of an adequate inventory of new Motor cars. Notwithstanding the
existence or
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terms of a Sales Goal letter, Dealer shall maintain a minimum new car
inventory of one Rolls-Royce and one Bentley Motor car.
(d) Dealer will not conduct any aspect of its business of the sale of
Products at any location other than that referred to in Paragraph (l) of this
Agreement without the prior written consent of the Company.
(e) The Company shall have the right from time to time to inspect
Dealer's premises and its records and accounts with respect to the sale of
Products, and to make recommendations and set standards concerning the methods
of displaying and selling Products. Dealer shall give careful consideration to
such recommendations and shall take such recommended steps for the improvement
of its sales facilities and performance and to conform them to the standards
established by the Company.
9. SERVICE RESPONSIBILITIES.
(a) Dealer shall establish and maintain suitable facilities for the
service and repair of Motor cars. Dealer shall provide effective service at
reasonable rates according to Dealer's market area to any owner of a Motor car
who may request it, without regard to the age of the Motor car, the source of
purchase or the place where the Motor car is customarily based. Dealer agrees
to provide service performance satisfactory to the Company.
(b) Dealer shall employ qualified mechanics and other service personnel
to render prompt and effective service for Motor cars. If the Company or
Manufacturer shall from time to time conduct training schools, Dealer, at its
own expense, shall send all mechanics and other service employees to such
schools for training in the service of Motor cars.
(c) Dealer will not conduct any aspect of its business of servicing
Motor cars at any location other than that referred to in Paragraph (l) of
this Agreement without the prior written consent of the Company.
(d) Dealer shall comply with all service-related policies and procedures
issued by the Company. Dealer shall promptly investigate and handle any
complaint which may be assigned to Dealer by the Company for investigation and
handling, and shall supply service as may be reasonably required in the
circumstances.
(e) Dealer acknowledges and understands that pursuant to the
requirements of federal law, the Company or Manufacturer may from time to time
recall Products for correction. Dealer shall promptly comply with the
Company's instructions for modification or alteration of any Products in
connection with any such recall, including, without limitation, Products
theretofore sold by Dealer or by any other of the Company's dealers, and shall
not
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sell or deliver any Product covered by any such instructions until the
required modifications or alterations shall have been properly accomplished.
Dealer shall indemnify and hold harmless the Company and Manufacturer from any
liability, loss or expense, including reasonable attorneys' fees, which either
shall suffer by reason of the failure by Dealer to comply with the provisions
hereof.
(f) Dealer will, in the conduct of its operations, comply with all
applicable federal, state and local laws, rules and regulations including,
without limitation, those relating to the Company's Warranty, the manner of
rendering maintenance and repair service, environmental compliance, automobile
safety, anti-air pollution and disclosure of information, including warranty
information, to retail customers and the use, if any, of Dealer's name, marks
or logos on the Products. Dealer agrees that it will not use its own or any
third party's name, marks, or logos on the Products in any way without the
Company's prior authorization and approval. The Company shall provide to
Dealer, and Dealer to the Company, such information and assistance as may
reasonably be requested by the other in connection with compliance with such
federal, state and local laws, rules and regulations. Dealer shall purchase
from the Company such special tools and equipment as in the Company's judgment
are required to effect such compliance.
(g) Dealer acknowledges and understands that pursuant to the laws of the
states, a presumption may arise that a consumer is entitled to a purchase
price refund or replacement vehicle when multiple warranty repairs are
unsuccessful or when the vehicle's cumulative time out of service for warranty
repairs exceeds a stated amount. Dealer acknowledges and understands,
therefore, the importance of compliance with the provisions of Sections 9(a),
9(b), 9(d), 9(f), 10(a) and 11. Dealer shall keep accurate service records for
each Motor car. Dealer shall immediately notify its Zone Service Manager of
the chassis number and owner of a Motor car covered by the Company's Warranty
which has been (i) delivered to Dealer for the second time for the repair of
the same or a related nonconformity or (ii) out of service for repairs at
Dealer's repair facility for a total of ten (10) or more days. Dealer shall
confirm such notice in writing to the Company within three (3) days of the
event triggering such notice. Dealer shall indemnify and hold harmless the
Company and Manufacturer from any liability, loss or expense, including
reasonable attorney's fees, which it shall suffer by reason of any failure by
Dealer to properly or promptly perform warranty service or to comply with
policies and procedures established by the Company from time to time with
respect to warranties or the submission of warranty information.
(h) The Company shall have the right from time to time to inspect
Dealer's premises and its records and accounts with respect to the service of
Products, and to make recommendations and set standards concerning the
maintenance and operation
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thereof. Dealer shall give careful consideration to such recommendations and
shall take such recommended steps as may be necessary for the improvement of
its service facilities and activities and to conform them to the standards
established by the Company.
(i) Dealer acknowledges and understands that the Company may establish
Approved Coachwork Repair facilities (individually "ACR" and collectively
"ACRs") for the limited purpose of providing quality coachwork for owners of
Motor cars. Dealer acknowledges and understands that the Company may appoint
ACRs who are not authorized dealers as well as ACRs who are authorized
dealers. ACRs may be appointed within Dealer's sales territory as defined in
this Agreement. The appointment of Dealer as an ACR, or the termination of
Dealer as an ACR, does not affect the terms and conditions of this Agreement
or the rights and obligations of the Company and Dealer under this Agreement.
The ACR agreement is not a Dealer Agreement and is separate and distinct from,
and not a part of, this Agreement.
10. PARTS RESPONSIBILITIES.
(a) Dealer shall purchase an initial stock of parts, service tools and
equipment required by the Company. The initial stock of parts, service tools
and equipment shall be charged to Dealer's parts account. Dealer shall
maintain a stock of spare parts, tools, equipment, assemblies and accessories
as required by the Company for the repair and maintenance of Motor cars and
for sale to individuals and service and repair centers. Dealer shall purchase
new model parts kits, service tools and equipment as required by the Company.
New model parts kits, service tools and equipment shall be charged to Dealer's
parts account. While it is not expected that Dealer will maintain a stock from
which every possible order can be filled, Dealer nevertheless recognizes and
agrees that the maintenance of an adequate inventory is essential to
successful representation of the Company.
(b) Dealer shall purchase and maintain current catalogs, literature,
price lists and technical manuals as required by the Company in order properly
to administer Dealer's parts department. All such catalogs, literature, price
lists and technical manuals shall be charged to Dealer's parts account. Dealer
acknowledges and agrees to maintain the confidentiality of information
concerning pricing and inventory communicated by the Company, its
representatives and contractors, whether through the Dealer Communication
Network or otherwise.
(c) Dealer will not offer for sale, or use in the repair of any Motor
car, as a genuine Rolls-Royce or Bentley spare part, assembly or accessory,
any such Product that has not in fact been approved as to type and
specification by the Company.
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11. COMPANY'S WARRANTY.
(a) The Company's Warranty applicable to new Motor cars shall be
prominently displayed in Dealer's premises and shall be incorporated as a
condition of each Motor car sale made by Dealer. No order shall be accepted by
Dealer without calling the attention of the purchaser to the provisions of the
Company's Warranty. Dealer shall require each buyer of a new Motor car to sign
an Owner Identification Card attesting that buyer has read the provisions of
the Company's Warranty. Dealer shall promptly forward the signed Owner
Identification Card to the Company. Dealer is familiar with and accepts the
Company's Warranty in effect at the time of this Agreement. THE COMPANY'S
EXPRESS WARRANTY SHALL EXCLUDE THE IMPLICATION OF ALL OTHER WARRANTIES
(INCLUDING THE DURATION OF IMPLIED WARRANTIES AS EXPRESSED THEREIN),
LIABILITIES, CONDITIONS OR OBLIGATIONS WHETHER OR NOT ARISING FROM THE
NEGLIGENCE, BREACH OF CONTRACT OR OTHER DEFAULT OF THE COMPANY OR OF
MANUFACTURER OR ANY OF THEM OR OF THE AGENTS, SERVANTS OR EMPLOYEES OF ANY OF
THEM, ALL OF WHOM DEALER HEREBY RELEASES IN EXCHANGE FOR THE COMPANY'S
WARRANTY. The Company will notify Dealer in writing of any change in the
provisions of the Company's Warranty to be issued in the future, but no such
change shall be effective as to deliveries made to Dealer, or to any ultimate
purchaser, respectively, prior to the receipt of such notice in writing by
Dealer. Acceptance by Dealer of delivery of any Motor car covered by the
Company's Warranty after receipt of such notice shall be deemed acceptance by
Dealer of the Company's Warranty as changed.
(b) Dealer shall expeditiously perform effective service at reasonable
rates according to Dealer's market area to correct any defect covered by the
Company's Warranty. The Company will provide Dealer with spare parts,
assemblies and accessories necessary for such repairs under the terms of such
warranty, and Dealer, recognizing that it is acting on behalf of the Company
in the fulfillment of the Company's Warranty, agrees that it will use only
such Company-provided spare parts, assemblies and accessories in the
performance of warranty service. Dealer will pay for such spare parts,
assemblies and accessories and will receive credit for the same from the
Company. Dealer shall also perform such work as is specified in recommended
maintenance programs and procedures promulgated from time to time. The
allowance of the Company's warranty claim submitted by Dealer, or the making
of any policy payment, shall in no event be deemed to be a waiver of any
provision of the Company's Warranty or of this Agreement, nor shall any such
allowance or payment be deemed to create an agreement on the part of the
Company to allow a similar claim or to make a similar payment in the future.
(c) The Company shall have the right, from time to time and at any time
during normal business hours, to inspect Dealer's books and records relating
to all claims made by a consumer or by Dealer under the Company's Warranty.
If, for any reason, Dealer refuses to allow the Company to inspect Dealer's
books and
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records relating to Warranty claims, or if Dealer is unable to substantiate
claims made by a consumer or by Dealer under the Company's Warranty, the
Company reserves the right to charge back to Dealer any payments or credits
received by Dealer pursuant to the Company's Warranty for such claims.
(d) Upon delivery of each Motor car, Dealer agrees to supply to the
Company full information as to the chassis number of the Motor car, the date
of delivery of the Motor car to the buyer and the name and address of the
buyer.
(e) The term of the Company's Warranty for each new Motor car sold to
Dealer shall begin to run upon the earlier of either the first retail sale of
such Motor car by Dealer or the passage of two years from the date of the
Company's sale of such Motor car to Dealer. The Company shall establish a
warranty policy for demonstrators and trials cars, which policy may be amended
by the Company from time to time.
(f) The benefit of the Company's Warranty, by its terms, will not be
available to the owner of a Motor car sold or used for commercial service or
hire. If a Motor car is so used or if its buyer evidences an intention so to
use it, Dealer shall promptly inform the Company in writing of such fact (in
advance of delivery, whenever possible), and the Company shall thereafter
issue, or condition its approval of the sale upon the issuance and acceptance
of, a warranty from the Company with respect to said Motor car in such form
and subject to such limitations as may be deemed appropriate to such
commercial service or hire.
(g) Dealer agrees to acknowledge, investigate and handle all complaints
from customers in a manner which will enhance the good will of the Company,
Manufacturer and the Products. Dealer agrees to participate in and cooperate
with such consumer dispute resolution procedures as the Company may designate
from time to time.
(h) The Company may from time to time offer or authorize others to offer
certain warranties or service contracts applicable to previously-owned Motor
cars. Dealer agrees to participate in the operation of such programs.
12. MUTUAL INDEMNIFICATION.
(a)(i) Subject to the provisions of this Section 12, the Company shall
defend and hold Dealer harmless against any judgment which may be rendered
against Dealer, including assessed costs and reasonable attorneys' fees,
resulting from complaints (exclusive of claims alleging or founded upon breach
of express or implied warranty, as to which Dealer's remedies as provided in
Section 11 shall be exclusive) seeking monetary damages filed against Dealer
concerning:
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(A) alleged bodily injury or property damage (including damage to
Products themselves) claimed to have been caused by an alleged defect in
the design, manufacture or assembly of Products (except alleged defects
in the design or manufacture of tires), provided, however, that any
claimed defect in manufacture or assembly was not such as should have
been detected by Dealer in a reasonable inspection of Products, whether
in the performance of the pre-delivery inspection or otherwise;
(B) alleged failure of Products to conform, because of changes in
standard equipment or material component parts, to the description set
forth in advertisements or product brochures made available to Dealer by
the Company and allegedly relied on by the first retail customer, unless
Dealer received written notice of such changes from the Company prior to
the date of delivery of affected Products to such customer; or
(C) any alleged substantial Product damage repaired by the Company
(excluding paint damage and removal and replacement of the damaged part
or component with a like part or component) prior to the time the
Product is delivered to Dealer's designated location, unless the Company
has notified Dealer in writing of such damage and repair prior to the
date of delivery of affected Products to the first retail customer.
(ii) In the event that any complaint containing allegations as set forth
in (A) through (C) above is filed naming Dealer as a defendant, the Company
will, following receipt of notice as provided in Subsection (c) of this
Section 12, undertake at its sole expense the defense of the complaint on
behalf of Dealer. The Company is specifically authorized by Dealer to settle
or to continue to defend any such complaint filed against Dealer, provided
that the Company shall be solely liable for the payment of the amount of any
settlement which it effects.
(iii) Should the Company for any reason refuse to undertake the defense
on behalf of Dealer when it is obligated to do so under this Section 12,
Dealer may conduct its own defense and the Company's liability shall be
limited to judgments, assessed costs and reasonable attorneys' fees paid by
Dealer.
(iv) The Company shall have the right to decline to accept such defense
or, after accepting the defense but prior to trial, to tender the defense back
to Dealer, and Dealer shall accept such tender, if the Company reasonably
concludes that the allegations being pursued are no longer those set forth in
(A) through (C) above.
(b)(i) Subject to the provisions of this Section 12, Dealer shall
indemnify and hold the Company and Manufacturer harmless
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against any judgment which may be rendered against the Company or
Manufacturer, plus reasonable attorneys' fees, resulting from complaints
seeking monetary damages filed against the Company or Manufacturer,
concerning:
(A) Dealer's alleged failure to perform, or negligent performance
of, the service obligations assumed by it pursuant to this Agreement, or
any maintenance or repair service on Products or such other motor
vehicles as may be sold or serviced by Dealer;
(B) Dealer's alleged breach of contract between Dealer and
Dealer's customer, provided, however, that the breach was not caused by
any act or omission on the part of the Company concerning which the
Company unreasonably failed to notify Dealer prior to the date of
Dealer's entering into the contract with its customer; or
(C) Dealer's alleged misleading statements, misrepresentations, or
unfair or deceptive acts or practices, whether through advertisements or
otherwise, affecting any customer of Dealer, provided, however, that the
statements, representations or advertisements are not based on
information or material produced or supplied by the Company and not
subsequently superseded or withdrawn by written notice from the Company
to Dealer.
(ii) In the event that any complaint containing allegations as set forth
in (A) through (C) above is filed naming the Company or Manufacturer as a
defendant, Dealer will, following receipt of notice as provided in Subsection
(c) of this Section 12, undertake at its sole expense the defense of the
complaint on behalf of the Company. Dealer is specifically authorized by the
Company to settle or to continue to defend any such complaint filed against
the Company, provided that Dealer shall be solely liable for the payment of
the amount of any settlement which it effects.
(iii) Should Dealer for any reason refuse to undertake the defense on
behalf of the Company when it is obligated to do so under this Section 12, the
Company may conduct its own defense and Dealer's liability shall be limited to
judgments, assessed costs and reasonable attorneys' fees paid by the Company.
(iv) Dealer shall have the right to decline to accept such defense or,
after accepting the defense but prior to trial, to tender the defense back to
the Company, and the Company shall accept such tender, if Dealer reasonably
concludes that the allegations being pursued are no longer those set forth in
(A) through (C) above.
(c)(i) Whenever a complaint is filed against either the Company or
Dealer or both of them, each shall, within fifteen (15) days after service of
the complaint, notify the other in
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writing, as provided in Section 22, of any request to assume its defense and
to indemnify it, and shall provide at that time copies of any pleadings which
have been served to date, together with all information then available
regarding the circumstances giving rise to the complaint. In the event this
provision is for any reason not complied with, Subsections (a) and (b) of this
Section 12 shall not apply for purposes of that complaint.
(ii) The request to assume the defense and to indemnify shall be
accepted or rejected by the party to which it is made within one month
following its receipt. Prior to receipt of a response to its request, each
party agrees to take all reasonable steps to ensure that the defense to the
complaint is in no way prejudiced, whether by action or inaction. If the
request is accepted, the party which made the request shall cooperate fully in
the defense of the complaint in such manner and to such extent as the party
assuming the defense may reasonably require, provided, however, that
Subsections (a) and (b) of this Section 12 shall be applicable commencing with
the date on which the request is accepted, and any expenses or other
obligations incurred prior to such acceptance by the party which made the
request shall be borne solely by such party.
(d) Whenever a complaint alleges liability on the part of both the
Company (on the bases set forth in Subsection (a) of this Section 12) and
Dealer (on the bases set forth in Subsection (b) of this Section 12), each
party shall be responsible for its own defense, including costs and attorneys'
fees, unless one party offers to undertake the total defense and the other
party agrees thereto in writing. The Company or Dealer responsibility for its
own defense pursuant to this Subsection (d), or pursuant to any other
circumstances not within the scope of this Section 12, shall in no way affect
whatever legal rights either may have to indemnification or contribution.
13. MARKETING, ADVERTISING AND PROMOTION.
(a) The decision as to the best method of advertising and promoting
Products for resale in the United States shall at all times rest with the
Company. Dealer will not advertise or trade in Products for resale in such a
manner as to prejudice the sale thereof, and will immediately withdraw any
advertisement, or cease any method of trading, on being notified by the
Company that it considers the same objectionable. The Company may require
Dealer to submit advertisements to the Company for approval prior to
publication, which approval shall not be unreasonably withheld.
(b) Dealer shall at all times use its best efforts to bring Products to
the favorable notice of the public. Subject to applicable governmental
ordinances, regulations and statutes, Dealer agrees to erect and maintain at
Dealer's location, entirely at Dealer's expense, standard authorized product
and service signs of types recommended by the Company, as well as
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such other authorized signs as are necessary to advertise Dealer's operations
effectively. Dealer shall announce upon its stationery, circulars, invoices
and other promotional materials that it is an authorized dealer of Motor cars.
Any use by Dealer in such connection of the Trademarks shall be accompanied by
a prominent notation in form satisfactory to the Company that the Trademarks
are registered in the United States Patent and Trademark Office.
(c) Dealer shall not, without the Company's prior written consent,
permit Products to be photographed or otherwise utilized by third parties to
advertise or promote other products, services, activities or events of any
kind.
(d) Dealer shall purchase the Company's annual marketing package and any
other additional marketing materials required by the Company from time to
time. The annual marketing package and additional marketing materials shall be
charged to Dealer's parts account.
(e) Dealer shall contribute to the Company's cooperative Advertising
Partnership, which shall be used to promote the sale of Products. The Company
shall have discretion as to the manner in which contributions are utilized in
advertising.
14. RELATIONSHIP OF THE PARTIES AND MANUFACTURER.
Neither Dealer nor any of its officers, agents or employees is
authorized to bind the Company or Manufacturer or to transact business for the
account of either of them in any way whatsoever. This Agreement shall not be
deemed to create any agency on the part of Dealer, or a joint venture between
the parties. Manufacturer shall not be deemed to have assumed any liability or
obligation to Dealer hereunder. Dealer acknowledges and agrees that the
Company does not, directly or indirectly, require or accept any fee or charge
for the right to enter into or conduct business under this Agreement or for
the right to sell, resell or distribute Products; Dealer further acknowledges
and agrees that payments by Dealer to the Company for Products or otherwise as
provided in this Agreement do not constitute such a fee or charge.
15. EXHIBITS AND TRIALS.
Dealer will not exhibit or assist in exhibiting any Motor cars at any
exhibition, or take part or assist in or support any competition or
competitive or other trial (except by a customer) of or relating to Motor
cars, or publish or cause or assist to be published any advertisement or
description of the result of any trial, competition or individual performance
of Motor cars, without the prior written approval of the Company.
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<PAGE>
16. TERMINATION OF AGREEMENT.
(a) Upon not less than sixty (60) days notice in writing, Dealer at its
option may terminate this Agreement.
(b) Upon notice to Dealer, this Agreement may be terminated by the
Company in any of the following circumstances:
(1) If Dealer becomes insolvent; or if Dealer is unable to pay its
debts as they become due; or if Dealer or any person owning or holding,
beneficially or otherwise, a majority or controlling interest in Dealer,
commences proceedings under any federal or state law for the relief of
debtors; or if a receiver or trustee is appointed for Dealer, or if
Dealer makes an assignment for the benefit of creditors; or if Products
are subjected to execution or other judicial process.
(2) If any change takes place in the identity of the persons who
participate in the ownership, or the persons who have authority and
responsibility for the management, of Dealer, or Dealer otherwise
commits a breach of Section 2(b) of this Agreement.
(3) If Dealer or any of Dealer's employees, representatives or
agents provides false information to the Company, whether in connection
with the requirement of Section 5 of this Agreement or otherwise.
(4) If Dealer or stockholders, directors, officers or employees
thereof shall be convicted in any court of a violation of law, or shall
plead nolo contendere or the equivalent to any criminal charge or shall
be found liable in a civil action under circumstances tending, in the
Company's reasonable opinion, adversely to affect the operation of the
business of Dealer or the good will or reputation of the Company,
Manufacturer or Products or the operation of the business of the
Company.
(5) If there is a material change unacceptable to the Company in
the premises occupied by Dealer.
(6) If Dealer shall fail to function as a going concern or to
conduct its operations in the normal course of business.
(7) If Dealer shall be guilty of a material breach of its
obligations under this Agreement or if Dealer shall conduct its business
in a manner which in the reasonable opinion of the Company will result
in material harm to the business of the Company or the business of
Manufacturer or if Dealer shall fail for any legal reason to be duly
qualified to act as a dealer hereunder, but in any of the circumstances
mentioned in this Subsection (7) the right of
-17-
<PAGE>
cancellation may not be exercised unless the Company shall have first
notified Dealer of the claimed breach, conduct or failure and Dealer
shall have failed within ten (10) days thereafter to cure such breach,
conduct or failure or, if a longer time under the circumstances is
necessary, to initiate the correction thereof and to prosecute such
correction with diligence to completion.
(8) If the Company shall cease to be an importer of Products.
(9) If the Company determines to terminate this form of Dealer
Agreement and to offer dealers a new or amended form of Dealer
Agreement.
(10) If any other reason or circumstance exists which constitutes
cause for termination under applicable federal or state laws.
(11) (i) If any principal participant in the ownership of Dealer
(a "principal owner") dies or becomes incapacitated; provided, however,
that the Company will offer an interim agreement of one year's duration
to any person nominated in writing and accepted by the Company to
succeed to such ownership interest in Dealer in the event a principal
owner dies or becomes incapacitated. Such nomination must list all
persons who have authority and responsibility for the management of
Dealer's business, must be executed by all persons holding ownership
interests in Dealer, must be notarized, and must be received and
accepted by the Company prior to such death or incapacity. Acceptance by
the Company shall be in its discretion. A principal owner may cancel an
accepted nomination by notarized written notice to the Company, provided
notice is received by the Company before the principal owner's death or
incapacity. The Company may not cancel an accepted nomination unless a
change in the circumstances of the successor nominee, in the opinion of
the Company, disqualifies such successor nominee and the Company so
notifies Dealer. A superseding nomination may then be made by the
principal owner affected for acceptance by the Company.
(ii) In the event no person is nominated and accepted to succeed
to a principal owner's ownership interest, and if such interest passes
directly to a surviving spouse or children, and if the remaining owners
and management of Dealer can, in the Company's opinion, comply with the
requirements of this Agreement, the Company will consent to the
retention by such spouse or children of a non-management interest in the
franchise subject, however, to any rights of the remaining owners and
management to buy out the spouse's or children's interest in accordance
with any agreement made by them.
-18-
<PAGE>
(iii) The interim agreement to be offered under this Subsection 11
is not renewable; however, the Company may, in its discretion, extend
the term thereof in order to facilitate the purchase by others of the
former principal owner's interest in Dealer. At the end of any interim
agreement, the Company will offer its standard Dealer Agreement to the
then-current principal owners, provided that such persons in all
respects meet the requirements for appointment as a Rolls-Royce and
Bentley dealer.
(c) Neither the Company nor Manufacturer shall, by reason of any
termination, however occasioned, or by reason of non-renewal of Dealer's
appointment, be liable to Dealer for compensation, reimbursement or damages or
on account of the loss of prospective profits on anticipated sales or on
account of expenditures, investments, leases or commitments in connection with
Dealer's business or good will, or on any other account.
17. EFFECT OF TERMINATION OR EXPIRATION.
Upon the date on which termination of this Agreement becomes effective,
or at the end of the term of this Agreement (unless it is immediately
succeeded by a new written agreement between the parties):
(a) Dealer shall forthwith cease all use of any of the Trademarks and
return to the Company all parts books, service manuals, signs illustrating
Products or bearing any of the Trademarks and all other items supplied by the
Company. Dealer shall transfer to the Company or to its nominees all its
orders for Products and deposits received from customers, provided Dealer
shall be entitled to receive a commission in respect of any outstanding orders
for specific retail customers previously accepted by the Company.
(b) The Company shall have the option to reacquire from Dealer each
unused, undamaged and unsold Motor car in Dealer's stock, at a price to be
determined by the Company. The Company shall likewise have the option of
purchasing other Products in Dealer's possession and any signs, brochures or
other promotional materials which were purchased from the Company, at their
original cost to Dealer, less a reasonable discount for use, damage or
deterioration; provided, however, that if Dealer shall cease to be a Dealer
for any reason other than termination of this Agreement by Dealer, then the
Company shall purchase and reacquire unused, undamaged and unsold parts and
accessories listed in the price list current at that time at a price equal to
Dealer net price less stock discount and a 15% handling charge.
(c) Dealer will promptly remove at its own expense all signs bearing any
of the Trademarks and will destroy all letterheads, stationery and other forms
used by Dealer bearing any of the Trademarks. Dealer will forthwith
discontinue representing itself to be an authorized dealer in any way.
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<PAGE>
Dealer further agrees to take all steps necessary to change as soon as
possible its telephone directory listings and advertisements to
eliminate any reference to the Trademarks. Dealer agrees that as a
result of any continued unauthorized representation that Dealer is an
authorized dealer in Products the Company would suffer damage in an
amount difficult or impossible to ascertain. Accordingly, Dealer agrees
to pay the Company, as liquidated damages and not as a penalty, $500 for
the breach of its obligations under this Subsection (c) for each day
that such breach continues and the costs, including reasonable
attorneys' fees, that the Company may incur in enforcing compliance with
this Subsection. The right of the Company to such liquidated damages and
costs is in addition to all other rights and remedies which the Company
may elect to invoke including, but expressly not limited to, injunction
and specific performance.
(d) Dealer shall turn over to the Company, free of charge, all of its
sales records, service records and customer lists and other records and data
relating to the sales and service of Motor cars.
(e) Dealer shall return to the Company all data processing equipment
(including but not limited to terminals, keyboards and printers) provided to
Dealer by the Company, which equipment remains the property of the Company.
(f) The acceptance of any order from, or the sale of any Products to,
Dealer after the termination or expiration of this Agreement shall not be
construed as a renewal or extension thereof nor as a waiver of termination,
but in the absence of a new written agreement signed by both parties, each
such transaction shall be considered to be undertaken pursuant to a contract
at will and shall otherwise be governed by provisions identical to the
relevant provisions of this Agreement.
(g) Dealer warrants and represents to the Company that all property
returned by Dealer to the Company pursuant to this Section 17 will be free and
clear of all liens, encumbrances and security interests. Dealer agrees to
indemnify the Company and hold it harmless from all liability, loss and
damage, including reasonable attorneys' fees, arising out of or resulting from
any breach of the foregoing representation and warranty.
18. TRADEMARKS, TRADE NAMES AND SERVICE MARKS.
Dealer recognizes that the Trademarks have become, by reason of the
excellence of the products and service they identify and their continued use
in commerce over a period of many decades, universally recognized symbols of
quality and are of unique and exceptional value. Dealer further recognizes and
acknowledges that the continuity of its operation as a financially sound and
viable business organization, able to meet its obligations as they become due
and without any resort to remedies for the
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<PAGE>
benefit of debtors, is essential to the protection and preservation of its
reputation and the Company's reputation and the integrity of the Trademarks.
Accordingly, the parties have agreed as follows:
(a) Dealer acknowledges that the Company and Manufacturer have the
exclusive ownership of or exclusive right to use the Trademarks in the
distribution and sale of Products and related services and that the Trademarks
are valid. Dealer will never contest such ownership and right or the validity
of any of the Trademarks. Dealer further agrees that it will never attempt to
register any tradename, trademark or service mark which consists of,
incorporates, includes, or is a colorable imitation of any of the Trademarks,
and if Dealer does so in breach of this Agreement, Dealer does so in
constructive trust for the Company and Manufacturer of their designee.
(b) Dealer is hereby granted a non-exclusive right and license to use
the Trademarks in connection with the conduct of its business under this
Agreement, but only in such connection. The term of such right and license
shall terminate when this Agreement shall terminate, however such termination
might be occasioned.
(c) Dealer will not use any of the Trademarks as a part of its corporate
style or tradename without the prior written consent of the Company, which
consent the Company may deny or may grant on such terms and conditions as the
Company may from time to time prescribe and which the Company may withdraw at
any time, all in the absolute discretion of the Company.
(d) Any particular use of any of the Trademarks by Dealer will be
discontinued immediately if, in the sole judgment of the Company, such use is
inconsistent with the reputation and standing of the Company or Manufacturer
or with the Company's business, advertising or public relations policies.
(e) Dealer shall not produce, sell or distribute any items bearing the
Trademarks except items Dealer purchases from the Company.
(f) Dealer will promptly report to the Company any use of the Trademarks
by any person, firm or corporation, in connection with the distribution of
Products or otherwise, which comes to the attention of Dealer and which Dealer
has reason to believe is unauthorized, and Dealer will comply with reasonable
requests by the Company for cooperation in connection with the investigation
of or legal action to prevent unauthorized uses. Dealer understands and agrees
that only the Company or the owners of the Trademarks in their sole discretion
may initiate legal action involving the Trademarks and that Dealer may not
initiate any legal action which directly or indirectly involves the
Trademarks.
-21-
<PAGE>
19. SEPARABILITY.
Should any provision of this Agreement be unenforceable or prohibited by
any applicable law, this Agreement shall be considered divisible as to such
provision, which shall be inoperative, but the remainder of this Agreement
shall be valid and binding as though such provision were not included herein.
20. ASSIGNMENT.
Neither party may assign this Agreement, or any of its interests herein,
without the written consent of the other party, except that the Company may
assign this Agreement without such consent to any person, firm or corporation
succeeding to its business and also to any subsidiary or affiliated company of
the Company. Any assignment in violation of this Section shall be void.
21. ENTIRE AGREEMENT.
Dealer agrees that it has not relied on any representations, warranties
or promises not contained herein, that no oral statement has been made to it
that in any way tends to change or modify any of the terms of this Agreement,
that there is no oral agreement or understanding between the parties affecting
this Agreement or relating to the subject matter hereof, that this Agreement
sets forth the entire understanding of the parties, and that there are not
agreements or understandings between the parties except as set forth herein.
No provision of this Agreement may be altered, amended or terminated except by
an instrument in writing signed by an executive officer of Dealer and of the
Company.
22. NOTICE.
Any notice under this Agreement shall be in writing and shall be sent by
certified mail, postage prepaid, telegram facsimile or mailgram to the
addresses set forth at the head of this Agreement or such other addresses as
may be designated in writing by like notice from time to time. All notices
required to be sent by Dealer to the Company under this Agreement shall be
addressed to the attention of the legal department.
23. NO IMPLIED WAIVERS.
Any failure of either party to this Agreement to require performance by
the other party of any provision herein shall in no way affect the right of
such party to require such performance at any time thereafter, nor shall any
waiver by either party of a breach of any provision herein constitute a waiver
of any succeeding breach of the same or any other provision, nor constitute a
waiver of the provision itself.
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<PAGE>
24. GOVERNING LAW.
This Agreement shall be interpreted and enforced in accordance with the
law of the State of New York applicable to agreements executed and wholly to
be performed in such state. If any provision herein contravenes the valid laws
or regulations of any state or other jurisdiction wherein this Agreement is to
be performed, or denies access to the procedures, forums, or remedies provided
by for such laws or regulations, such provision shall be deemed to be modified
to conform to such laws or regulations, and all other terms and provisions
shall remain in full force and effect.
-23-
<PAGE>
EXHIBIT "B"
ROLLS-ROYCE MOTORS CARS INC.
DEALERSHIP STRUCTURE, MANAGEMENT AND OWNERSHIP
STRUCTURE
Dealership Name: SCOTTSDALE AUDIT, LTD.
---------------------------------------------------------------
Type (corporation, partnership,
sole proprietorship): corporation
--------------------------------------------------
Parent and subsidiary corporations: United Auto Group
--------------------------------------------
MANAGEMENT
General Manager: George W. Brochick
---------------------------------------------------------
General Sales Manager: Jon Wiggins
---------------------------------------------------
Sales Manager: Wayne Zingsheim
-----------------------------------------------------------
Service Manager: James Baumer
---------------------------------------------------------
Parts Manager: Doug Payne
-----------------------------------------------------------
Other:
-------------------------------------------------------------------
-------------------------------------------------------------------
OWNERSHIP
List all partners/shareholders with 5% or greater holdings:
1) Name: United Auto Group
-----------------------------------------------------------------------
Address: 375 Park Avenue, 22nd Floor, New York, NY 10152
-------------------------------------------------------------------
Type (individual, corporation,
partnership, other): corporation
--------------------------------------------------
2) Name:
-----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
Type (individual, corporation,
partnership, other):
--------------------------------------------------
3) Name:
-----------------------------------------------------------------------
Address:
--------------------------------------------------------------------
<PAGE>
Type (individual, corporation,
partnership, other):
--------------------------------------------------
4) Name:
-----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
Type (individual, corporation,
partnership, other):
--------------------------------------------------
5) Name:
-----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
Type (individual, corporation,
partnership, other):
--------------------------------------------------
6) Name:
-----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
Type (individual, corporation,
partnership, other):
--------------------------------------------------
<PAGE>
==============================================================================
STOCK PURCHASE AGREEMENT
DATED: FEBRUARY 7, 1997
AMONG
UNITED AUTO GROUP, INC.
UAG NEVADA, INC.,
GARY HANNA NISSAN, INC.,
THE GARY W. HANNA FAMILY TRUST
RESTATED DECEMBER 18, 1990
AND
GARY W. HANNA
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. PURCHASE AND SALE OF SHARES.................................. 4
1.1. Certain Definitions.......................................... 4
1.2. Purchase and Sale of the Shares.............................. 6
1.3. Net Worth Adjustment......................................... 8
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE STOCKHOLDER
AND MR. HANNA................................................11
2.1 Organization and Good Standing.....ERROR! BOOKMARK NOT DEFINED.
2.2. Subsidiaries.................................................11
2.3. Capitalization.....................ERROR! BOOKMARK NOT DEFINED.
2.4. Authority; Approvals and Consents............................12
2.5 Financial Statements...............ERROR! BOOKMARK NOT DEFINED.
2.6. Absence of Undisclosed Liabilities...........................14
2.7 Absence of Material Adverse Effect;
Conduct of Business..............ERROR! BOOKMARK NOT DEFINED.
2.8. Taxes........................................................16
2.9. Legal Matters................................................17
2.10. Property...........................ERROR! BOOKMARK NOT DEFINED.
2.11. Environmental Matters........................................18
2.12 Inventories........................ERROR! BOOKMARK NOT DEFINED.
2.13. Accounts Receivable..........................................22
2.14. Insurance....................................................22
2.15. Contracts; etc...............................................22
2.16. Labor Relations..............................................23
2.17. Employee Benefit Plans.......................................24
2.18. Other Benefit and Compensation Plans or Arrangements.........27
2.19. Transactions with Insiders...................................28
2.20. Propriety of Past Payments...................................28
2.21. Interest in Competitors......................................29
2.22. Brokers......................................................29
2.23. Accounts.....................................................29
2.24. Disclosure...................................................29
2.25. Net Worth....................................................30
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER............30
3.1. Ownership of Shares; Title...................................30
3.2. Authority....................................................30
3.3. Real Property and Improvements...............................31
3.4. Investment Intent............................................31
3.5. Qualification of Stockholder.................................31
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG........................32
4.1. Organization and Good Standing...............................32
4.2. Subsidiaries.................................................33
4.3. Capitalization...............................................33
4.4. SEC Filings..................................................33
4.5. Authority; Approvals and Consents............................33
4.6. Financial Statements.........................................35
4.7. Taxes........................................................36
(i)
<PAGE>
4.8. Disclosure...................................................36
ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS..........................36
5.1. Access; Confidentiality......................................36
5.2. Furnishing Information; Announcements........................37
5.3. Antitrust Improvements Act Compliance........................38
5.4. Certain Changes and Conduct of Business......................38
5.5. No Intercompany Payables or Receivables......................42
5.6. Negotiations.................................................42
5.7. Consents; Cooperation........................................42
5.8. Additional Agreements........................................43
5.9. Interim Financial Statements.................................43
5.10. Notification of Certain Matters..............................43
5.11. Assurance by the Stockholder and Mr. Hanna...................44
5.12. Section 338(h)(10) Election..................................44
5.13. Non-Interference.............................................44
5.14. Distribution of Earnings to Stockholder......................45
5.15. Accountant's Fees............................................45
5.16. S Short Year.................................................45
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO EFFECT THE
CLOSING......................................................45
6.1. Representations and Warranties; Agreements; Covenants........46
6.2. Authorization; Consents......................................46
6.3. Opinions of the Company's and the Stockholder's Counsel......46
6.4. Absence of Litigation........................................47
6.5. No Material Adverse Effect...................................47
6.6. Net Worth....................................................47
6.7. Completion of Due Diligence..................................47
6.8. Net Income...................................................48
6.9. Lease........................................................48
6.10. Board Approval...............................................48
6.11. Certificates.................................................48
6.12. Legal Matters................................................48
6.13. Approval of Manufacturers and Distributors...................48
6.14. Environmental Laws...........................................49
6.15. Nondisturbance Agreement.....................................49
6.16. Title Insurance..............................................49
6.17. Schedules....................................................49
6.18. Lease Termination Agreement/Memorandum of Lease..............49
ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, THE STOCKHOLDER
AND MR. HANNA TO EFFECT THE CLOSING..........................49
7.1. Representations and Warranties; Agreements...................50
7.2. Authorization of the Agreement, Consents.....................50
7.3. Opinions of UAG's and Sub's Counsel..........................50
7.4. Absence of Litigation........................................50
7.5. Certificates.................................................51
7.6. Legal Matters................................................51
7.7. Schedules....................................................51
ARTICLE 8. TERMINATION..................................................51
8.1. Termination..................................................51
(ii)
<PAGE>
8.2. Effect of Termination........................................52
ARTICLE 9. INDEMNIFICATION..............................................53
9.1. Indemnification by the Stockholder...........................53
9.2. Indemnification by UAG and Sub...............................53
9.3. Procedures...................................................54
9.4. Offset.......................................................55
9.5. Remedies.....................................................55
9.6. Definitions..................................................56
ARTICLE 10. MISCELLANEOUS................................................56
10.1. Survival of Provisions.......................................56
10.2. Fees and Expenses............................................56
10.3. Headings.....................................................56
10.4. Notices......................................................57
10.5. Assignment...................................................58
10.6. Entire Agreement.............................................58
10.7. Waiver and Amendments........................................59
10.8. Counterparts.................................................59
10.9. Accounting Terms.............................................59
10.10. Schedules....................................................59
10.11. Severability.................................................59
10.12. Remedies.....................................................60
10.13. Governing Law................................................60
10.14. Time is of the Essence.......................................60
(iii)
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated February __, 1997, is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Nevada,
Inc., a Delaware corporation ("UAG Nevada" or "Sub"), Gary Hanna Nissan, Inc.,
a Nevada corporation (the "Company"), The Gary W. Hanna Family Trust Restated
December 18, 1990 (the "Stockholder") and Gary W. Hanna, an individual
resident of the state of Nevada ("Mr. Hanna").
W I T N E S S E T H:
WHEREAS, UAG Nevada is a wholly-owned subsidiary of UAG;
WHEREAS, the Company operates a franchise automobile dealership
and related businesses in Las Vegas, Nevada;
WHEREAS, the Stockholder owns all of the issued and outstanding
shares of the capital stock of the Company (the "Shares");
WHEREAS, UAG Nevada desires to purchase all of the Shares from the
Stockholder, and the Stockholder desires to sell the Shares to UAG Nevada (in
each case upon the terms and subject to the conditions set forth in this
Agreement), such that immediately after giving effect to such purchase and
sale, UAG Nevada will own one hundred percent (100%) of the issued and
outstanding shares of the capital stock of the Company, on a fully diluted
basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions
and other agreements set forth herein, the parties hereto hereby agree as
follows:
ARTICLE 1.
PURCHASE AND SALE OF SHARES
1.1. Certain Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, his or her spouse,
issue, parents, estate and any trust entirely for the benefit of his or her
spouse and/or issue.
-4-
<PAGE>
(b) "Business Day" shall mean any day excluding Saturday, Sunday
and any day which is a legal holiday under Federal law.
(c) "Closing Date" shall have the meaning ascribed to it in
Section 1.2(b).
(d) "GAAP" shall mean generally accepted accounting principles
which are in effect in the United States on the Closing Date.
(e) "Knowledge" shall mean, with respect to the Stockholders, that
the Stockholder knows, or in the exercise of reasonable diligence, would or
should have known of the particular matter referred to and, with respect to
UAG, that the President of UAG knows or, in the exercise of reasonable
diligence, would or should have known of the particular matter referred to.
(f) "Lease" shall have the meaning ascribed to it in Section
1.2(c)(iii).
(g) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior assignments, conditional
and installment sale agreements, encumbrances or charges of any kind.
(h) "Material Adverse Effect" shall mean any change in, or effect
on, the Company (including the business thereof) which is, or might be,
materially adverse to the business, operations, assets, condition (financial
or otherwise) or prospects of the Company.
(i) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(j) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
(k) "UAG Common Stock" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(l) "UAG Market Value" shall mean the arithmetic average of the
daily closing price per share of UAG Common Stock, rounded to four decimal
places, as reported on the New York Stock Exchange Composite Tape for each of
the twenty (20) consecutive trading days ending (and including) the trading
day that occurs one trading day prior to the date on which the UAG Market
Value is to be determined.
<PAGE>
1.2. Purchase and Sale of the Shares.
(a) Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholder shall sell to Sub, and
Sub shall purchase from the Stockholder, the Shares for an aggregate purchase
price (the "Purchase Price") equal to (i) Seven Million Dollars ($7,000,000)
(the "Base Price"), which Base Price is subject to adjustment after Closing as
provided in Sections 1.3 below; and (ii) shares of UAG Common Stock (the "UAG
Shares") having an aggregate UAG Market Value on the Closing Date equal to
Five Million Five Hundred Thousand Dollars ($5,500,000).
At the Closing referred to in Section 1.2(b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver
to Sub the Shares representing 100% of the issued and outstanding
capital stock of the Company and deliver the certificates representing
such Shares accompanied by stock powers duly executed in blank; and
(ii) Sub shall accept and purchase the Shares from the
Stockholder and in payment therefor shall (A) deliver to the Stockholder
immediately available funds in an aggregate amount equal to the Base
Price by wire transfer to an account designated in writing by the
Stockholder or by certified funds; and (B) deliver to the Stockholder
the certificates representing the UAG Shares.
(b) Closing. Subject to the conditions set forth in this
Agreement, the purchase and sale of the Shares pursuant to this Agreement (the
"Closing") shall take place as soon as practicable following the date on which
all conditions to the obligations of the parties hereunder (other than those
requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived, but no
later than April 30, 1997. The date on which the Closing occurs is herein
referred to as the "Closing Date".
(c) Deliveries at the Closing. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) the Stockholder shall deliver to Sub certificates
representing the Shares bearing the restrictive legend customarily
placed on securities that have not been registered under applicable
federal and state securities laws and accompanied by stock powers as
required by Section 1.2(a)(i) hereof, and any other documents that are
necessary to transfer to Sub good title to all the Shares, and (B) all
opinions, certificates and other instruments and documents required to
be delivered by the Company, the Stockholder or Mr. Hanna at or prior to
the Closing or otherwise required in connection herewith;
<PAGE>
(ii) the Sub shall (A) pay to the Stockholder funds and
deliver the certificates representing the UAG Shares as required by
Section 1.2(a)(ii) hereof; and (B) deliver to the Stockholder all
opinions, certificates and other instruments and documents required to
be delivered by UAG or Sub at or prior to the Closing or otherwise
required in connection herewith; and
(iii) the Company and the Stockholder shall enter into a
lease for the real property used in the business of the Company in a
form mutually acceptable to the parties (the "Lease"). The Lease shall
be for a twenty (20) year term commencing on the Closing Date. The
initial annual lease rate shall be the lease rate paid by the Company
for the year ending December 31, 1996 (unless such lease rate exceeds
the fair market rate in which case the initial lease rate shall be the
fair market rate for the year ending December 31, 1996)("Base Rate"),
payable monthly, and (x) on the fifth anniversary of the Closing Date
(the "Fifth Anniversary") shall increase to an amount equal to the Base
Rate plus an amount equal to a percentage of the Base Rate, which
percentage shall be the percentage increase in the Consumer Price Index
published from time to time by the United States Department of Labor
("CPI") between the Closing Date and the Fifth Anniversary (such
increased lease rate hereinafter the "Increased Rate"), and (y) on the
tenth anniversary of the Closing Date (the "Tenth Anniversary") shall
increase to an amount equal to the Increased Rate plus an amount equal
to a percentage of the Increased Rate, which percentage shall be the
percentage increase in the CPI between the Fifth Anniversary and the
Tenth Anniversary (such increased lease rate being referred to as the
"Second Increased Rate"), and (z) on the fifteenth anniversary of the
Closing Date (the "Fifteenth Anniversary") shall increase to an amount
equal to the Second Increased Rate plus an amount equal to a percentage
of the Second Increased Rate, which percentage shall be the percentage
increase in the CPI between the Tenth Anniversary and the Fifteenth
Anniversary (such increased lease rate being referred to as the "Third
Increased Rate"). The lease shall provide the Company with the option to
extend the lease term for an additional five-year period (the "First
Option") commencing on the twentieth anniversary of the Closing Date
("Twentieth Anniversary") at a rate equal to the Third Increased Rate
plus a percentage of the Third Increased Rate, which percentage shall be
the percentage increase in the CPI between the Fifteenth Anniversary and
the Twentieth Anniversary (such increased lease rate being referred to
as the "Fourth Increased Rate"). The lease shall further provide that,
in the event the Company exercises the First Option, the Company shall
have the option to extend the lease term for an additional five-year
period commencing with the twenty-fifth anniversary of the Closing Date
("Twenty-Fifth Anniversary") at a rate equal to the Fourth Increased
Rate plus a percentage of the Fourth Increased Rate, which percentage
shall be the
<PAGE>
percentage increase in the CPI between the Twentieth Anniversary and
the Twenty-Fifth Anniversary.
1.3. Net Worth Adjustment.
(a) On the Closing Date, or as soon as practicable after the
Closing Date, the Stockholder shall deliver to UAG a balance sheet of the
Company dated as of the Closing Date (such balance sheet so delivered is
referred to herein as the "Closing Date Balance Sheet"). The Closing Date
Balance Sheet shall be prepared in good faith on the same basis and in
accordance with the accounting principles, methods and practices used in
preparing the Company Financial Statements (as defined in Section 2.5 hereof)
(such accounting principles, methods and practices and such procedures, are
referred to herein as the "Accounting Principles").
In connection with the preparation of the Closing Date Balance
Sheet, the Stockholder and the Company shall permit the Reviewer (as defined
below) and other representatives of UAG to conduct a physical inventory at
each location where inventory is held by the Company.
(b) Within sixty (60) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other accounting firm (the
"Reviewer") as may be selected by UAG shall audit or otherwise review the
Closing Date Balance Sheet in such manner as UAG and the Reviewer deem
appropriate, and (ii) UAG shall deliver such reviewed balance sheet (the
"Reviewed Balance Sheet"), together with the Reviewer's report thereon, to the
Stockholder.
The Reviewed Balance Sheet (i) shall be prepared on the same basis
and in accordance with the Accounting Principles and (ii) shall include a
schedule showing the computation of the Final Net Worth (as defined in
Section 1.3(g)(i) hereof), computed in accordance with the definition of Net
Worth set forth in Section 1.3(g)(ii) hereof. UAG and the Reviewer shall have
the opportunity to consult with the Stockholder, the Company and each of the
accountants and other representatives of the Stockholder and the Company and
to examine the work papers, schedules and other documents prepared by the
Stockholder, the Company and each of such accountants and other
representatives during the preparation of the Closing Date Balance Sheet. The
Stockholder and the Stockholder's independent public accountants shall have
the opportunity to consult with the Reviewer and to examine the work papers,
schedules and other documents prepared by the Reviewer during the preparation
of the Reviewed Balance Sheet.
(c) The Stockholder shall have a period of forty-five (45) days
after delivery of the Reviewed Balance Sheet to present in writing to UAG all
objections the Stockholder may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail.
If no objections are raised within such 45-day period, the Reviewed Balance
Sheet shall be deemed accepted and approved by the Stockholder and a
supplemental closing (the "Supplemental Closing") shall take place within five
<PAGE>
(5) Business Days following the expiration of such 45-day period, or on such
other date as may be mutually agreed upon in writing by UAG and the
Stockholder.
(d) If the Stockholder shall raise any objection within such
45-day period, UAG and the Stockholder shall attempt to resolve the matter or
matters in dispute and, if resolved, the Supplemental Closing shall take place
within five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Stockholder
within sixty (60) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a firm of independent
public accountants mutually acceptable to UAG and the Stockholder, which firm
shall make a final and binding determination as to such matter or matters.
Such accounting firm shall send its written determination to UAG and the
Stockholder and the Supplemental Closing, if any, shall take place five (5)
Business Days following the receipt of such determination by UAG and the
Stockholder. The fees and expenses of the accounting firm referred to in this
Section 1.3(e) shall be paid one-half by UAG and one-half by the Stockholder.
(f) UAG and the Stockholder agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected
by UAG and the Stockholder pursuant to Section 1.3(e) hereof in order that any
and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the aggregate Net Worth as shown on the Reviewed
Balance Sheet as finally determined through the operation of Sections 1.3 (a)
through (e) hereof (such amount being referred to herein as the "Final Net
Worth") shall be less than the Net Worth of the Company as set forth on the
November 30 Balance Sheet (as defined in Section 2.5) (the "November 30 Net
Worth") (the amount of any such deficiency being referred to herein as the
"Net Worth Deficiency"), the Stockholder shall pay to UAG at the Supplemental
Closing, by wire transfer of immediately available funds to an account
designated in writing by UAG at least two (2) Business Days prior to the date
of the Supplemental Closing, an amount equal to the Net Worth Deficiency,
together with interest on such amount from the Closing Date to the date of the
Supplemental Closing at the prime rate or its equivalent (as announced from
time to time by Citibank, N.A.).
(ii) "Net Worth" computed in connection with the Closing Date
Balance Sheet, the November 30 Balance Sheet and the Reviewed Balance
Sheet shall mean the amount by which the total assets (not including
intangible assets) exceed the total liabilities reflected, in each case,
on the balance sheets of Company comprising the Closing Date Balance
Sheet, the November 30 Balance Sheet or the Reviewed Balance Sheet, as
the case may be.
<PAGE>
1.4. Stock Price Adjustment.
If, on the Adjustment Date (as defined below), the UAG Shares have
an aggregate UAG Market Value of less than Six Million Dollars ($6,000,000)
(the amount of any such deficiency being referred to herein as the "Stock
Price Deficiency") then, no later than thirty (30) days after the Adjustment
Date, UAG shall pay the Stockholder cash in an amount (the "Adjustment
Amount") equal to the Stock Price Deficiency. For purposes of this Agreement,
the Adjustment Date shall mean the date on which the Stockholder may sell the
UAG Shares in reliance on Rule 144 promulgated by the Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as amended ("Rule
144").
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, THE STOCKHOLDER AND MR. HANNA
Subject to the parties' agreement and acknowledgment that certain
of the Schedules referred to in this Article 2 are to be delivered by the
Company and the Stockholder no later than thirty (30) days from the date
hereof, the Company, the Stockholder and Mr. Hanna hereby jointly and
severally represent and warrant to UAG and Sub as follows:
2.1. Organization and Good Standing.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has the corporate power and authority to own, lease and operate the properties
used in its business and to carry on its business as now being conducted. The
Company is duly qualified to do business and is in good standing as a foreign
corporation in each state and jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of
the Company would not, or could not reasonably be expected to, in the
aggregate have a Material Adverse Effect. Schedule 2.1(a) hereto lists (i) the
states and other jurisdictions where the Company is so qualified and (ii) the
assumed names under which the Company conducts business. Attached to Schedule
2.1(b) hereto are complete and correct copies of the Company's Articles of
Incorporation and Bylaws (including comparable governing instruments with
different names), as amended and presently in effect.
2.2. Subsidiaries.
The Company does not have any interest or investment in any
Person.
2.3. Capitalization.
The authorized stock of the Company and the number of shares of
capital stock which are issued and outstanding are set forth on Schedule 2.3
hereto. The shares listed on Schedule 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued
in violation of any preemptive rights or of any federal or state securities
law and no personal liability attaches to the ownership thereof. There is no
security, option, warrant, right, call, subscription,
<PAGE>
agreement, commitment or understanding of any nature whatsoever, fixed or
contingent, that directly or indirectly (i) calls for the issuance, sale,
pledge or other disposition of any shares of capital stock of the Company or
any securities convertible into, or other rights to acquire, any shares of
capital stock of the Company, or (ii) obligates the Company to grant, offer or
enter into any of the foregoing, or (iii) relates to the voting or control of
such capital stock, securities or rights, except as set forth on Schedule 2.3
hereto. The Company has not agreed to register any securities under the
Securities Act of 1933, as amended (the "Securities Act").
2.4. Authority; Approvals and Consents.
The Company has the corporate power and authority to enter into
this Agreement and the documents referred to herein (the "Documents") to which
it is a party and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Documents to
which it is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company is necessary to authorize and approve this Agreement and the Documents
and the transactions contemplated hereby and thereThis Agreement has been, and
on the Closing Date the Documents will be, duly executed and delivered by, and
constitute valid and binding obligations of, the Company, enforceable against
the Company in accordance with its terms. The execution, delivery and
performance by the Company, the Stockholder and Mr. Hanna of this Agreement
and the Documents to which it or they are a party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Articles of
Incorporation or Bylaws (including any comparable governing instrument
with a different name) of the Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any Company Agreement (as
defined in Section 2.15 hereof) or, except as set forth on Schedule 2.4
hereto, require any consent or waiver of any party to any Company
Agreement;
(iii) result in the creation of any security interest upon,
or any Person obtaining any right to acquire, any properties, assets or
rights of the Company (other than the rights of Sub to acquire the
Shares pursuant to this Agreement);
<PAGE>
(iv) violate or conflict with any Legal Requirements (as
defined in Section 2.9 hereof) applicable to the Company or its business
or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act
(as defined in Section 5.3 hereof).
Except as set forth or referred to above, no authorization,
consent, order, permit or approval of, or notice to, or filing, registration
or qualification with, any governmental administrative or judicial authority
is necessary to be obtained or made by the Company to enable the Company to
continue to conduct its business and operations and use its properties after
the Closing in a manner which is in all material respects consistent with that
in which it is presently conducted.
2.5. Financial Statements.
Except as otherwise indicated below, attached as Schedule 2.5 are
true and complete copies of:
(i) (A) the balance sheet of the Company as of December 31,
1995, and the related consolidated statement of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1995,
together with the notes thereto and (B) the balance sheet of the Company
as of December 31, 1994, and the related consolidated statement of
income, stockholders' equity and cash flow for the fiscal year ended
December 31, 1994, together with the notes thereto;
(ii) the balance sheet of the Company as of December 31,
1996 (the "December 31 Balance Sheet") and the statement of income,
stockholders' equity and cash flow for the month periods ended on such
date, together with the notes thereto;
(iii) the balance sheet of the Company as of November
30, 1996 (the "November 30 Balance Sheet"); and
(iv) the most recent monthly and year-to-date financial
statements provided to Nissan (the "Company Factory Statement");
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Company Financial Statements"). The
Company Financial Statements are consistent with and in accordance with the
books and records of the Company, fairly present the financial position,
results of operations, stockholders' equity and changes in financial position
<PAGE>
of the Company as of the dates and for the periods indicated, in the case of
the financial statements referred to in clauses (i), (ii) and (iii) above in
conformity with GAAP consistently applied (except as set forth on Schedule
2.5(b) hereto) during such periods, and can be legitimately reconciled with
the financial statements and the financial records maintained and the
accounting methods applied by the Company for federal income tax purposes, and
the unaudited financial statements included in the Company Financial
Statements indicate all adjustments, which consist of only normal recurring
accruals, necessary for such fair presentations. The statements of income
included in the Company Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified therein, and the
balance sheets included in the Company Financial Statements do not reflect any
write-up or revaluation increasing the book value of any assets. The books and
accounts of the Company are complete and correct in all material respects and
fairly reflect all of the transactions, items of income and expense and all
assets and liabilities of the businesses of the Company.
2.6. Absence of Undisclosed Liabilities.
The Company does not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Section 2.17 and 2.18
hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for
(i) liabilities reflected or reserved against on the most recent Company
Financial Statements, (ii) current liabilities incurred in the ordinary course
of business and consistent with past practice after the date of the November
30 Balance Sheet which, individually and in the aggregate, do not have, and
cannot reasonably be expected to have, a Material Adverse Effect, and (iii)
liabilities disclosed on Schedule 2.6 hereto. The Company is not a party to
any Company Agreement, or subject to any charter or bylaw provision, any other
corporate limitation or any Legal Requirement, which has, or can reasonably be
expected to have, a Material Adverse Effect.
2.7. Absence of Material Adverse Effect; Conduct of Business.
(a) Since December 31, 1995, the Company has operated in the
ordinary course of business consistent with past practice, except as set forth
on Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the Company, and no factor, event, condition, circumstance or
prospective development exists
<PAGE>
which threatens or may threaten to have a Material Adverse Effect;
(ii) any material loss, damage, destruction or other
casualty to the property or other assets of the Company, whether or not
covered by insurance;
(iii) any change in any method of accounting or
accounting practice of the Company; or
(iv) any loss of the employment, services or benefits
of any key employee of the Company.
(b) Since December 31, 1995, except as set forth in Schedule
2.7(b) hereto, the Company has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or
satisfy any obligation or liability (whether absolute, accrued,
contingent or otherwise), other than liabilities being contested in good
faith and for which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics liens and liens for taxes
not yet due and payable;
(iv) sold or transferred any assets or canceled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in
the ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off
as uncollectible any accounts receivable or any portion thereof not
reflected in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits
of employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess
<PAGE>
of $200,000, or additions to property, plant and equipment other than
ordinary repairs and maintenance;
(x) discontinued any franchise or the sale of any
products or product line or program;
(xi) incurred any obligation or liability for the
payment of severance benefits; or
(xii) entered into any agreement or made any commitment
to do any of the foregoing.
2.8. Taxes.
The Company has made a valid election pursuant to Section 1362(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), to be an "S
corporation" within the meaning of Section 1361(a)(1) of the Code and has
continued to qualify as such for all taxable years since December 31, 1986 and
will continue to so qualify through the Closing Date.
The Company and, for any period during all or part of which the
tax liability of any other corporation was determined on a combined or
consolidated basis with the Company any such other corporation, has filed
timely all federal, state, local and foreign tax returns, reports and
declarations required to be filed (or have obtained or timely applied for an
extension with respect to such filing) correctly reflecting the Taxes (as
defined below) and all other information required to be reported thereon and
have paid, or made adequate provision for the payment of, all Taxes which are
due pursuant to such returns or pursuant to any assessment received by the
Company or any such other corporation. As used herein, "Taxes" shall mean all
taxes, fees, levies or other assessments, including but not limited to income,
excise, property, sales, franchise, withholding, social security and
unemployment taxes imposed by the United States, any state, county, local or
foreign government, or any subdivision or agency thereof or taxing authority
therein, and any interest, penalties or additions to tax relating to such
taxes, charges, fees, levies or other assessments.
Copies of all tax returns for the fiscal years ended since December
31, 1991 have been furnished or made available to UAG or its representatives
and such copies are accurate and complete as of the date hereof. The Company
has also furnished to UAG correct and complete copies of all notices and
correspondence sent or received since December 31, 1991 by the Company to or
from any federal, state or local tax authorities. The Company has adequately
reserved for the payment of all Taxes with respect to periods ended on, prior
to or through the Closing Date for which tax returns have not yet been filed.
In the ordinary course, the Company makes adequate provision on its books for
the payment of all Taxes (including for the current fiscal period) owed by the
Company. Except to the extent reserves therefor are reflected on the Closing
Date Balance Sheet, the Company is not liable, or will
<PAGE>
not become liable, for any Taxes for any period ending on, prior to or through
the Closing Date. Except as set forth on Schedule 2.8 hereto, the Company has
not been subject to a federal or state tax audit of any kind, and no
adjustment has been proposed by the Internal Revenue Service ("IRS") with
respect to any return for any subsequent year. With respect to the audits
referred to on Schedule 2.8 hereto, no such audit has resulted in an
adjustment in excess of $50,000. Neither the Company nor the Stockholder knows
of any basis for an assertion of a deficiency for Taxes against the Company.
The Stockholder will cooperate, and will cause its Affiliates to cooperate,
with the Company in the filing of any returns and in any audit or refund claim
proceedings involving Taxes for which the Company may be liable or with
respect to which the Company may be entitled to a refund.
2.9. Legal Matters.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company
or the Stockholder, threatened against or affecting, the Company, any ERISA
Plan (as defined in Section 2.17(a) hereof) or any of its properties or rights
before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, domestic or foreign, nor is any basis known
to the Stockholder or the Company for any such Claims, and (ii) the Company is
not subject to any judgment, decree, writ, injunction, ruling or order
(collectively, "Judgments") of any governmental, administrative or judicial
authority, domestic or foreign. Schedule 2.9(a) hereto identifies each Claim
and Judgment disclosed thereon which is fully covered by an insurance policy.
(b) The business of the Company is being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Company or its business
or properties. The Company holds, and is in compliance with, all franchises,
licenses, permits, registrations, certificates, consents, approvals or
authorizations (collectively, "Permits") required by all applicable Legal
Requirements. A list of all such permits is set forth on Schedule 2.9(b)
hereof.
(c) The Company owns or holds all Permits material to the conduct
of its business. No event has occurred and is continuing which permits, or
after notice or lapse of time or both would permit, any modification or
termination of any Permit.
<PAGE>
2.10. Property.
The properties and assets, real and personal, owned by or leased
to the Company are adequate for the conduct of the business of the Company as
presently conducted. Set forth on Schedule 2.10(a) hereto is a list of all
interests in real property owned by or leased to the Company (including all
real property owned or leased by the Stockholder, directly or indirectly) and
used in the business of the Company and of all options or other contracts to
acquire any such interest (collectively, the "Real Property"). With respect to
any leased Real Property there are no defaults by either parties under and no
state of facts exist which with the giving of notice or the passage of time,
or both, would constitute a default under such leases and true and correct
copies of such leases are attached as Schedule 2.10(b). All improvements to
the Real Property ("Improvements") and all machinery, equipment and other
tangible property owned or used by or leased to the Company are in good
operating condition and in good repair and are fit for the particular purposes
for which they are used by the Company, subject only to ordinary wear and
tear.
Such tangible properties and all Improvements owned or leased by
the Company conform in all material respects with all applicable laws,
ordinances, rules and regulations and other Legal Requirements and such
Improvements do not encroach in any respect on property of others. There are no
latent defects with respect to the Improvements. The Real Property is currently
zoned to permit the conduct of the business of the Company as presently
conducted.
Certificates of Occupancy have been issued with respect to the
Improvements without special conditions or restrictionsAll utilities servicing
the Real Property and the Improvements are provided by publicly-dedicated
utility lines and are located within public rights-of-way and do not cross or
encumber any private land.
No notice of any pending, threatened or contemplated action by
any governmental authority or agency having the power of eminent domain has
been given to the Company or the Stockholder with respect to the Real Property.
2.11. Environmental Matters.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) to the
knowledge of the Stockholder and the Company, the Company, the Real Property,
the Improvements and any property formerly owned, occupied or leased by the
Company are in full compliance with all Environmental Laws (as defined below),
(ii) the Company has obtained all Environmental Permits (as defined below),
(iii) such Environmental Permits are in full force and effect, and (iv) the
Company is in compliance with all terms and conditions of such Environmental
Permits. The Stockholder and the Company did not engage in any activity or
conduct, or cause or permit any condition, that would not be in compliance
with the Environmental Laws or Environmental Permits. As used herein,
"Environmental Laws" shall mean all applicable requirements of environmental,
public or employee health and safety, public or community right-to-
<PAGE>
know, ecological or natural resource laws or regulations or controls,
including all applicable requirements imposed by any law (including without
limitation common law), rule, order, or regulations of any federal, state, or
local executive, legislative, judicial, regulatory, or administrative agency,
board, or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to, (i) noise, (ii) pollution or
protection of the air, surface water, groundwater, or soil, (iii) solid,
gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or
(v) regulation of the manufacture, processing, distribution and commerce, use,
or storage of Hazardous Materials. As used herein, "Environmental Permits"
shall mean all permits, licenses, approvals, authorizations, consents or
registrations required under applicable Environmental Laws in connection with
the ownership, use and/or operation of the Company's business or the Real
Property or Improvements.
As used in this Section 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous
substances," "hazardous materials," "toxic substances" or similar terms in or
pursuant to, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as
amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L.
99-499, 100 State, 1613), the Resource Conservation and Recovery Act of 1976
(42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Occupational Safety and Health AcT
of 1970 (29 U.S.C. ss. 651 et seq.) ("OSHA"), and the Hazardous MaterialS
Transportation Act, 49 U.S.C. ss. 1801 et seq. ("HMTA"), and in the
regulationS promulgated pursuant to such laws, all as amended, (ii) those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency
(or any successor agency) as hazardous substances (40 CFR part 302 and
amendments thereto), (iii) any material, waste or substance which is or
contains (A) petroleum, including crude oil or any fraction thereof, natural
gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos,
(C) polychlorinated biphenyls, (D) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. ss. 1251 et seq. (33
U.S.C. SS. 1321) or listed pursuant to Section 307 of the Clean Water Act (33
U.S.C. ss. 1317), (E) flammable explosives, (F) radioactive materials, and
(iv) such other substances, materials and wastes which are or become regulated
or classified as hazardous, toxic or as "special wastes" under any
Environmental Laws.
(b) The Company and the Stockholder have not violated, done or
suffered any act which could give rise to liability under, and, to the
knowledge of the Stockholder and the Company, are not otherwise exposed to
liability under, any Environmental Law. To the knowledge of the Stockholder
and the Company, no event has occurred with respect to the Real Property, the
Improvements or any property formerly owned, occupied or leased by the
Company, which,
<PAGE>
with the passage of time or the giving of notice, or both, would constitute a
violation of or non-compliance with any applicable Environmental Law. The
Company has no contingent liability under any Environmental Law. There are no
liens under any Environmental Law on the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) neither
the Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Company or the Stockholder, any property adjacent to the Real
Property is being used or has been used (at such time as the Stockholder owned
or leased such property) for the treatment, generation, transportation,
processing, handling, production or disposal of any Hazardous Materials or as
a landfill or other waste disposal site and there has been no spill or release
of any Hazardous Materials (provided, however, that certain petroleum products
are stored and handled on the Real Property in the ordinary course of the
Company's business in full compliance with all Environmental Laws including
the existing regulations of the United States Environmental Protection Agency
requiring spill protection, overfill protection and corrosion protection by
December 22, 1998 and all secondary containment requirements with respect to
above ground storage tanks), (ii) to the knowledge of the Stockholder and the
Company none of the Real Property or portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company has been subject to
investigation by any governmental authority evaluating the need to investigate
or undertake Remedial Action (as defined below) at such property, and (iii) to
the knowledge of the Company and the Stockholder, none of the Real Property,
the Improvements or any property formerly owned, occupied or leased by the
Company or any site or location where the Company sent waste of any kind, is
identified on the current or proposed (A) National Priorities List under 40
C.F.R. 300 Appendix B, (B) Comprehensive Environmental Response Compensation
and Liability Inventory System list, or (C) any list arising from any statute
analogous to CERCLA. As used herein, "Remedial Action" shall mean any action
required to (i) clean up, remove or treat Hazardous Materials, (ii) prevent a
release or threat of release of any Hazardous Material, (iii) perform
pre-remedial studies, investigations or post-remedial monitoring and care,
(iv) cure a violation of Environmental Law or (v) take corrective action under
sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on Schedule 2.11(d) hereto, there have
been and are no (i) aboveground or underground storage tanks, subsurface
disposal systems, or wastes, drums or containers disposed of or buried on, in
or under the ground or any surface waters, (ii) asbestos or asbestos
containing materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers, or (iv) wetlands (as defined
under any Environmental Law) located within any portion of the Real Property,
nor have any liens been placed upon any portion of the Real Property, the
Improvements or any property formerly owned,
<PAGE>
occupied or leased by the Company in connection with any actual or alleged
liability under any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is
no pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving the Company, the Real Property, the Improvements,
any property formerly owned, leased or occupied by the Company, any offsite
contamination affecting the business of the Company or any operations
conducted at the Real Property, (ii) there are no ongoing negotiations with or
agreements with any governmental authority relating to any Remedial Action or
other environmentally related claim, (iii) the Company has not submitted
notice pursuant to Section 103 of CERCLA or analogous statute or notice under
any other applicable Environmental Law reporting a release of a Hazardous
Material into the environment, and (iv) the Company has not received any
notice, claim, demand, suit or request for information from any governmental
or private entity with respect to any liability or alleged liability under any
Environmental Law, nor to the knowledge of the Stockholder and the Company,
has any other entity whose liability therefor, in whole or in part, may be
attributed to the Company, received such notice, claim, demand, suit or
request for information.
(f) The Stockholder and the Company have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Company and any property formerly
owned, occupied or leased by the Company, and have permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, and any property formerly owned, occupied or leased by the
Company, by UAG or UAG's agents or experts as they have or shall have deemed
necessary or appropriate to confirm the condition of such properties.
2.12. Inventories
The values at which inventories are carried on the Company
Financial Statements reflect the normal inventory valuation policies of the
Company, and, in the case of the December 31 Balance Sheet, such values are in
conformity with GAAP consistently applied. All inventories reflected on the
Company Financial Statements or arising since the date thereof are currently
marketable and can reasonably be anticipated to be sold at normal mark-ups
within ninety (90) days after the date hereof in the ordinary course of
business, except for spare parts inventory which inventory is good and usable.
<PAGE>
2.13. Accounts Receivable.
All accounts receivable reflected on the December 31 Balance Sheet
are, and all accounts receivable that will be or will have been reflected on
the Closing Date Balance Sheet will be, good, and have been or will have been
collected or are collectible, without resort to litigation, within 90 days of
the Closing Date, and are subject to no defenses, setoffs or counterclaims
other than normal cash discounts accrued in the ordinary course of business.
2.14. Insurance.
All material properties and assets of the Company which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Company is engaged and customary
for companies engaged in similar businesses or owning similar assets. Set
forth on Schedule 2.14 hereto is a list and brief description (including the
name of the insurer, the type of coverage provided, the amount of the annual
premium for the current policy period, the amount of remaining coverage and
deductibles and the coverage period) of all policies for such insurance and
the Company have made or will make available to UAG true and complete copies
of all such policies.
All such policies are in full force and effect, are underwritten
by financially secure insurers, are sufficient for all applicable requirements
of law and will not in any way be affected by or terminated or lapsed by
reason of the consummation of the transactions contemplated by this Agreement.
No notice of cancellation or non-renewal with respect to, or disallowance of
any claim under, any such policy has been received by the Company.
2.15. Contracts; etc.
As used in this Agreement, the term "Company Agreements" shall
mean all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on Schedule 2.10
hereto) to which the Company is a party or by which the Company or any of its
assets or properties (including the Real Property and the Improvements) may be
bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing. Set forth on Schedule 2.15 hereto is a
complete and accurate list of each Company Agreement which is material to the
business, operations, assets, condition (financial or otherwise) or prospects
of the Company. True and complete copies of all written Company Agreements
referred to on Schedule 2.15 and Schedule 2.10 hereto, exclusive of individual
vehicle titles and/or manufacturer's certificates of origin and floor plan
liens applicable to individual vehicles, have been delivered or made available
to UAG,
<PAGE>
and the Company has provided UAG with accurate and complete written summaries
of all such Company Agreements which are unwritten.
Except as set forth on Schedule 2.15, the Company is not, nor, to
the knowledge of the Company and the Stockholder is, any other party thereto,
in breach of or default under any Company Agreement, and no event has occurred
which (after notice or lapse of time or both) would become a breach or default
under, or would permit modification, cancellation, acceleration or termination
of, any Company Agreement or result in the creation of any Lien upon, or any
Person obtaining any right to acquire, any properties, assets or rights of the
Company in any such case where such breach, default or other event would have,
or could reasonably be expected to have, a Material Adverse Effect. There are
no material unresolved disputes involving the Company under any Company
Agreement.
2.16. Labor Relations.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the
payment and withholding of taxes, and have withheld and paid to the
appropriate governmental authority, or are holding for payment not yet due to
such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of their employees.
(b) Except as set forth on Schedule 2.16(b) hereto, the Company is
not a party to any (i) outstanding employment agreements or contracts with
officers or employees that are not terminable at will, or that provide for
payment of any bonus or commission, (ii) agreement, policy or practice that
requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law), (iii) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, nor do the Stockholder or the Company know of any activities or
proceedings of any labor union to organize any such employees. The Company has
furnished to UAG complete and correct copies of all such agreements
("Employment and Labor Agreements"). The Company has not breached or otherwise
failed to comply with any provisions of any Employment or Labor Agreement.
(c) Except as set forth in Schedule 2.16(c) hereto, (i) there is
no unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholder's or
the Company's knowledge, threatened, against or affecting the Company, and the
Company has not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any
<PAGE>
similar foreign agency and no question concerning representation exists
relating to the employees of the Company, (iv) there are no charges with
respect to or relating to the Company pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for
the prevention of unlawful employment practices, (v) the Company has not
received formal notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Company and, to the knowledge of the Company,
no such investigation is in progress and (vi) the consents of the unions that
are parties to any Employment and Labor Agreements are not required to
complete the transactions contemplated by this Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the
regulatiONS promulgated therein.
2.17. Employee Benefit Plans.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete
list of:
(i) each employee pension benefit plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA"), maintained by the Company or to which the Company is required
to make contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in
Section 3(i) of ERISA, maintained by the Company or to which the Company
is required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to UAG together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination
letters or applications therefor with respect to any Pension Benefit Plan
intended to be qualified pursuant to Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and valuation or actuarial reports,
accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or
5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on
Schedule 2.17(b):
(i) there is no ERISA Plan which is a " multiemployer"
plan as that term is defined in Section 3(37) of ERISA ("Multiemployer
Plan");
<PAGE>
(ii) no event has occurred or (to the knowledge of the
Company or the Stockholder) is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of ERISA or under
Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state,
local or foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder has been exempt
from taxation under Section 501(a) of the Code and is currently in
compliance with applicable federal laws;
(ii) has been operated, since its inception, in accordance
with its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review
by the IRS or (to the knowledge of the Company and the Stockholder) no
such action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under Section
401(a) of the Code or that any trust established under a Pension Benefit
Plan is not exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of Section
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Company since the effective date of ERISA and all premiums due and owing
to the PBGC have been timely paid;
(ii) the PBGC has not notified the Company or any
Pension Benefit Plan of the commencement of proceedings under Section
4042 of ERISA to terminate any such plan;
(iii) no event has occurred since the inception of any
Pension Benefit Plan or (to the knowledge of the Company or the
Stockholder) is threatened or about to occur
<PAGE>
which would constitute a reportable event within the meaning of Section
4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA
and Section 412 of the Code); and
(v) if any of such Pension Benefit Plans were to be
terminated on the Closing Date (A) no liability under Title IV of ERISA
would be incurred by the Company and (B) all benefits accrued to the day
prior to the Closing Date (whether or not vested) would be fully funded
in accordance with the actuarial assumptions and method utilized by such
plan for valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
(f) The approximate aggregate of the amounts of contributions by
the Company to be paid or accrued under ERISA Plans for the current fiscal
year is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"),
and the Aggregate ERISA Contributions are not expected to exceed the total
amount set forth on Schedule 2.17(f). To the extent required in accordance
with GAAP, the December 31 Balance Sheet reflects in the aggregate an accrual
of all amounts of employer contributions accrued but unpaid by the Company
under the ERISA Plans as of the date of the December 31 Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has
not, since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205
of ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined
in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a claim
filed on or before the Closing Date.
(ii) No claims for benefits are in dispute or
litigation.
<PAGE>
2.18. Other Benefit and Compensation Plans or Arrangements.
(a) Set forth on Schedule 2.18(a) hereto is a true and complete
list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan whether written or oral, which the Company maintains or is required
to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Company pursuant to which
payments may be required to be made at any time following the date
hereof (including, without limitation, any employment, deferred
compensation, severance, supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of the Company whose aggregate
compensation for the fiscal year ended December 31, 1996 exceeded
$50,000. True and complete copies of all of the written plans,
arrangements and agreements referred to on Schedule 2.18(a)
("Compensation Commitments") have been provided to UAG together with,
where prepared by or for the Company, any valuation, actuarial or
accountant's opinion or other financial reports with respect to each
Compensation Commitment for the last three years. An accurate and
complete written summary has been provided to UAG with respect to any
Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all
material respects in accordance with its terms;
(ii) is not currently under investigation, audit or review
by the IRS or any other federal or state agency and (to the knowledge of
the Company or the Stockholder) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or
foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of
the Code; and
<PAGE>
(vi) has operated since its inception in material compliance
with the reporting and disclosure requirements imposed under ERISA and
the Code.
2.19. Transactions with Insiders.
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Company or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since January 1, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any
director or officer of the Company, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(ii) the term "Associate" used to indicate a relationship
with any person means (A) any corporation, partnership, joint venture or
other entity of which such person is an officer or partner or is,
directly or indirectly, through one or more intermediaries, the
beneficial owner of 30% or more of (1) any class or type of equity
securities or other profits interest or (2) the combined voting power of
interests ordinarily entitled to vote for management or otherwise, and
(B) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's
spouse, such person's parents, sisters, brothers, children and the
spouses of the foregoing, and any member of the immediate household of
such person.
2.20. Propriety of Past Payments.
No funds or assets of the Company have been used for illegal
purposes; no unrecorded funds or assets of the Company have been established
for any purpose; no accumulation or use of the Company's corporate funds or
assets have been made without being properly accounted for in the respective
books and records of the Company; all payments by or on behalf of the Company
have been duly and properly recorded and accounted for in their respective
books and records; no false or artificial entry has been made in the books and
records of the Company for any reason; no payment has been made by or on
behalf of the Company with the understanding that any part of such payment is
to be used for any purpose other than that described in the documents
supporting such payment; and the Company has not made, directly or indirectly,
any illegal contributions to any political party or candidate, either domestic
or foreign. Neither the IRS nor any other federal, state, local or foreign
government agency or entity has initiated or threatened
<PAGE>
any investigation of any payment made by the Company of, or alleged to be of,
the type described in this Section 2.20.
2.21. Interest in Competitors.
Except as set forth on Schedule 2.21, neither the Company nor the
Stockholder, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2% of
the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or otherwise,
directly or indirectly, in any Person other than the Company that is engaged
in the retail sale of automobiles or light duty trucks.
2.22. Brokers.
Neither the Company, nor any director, officer or employee
thereof, nor the Stockholder or any representative of the Stockholder, has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Documents except
that the Stockholder has employed Ben Hicks (the "Broker") in connection with
this transaction. The Stockholder will satisfy any obligations of UAG, Sub,
the Stockholder, Mr. Hanna and the Company relating to the employment of
Broker, and will hold UAG, Sub and the Company harmless therefrom.
2.23. Accounts.
Schedule 2.23 hereof correctly identifies each bank account
maintained by or on behalf or for the benefit of the Company and the name of
each Person with any power or authority to act with respect thereto.
2.24. Disclosure.
Neither the Company nor the Stockholder have made any material
misrepresentation to UAG or the Sub relating to the Company or the Shares or
the Real Property or Improvements and neither the Company nor the Stockholder
have omitted to state to UAG any material fact relating to the Company or the
Shares or the Real Property or Improvements which is necessary in order to
make the information given by or on behalf of the Company or the Stockholder
to UAG not misleading or which if disclosed would reasonably affect the
decision of a person considering an acquisition of the Shares. No fact, event,
condition or contingency exists or has occurred which has, or in the future
can reasonably be expected to have, a Material Adverse Effect, which has not
been disclosed in
<PAGE>
the Company Financial Statements or the Schedules to this Agreement.
2.25. Net Worth.
On the Closing Date, the Net Worth of the Company will be equal to
or greater than the November 30 Net Worth.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
Subject to the parties' agreement and acknowledgment that certain
of the Schedules referred to in this Article 3 are to be delivered by the
Company and the Stockholder no later than thirty (30) days after the date
hereof, the Stockholder hereby represents and warrants to UAG as follows:
3.1. Ownership of Shares; Title.
The Stockholder is the owner of record and beneficially of the
Shares as set forth on Schedule 3.1 hereof and has, and shall transfer to Sub
at the Closing, good and marketable title to the Shares owned by it, free and
clear of any and all security interests, pledge agreements, Liens, proxies and
voting or other agreements except restrictions on transfer imposed by
applicable federal and state securities laws.
3.2. Authority.
The Stockholder has all requisite power and authority and has full
legal capacity and is competent to execute, deliver and perform this Agreement
and the Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby (including the disposition of the Shares to
Sub as contemplated by this Agreement). This Agreement has been duly executed
and delivered by the Stockholder and constitutes, and the Documents to which
the Stockholder is a party when executed and delivered by the Stockholder will
constitute, a valid and binding obligation of the Stockholder, enforceable
against it in accordance with its terms. Except as set forth on Schedule 3.2,
the execution, delivery and performance of this Agreement and the Documents by
the Stockholder and the consummation of the transactions contemplated hereby
and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any material contract,
agreement,
<PAGE>
commitment, understanding, arrangement or restriction to which the
Stockholder is a party or to which the Stockholder or any of its
property is subject;
(ii) violate or conflict with any Legal Requirements
applicable to the Stockholder or any of Stockholder's businesses or
properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act
(as defined in Section 5.3 hereof).
3.3. Real Property and Improvements.
The Stockholder owns the Real Property and Improvements in fee
simple, free and clear of all Liens, except those disclosed in Schedule
3.3(a), none of which currently or, to its knowledge, in the future will
affect the use of the Real Property or the Improvements for the conduct of the
business of the Company as presently conducted. No assessments have been made
against any portion of the Real Property which are unpaid (except ad valorem
taxes for the current year that are not yet due and payable), whether or not
they have become Liens. There are no disputes concerning the location of the
lines and corners of the Real Property. No one has been granted any right to
purchase or lease the Real Property or Improvements other than the existing
leases in favor of the Company, which are to be terminated at the Closing by
agreement between the parties and pursuant to which the Stockholder shall
acknowledge that there are no defaults under any such leases and that the
Company has no liability arising out of or relating to such leases.
3.4. Investment Intent.
The Stockholder has no present plan, intention or arrangement to
dispose of any of the UAG Common Stock received by it pursuant to the terms of
this Agreement.
3.5. Qualification of Stockholder.
The Stockholder and Mr. Hanna (i) are "accredited investors"
within the meaning of Regulation D of the Securities Act, and the Stockholder
is acquiring the UAG Common Stock to be issued pursuant to the terms of this
Agreement for its own account and not with a view to, or for resale in
connection with, any distribution thereof; (ii) the Stockholder was not formed
for the purpose of acquiring UAG Common Stock; (iii) the Stockholder and Mr.
Hanna understand and acknowledge that such UAG Common Stock has
<PAGE>
not been registered under the Securities Act or any state securities laws by
reason of certain exemptions from the registration provisions thereof which
depend upon, among other things, the bona fide nature of the Stockholder's
investment intent as expressed herein; (iv) the Stockholder and Mr. Hanna are
able to bear the economic risk of investment in such UAG Common Stock and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the risks and merits of such UAG Common Stock; (v) the
Stockholder and Mr. Hanna acknowledge that the UAG Shares were not offered to
them by means of publicly disseminated advertisements or sales literature, or
as part of a general solicitation; (vi) the Stockholder and Mr. Hanna
acknowledge that in deciding to proceed with the transaction set forth herein
they have relied solely on their own independent investigation of UAG; and
(vii) the Stockholder and Mr. Hanna understand and acknowledge that such UAG
Common Stock will be "restricted securities" as that term is defined in Rule
144 under the Securities Act and that the certificates representing such UAG
Common Stock will bear a legend restricting transfer unless (A) the transfer
is exempt from the registration requirements under the Securities Act and any
applicable state securities law and an opinion of counsel reasonably
satisfactory to UAG that such transfer is exempt therefrom is delivered to UAG
or (B) the transfer is made pursuant to an effective registration statement
under the Securities Act and any applicable state securities law.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgment that certain
of the Schedules referred to in this Article 4 are to be delivered by the UAG
no later than thirty (30) days after the date hereof, UAG and Sub hereby
represent and warrant to the Company and the Stockholder as follows:
4.1. Organization and Good Standing.
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business
and to carry on its business as now being conducted. UAG is duly qualified to
do business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and the Sub would not, or
could not reasonably be expected to, in the aggregate have a Material Adverse
Effect on UAG and the Sub, taken as a whole. UAG has made available to the
Stockholder complete and correct copies of its charter and bylaws, as amended
and presently in effect.
<PAGE>
4.2. Subsidiaries.
The Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own, lease and operate the properties and
assets used in its business and to carry on its business as now being
conducted, and is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of
UAG and the Sub would not, or could not reasonably be expected to, in the
aggregate have a material adverse effect on UAG and the Sub, taken as a whole.
All of the outstanding shares of capital stock of the Sub have been validly
authorized and issued, are fully paid and non-assessable, have not been issued
in violation of any preemptive rights or of any federal or state securities
law.
4.3. Capitalization.
The authorized stock of UAG and the number of shares of capital
stock which are issued and outstanding are set forth on Schedule 4.3 hereto.
The shares listed on Schedule 4.3 hereto constitute all the issued and
outstanding shares of capital stock of UAG and have been validly authorized
and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law
and no personal liability attaches to the ownership thereof.
4.4. SEC Filings.
UAG has heretofore made available to the Company, the Stockholder
and Mr. Hanna UAG's Registration Statement on Form S-1 as declared effective
by the SEC on October 23, 1996 and UAG's Quarterly Report on Form 10-Q for the
period ending September 30, 1996 (the "SEC Filings"). As of their respective
dates, the SEC filings did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.5. Authority; Approvals and Consents.
UAG and Sub have the corporate power and authority to enter into
this Agreement and the Documents to which they are a party and to perform its
obligations hereunder and thereunder. At the time of the Closing, the
execution, delivery and performance of this Agreement and the Documents to
which it is a party and the consummation of the transactions contemplated
hereby and thereby will have been duly authorized and approved by the Board of
<PAGE>
Directors of UAG and Sub and no other corporate proceedings on the part of UAG
or Sub will be necessary to authorize and approve this Agreement and the
Documents and the transactions contemplated hereby and thereby. This Agreement
has been, and on the Closing Date the Documents will be, duly executed and
delivered by, and constitute a valid and binding obligation of, UAG and Sub,
enforceable against UAG and Sub in accordance with their respective terms.
Except as set forth on Schedule 4.5 hereto, the execution, delivery and
performance by UAG and Sub of this Agreement and the Documents to which they
are a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or Bylaws of UAG or Sub;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any UAG Agreement (as
defined below) or require any consent or waiver of any party to any UAG
Agreement;
(iii) result in the creation of any security interest upon,
or any person obtaining any right to acquire, any properties, assets or
rights of UAG;
(iv) violate or conflict with any Legal Requirements
applicable to UAG or its respective businesses or properties that would
or could reasonably be expected to have a Material Adverse Effect on UAG
and the UAG Subsidiaries, taken as a whole; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act
(as defined in Section 5.3 hereof).
Except as set forth or referred to above, no authorization,
consent, order, permit or approval of, or notice to, or filing, registration
or qualification with, any governmental administrative or judicial authority
is necessary to be obtained or made by UAG to enable UAG to continue to
conduct its business and operations and use its properties after the Closing
in a manner which is in all material respects consistent with that in which
they are presently conducted. As used in this Agreement, the term "UAG
Agreement" shall mean all mortgages, indenture notes, agreements, contracts,
leases, licenses, franchises, obligations, instruments or other commitments,
arrangements or understandings of any kind, whether written or oral, binding
or non-binding, to which UAG or the UAG Subsidiaries is a party or by which
UAG or the UAG Subsidiaries or any of its assets or properties may be bound or
<PAGE>
affected, including all amendments, modifications, extensions or renewals of
any of the foregoing, and which involve receipts or payments by UAG or UAG
Subsidiaries which exceed $100,000 per year.
"UAG Subsidiary" shall mean any corporation or other entity in
which UAG, directly or indirectly, owns beneficially securities representing
50% or more of (i) the aggregate equity or profit interests or (ii) the
combined voting power of voting interests ordinarily entitled to vote for
management or otherwise.
4.6. Financial Statements.
Attached as Schedule 4.6 are true and complete copies of:
(a) the consolidated balance sheet of UAG and its consolidated UAG
Subsidiaries as of December 31 in each of the years 1994 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the fiscal years ended on such dates, together with the notes thereto, in
each case examined by and accompanied by the report of Coopers & Lybrand,
independent certified public accountants; and
(b) the unaudited consolidated balance sheet of UAG and its
consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance
Sheet"), and the unaudited consolidated statements of income, stockholders'
equity and cash flows for the month periods ended on such dates, together with
the notes thereto;
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and
the UAG Subsidiaries, fairly present the consolidated financial position,
results of operations, stockholders' equity and changes in financial position
of UAG and the UAG Subsidiaries as of the dates and for the periods indicated,
in each case in conformity with GAAP consistently applied (except as otherwise
indicated in such statements) during such periods, and can be legitimately
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by UAG and the UAG Subsidiaries for federal
income tax purposes, and the unaudited financial statements included in the
UAG Financial Statements indicate all adjustments, which consist of only
normal recurring accruals, necessary for such fair presentations. The
statements of income included in the UAG Financial Statements do not contain
any items of special or nonrecurring income except as expressly specified
therein, and the balance sheets included in the UAG Financial Statements do
not reflect any write-up or revaluation increasing the book value of any
assets. The books and accounts of UAG and the UAG Subsidiaries are complete
and correct in all material respects and fairly reflect all of the
transactions, items of income and expense and all assets and liabilities of
the businesses
<PAGE>
of UAG and the UAG Subsidiaries consistent with prior practices of UAG and the
UAG Subsidiaries.
4.7. Taxes.
UAG, each UAG Subsidiary and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined
or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. In the ordinary course,
UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG
Subsidiaries. Neither UAG nor any UAG Subsidiary has been subject to a federal
or state tax audit of any kind, and no adjustment has been proposed by the IRS
with respect to any return for any subsequent year. UAG knows of no basis for
an assertion of a deficiency for Taxes against UAG or any UAG Subsidiary.
4.8. Disclosure.
Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Company or the Stockholder relating to this Agreement
and neither UAG nor any UAG Subsidiary has omitted to state to the Company or
the Stockholder any material fact relating to this Agreement which is
necessary in order to make the information given by or on behalf of UAG or any
UAG Subsidiary to the Company or the Stockholder or their representatives at
or prior to Closing not misleading. No fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be expected
to have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a
whole, which has not been disclosed in the SEC Filings or the Schedules to
this Agreement.
ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. Access; Confidentiality.
Between the date hereof and the Closing Date, the Stockholder, the
Company and Mr. Hanna will (i) provide to the officers and other authorized
representatives of UAG and Sub full access, during normal business hours, to
any and all premises,
<PAGE>
properties, files, books, records, documents, and other information of the
Company and will cause their officers to furnish to UAG and Sub and their
authorized representatives any and all financial, technical and operating data
and other information pertaining to the businesses and properties of the
Company, and (ii) make available for inspection and copying by UAG and Sub
true and complete copies of any documents relating to the foregoing. UAG and
Sub will hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law) all Confidential Information (as defined below) and will
not disclose the same to any third party except in connection with obtaining
financing and otherwise as may reasonably be necessary to carry out this
Agreement and the transactions contemplated hereby, including any due
diligence review by or on behalf of UAG and Sub. If this Agreement is
terminated, UAG and Sub will promptly return to the Company, upon the
reasonable request of the Company, all Confidential Information furnished by
the Company and held by UAG and Sub, including all copies and summaries
thereof. As used herein, "Confidential Information" shall mean all information
concerning the Company obtained by UAG or Sub from the Company in connection
with the transactions contemplated by this Agreement, except information (x)
ascertainable or obtained from public information, (y) received from a third
party not employed by or otherwise affiliated with the Company or (z) which is
or becomes known to the public, other than through a breach by UAG of this
Agreement. The Stockholder will hold in confidence (unless and to the extent
compelled to disclose by judicial or administrative process, or, in the
opinion of their counsel, by other requirements of law) all UAG Confidential
Information (as defined below) and will not disclose the same to any third
party except as may reasonably be necessary to carry out this Agreement and
the transactions contemplated hereby. If this Agreement is terminated, the
Stockholder will promptly return to UAG, upon the reasonable request of UAG,
all UAG Confidential Information furnished by UAG and held by the Stockholder,
including all copies and summaries thereof. As used herein, "UAG Confidential
Information" shall mean all information concerning UAG obtained by the
Stockholder, the Company and Mr. Hanna in connection with the transactions
contemplated by this Agreement, except information (x) ascertained or obtained
from public information, (y) received from a third party not employed or
otherwise affiliated with UAG or (z) which is or becomes known to the public,
other than a breach by the Stockholder, the Company and Mr. Hanna of this
Agreement.
5.2. Furnishing Information; Announcements.
The Stockholder and the Company, on the one hand, and UAG and Sub,
on the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the Stockholder
and the Company or UAG and Sub, respectively, required for inclusion in any
statement or application made by UAG or the Company to any governmental or
<PAGE>
regulatory body or in connection with obtaining any third party consent in
connection with the transactions contemplated by this Agreement. Neither the
Stockholder nor the Company, on the one hand, nor UAG nor Sub, on the other
hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law (including federal or state securities laws) as determined by
such parties' counsel.
5.3. Antitrust Improvements Act Compliance.
UAG and Sub and the Stockholder, Mr. Hanna and the Company, as
applicable, shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice any notifications
required to be filed by the respective "ultimate parent" entities under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act"), and the rules and regulations promulgated thereunder, with respect to
the transactions contemplated herein. The parties shall use their best efforts
to make such filings promptly, to respond to any requests for additional
information made by either of such agencies, to cause the waiting periods
under the H-S-R Act to terminate or expire at the earliest possible date and
to resist vigorously, at their respective cost and expense (including, without
limitation, the institution or defense of legal proceedings), any assertion
that the transactions contemplated herein constitute a violation of the
antitrust laws, all to the end of expediting consummation of the transactions
contemplated herein; provided, however, that if UAG or the Stockholder shall
determine after issuance of any preliminary injunction that continuing such
resistance is not in its or their best interests, UAG or the Stockholder, as
the case may be, may, by written notice to the other party, terminate this
Agreement with the effect set forth in Section 8.2 hereof.
5.4. Certain Changes and Conduct of Business.
(a) From and after the date of this Agreement and until the
Closing Date, the Company shall, and the Stockholder and Mr. Hanna shall cause
the Company to, conduct its business solely in the ordinary course consistent
with past practices and, without the prior written consent of UAG, neither the
Stockholder, Mr. Hanna, nor the Company will, except as required or permitted
pursuant to the terms hereof, permit the Company to:
(i) make any material change in the conduct of its business
and operations or enter into any transaction other than in the ordinary
course of business consistent with past practices;
<PAGE>
(ii) make any change in its Articles of Incorporation or
Bylaws, issue any additional shares of capital stock or equity
securities or grant any option, warrant or right to acquire any capital
stock or equity securities or issue any security convertible into or
exchangeable for its capital stock or alter any term of any of its
outstanding securities or make any change in its outstanding shares of
capital stock or other ownership interests or its capitalization,
whether by reason of a reclassification, recapitalization, stock split
or combination, exchange or readjustment of shares, stock dividend or
otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any
thereof, except pursuant to transactions in the ordinary course of
business consistent with past practices, (B) issue any securities
convertible or exchangeable for debt securities of the Company, or (C)
issue any options or other rights to acquire from the Company, directly
or indirectly, debt securities of the Company or any security
convertible into or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or
other conveyance of any of its assets or any part thereof, except
transactions pursuant to existing contracts set forth in Schedule 2.15
hereto and dispositions of inventory or of worn-out or obsolete
equipment for fair or reasonable value in the ordinary course of
business consistent with past practices;
(v) subject any of its assets, or any part thereof, to any
Lien or suffer such to be imposed other than such Liens as may arise in
the ordinary course of business consistent with past practices by
operation of law which will not have, or cannot reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination
thereof) in respect of any shares of its capital stock (other than
distributions of net income attributable to periods after November 30,
1996) or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or
enter into any other transaction, other than in the ordinary course of
business consistent with past practices;
<PAGE>
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general
increase in the compensation of officers or employees (including any
such increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment) or grant any increase in the compensation payable or
to become payable to any employee, except in accordance with
pre-existing contractual provisions or consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xi) guarantee any indebtedness for borrowed money or any
other obligation of any other Person, other than in the ordinary course
of business consistent with past practice;
(xii) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained by the
Company (or on behalf of the Company) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person;
(xiv) make any change in any method of accounting or
accounting principle, method, estimate or practice except for any such
change required by reason of a concurrent change in GAAP or write-down
the value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with
past practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material
respect or terminate any material commitment, bid or expenditure, other
than in the ordinary course of business consistent with past practice;
(xvii) take any other action that would cause any of the
representations and warranties made by the Company in this Agreement not
to remain true and correct; or
<PAGE>
(b) From and after the date hereof and until the Closing Date, the
Stockholder, Mr. Hanna and the Company will cause the Company to use its
reasonable best efforts to:
(i) continue to maintain, in all material respects,
its properties in accordance with present practices in a condition
suitable for their current use;
(ii) comply with all applicable Environmental Laws, and, in
the event the Company shall receive notice that there exists a violation
of any Environmental Law with respect to its operations or any Real
Property, promptly (and in any event within the time period permitted by
the applicable governmental authority) remove or remedy such violation
in accordance with all applicable Environmental Laws; provided, however,
that any remediation or removal shall be subject to the prior approval
of UAG;
(iii) file, when due or required, federal, state, foreign
and other tax returns and other reports required to be filed and pay
when due all taxes, assessments, fees and other charges lawfully levied
or assessed against the Company unless the validity thereof is contested
in good faith and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue
to maintain existing business relationships with suppliers, customers
and others with whom business relationships exist other than
relationships that are, at the same time, not economically beneficial to
it; and
(vi) continue to conduct its business in the ordinary course
consistent with past practices.
(c) From and after the date of this Agreement and until the
Closing Date, the Stockholder shall not, except with the prior written consent
of UAG and except as required or permitted pursuant to the terms hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any
part thereof, to any new Lien or suffer such to be imposed;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholder in this Agreement
not to remain true and correct; or
<PAGE>
(iv) commit themselves to do any of the foregoing.
5.5. No Intercompany Payables or Receivables.
Except as disclosed on Schedule 5.5 hereto, at the Closing there
will be no intercompany payables or intercompany receivables due and/or owing
between the Stockholder, Mr. Hanna and their Affiliates (other than the
Company) on the one hand, and the Company, on the other hand.
5.6. Negotiations.
Until the earlier of 180 days from the date hereof, the Closing
and the termination of this Agreement pursuant to clause (ii) of Section 8.1
hereof, neither the Stockholder, nor the Company, nor Mr. Hanna nor their
officers, directors, employees, advisors, agents, representatives, Affiliates
or anyone acting on behalf of the Stockholder, the Company, Mr. Hanna or such
Persons, shall, directly or indirectly, encourage, solicit, initiate or engage
in discussions or negotiations with, or provide any information to, any person
(other than UAG or its representatives) concerning any merger, sale of assets
(other than in the ordinary course of business), purchase or sale of shares of
capital stock or similar transaction involving the Company or purchase or sale
of any of the Real Property or Improvements. The Stockholder and Mr. Hanna
shall promptly communicate to UAG any inquiries or communications concerning
any such transaction (including the identity of any person making such inquiry
or communication) which the Company, the Stockholder or Mr. Hanna may receive
or of which any of such parties may become aware.
5.7. Consents; Cooperation.
Subject to the terms and conditions hereof, the Stockholder, Mr.
Hanna and the Company and UAG will use their respective best efforts at their
own expense:
(i) to obtain prior to the earlier of the date required (if
so required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all
third parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on their
respective parts for (A) the consummation of the transactions
contemplated by this Agreement, (B) the ownership or leasing and
operating after the Closing by the Company of all of its material
properties and (C) the conduct after the Closing by the Company of its
business as conducted by it on the date hereof;
<PAGE>
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance
as may reasonably be requested in connection with the foregoing.
5.8. Additional Agreements.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
The Stockholder agrees to execute and deliver any and all documents that the
manufacturer typically requires a selling dealer to execute in connection with
the transfer of a dealership. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, the Stockholder and the proper officers of the Company shall take
all such necessary action.
5.9. Interim Financial Statements.
Within thirty (30) days after the end of each calendar month after
the date of this Agreement and continuing until the Closing Date, the Company
will deliver to UAG the most recent monthly and year-to-date financial
statements provided to Nissan. All such statements shall fairly present the
financial position, results of operations and cash flow of the Company as of
the date or for the periods indicated and shall be prepared on a basis
consistent with the Company Factory Statement attached hereto as part of
Schedule 2.5.
5.10. Notification of Certain Matters.
Between the date hereof and the Closing, each party to this
Agreement will give prompt notice in writing to the other parties hereto of:
(i) any information that indicates that any representation and warranty of
such party contained herein was not true and correct as of the date hereof or
will not be true and correct as of the Closing, (ii) the occurrence of any
event which could result in the failure to satisfy a condition specified in
Article 6 or Article 7 hereof, as applicable, (iii) any notice or other
communication from any third person alleging that the consent of such third
person is or may be required in connection with the
<PAGE>
transactions contemplated by this Agreement, and (iv) in the case of the
Stockholder, Mr. Hanna and the Company, any notice of, or other communication
relating to, any default or event which, with notice or lapse of time or both,
would become a default under any Company Agreement. Mr. Hanna shall (x)
promptly advise UAG of any event that has, or could in the future have, a
Material Adverse Effect (y) confer on a regular basis with one or more
designated representatives of UAG to report operational matters and to report
the general status of ongoing operations, and (z) notify UAG of any emergency
or other change in the normal course of business or in the operation of the
properties of the Company and of any governmental complaints, investigations
or hearings (or communications indicating that the same may be contemplated)
or adjudicatory proceedings involving the Company or any of their assets or
operations, and will keep UAG fully informed of such events and permit UAG's
representatives access to all materials prepared in connection therewith. The
Stockholder and Mr. Hanna shall give prompt notice to UAG of any notice or
other communication from any third person asserting any right, title or
interest in any of the Shares held by the Stockholder (including, without
limitation, any threat to commence, or notice of the commencement of any
action or other proceeding with respect to any of the Shares) or the
occurrence of any other event of which the Stockholder or Mr. Hanna has
knowledge which could result in any failure to consummate the sale of the
Shares as contemplated hereby.
5.11. Assurance by the Stockholder and Mr. Hanna.
The Stockholder and Mr. Hanna shall cause the Company to comply
with its covenants set forth in this Agreement and Mr. Hanna shall cause the
Stockholder to comply with its covenants set forth in this Agreement.
5.12. Section 338(h)(10) Election.
The Stockholder agrees to join with UAG or Sub, if UAG or Sub so
requests, in making a timely election to treat the purchase and sale of the
Shares pursuant to this Agreement as a sale of all of the Company's assets
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, as
permitted pursuant to Section 1.338(h)(10)-1(a) of the Treasury Regulations
promulgated thereunder.
5.13. Non-Interference.
From the Closing Date until the later of (i) five years or (ii)
such other period of time as may be the maximum permissible period of
enforceability of this covenant, the Stockholder, Mr. Hanna and their
Affiliates shall not interfere with or disrupt, or attempt to interfere with
or disrupt, the relationship, contractual or otherwise, between the Company
and any customer, client,
<PAGE>
supplier, manufacturer, distributor, consultant, independent contractor or
employee of the Company and agree not to solicit or hire any employee of the
Company unless such employee has already terminated his employment with the
Company.
5.14. Distribution of Earnings to Stockholder.
At the Supplemental Closing, the Company shall make a final
distribution to the Stockholder of any earnings attributable to the period
from December 1, 1996 to the Closing Date (to the extent such earnings have
not previously been distributed); provided, however, that such distribution
shall only be made to the extent that the Final Net Worth as determined in
accordance with Section 1.3 hereof exceeds the November 30 Net Worth.
5.15. Accountant's Fees.
To the extent that Coopers & Lybrand determines that it is
necessary to have the Company's accountant certify or audit any of the Company
Financial Statements, then the Stockholder and UAG shall each pay one-half
(1/2) of the Company's accountant's fees relating hereto.
5.16. S Short Year.
The parties hereto acknowledge that upon the closing of the
transactions contemplated by this Agreement, the Company's status as an
S-corporation for federal income tax purposes shall cease, that the taxable
year of the Company in which such closing occur shall be divided into two (2)
short taxable years (an S Short Year and C Short Year). Each of the parties
hereto covenants and agrees to make all elections, consents, statements, and
filings that may be required by the Internal Revenue Code of 1986 to close the
Company's books on the last applicable day of the S Short Year.
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS OF
UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at
the Closing shall be subject to the satisfaction, at or prior to the Closing,
of each of the following conditions, each of which may be waived by UAG or Sub
as provided herein except as otherwise required by applicable law:
<PAGE>
6.1. Representations and Warranties; Agreements; Covenants.
Each of the representations and warranties of the Company, the
Stockholder and Mr. Hanna contained in this Agreement shall be true and
correct as of the date hereof and (having been deemed to have been made again
at and as of the Closing) shall be true and correct in all material respects
as of the Closing. Each of the obligations of the Company, the Stockholder and
Mr. Hanna required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all respects
as of the Closing. At the Closing, UAG shall have received a certificate,
dated the Closing Date and duly executed by the Stockholder and Mr. Hanna, to
the effect that the conditions set forth in the two preceding sentences have
been satisfied.
6.2. Authorization; Consents.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Company. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental
and regulatory bodies and third persons (including, but not limited to, Nissan
required to consummate the transactions contemplated hereby and all consents
or waivers shall have been made or obtained.
6.3. Opinions of the Company's and the Stockholder's Counsel.
UAG and Sub shall have been furnished with the opinion of counsel
for the Company and the Stockholder, dated the Closing Date, in form and
substance satisfactory to UAG and its counsel, which opinion shall have been
rendered with respect to those matters contained in Sections 2.1, 2.2, 2.3,
2.4, 2.9, 3.1 and 3.2 hereof. In rendering the foregoing opinion, such counsel
may rely as to factual matters upon certificates or other documents furnished
by officers and directors of the Company and by government officials and upon
such other documents and data as such counsel deem appropriate as a basis for
their opinions. Such counsel may specify the state or states in which they are
admitted to practice, that they are not admitted to the Bar in any other state
or experts in the law of any other state and that such opinions are limited to
the State of Nevada and federal laws.
<PAGE>
6.4. Absence of Litigation.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of UAG or Sub effectively to
exercise full rights of ownership of the Shares. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which UAG or Sub, in good
faith and with the advice of counsel, believes makes it undesirable to proceed
with the consummation of the transactions contemplated hereby.
6.5. No Material Adverse Effect.
During the period from December 31, 1995 to the Closing Date,
there shall not have been any material adverse change in the assets,
properties, business, operations, prospects, net income or financial condition
of the Company.
6.6. Net Worth.
On the Closing Date, the Stockholder shall deliver to UAG a
balance sheet of the Company dated as of the most recent practicable date
preceding the Closing Date, prepared in accordance with the Accounting
Principles (the "Estimated Closing Date Balance Sheet"). The Estimated Closing
Date Balance Sheet shall show as of the date thereof, after taking into
account the payment of any of the fees, costs and expenses by the Company
incurred in connection with this Agreement, a Net Worth not more than $250,000
less than the November 30, 1996 Net Worth.
6.7. Completion of Due Diligence.
UAG and Sub shall have completed their due diligence examination
of the Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to UAG and Sub. UAG will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, then the expenses of performing the Phase II environmental audit
shall be paid one-half by UAG and one-half by the Stockholder; provided,
however, that the Stockholder may elect not to pay any costs of the Phase II
audit but, if the Stockholder elects not to pay one-half of the costs of the
Phase II audit and
<PAGE>
the results of the Phase II audit conclude that remediation is recommended,
the Stockholder shall pay the entire costs of the Phase II audit.
6.8. Net Income.
Coopers & Lybrand shall have confirmed to UAG that the Pre-Tax
Earnings of the Company for the year ending December 31, 1996 are no less than
the pre-tax earnings set forth on the Company's December 31, 1996 income
statement.
6.9. Lease.
The Company and the Stockholder shall have entered into the Lease.
6.10. Board Approval.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.11. Certificates.
The Stockholder, the Company and Mr. Hanna shall have furnished
UAG and Sub with a certificate, dated as of the Closing Date, executed by the
Stockholder and Mr. Hanna certifying to the fulfillment of the conditions set
forth in Sections 6.4, 6.5, 6.6 and 6.14 hereof and shall have furnished UAG
and Sub with such any other certificates of its officers and others as UAG and
Sub may reasonably request to evidence compliance with the conditions set
forth in this Article 6.
6.12. Legal Matters.
All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of the Stockholder and
the Company under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of the Stockholder and the
Company in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG and Sub.
6.13. Approval of Manufacturers and Distributors.
The Stockholder and the Company shall have obtained the consent,
authorization and approval of Nissan for the transfer of the Company to Sub on
terms no less favorable to those granted to
<PAGE>
the Stockholder and the Company immediately prior to the execution of this
Agreement.
6.14. Environmental Laws.
The Company shall be in compliance with all applicable
Environmental Laws.
6.15. Nondisturbance Agreement.
UAG shall have been provided with a nondisturbance agreement in
form and substance satisfactory to UAG with respect to the properties that are
the subject of the Lease.
6.16. Title Insurance.
UAG shall have obtained title insurance on behalf of the Company
with respect to the leasehold estates arising out of the Lease in form and
substance satisfactory to UAG.
6.17. Schedules.
The Company and the Stockholder shall have delivered to UAG and
Sub all Schedules referred to in Articles 2 and 3 and such Schedules shall be
acceptable in form and substance to UAG and Sub.
6.18. Lease Termination Agreement/Memorandum of Lease.
The appropriate parties shall have executed a lease termination
agreement and memorandum of lease in form and substance satisfactory to UAG.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY,
THE STOCKHOLDER AND MR. HANNA TO EFFECT THE CLOSING
The obligations of the Company, the Stockholder and Mr. Hanna
required to be performed by them at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
each of which may be waived by the Company, the Stockholder and Mr. Hanna as
provided herein except as otherwise required by applicable law:
<PAGE>
7.1. Representations and Warranties; Agreements.
Each of the representations and warranties of UAG and Sub
contained in this Agreement shall be true and correct on the date made and
shall be true and correct in all material respects as of the Closing. Each of
the obligations of UAG and Sub required by this Agreement to be performed by
them at or prior to the Closing shall have been duly performed and complied
with in all material respects as of the Closing. At the Closing, the
Stockholder shall have received a certificate, dated the Closing Date and duly
executed by UAG and Sub to the effect that the conditions set forth in the
preceding two sentences have been satisfied.
7.2. Authorization of the Agreement, Consents.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG
and Sub. All filings required to be made under the H-S-R Act in connection
with the transactions contemplated hereby shall have been made and all
applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental
and regulatory bodies and third persons (including, but not limited to,
[Nissan] required to consummate the transactions contemplated hereby and all
consents or waivers shall have been made or obtained.
7.3. Opinions of UAG's and Sub's Counsel.
The Stockholder shall have been furnished with the opinion of
Rogers & Hardin, counsel to UAG and Sub, dated the Closing Date, in form and
substance reasonably satisfactory to the Stockholder and its counsel, which
opinion shall have been rendered with respect to those matters contained in
Sections 4.1, 4.2 and 4.5 hereof. In rendering the foregoing opinions, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of UAG and the Sub and by government
officials, and upon such other documents and data as such counsel deems
appropriate as a basis for its opiniSuch opinions may be limited to federal
laws and the General Corporation Law of the State of Delaware.
7.4. Absence of Litigation.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect (i) that prevents or
delays the consummation of any of the transactions
<PAGE>
contemplated hereby or (ii) would impose any limitation on the ability of the
Stockholder effectively to exercise full rights of ownership of the Shares. No
action, suit or proceeding before any court or any governmental or regulatory
entity shall be pending (or threatened by any governmental or regulatory
entity), and no investigation by any governmental or regulatory entity shall
have been commenced (and be pending), seeking to restrain or prohibit (or
questioning the validity or legality of) the consummation of the transactions
contemplated by this Agreement or seeking damages in connection therewith
which the Stockholder, in good faith and with the advice of counsel, believes
makes it undesirable to proceed with the consummation of the transactions
contemplated hereby.
7.5. Certificates.
UAG and Sub shall have furnished the Stockholder with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 7 as may be reasonably requested by the
Stockholder.
7.6. Legal Matters.
All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of UAG or Sub under the
provisions of this Agreement, and all other actions and proceedings required
to be taken by or on behalf of UAG or Sub in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for the Stockholder.
7.7. Schedules.
UAG shall have delivered to the Stockholder all Schedules referred
to in Article 4 and such Schedules shall be acceptable in form and substance
to the Stockholder.
ARTICLE 8
TERMINATION
8.1. Termination.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholder;
<PAGE>
(ii) by either UAG or the Stockholder if the Closing shall
not have taken place on or prior to April 30, 1997, or such later date
as shall have been approved by UAG and the Stockholder (provided that
the terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(iii) by UAG or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in
Article 6 hereof have not been met or waived by UAG and Sub at such time
as such condition is no longer capable of satisfaction (provided UAG and
Sub are not otherwise in material breach of their or its
representations, warranties, covenants or agreements under this
Agreement);
(v) by the Stockholder if any of the conditions specified in
Article 7 hereof have not been met or waived by the Stockholder at such
time as such condition is no longer capable of satisfaction (provided
that neither the Stockholder nor the Company is otherwise in material
breach of their or its representations, warranties covenants or
agreements under this Agreement); or
(vi) by either UAG or the Stockholder if there has been a
material breach on the part of the other of any representation,
warranty, covenant or agreement set forth in this Agreement, which
breach has not been cured within ten (10) Business Days following
receipt by the breaching party of written notice of such breach.
If UAG or the Stockholder shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effected by notice to the
other party specifying the provision hereof pursuant to which such termination
is made.
8.2. Effect of Termination.
Except (i) for any breach of this Agreement prior to its
termination, (ii) for the obligations contained in Sections 5.1 and 10.2
hereof and (iii) as set forth in Sections 9.1 and 9.2 hereof, upon the
termination of this Agreement pursuant to Section 8.1 hereof, this Agreement
shall forthwith become null and void and none of the parties hereto or any of
their respective officers, directors, employees, agents, Affiliates,
consultants, stockholders or principals shall have any liability or obligation
hereunder or with respect hereto.
<PAGE>
ARTICLE 9
INDEMNIFICATION
9.1. Indemnification by the Stockholder.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholder and Mr. Hanna indemnify and agree to fully defend, save and hold
harmless on an after-tax basis UAG, Sub, the Company (after Closing), and any
of their respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "UAG Indemnified Party"), if a
UAG Indemnified Party (including the Company after the Closing Date) shall at
any time or from time to time suffer any Costs (as defined in Section 9.6
below) arising, directly or indirectly, out of or resulting from, or shall pay
or become obligated to pay any sum on account of, (i) any and all Events of
Breach (as defined below) or (ii) any Claim before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, which Claim involves, affects or relates to any assets, properties or
operations of the Company or the conduct of the business of the Company prior
to the Closing Date (a "Stockholder Third Party Claim"). As used herein,
"Event of Breach" shall be and mean any one or more of the following: (i) any
untruth or inaccuracy in any representation of the Stockholder, the Company or
Mr. Hanna or the breach of any warranty of the Stockholder, the Company or Mr.
Hanna contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by the
Stockholder, the Company or Mr. Hanna (or any representative of the
Stockholder, the Company or Mr. Hanna) to UAG (or any representative of UAG)
and any misrepresentation in or omission from any document furnished to UAG in
connection with the Closing, and (ii) any failure of the Stockholder, the
Company or Mr. Hanna duly to perform or observe any term, provision, covenant,
agreement or condition on the part of the Stockholder, the Company or Mr.
Hanna to be performed or observed.
9.2. Indemnification by UAG and Sub.
Notwithstanding the Closing, UAG and Sub indemnifies and agrees to
fully defend, save and hold harmless on an after-tax basis the Stockholder,
the Company (prior to Closing) and Mr. Hanna and any of their respective
officers, directors, employees, stockholders, advisors, representatives,
agents and Affiliates (each a "Stockholder Indemnified Party"), if a
Stockholder Indemnified Party shall at any time or from time to time suffer
any Costs arising, directly or indirectly, out of or resulting from, or shall
pay or become obligated to pay any sum on account of, (i) any and all UAG
Events of Breach (as defined below) or (ii) any Claim before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, which Claim involves, affects or relates to any assets, properties or
<PAGE>
operations of UAG or the conduct of the business of UAG and Sub after the
Closing Date (a "UAG Third Party Claim"). As used herein, "UAG Event of
Breach" shall be and mean any one or more of the following: (i) any untruth or
inaccuracy in any representation of UAG or Sub or the breach of any warranty
of UAG or Sub contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by UAG
(or any representative of UAG) to the Stockholder, the Company or Mr. Hanna
(or any representative of the Stockholder, the Company or Mr. Hanna) and any
misrepresentation in or omission from any document furnished to the
Stockholder, the Company or Mr. Hanna in connection with the Closing, and (ii)
any failure of UAG or Sub duly to perform or observe any term, provision,
covenant, agreement or condition on the part of UAG or Sub to be performed or
observed.
9.3. Procedures.
If (i) any Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholder, the Company or Mr. Hanna have
become obligated to a UAG Indemnified Party pursuant to Section 9.1, or if any
Stockholder Third Party Claim is begun, made or instituted as a result of
which the Stockholder, the Company or Mr. Hanna may become obligated to a UAG
Indemnified Party hereunder, or (ii) a UAG Event of Breach occurs or is
alleged and a Stockholder Indemnified Party asserts that UAG has become
obligated to a Stockholder Indemnified Party pursuant to Section 9.2, or if
any UAG Third Party Claim is begun, made or instituted as a result of which
UAG may become obligated to a Stockholder Indemnified Party hereunder (for
purposes of this Article 9, any UAG Indemnified Party and any Stockholder
Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG,
Sub, the Stockholder and Mr. Hanna are sometimes referred to as an
"Indemnifying Party," and any UAG Third Party Claim and any Stockholder Third
Party Claim is sometimes referred to as a "Third Party Claim," in each case as
the context so requires), such Indemnified Party shall give written notice to
the Indemnifying Party of its obligation to provide indemnification hereunder,
provided that any failure to so notify the Indemnifying Party shall not
relieve them from any liability that it may have to the Indemnified Party
under this Article 9. If such notice relates to a Third Party Claim, each
Indemnifying Party, jointly and severally, agrees to defend, contest or
otherwise protect such Indemnified Party against any such Third Party Claim at
its sole cost and expense. Such Indemnified Party shall have the right, but
not the obligation, to participate at its own expense in the defense thereof
by counsel of such Indemnified Party's choice and shall in any event cooperate
with and assist the Indemnifying Party to the extent reasonably possible. If
the Indemnifying Party fails timely to defend, contest or otherwise protect
against such Third Party Claim, such Indemnified Party shall have the right to
do so, including, without limitation, the right to make any compromise or
<PAGE>
settlement thereof, and such Indemnified Party shall be entitled to recover
the entire Cost thereof from the Indemnifying Party, including, without
limitation, attorneys' fees, disbursements and amounts paid (or of which such
Indemnified Party has become obligated to pay) as the result of such Third
Party Claim.
Failure by the Indemnifying Party to notify such Indemnified Party
of its or their election to defend any such Third Party Claim within fifteen
(15) days after notice thereof shall have been given to the Indemnifying Party
shall be deemed a waiver by the Indemnifying Party of its or their right to
defend such Third Party Claim. If the Indemnifying Party assumes the defense
of the particular Third Party Claim, the Indemnifying Party shall not, in the
defense of such Third Party Claim, consent to entry of any judgment or enter
into any settlement, except with the written consent of such Indemnified
Party. In addition, the Indemnifying Party shall not enter into any settlement
of any Third Party Claim except with the written consent of such Indemnified
Party, which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to such Indemnified Party a full release from
all liability in respect of such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to control (but shall be entitled to participate at their own expense
in the defense of), and the Indemnified Party shall be entitled to have sole
control over, the defense or settlement of any Third Party Claim to the extent
the Third Party Claim seeks an order, injunction or other equitable relief
against the Indemnified Party which, if successful, could materially interfere
with the business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party.
9.4. Offset.
In addition to and not in limitation of all rights of offset that
an Indemnified Party may have under applicable law, the parties agree that, at
any Indemnified Party's option, any or all amounts owing to such Indemnified
Party under this Article 9 or any other provision of this Agreement or any
other liability of the other parties (or any Affiliate of the other parties)
to such Indemnified Party in connection with any of the Documents, may be
recovered by the Indemnified Party by an offset against any or all amounts due
to such other parties pursuant to this Agreement or the Documents.
9.5. Remedies.
The rights of an Indemnified Party under this Article 9 are in
addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
<PAGE>
9.6. Definitions.
For purposes of this Article 9 "Costs" shall mean all liabilities,
losses, costs, damages (not including consequential damages), expenses,
claims, attorneys' fees, experts' fees, consultants' fees, and disbursements
of any kind or of any nature whatsoever. For purposes of application of the
indemnity provisions of this Article 9, the amount of any Cost arising from
the breach of any representation, warranty, covenant or agreement shall be the
entire amount of any Cost suffered, paid or required to be paid by the
respective Indemnified Party as a result of such breach.
ARTICLE 10
MISCELLANEOUS
10.1. Survival of Provisions.
The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement. In the event
of a breach of any such representations, warranties or covenants, the party to
whom such representations, warranties or covenants have been made shall have
all rights and remedies for such breach available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, regardless of any
disclosure to, or investigation made by or on behalf of, such party on or
before the Closing Date.
10.2. Fees and Expenses.
If the Closing does not occur and Section 5.6 hereof is breached,
then the Stockholder or the Company shall pay to UAG, within five (5) Business
Days after receipt of a request therefor, an amount equal to all of the legal
and other fees, costs and expenses incurred by UAG in connection with this
Agreement and the transactions contemplated hereby.
10.3. Headings.
The section headings herein are for convenience of reference only,
do not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
<PAGE>
10.4. Notices.
All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if
delivered by hand, recognized overnight delivery service for next business day
delivery or facsimile transmission (with original to follow by mail) or mailed
by registered or certified mail, postage prepaid (return receipt requested),
as follows:
If to the Company before the Closing Date:
Gary Hanna Nissan
2850 Augusta Drive
Las Vegas, Nevada 89109
with a copy to:
Clark Greene & Associates, Ltd.
3770 Howard Hughes Parkway, Suite 195
Las Vegas, Nevada 89109-0940
Attn: A. Kent Greene, Esq.
If to the Company after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholder or Mr. Hanna:
2850 Augusta Drive
Las Vegas, Nevada 89109
with a copy to:
Clark Greene & Associates, Ltd.
3770 Howard Hughes Parkway, Suite 195
Las Vegas, Nevada 89109-0940
Attn: A. Kent Greene, Esq.
If to UAG or Sub:
United Auto Group, Inc.
<PAGE>
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
or such other address as shall be furnished in writing by such
party, and any such notice or communication shall be effective and be deemed
to have been given as of the date so delivered or three (3) days after the
date so mailed; provided, however, that any notice or communication changing
any of the addresses set forth above shall be effective and deemed given only
upon its receipt.
10.5. Assignment.
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and the provisions of Article 9 hereof shall
inure to the benefit of the Indemnified Parties referred to therein; provided,
however, that neither this Agreement nor any of the rights, interests, or
obligations hereunder may be assigned by any of the parties hereto without the
prior written consent of the other parties. Notwithstanding the foregoing, UAG
and Sub shall have the unrestricted right to assign this Agreement and to
delegate all or any part of its obligations hereunder to any Affiliate of UAG
or Sub, but in such event UAG shall remain fully liable for the performance of
all of such obligations in the manner prescribed in this Agreement.
10.6. Entire Agreement.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to
the transactions contemplated hereby other than those expressly set forth
herein or in the Documents. Prior drafts of this Agreement shall not be used
as a basis for interpreting this Agreement.
<PAGE>
10.7. Waiver and Amendments.
Each of the Stockholder, Mr. Hanna and the Company as one party,
and UAG and Sub as the other party may by written notice to the other parties
(i) extend the time for the performance of any of the obligations or other
actions of the other parties, (ii) waive any inaccuracies in the
representations or warranties of the other parties contained in this
Agreement, (iii) waive compliance with any of the covenants of the other
parties contained in this Agreement, (iv) waive performance of any of the
obligations of the other parties created under this Agreement, or (v) waive
fulfillment of any of the conditions to its own obligations under this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the parties hereto.
10.8. Counterparts.
This Agreement may be executed by facsimile signature(s) and in
any number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
10.9. Accounting Terms.
All accounting terms used herein which are not expressly defined
or modified in this Agreement shall have the respective meanings given to them
in accordance with GAAP.
10.10. Schedules.
Disclosure of any matter in any Schedule hereto or in the
Financial Statements shall not be considered as disclosure pursuant to any
other provision, subprovision, section or subsection of this Agreement or
Schedule to this Agreement and shall not be deemed to limit any
representations or warranties made herein.
10.11. Severability.
If any one or more of the provisions of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
<PAGE>
10.12. Remedies.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in Article 8, indemnification as
set forth in Article 9, or the payment of certain fees, costs and expenses as
set forth in Section 10.2, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
10.13. Governing Law.
This Agreement shall be governed by and construed in accordance
the laws of the State of Nevada without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
10.14. Time is of the Essence.
Time is of the essence for purposes of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ George G. Lowrance
----------------------------------------
George G. Lowrance
Executive Vice President
UAG NEVADA, INC.
By:
----------------------------------------
Its:
---------------------------------------
GARY HANNA NISSAN, INC.
By: /s/ Gary W. Hanna
----------------------------------------
Gary W. Hanna, President
THE GARY W. HANNA FAMILY TRUST
By:
----------------------------------------
Its:
---------------------------------------
/s/ Gary W. Hanna
-------------------------------------------
Gary W. Hanna, Individually
<PAGE>
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (the "Amendment") is
made and entered into this 22nd day of April, 1997, by and among United Auto
Group, Inc., a Delaware corporation ("UAG"), UAG Nevada, a Delaware
corporation ("UAG Nevada"), Gary Hanna Nissan, Inc., a Nevada corporation (the
"Company"), The Gary W. Hanna Family Trust Restated December 18, 1990 (the
"Stockholder") and Gary W. Hanna, an individual resident of the state of
Nevada ("Mr. Hanna").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Stock
Purchase Agreement dated February 7, 1997 (the "Stock Purchase Agreement");
WHEREAS, the parties hereto desire to amend the terms of the Stock
Purchase Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Stock Purchase Agreement.
2. Section 1.2(c)(iii) shall be amended to provide that the initial
annual lease rate under the Lease shall be Four Hundred and Fifty Thousand
Dollars ($450,000).
3. In consideration for the sale of the Shares by the Stockholder to UAG
Nevada, UAG Nevada will make an additional payment to the Stockholder in the
aggregate amount of One Million Two Hundred Forty Thousand Dollars
($1,240,000) payable in three equal installments of Four Hundred Thirteen
Thousand Three Hundred and Thirty-three Dollars ($413,333) payable on April
30, 1998, April 30, 1999 and April 30, 2000.
4. The parties acknowledge that Law-Crandall, a division of Law
Engineering and Environmental Services, Inc. ("Law") conducted a Phase I
Environmental Assessment of the Company and limited Phase II testing with
respect to underground hydraulic lifts that previously had been reported as
leaking. Western Technologies then conducted a limited Phase II investigation
with respect to the hydraulic lifts by installing two monitoring wells and
removing one of the hydraulic lifts. As a result of such Phase II testing, the
parties have been advised that the sixteen remaining hydraulic lifts (the
"Remaining Lifts") should be removed. UAG agrees to be responsible for removal
of the sixteen
<PAGE>
remaining subsurface hydraulic lifts, disposal of residual hydraulic oil in
the tanks and cylinders and hauling away of the soil excavated in connection
with the removal of such lifts. UAG also agrees that it will cause the Company
(after the Closing) to comply with NDEP requirements for reporting the results
of the monitoring wells once each quarter for three quarters commencing
approximately three months after the Closing. To the extent that there is
additional remediation required solely as a result of the prior leaking of the
hydraulic lifts which an appropriate governmental authority mandates be
remediated, UAG agrees that (after the Closing) such remediation shall be at
the Company's cost and expense. Mr. Hanna, individually and on behalf of the
Stockholder, agrees that under no circumstances shall he or the Stockholder
have any right to require any remediation with respect to such hydraulic lifts
and any contamination associated therewith unless and until so mandated by an
appropriate governmental authority after all appeals initiated by UAG have
been exhausted.
5. UAG and Mr. Hanna will each pay one-half of the costs of Law's
limited Phase II testing (provided, however, that UAG shall pay all costs over
$12,000). UAG shall also pay the first $10,000 of the costs of Western
Technologies limited Phase II testing fees with UAG and Mr. Hanna each paying
one-half of the costs over $10,000.
6. Mr. Hanna and the Stockholder represent and warrant that the total
assets of The Gary W. Hanna Family Trust Restated December 18, 1990 exceed
$5,000,000.
7. The Stockholder, Mr. Hanna and UAG acknowledge that as of the date
hereof the Company has an outstanding payable to Mr. Hanna in the total amount
of $850,000 ("Hanna Payable") which shall be paid no later than April 25,
1997. The Stockholder and Mr. Hanna represent and warrant that as of the date
hereof (except for the Hanna Payable) there are no debts, monies, wages,
bonuses, obligations or liabilities of any kind owed by the Company to Mr.
Hanna, the Stockholder or their Affiliates (except to the extent any payments
are required pursuant to Section 5.14 of the Stock Purchase Agreement).
8. The Closing Date Balance Sheet to be delivered pursuant to Section
1.3 of the Stock Purchase Agreement shall be dated April 30, 1997; provided,
however, that for purposes of determining the Final Net Worth pursuant to
Section 1.3 of the Stock Purchase Agreement, the Net Worth on the Closing
Balance Sheet shall be reduced to reflect the net income of the Company from
the Closing Date through April 30, 1997 (the "Post-Closing Earnings"). For
purposes of determining the Post-Closing Earnings the net income for the month
of April shall be prorated based on the number of days in the month after the
Closing Date.
9. The parties hereto agree that the November 30 Net Worth as defined in
Section 1.3(g)(i) shall be the Net Worth as shown
<PAGE>
on the November 30 Balance Sheet attached hereto as Exhibit A and that the
Closing Date Balance Sheet shall be prepared in accordance with generally
accepted accounting principles.
10. The UAG Shares to be issued to the Stockholder pursuant to Article 1
of the Stock Purchase Agreement shall be delivered to Clark, Greene &
Associates, Ltd. to be held in escrow pursuant to the terms of the Escrow
Agreement attached hereto as Exhibit B.
11. For a period through December 31, 1997 the Company shall retain Mr.
Hanna as a consultant with such duties as the Chairman of UAG shall reasonably
request. In return therefor, UAG shall provide Mr. Hanna with a demonstrator
vehicle (including gas and insurance) and shall continue to provide Mr. Hanna
and Carolyn Hanna with health insurance (comparable to the health insurance
currently provided to Mr. Hanna and Carolyn Hanna by the Company). Mr. Hanna's
use of the demonstrator vehicle.
12. Except as expressly provided herein, nothing contained herein shall
otherwise limit or affect any of the provisions of the Stock Purchase
Agreement including the provisions of Article 2 and Article 9 thereof.
13. This Amendment may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original. If any one or more of
the provisions of this Amendment shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions of this Amendment shall not be affected thereby.
14. This Amendment shall survive the Closing Date and the consummation
of the transactions contemplated by the Stock Purchase Agreement.
15. This Amendment shall be governed by and construed in accordance with
the laws of the state of Nevada without giving effect any choice or conflict
of law provision or rule that would cause laws of any other jurisdiction to
apply.
16. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, legal
representatives, successors, transferees and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
United Auto Group, Inc.
By:
----------------------------------
Its:
---------------------------------
UAG Nevada, Inc.
By:
----------------------------------
Its:
---------------------------------
Gary W. Hanna Nissan, Inc.
By:
----------------------------------
Its:
---------------------------------
[Signatures continued on following page]
<PAGE>
The Gary W. Hanna Family Trust Restated December 18, 1990
By:
----------------------------------
Its:
---------------------------------
Gary W. Hanna, Individually
<PAGE>
EXHIBIT "A"
GARY HANNA NISSAN, INC.
ADJUSTMENTS TO NOVEMBER 30, 1996
NET WORTH
Per Dealer Financial 11/30/96 $1,816,247
----------
Deferred Warranty Adjustment: (587,776)
Beg. Deferred Warranty Costs 199,843
----------
Less: Deferred Tax on Costs @ 34 (387,933)
----------
Y/E Adjustments Affecting Net Worth (65,659)
----------
Y/E Adjustments Affecting Parts Inventory 3,770
----------
Estimated Depreciation Adjustments to GAAP 100,000
----------
Adjusted Net Worth $1,466,425
==========
<PAGE>
EXHIBIT "A"
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made and entered into as of
the ____ day of April, 1997, by and among United Auto Group, Inc., a Delaware
corporation ("UAG"), UAG Nevada, Inc., a Delaware corporation ("UAG Nevada"),
Clark, Greene & Associates, Ltd. (the "Escrow Agent"), the Gary W. Hanna
Family Trust Restated December 18, 1996 (the "Stockholder") and Gary W. Hanna,
an individual resident of the state of Nevada ("Mr. Hanna").
W I T N E S S E T H:
WHEREAS, certain of the parties hereto, among others, have entered into
a Stock Purchase Agreement dated February 7, 1997 (the "Stock Purchase
Agreement");
WHEREAS, pursuant to Section 1.2 of the Stock Purchase Agreement, UAG is
to deliver Three Hundred Two Thousand and Ninety-Four (302,094) shares (the
"Escrow Shares") of its common stock, $.0001 par value per share, to the
Escrow Agent, to hold and distribute such shares pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Escrow Deposit. At the time of execution of this Agreement, UAG
shall cause to be delivered to the Escrow Agent, to be held and distributed as
hereinafter provided, a stock certificate issued in the name of the
Stockholder representing the Escrow Shares, and the Stockholder shall deliver
to the Escrow Agent a stock power duly endorsed in blank with signature
guaranty with respect to the Escrow Shares (the "Stock Power").
2. Property Distributed in Respect of Escrow Shares. During the term
hereof, the Escrow Agent shall receive all of the money, securities, rights or
property distributed in respect of the Escrow Shares, including any such
property distributed as dividends, such property to be held and administered
as herein provided (the "Share Proceeds").
3. Voting and Transfer of Escrow Shares. For so long as the Escrow
Shares are held by the Escrow Agent, the Stockholder shall be entitled to
exercise any and all voting or consensual rights and powers relating to or
pertaining to the Escrow Shares so held by the Escrow Agent. The Stockholder
shall not transfer the Escrow Shares, or any interest therein, during the term
of this Agreement, except under the laws of descent and distribution.
<PAGE>
4. Distribution of the Escrow Shares. The Escrow Agent shall distribute
the Escrow Shares held by it under this Agreement by delivery of the
certificates representing the Escrow Shares together with the Stock Power and
the Share Proceeds (if any), as herein directed: to the Stockholder on the (i)
the later of (a) sixty (60) days after the date hereof, or (b) the date on
which the Escrow Agent receives written notice from UAG and Mr. Hanna that
UAG, UAG Nevada and the Company has obtained all permits and licenses required
by any governmental agency or authority to operate its business; or (ii) one
year after the date hereof (upon written notice from UAG and Mr. Hanna that
the reason the Company did not receive any necessary licenses or permits was
not as a result of any action by Mr. Hanna or the Company prior to the
Closing).
5. Method of Distribution of Escrow Shares. Distribution of the Escrow
Shares by the Escrow Agent shall be made by delivering the certificates
representing such shares together with the Stock Power. Notwithstanding
anything herein to the contrary, the Escrow Agent shall be entitled (but not
required) to alter the manner and timing of disbursement in accordance with
written directions from the parties hereto.
6. Duties of the Escrow Agent. The acceptance by the Escrow Agent of
its duties under this Agreement is subject to the following terms and
conditions, which the parties to this Agreement hereby agree and shall govern
and control with respect to the Escrow Agent's rights, duties, liabilities and
immunities:
(a) The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, receipt or other paper or
document which the Escrow Agent believes in good faith emanates from one
of the parties hereto, not only as to its due execution and the validity
and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein. The Escrow Agent is also
relieved from the necessity of satisfying itself as to the authority of
the persons executing this Agreement in a representative capacity.
(b) The Escrow Agent shall not be liable for any error of
judgment, or for any act on or step taken or omitted by it in good
faith, or for any mistake of fact or law, or for anything that it may do
or refrain from doing in connection herewith, except for its own gross
negligence or willful misconduct.
(c) The Escrow Agent may consult with, and obtain advice
from, independent legal counsel selected by the Escrow Agent in the
event of any question as to any of the provisions hereof or its duties
hereunder (the reasonable cost of obtaining such advice being borne by
Stockholder and UAG), and it shall incur no liability and shall be fully
<PAGE>
protected in acting in accordance with the opinion and instructions of
such counsel.
(d) The Escrow Agent shall have no duties except for those
set forth herein, and the Escrow Agent shall not be subject to, or
obliged to recognize, any other Agreement between, or direction or
instruction of, any or all of the parties hereto. The Escrow Agent shall
not be bound by any notice of a claim, demand or objection with respect
to any of the Escrow Shares, or any waiver, modification, termination or
recision of this Agreement, unless received by it in writing, and if its
duties herein are effected, unless it shall have given its consent
thereto.
(e) The Escrow Agent's acceptance of the appointment as
Escrow Agent hereunder shall not prevent it from representing any party
hereto in any dispute over disbursement of, or conflicting claims, to,
any of the Escrow Shares, or otherwise. If any dispute arises over
disbursement of, or conflicting claims to, any of the Escrow Shares,
then the Escrow Agent may interplead such contested Escrow Shares into a
court of proper jurisdiction of its choosing, and thereupon the Escrow
Agent shall be fully and completely discharged of its duties as Escrow
Agent with respect to such contested Escrow Shares.
7. Indemnification and Expense Reimbursement of the Escrow Agent. UAG
and Stockholder jointly and severally agree to indemnify, defend and hold
harmless the Escrow Agent from any and all costs, expenses, damages or
liability of any kind whatsoever (including reasonable legal fees) arising by
virtue of its services as Escrow Agent hereunder, except for liabilities due
to the Escrow Agent's gross negligence or willful misconduct, and to reimburse
the Escrow Agent for all reasonable costs and expenses incurred by the Escrow
Agent in connection with the performance of its duties hereunder. As between
the Stockholder and UAG, each agrees to bear fifty percent (50%) of such costs
and expenses and to contribute (or reimburse the other party) its respective
portion of such amounts incurred.
8. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered by hand, (b) mailed by
registered or certified mail (return receipt requested), (c) delivered by
recognized overnight delivery service for next business day delivery, or (d)
facsimile transmission (confirmed in writing) to the parties at the following
addresses and shall be deemed given on the date on which so delivered or on
the third business day following the date on which so mailed:
<PAGE>
If to he Escrow Agent:
Clark, Greene & Associates Ltd.
3770 Howard Hughes Parkway
Suite 195
Las Vegas, Nevada 89109
Attn: Thomas L. Roberts, Esq.
Fax: (702) 369-3200
To UAG or UAG Nevada:
United Auto Group Inc.
375 Park Avenue
Suite 2001
New York, New York 10152
Attn: General Counsel
Fax: (212) 223-5148
To Stockholder:
The Gary W. Hanna Family Trust
Restated December 18, 1990
2850 Augusta Drive
Las Vegas, Nevada 89104
or such other address as shall be furnished in writing by such party to all
other parties.
9. Applicable Law. This Agreement shall be construed under and governed
exclusively by the laws of the state of Nevada, without regard to its
principles or conflicts of law.
10. Amendment. This Agreement may be amended or modified only in writing
signed by all parties thereto.
11. Execution; Counterparts. This Agreement may be executed by
facsimile, and it may be executed in two or more counterparts, each of which
shall be an original but all of which shall constitute but one and the same
agreement and shall become binding upon the parties when each party hereto has
executed one or more counterparts.
<PAGE>
IN WITNESS WHEREOF, Escrow Agent, UAG, UAG Nevada and Stockholder have
each caused this Agreement to be executed and delivered as of the date and
year first written above.
CLARK, GREENE & ASSOCIATES, LTD.
By:
----------------------------------------
Its:
---------------------------------------
UNITED AUTO GROUP, INC.
By:
----------------------------------------
Its:
---------------------------------------
UAG NEVADA, INC.
By:
----------------------------------------
Its:
---------------------------------------
THE GARY W. HANNA FAMILY TRUST RESTATED
DECEMBER 18, 1998
By:
----------------------------------------
Its:
---------------------------------------
-------------------------------------------
GARY W. HANNA
<PAGE>
STOCK PURCHASE AGREEMENT
DATED FEBRUARY 19, 1997
AMONG
UNITED AUTO GROUP, INC.
UAG EAST, INC.
AND
AMITY AUTO PLAZA LTD., D/B/A AMITY TOYOTA SUPERSTORE
MASSAPEQUA IMPORTS LTD., D/B/A LEXUS OF MASSAPEQUA
WESTBURY NISSAN LTD., D/B/A WESTBURY NISSAN SUPERSTORE
WESTBURY SUPERSTORE LTD., D/B/A WESTBURY TOYOTA
J&S AUTO REFINISHING LTD., D/B/A PREMIER AUTO BODY
FLORIDA CHRYSLER PLYMOUTH JEEP EAGLE INC.
PALM AUTO PLAZA INC., D/B/A PALM BEACH TOYOTA
WEST PALM INFINITI INC.
WEST PALM NISSAN INC.
NORTHLAKE AUTO FINISH INC., D/B/A TRAIL AUTO BODY
AND
JOHN A. STALUPPI
JOHN A. STALUPPI, JR.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. PURCHASE AND SALE OF SHARES.......................................2
1.1. Certain Definitions.................................................2
1.2. Purchase and Sale of the Shares.....................................4
1.3. Net Worth Adjustment................................................7
1.4. New Facility........................................................9
1.5. Stock Price Adjustment.............................................11
1.6. Escrow Deposit.....................................................11
1.7. Additional Purchase Price..........................................11
1.8. Contingent Payment.................................................12
1.9. Effective Date.....................................................12
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
AND THE STOCKHOLDERS.........................................12
2.1. Organization and Good Standing....................................12
2.2. Subsidiaries......................................................13
2.3. Capitalization....................................................13
2.4. Authority; Approvals and Consents.................................13
2.5. Financial Statements..............................................14
2.6. Absence of Undisclosed Liabilities................................15
2.7. Absence of Material Adverse Effect; Conduct of Business...........16
2.8. Taxes.............................................................17
2.9. Legal Matters.....................................................18
2.10. Property..........................................................19
2.11. Environmental Matters.............................................20
2.12. Inventories.......................................................22
2.13. Accounts Receivable...............................................22
2.14. Insurance.........................................................22
2.15. Contracts; etc....................................................23
2.16. Labor Relations...................................................24
2.17. Employee Benefit Plans............................................25
2.18. Other Benefit and Compensation Plans or Arrangements..............27
2.19. Transactions with Insiders........................................28
2.20. Propriety of Past Payments........................................29
2.21. Interest in Competitors...........................................29
2.22. Brokers...........................................................30
2.23. Accounts..........................................................30
2.24. Disclosure........................................................30
2.25. Net Worth.........................................................30
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS...............30
3.1. Ownership of Shares; Title.........................................30
3.2. Authority..........................................................31
3.3. Real Property and Improvements.....................................31
3.4. Investment Intent..................................................32
3.5. Qualification of Stockholders......................................32
i
<PAGE>
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG............................33
4.1. Organization and Good Standing....................................33
4.2. Subsidiaries......................................................33
4.3. Capitalization....................................................34
4.4. SEC Filings.......................................................34
4.5. Authority; Approvals and Consents.................................34
4.6. Financial Statements..............................................35
4.7. Taxes.............................................................36
4.8. Absence of Undisclosed Liabilities................................36
4.9. Legal Matters.....................................................37
4.10. Disclosure........................................................37
4.11. Absence of Material Adverse Effect; Conduct of Business...........38
4.12. Insurance.........................................................39
4.13. Labor Relations...................................................39
4.14. Contracts; Etc....................................................40
4.15. Brokers...........................................................40
4.16. Propriety of Past Payments........................................40
4.17. Environmental Matters.............................................41
4.18. Employee Benefit Plans............................................41
ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS..............................41
5.1. Access; Confidentiality...........................................41
5.2. Furnishing Information; Announcements.............................42
5.3. Antitrust Improvements Act Compliance.............................43
5.4. Certain Changes and Conduct of Business of the Companies..........43
5.5. No Intercompany Payables or Receivables...........................46
5.6. Negotiations......................................................47
5.7. Consents; Cooperation.............................................47
5.8. Additional Agreements.............................................48
5.9. Interim Financial Statements......................................48
5.10. Notification of Certain Matters...................................48
5.11. Assurance by the Stockholders.....................................49
5.12. Personal Guarantees...............................................49
5.13. Non-Interference..................................................49
5.14. Environmental Audits..............................................49
5.15. Access to Records.................................................50
5.16. Nissan, Primus and World Omni Mortgages...........................50
5.17. Certain Changes and Conduct of Business of UAG....................51
5.18. 1996 Financial Statements.........................................52
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO EFFECT
THE CLOSING .....................................................52
6.1. Representations and Warranties; Agreements; Covenants.............52
6.2. Authorization; Consents...........................................52
6.3. Opinions of the Companies' and the Stockholders' Counsel..........53
6.4. Absence of Litigation.............................................53
6.5. No Material Adverse Effect........................................53
6.6. Net Worth.........................................................54
ii
<PAGE>
6.7. Completion of Due Diligence.......................................54
6.8. Net Income........................................................54
6.9. Leases............................................................54
6.10. Board Approval....................................................54
6.11. Certificates......................................................54
6.12. Legal Matters.....................................................54
6.13. Approval of Manufacturers and Distributors........................55
6.14. Nondisturbance Agreements/Estoppel Certificates...................55
6.15. Title Insurance...................................................55
6.16. Schedules.........................................................55
6.17. Lease Termination Agreements/Memoranda of Lease...................55
6.18. Resignation of the Companies' Directors...........................55
6.19. Employment Agreement..............................................55
ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS TO EFFECT THE
CLOSING......................................................56
7.1. Representations and Warranties; Agreements........................56
7.2. Authorization of the Agreement, Consents..........................56
7.3. Opinions of UAG's and Sub's Counsel...............................56
7.4. Absence of Litigation.............................................57
7.5. Certificates......................................................57
7.6. Legal Matters.....................................................57
7.7. Registration Rights Agreement.....................................57
7.8. Schedules.........................................................57
7.9. Leases............................................................58
7.10. No Material Adverse Effect........................................58
7.11. Employment Agreement..............................................58
ARTICLE 8. TERMINATION......................................................58
8.1. Termination........................................................58
8.2. Effect of Termination..............................................59
ARTICLE 9. INDEMNIFICATION..................................................59
9.1. Indemnification by the Stockholders................................59
9.2. Indemnification by UAG.............................................60
9.3. Procedures.........................................................60
9.4. Remedies...........................................................62
9.5. Definitions........................................................62
9.6. Limitation on Indemnification......................................62
ARTICLE 10. MISCELLANEOUS...................................................64
10.1. Survival of Provisions...........................................64
10.2. Fees and Expenses................................................64
10.3. Headings.........................................................64
10.4. Notices..........................................................65
10.5. Assignment.......................................................66
10.6. Entire Agreement.................................................66
10.7. Waiver and Amendments............................................67
10.8. Counterparts.....................................................67
10.9. Accounting Terms.................................................67
iii
<PAGE>
10.10. Schedules........................................................67
10.11. Severability.....................................................67
10.12. Remedies.........................................................68
10.13. Governing Law....................................................68
10.14. Time is of the Essence...........................................68
iv
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated February 19, 1997, is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG East, Inc.,
a Delaware corporation ("UAG East" or "Sub"), Amity Auto Plaza Ltd., d/b/a
Amity Toyota Superstore, a New York corporation ("Amity Toyota"), Massapequa
Imports Ltd., d/b/a Lexus of Massapequa, a New York corporation ("Massapequa
Lexus"), Westbury Nissan Ltd., d/b/a Westbury Nissan Superstore, a New York
corporation ("Westbury Nissan"), Westbury Superstore Ltd., d/b/a Westbury
Toyota, a New York corporation ("Westbury Toyota"), J&S Auto Refinishing Ltd.,
d/b/a Premier Auto Body, a New York corporation ("Premier"), Florida Chrysler
Plymouth Jeep Eagle Inc., a Florida corporation ("Florida CP"), Palm Auto
Plaza Inc., d/b/a Palm Beach Toyota, a Florida corporation ("West Palm
Toyota"), West Palm Infiniti Inc., a Florida corporation ("West Palm
Infiniti"), West Palm Nissan Inc., a Florida corporation ("West Palm Nissan"),
Northlake Auto Finish Inc., d/b/a Trail Auto Body, a Florida corporation
("Trail," and, together with Amity Toyota, Massapequa Lexus, Westbury Nissan,
Westbury Toyota, Premier, Florida CP, West Palm Toyota, West Palm Infiniti and
West Palm Nissan, the "Companies"), John A. Staluppi ("Mr. Staluppi") and John
A. Staluppi, Jr. (together with Mr. Staluppi, the "Stockholders").
W I T N E S S E T H:
WHEREAS, UAG East is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate franchise automobile dealerships
and related businesses in West Palm Beach, Florida and Long Island, New York;
WHEREAS, the Stockholders own all of the issued and outstanding
shares of the capital stock of the Companies (the "Shares");
WHEREAS, UAG East desires to purchase the Shares from the
Stockholders, and the Stockholders desire to sell the Shares to UAG East (in
each case upon the terms and subject to the conditions set forth in this
Agreement), such that immediately after giving effect to such purchase and
sale, UAG East will own one hundred percent (100%) of the issued and
outstanding shares of the capital stock of the Companies, on a fully diluted
basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions
and other agreements set forth herein, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE 1.
PURCHASE AND SALE OF SHARES
1.1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, his spouse, his issue,
his parents, his estate and any trust entirely for the benefit of his spouse
and/or issue.
(b) "Business Day" shall mean any day excluding Saturday, Sunday
and any day which is a legal holiday under Federal law.
(c) "Closing Date" shall have the meaning ascribed to it in
Section 1.2(b).
(d) "Documents" shall mean the Post-Closing Escrow Agreement, the
Escrow Agreement, the Piggyback Registration Rights Agreement and the Leases.
(e) "Effective Date" shall have the meaning ascribed to it in
Section 1.9 hereof.
(f) "Environmental Laws" shall mean all applicable requirements of
environmental, public or employee health and safety, public or community
right-to-know, ecological or natural resource laws or regulations or controls,
including all applicable requirements imposed by any law (including, without
limitation, common law), rule, order, or regulations of any federal, state, or
local executive, legislative, judicial, regulatory, or administrative agency,
board, or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to, (i) noise, (ii) pollution or
protection of the air, surface water, groundwater, or soil, (iii) solid,
gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or
(v) regulation of the manufacture, processing, distribution and commerce, use,
or storage of Hazardous Materials.
(g) "Environmental Permits" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation of
the Companies' businesses or the Real Property or Improvements.
(h) "Escrow Agent" shall mean Newman Tannenbaum Helpern Syracuse &
Hirschtritt LLP.
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(i) "Escrow Deposit" shall have the meaning ascribed to it in
Section 1.6.
(j) "GAAP" shall mean generally accepted accounting principles
which are in effect in the United States on the Closing Date.
(k) "Hazardous Materials" shall mean, collectively, (i) those
substances included within the definitions of or identified as "hazardous
chemicals," "hazardous waste," "hazardous substances," "hazardous materials,"
"toxic substances" or similar terms in or pursuant to, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980
(42 U.S.C. 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and
Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.) ("RCRA"),
the Occupational Safety and Health Act of 1970 (29 U.S.C. ss. 651 et seq.)
("OSHA"), and the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801
et seq. ("HMTA"), and in the regulations promulgated pursuant to such laws,
all as amended, (ii) those substances listed in the United States Department
of Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR part 302 and amendments thereto), (iii) any material, waste
or substance which is or contains (A) petroleum, including crude oil or any
fraction thereof, natural gas, or synthetic gas usable for fuel or any mixture
thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act, 33
U.S.C. ss. 1251 et seq. (33 U.S.C. ss. 1321) or listed pursuant to Section 307
of the Clean Water Act (33 U.S.C. ss. 1317), (E) flammable explosives, (F)
radioactive materials, and (iv) such other substances, materials and wastes
which are or become regulated or classified as hazardous, toxic or as "special
wastes" under any Environmental Laws.
(l) "Knowledge" shall mean, with respect to the Stockholders, that
either of the Stockholders knows of the particular matter referred to; with
respect to the Companies, that any person responsible for overseeing the day
to day operations of any of the Companies or any general manager, executive
manager, service manager, office manager (or any person with similar such
responsibilities regardless of title) knows of the particular matter referred
to; and, with respect to UAG, that the President or any Vice-President of UAG
knows of the particular matter referred to.
(m) "Leases" shall have the meaning ascribed to it in Section
1.2(c)(v).
(n) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment
sale agreements, encumbrances or similar charges.
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(o) "Material Adverse Effect" shall mean any change in, or effect
on, any of the Companies (including the businesses thereof) which is, or might
be, materially adverse to the business, operations, assets, condition
(financial or otherwise) or prospects of such Company when taken as a whole.
(p) "November 30 Balance Sheets" shall have the meaning ascribed
to it in Section 2.5.
(q) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(r) "Remedial Action" shall mean any action required to (i) clean
up, remove or treat Hazardous Materials, (ii) prevent a release or threat of
release of any Hazardous Material, (iii) perform pre-remedial studies,
investigations or post-remedial monitoring and care, (iv) cure a violation of
Environmental Law or (v) take corrective action under sections 3004(u),
3004(v) or 3008(h) of RCRA or analogous state law.
(s) "Piggyback Registration Rights Agreement" shall have the
meaning ascribed to it in Section 1.2(c)(vi).
(t) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
(u) "UAG Common Stock" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(v) "UAG Market Value" shall mean the arithmetic average of the
daily closing price per share of UAG Common Stock, rounded to four decimal
places, as reported on the New York Stock Exchange Composite Tape for each of
the twenty (20) consecutive trading days ending (and including) the trading
day that occurs one trading day prior to the date on which the UAG Market
Value is to be determined.
1.2. PURCHASE AND SALE OF THE SHARES
(a) Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholders shall sell to UAG
East, and UAG East shall purchase from the Stockholders, the Shares for an
aggregate purchase price (the "Purchase Price") equal to (i) Twenty-Five
Million Dollars ($25,000,000) in cash less the amount of any distributions
(the "Distributions") made by the Companies to the Stockholders from November
30, 1996 until the Closing Date (other than distributions of net income
attributable to periods after November 30, 1996 or distributions attributable
to periods prior to November 30, 1996 which are reflected on the November 30
Balance Sheets) (the "Base Price"), which Base Price is subject to adjustment
after Closing as provided
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in Sections 1.3, 1.7 and 1.8 below; (ii) promissory notes in substantially the
form attached hereto as Exhibit A (the "Three Year Notes") issued by UAG in
the aggregate principal amount of Twelve Million Five Hundred Thousand Dollars
($12,500,000) with interest only payable quarterly at the rate of six and
one-half percent (6.5%) per annum, maturing on the third anniversary of the
Closing Date; (iii) promissory notes in substantially the form attached hereto
as Exhibit B (together with the Three Year Notes, the "Notes") issued by UAG
in the aggregate principal amount of Twelve Million Five Hundred Thousand
Dollars ($12,500,000) with interest only payable quarterly at the rate of six
and one-half percent (6.5%) per annum, maturing on the sixth anniversary of
the Closing Date; and (iv) One Hundred Twenty-Seven Thousand Six Hundred Sixty
(127,660) shares of UAG Common Stock (the "UAG Shares") bearing the
restrictive legend customarily placed on securities that have not been
registered under applicable federal and state securities laws, which shares
shall be deposited in escrow pursuant to Section 1.2(c) below. At the Closing
referred to in Section 1.2(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver
to Sub the Shares representing 100% of the issued and outstanding
capital stock of the Companies and deliver the certificates representing
such Shares accompanied by stock powers duly executed in blank; and
(ii) Sub shall accept and purchase the Shares from the
Stockholders and in payment therefor shall (A) deliver to the
Stockholders immediately available funds in an aggregate amount equal to
the Base Price (less the Escrow Deposit) by wire transfer to an account
designated in writing by the Stockholders or by certified funds; (B)
deliver to the Stockholders the Notes; and (C) deliver to the Escrow
Agent certificates representing the UAG Shares bearing the restrictive
legend customarily placed on securities that have not been registered
under applicable federal or state securities laws.
(b) Closing. Subject to the conditions set forth in this
Agreement, the purchase and sale of the Shares pursuant to this Agreement (the
"Closing") shall take place as soon as practicable following the date on which
all conditions to the obligations of the parties hereunder (other than those
requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived but no
later than April 30, 1997. The date on which the Closing occurs is herein
referred to as the "Closing Date".
(c) Deliveries at the Closing. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) the Stockholders shall deliver to Sub certificates
representing the Shares accompanied by stock powers as required by
Section 1.2(a)(i) hereof, and any other
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documents that are necessary to transfer to Sub good title to all the
Shares, and (B) all opinions, certificates and other instruments and
documents required to be delivered by the Stockholders or the Companies
at or prior to the Closing or otherwise required in connection herewith;
(ii) the Sub shall (A) pay to the Stockholders funds as required
by Section 1.2(a)(ii) hereof; (B) deliver to the Stockholders the Notes;
and (C) deliver to the Stockholders all opinions, certificates and other
instruments and documents required to be delivered by UAG or Sub at or
prior to the Closing or otherwise required in connection herewith;
(iii) UAG and Mr. Staluppi shall enter into the Post-Closing
Escrow Agreement substantially in the form attached hereto as Exhibit C
(the "Post Closing Escrow Agreement"), and UAG shall deliver to the
Escrow Agent certificates representing the UAG Shares issued in the name
of Mr. Staluppi which shares shall be held and distributed pursuant to
the terms of the Post-Closing Escrow Agreement;
(iv) The Companies (other than Westbury Toyota) and the owner of
the property on which each such Company conducts its business (each a
"Landlord" and collectively the "Landlords") shall enter into a lease
for the real property on which such Company operates in a form mutually
acceptable to the parties (each a "Lease" and collectively the
"Leases"), such form to be agreed to by the parties within twenty (20)
days of the date of this Agreement. Each Lease shall be for a twenty
(20) year term and the lessee shall have the option to renew the lease
for two additional five year terms. Each Lease shall be a triple net
lease and the initial base monthly rent for each Lease shall be as set
forth on Schedule 1.2. Each lease with Mr. Staluppi or any entity in
which he has an ownership or control position shall contain a provision
whereby at the applicable Company's option, exercisable within six (6)
months after the Closing Date, the Company may have an appraisal of the
real property conducted and if the appraisal reflects that the initial
base monthly rent is greater than one-twelfth (1/12) of the appraised
fair market value of the property multiplied by a 10.75% capitalization
rate ("Cap Rate") then no adjustments shall be made to the lease rate
for the CPI Increase (as hereinafter defined) until from and after the
initial lease rate is equal to or exceeds the fair market value lease
rate (but in no event until three (3) years after the Closing Date);
provided, however, the Landlord under the affected lease shall have the
right to then obtain its own appraisal within two (2) months thereafter
and if the parties cannot agree on the fair market value lease rate, the
two appraisers shall select a third appraiser to determine the fair
market lease rate within two (2) months after Landlord's appraisal. All
appraisers must be independent and MAI certified with a minimum of ten
(10) years' experience. Mr.
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Staluppi represents and warrants that the initial lease rates do not
exceed the fair market lease rate for such property as determined by
taking into account the property's fair market value and a lease rate of
return not to exceed the Cap Rate. Subject to the foregoing, on the
third anniversary of the Closing Date and every three years thereafter,
the lease rate for each Lease shall increase to an amount equal to the
rate then in effect plus an amount equal to a percentage of the rate
then in effect, which percentage shall be equal to two hundred percent
(200%) of the percentage increase in the Consumer Price Index published
from time to time by the United States Department of Labor ("CPI") for
the metropolitan area in which such Company operates from the time of
the last adjustment; provided, however, that such increase shall not
exceed eight and one-half percent (8.5%) for each three (3) year period
("CPI Increase"). UAG shall guarantee the payment under and performance
of the lessees under the Leases; and
(v) UAG and Mr. Staluppi shall enter into a registration rights
agreement in the form attached hereto as Exhibit D (the "Piggyback
Registration Rights Agreement").
1.3. NET WORTH ADJUSTMENT
(a) On the Closing Date, or as soon as practicable after the
Closing Date, the Stockholders shall deliver to UAG balance sheets of the
Companies dated as of the Closing Date (such balance sheets so delivered are
referred to herein as the "Closing Date Balance Sheets"). The Closing Date
Balance Sheets shall be prepared in good faith on the same basis and in
accordance with the accounting principles, methods and practices used in
preparing the November 30 Balance Sheets (as defined in Section 2.5 hereof)
(such accounting principles, methods and practices and such procedures, are
referred to herein as the "Accounting Principles"). In connection with the
preparation of the Closing Date Balance Sheets, the Stockholders and the
Companies shall permit the Reviewer (as defined below) and other
representatives of UAG to conduct a physical inventory at each location where
inventory is held by the Companies.
(b) Within sixty (60) days after delivery of the Closing Date
Balance Sheets, (i) Coopers & Lybrand or such other accounting firm (the
"Reviewer") as may be selected by UAG shall audit or otherwise review the
Closing Date Balance Sheets in such manner as UAG and the Reviewer deem
appropriate, and (ii) UAG shall deliver such reviewed balance sheet (the
"Reviewed Balance Sheets"), together with the Reviewer's report thereon, to
the Stockholders. The Reviewed Balance Sheets (i) shall be prepared on the
same basis and in accordance with the Accounting Principles and (ii) shall
include a schedule showing the computation of the Final Net Worth (as defined
in Section 1.3(g)(i) hereof), computed in accordance with the definition of
Net Worth set forth in Section 1.3(g)(ii) hereof. UAG and the Reviewer shall
have the opportunity to consult with the Stockholders, the Companies and each
of the
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accountants and other representatives of the Stockholders and the Companies
and to examine the work papers, schedules and other documents prepared by the
Stockholders, the Companies and each of such accountants and other
representatives during the preparation of the Closing Date Balance Sheets. The
Stockholders and the Stockholders' independent public accountants shall have
the opportunity to consult with the Reviewer and to examine the work papers,
schedules and other documents prepared by the Reviewer during the preparation
of the Reviewed Balance Sheets.
(c) The Stockholders shall have a period of forty-five (45) days
after delivery of the Reviewed Balance Sheets to present in writing to UAG all
objections the Stockholders may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail.
If no objections are raised within such 45-day period, the Reviewed Balance
Sheets shall be deemed accepted and approved by the Stockholders and a
supplemental closing (the "Supplemental Closing") shall take place within five
(5) Business Days following the expiration of such 45-day period, or on such
other date as may be mutually agreed upon in writing by UAG and the
Stockholders.
(d) If the Stockholders shall raise any objection within such
45-day period, UAG and the Stockholders shall attempt to resolve the matter or
matters in dispute and, if resolved, the Supplemental Closing shall take place
within five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheets, then
the specific matters in dispute shall be submitted to a firm of independent
public accountants mutually acceptable to UAG and the Stockholders, which firm
shall make a final and binding determination as to such matter or matters.
Such accounting firm shall send its written determination to UAG and the
Stockholders and the Supplemental Closing, if any, shall take place five (5)
Business Days following the receipt of such determination by UAG and the
Stockholders. The fees and expenses of the accounting firm referred to in this
Section 1.3(e) shall be paid one-half by UAG and one-half by the Stockholders.
(f) UAG and the Stockholders agree to cooperate with each other
and each other's authorized representatives and with any accounting firm
selected by UAG and the Stockholders pursuant to Section 1.3(e) hereof in
order that any and all matters in dispute shall be resolved as soon as
practicable.
(g) (i) If the aggregate Net Worth as shown on the Reviewed
Balance Sheets as finally determined through the operation of Sections 1.3 (a)
through (e) hereof plus the amount of the Distributions (such amount being
referred to herein as the "Final Net Worth") shall be less than the Net Worth
of the Companies as set forth on the November 30 Balance Sheets (which balance
sheets are attached hereto as Schedule 2.5) (the amount of any such
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deficiency being referred to herein as the "Net Worth Deficiency"), the
Stockholders shall pay to UAG at the Supplemental Closing, by wire transfer of
immediately available funds to an account designated in writing by UAG at
least two (2) Business Days prior to the date of the Supplemental Closing, an
amount equal to the Net Worth Deficiency.
(ii) "Net Worth", computed in connection with the Closing Date
Balance Sheets, the Company Balance Sheets and the Reviewed Balance
Sheets, shall mean the amount by which the total assets (not including
intangible assets) exceed the total liabilities reflected, in each case,
on the balance sheets of Companies comprising the Closing Date Balance
Sheets, the Company Balance Sheets or the Reviewed Balance Sheets, as
the case may be.
1.4. NEW FACILITY
(a) Mr. Staluppi or an Affiliate is the owner of a parcel of land
located on Military Trail, West Palm Beach (the "West Palm Parcel") and is in
the process of developing a new facility on such land for use by West Palm
Toyota (the "New Facility"). The New Facility is to be developed pursuant to
plans and specifications to be agreed upon by the parties, which plans and
specifications shall include a breakdown of all hard and soft costs together
with the maximum total cost (the "Plans"). The construction contractor shall
be chosen from among no less than three (3) bidders (one of whom UAG may
designate) and the lowest bidder that is qualified to Toyota standards
(including an ability to post a performance bond) shall be selected. The
parties acknowledge that the New Facility will not be completed on the Closing
Date. Within nine (9) months after the Closing Date, Mr. Staluppi shall, at
his sole cost and expense, complete the New Facility as set forth in the
Plans. No change shall be made to the Plans without the prior written consent
of UAG which shall not be unreasonably withheld. Upon completion of the New
Facility and satisfaction of the New Facility Closing Conditions (as
hereinafter defined) West Palm Toyota and Mr. Staluppi shall enter into a
lease for the New Facility in a form mutually acceptable to the parties (the
"New Facility Lease") (the date on which the New Facility Lease becomes
effective is referred to herein as the "New Facility Lease Date"), such form
to be agreed to by the parties within twenty (20) days after the date of this
Agreement. The New Facility Lease shall be for a twenty (20) year term and the
lessee shall have the option to renew the lease for two additional five year
terms. The initial lease rate under the New Facility Lease shall be fixed at a
dollar amount equal to 100% of all hard and soft costs provided for in the
Plans and actually incurred by Mr. Staluppi for acquisition and construction
of the facility multiplied by the Cap Rate. Mr. Staluppi represents and
warrants that the acquisition cost of the property is no greater than fair
market value. The initial lease rate shall be
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increased every third anniversary after the commencement of the lease as set
forth in Section 1.2(c)(iv).
For purposes of this Agreement, "New Facility Closing Conditions" shall mean
(i) the completion of the New Facility substantially in accordance with the
Plans including but not limited to substantially all material punch list items
as certified by the architect for such New Facility; provided, however, that
if UAG disputes such certificate it may retain its own architect to determine
if such New Facility has been completed substantially in accordance with such
Plans; (ii) the issuance of a permanent Certificate of Occupancy by the local
governmental authorities with respect to such New Facility without condition;
(iii) West Palm Toyota having received any necessary consents or approvals
from Toyota to relocate its operations to the New Facility; (iv) delivery of
an ALTA "as-built" survey of the New Facility and the property upon which it
is located reflecting no encroachments on adjoining land or into set-back
areas and that all utilities serve the New Facility through publicly dedicated
rights-of-way and tie into public utilities, such survey to be certified to
UAG, UAG East, West Palm Toyota and a title insurance company chosen by UAG;
(v) UAG's obtaining a leasehold title insurance policy, without standard
exceptions insuring West Palm Toyota's leasehold estate in the New Facility
subject to no prior ground lease, mortgage, deed of trust or other security
instrument or if so encumbered, Mr. Staluppi's obtaining a non-disturbance
agreement from the holder thereof in favor of West Palm Toyota in form and
substance reasonably satisfactory to UAG in recordable form and insured by
such title company and otherwise subject to only those exceptions to title as
are reasonably acceptable to UAG and providing such endorsements as UAG shall
require including, but not limited to, coverage over mechanics and
materialman's liens; (vi) UAG confirming that the New Facility complies with
all zoning requirements and the title company is prepared to issue a zoning
endorsement; and (vii) UAG obtaining an updated Phase I environmental report
reflecting that (x) there are no Hazardous Materials on or in the New Facility
or the land upon which it is located other than any that may be disclosed in
the initial Phase I conducted by UAG, (y) there are no violations of
Environmental Laws at the New Facility or the land upon which it is located;
and (z) there is no recommendation for further investigation or action with
respect to the New Facility or such land, which report shall be for the
benefit of UAG, UAG East and West Palm Toyota. In addition, Mr. Staluppi shall
complete all remaining punch list items within sixty (60) days after the New
Facility Lease Date and shall use his best efforts to obtain standard
warranties for construction and equipment (including roofs) and to assign such
warranties to UAG or West Palm Toyota. Mr. Staluppi also agrees that all
equipment and fixtures necessary for a "turn-key" car dealership similar to
the existing West Palm Toyota dealership shall be relocated from the existing
West Palm Toyota Facility to the New Facility. In addition, from and after the
Closing Date until the earlier of (i) the New Facility Lease Date, and (ii)
nine (9) months after the Closing Date, West Palm Toyota shall pay to Mr.
Staluppi his out of
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pocket costs attributable to (x) real property taxes, (y) ground lease
payments and (z) interest on borrowed funds utilized to acquire and construct
the New Facility land and improvements.
1.5. STOCK PRICE ADJUSTMENT
If the UAG Market Value on the Adjustment Date (as defined below)
is less than Twenty-three and 50/100 Dollars ($23.50) (the amount of any such
deficiency being referred to herein as the ("Stock Price Deficiency") then, no
later than ten (10) Business Days after the Adjustment Date, UAG shall pay to
Mr. Staluppi cash in an amount (the "Adjustment Amount") equal to the Stock
Price Deficiency multiplied by the number of UAG Shares Mr. Staluppi received
at the Closing.
For purposes of this Agreement, the Adjustment Date shall mean the earlier of
(i) the date on which the UAG Shares are registered pursuant to the Piggyback
Registration Rights Agreement or (ii) the date on which Mr. Staluppi may sell
the UAG Shares in reliance on Rule 144 promulgated by the Securities and
Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended
("Rule 144").
1.6. ESCROW DEPOSIT.
Within three (3) business days of the Effective Date of this
Agreement, UAG will deposit into escrow funds in the amount of Two Hundred
Fifty Thousand Dollars ($250,000) (the "Escrow Deposit") by delivering such
funds to the Escrow Agent which Escrow Deposit shall be held and disbursed by
the Escrow Agent pursuant to the terms of an escrow agreement in substantially
the form attached hereto as Exhibit E.
1.7. ADDITIONAL PURCHASE PRICE.
If the Companies, on a combined basis, achieve annual Pre-Tax
Earnings of at least Eleven Million Five Hundred Thousand Dollars
($11,500,000) in any of the three (3) successive twelve (12) month periods
beginning on the first day of the calendar month immediately following the New
Facility Lease Date (such twelve (12) month periods being referred to herein
as "Year One," "Year Two," and "Year Three," respectively), then, in
consideration for the sale of the Shares by the Stockholders to Sub, Sub will
make an additional payment to the Stockholders with respect to each such year
that such Pre-Tax Earnings shall be achieved in the aggregate amount of One
Million Dollars ($1,000,000) (each such payment being referred to herein as an
"Additional Payment"), which Additional Payments, if any, shall be allocated
among the Stockholders as they so determine in their sole discretion. In the
event that Sub is required to make an Additional Payment in either Year One,
Year Two or Year Three, then Sub shall make the Additional Payment within
sixty (60) days after the completion of the review by the Companies' certified
public accountant of the Companies' financial statements covering the entire
Year for which such Additional
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Payment is to be paid. For purposes of this Agreement, Pre-Tax Earnings shall
not include any general overhead charges, management fees or other similar
payments to UAG or its Affiliates. During Years One, Two and Three each
Company shall deliver to Mr. Staluppi a copy of its monthly factory statement
within five (5) days of its delivery to the factory which statement shall be
treated as confidential by Mr. Staluppi.
1.8. CONTINGENT PAYMENT.
If the total of the annual Pre-Tax Earnings for Year One, Year Two
and Year Three (the "Total Pre-Tax Earnings") exceeds Thirty Four Million Five
Hundred Thousand Dollars ($34,500,000), then, in consideration for the sale of
the Shares by the Stockholders to Sub, Sub will make an additional payment to
the Stockholders in the aggregate amount of One Million Dollars ($1,000,000)
(such payment being referred to herein as the "Contingent Payment"), which
Contingent Payment shall be allocated among the Stockholders as they so
determine in their sole discretion. In the event that Sub is required to make
a Contingent Payment, then Sub shall make the Contingent Payment within sixty
(60) days after completion of the review by the Companies' certified public
accounts of the Companies' financial statements covering Year Three.
1.9. EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect
until the parties have notified all of the manufacturer's whose consent is
required (the "Effective Date").
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 2 are to be delivered by the Companies
and the Stockholders no later than ten (10) Business Days after the Effective
Date hereof, the Companies and the Stockholders hereby jointly and severally
represent and warrant to UAG and Sub as follows:
2.1. ORGANIZATION AND GOOD STANDING.
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own, lease and
operate the properties used in its businesses and to carry on their businesses
as now being conducted. The Companies are duly qualified to do business and
are in good standing as a foreign corporation in each state and jurisdiction
where qualification as a foreign corporation is required, except for such
failures to be qualified and in good standing, if any, which when taken
together with all other such failures of the
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Companies would not, or could not reasonably be expected to, in the aggregate
have a Material Adverse Effect. Schedule 2.1 hereto lists (i) the states and
other jurisdictions where the Companies are so qualified and (ii) the assumed
names under which the Companies conduct business. Attached to Schedule 2.1(b)
hereto are complete and correct copies of the Companies' Articles of
Incorporation and Bylaws (including comparable governing instruments with
different names), as amended and presently in effect.
2.2. SUBSIDIARIES
The Companies do not have any interest or investment in any
Person.
2.3. CAPITALIZATION
The authorized stock of each of the Companies and the number of
shares of capital stock which are issued and outstanding are set forth on
Schedule 2.3 hereto. The shares listed on Schedule 2.3 hereto constitute all
the issued and outstanding shares of capital stock of the Companies and have
been validly authorized and issued, are fully paid and nonassessable, have not
been issued in violation of any preemptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
There is no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent,
that directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Companies or any securities
convertible into, or other rights to acquire, any shares of capital stock of
the Companies, or (ii) obligates the Companies to grant, offer or enter into
any of the foregoing, or (iii) relates to the voting or control of such
capital stock, securities or rights, except as set forth on Schedule 2.3
hereto. The Companies have not agreed to register any securities under the
Securities Act of 1933, as amended (the "Securities Act").
2.4. AUTHORITY; APPROVALS AND CONSENTS
The Companies have the corporate power and authority to enter into
this Agreement and the documents referred to herein (the "Documents") to which
they are a party and to perform their obligations hereunder and thereunder.
The execution, delivery and performance of this Agreement and the Documents to
which they are a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by the Board of
Directors of each of the Companies and no other corporate proceedings on the
part of the Companies are necessary to authorize and approve this Agreement
and the Documents and the transactions contemplated hereby and thereby. This
Agreement has been, and on the Closing Date the Documents will be, duly
executed and delivered by, and constitute valid and binding obligations of,
each of the Companies, enforceable against the Companies in accordance with
their respective terms. The execution, delivery and performance by
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each of the Companies and the Stockholders of this Agreement and the Documents
to which it or they are a party and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Articles of Incorporation or
By-Laws (including any comparable governing instrument with a different
name) of any of the Companies;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any Company Agreement (as
defined in Section 2.15 hereof) or, except as set forth on Schedule 2.4
hereto, require any consent or waiver of any party to any Company
Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or
rights of the Companies (other than the rights of Sub to acquire the
Shares pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in Section 2.9 hereof) applicable to the Companies or any of their
respective businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act
(as defined in Section 5.3 hereof).
Except as set forth or referred to above, no authorization,
consent, order, permit or approval of, or notice to, or filing, registration
or qualification with, any governmental administrative or judicial authority
is necessary to be obtained or made by the Companies to enable the Companies
to continue to conduct their respective businesses and operations and use
their respective properties after the Closing in a manner which is in all
material respects consistent with that in which they are presently conducted.
2.5. FINANCIAL STATEMENTS
Except as otherwise indicated below, attached as Schedule 2.5 are
true and complete copies of:
(i) (A) the balance sheets of the Companies as of December 31,
1995, and the related consolidated statements of income, stockholders'
equity and cash flow for
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the fiscal year ended December 31, 1995, together with the notes thereto
and (B) the balance sheets of the Companies as of December 31, 1994, and
the related consolidated statements of income, stockholders' equity and
cash flow for the fiscal year ended December 31, 1994, together with the
notes thereto, in each case examined by and accompanied by the report of
independent certified public accountants (except where such examination
and report are not available);
(ii) the balance sheets of the Companies as of November 30, 1996
(the "November 30 Balance Sheets"); and
(iii) the most recent monthly and year-to-date financial
statements provided to each franchisor of the Companies (each, a
"Company Factory Statement" and, collectively, the "Company Factory
Statements");
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Company Financial Statements"). The
Company Financial Statements are consistent with and in accordance with the
books and records of the Companies, fairly present the financial position,
results of operations, stockholders' equity and changes in financial position
of the Companies as of the dates and for the periods indicated, in the case of
the financial statements referred to in clause (i) above in conformity with
GAAP consistently applied (except as otherwise indicated in such statements)
during such periods, and the unaudited financial statements included in the
Company Financial Statements indicate all adjustments, which consist of only
normal recurring accruals, necessary for such fair presentations. The Company
Financial Statements are consistent with the financial records maintained and
the accounting methods applied by the Companies for tax purposes. The
statements of income included in the Company Financial Statements do not
contain any items of special or nonrecurring income except as expressly
specified therein, and the balance sheets included in the Company Financial
Statements do not reflect any write-up or revaluation increasing the book
value of any assets. The books and accounts of the Companies are complete and
correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses
of the Companies.
2.6. ABSENCE OF UNDISCLOSED LIABILITIES
The Companies do not have any material liability of any nature
whatsoever (whether known or unknown, due or to become due, accrued, absolute,
contingent or otherwise), including, without limitation, any unfunded
obligation under employee benefit plans or arrangements as described in
Section 2.18 and 2.19 hereof or liabilities for Taxes (as defined in Section
2.8 hereof), except for (i) liabilities reflected or reserved against on the
most recent Company Financial Statements, (ii) current liabilities incurred in
the ordinary course of business and consistent with
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past practice after the date of the Company Balance Sheets which, individually
and in the aggregate, do not have, and cannot reasonably be expected to have,
a Material Adverse Effect, and (iii) liabilities disclosed on Schedule 2.6
hereto. The Companies are not parties to any Company Agreement, or subject to
any charter or by-law provision, any other corporate limitation or any Legal
Requirement, which has, or can reasonably be expected to have, a Material
Adverse Effect.
2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS
(a) Since November 30, 1996, the Companies have operated in the
ordinary course of business consistent with past practice, except as set forth
on Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the Companies, and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have a
Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of the Companies, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, new car sales manager, used car sales manager, or any
equivalent employee of any of the Companies.
(b) Since November 30, 1996, except as set forth in Schedule
2.7(b) hereto, the Companies have not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics liens and liens for taxes
not yet due and payable;
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(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not
reflected in the Company Financial Statements except in the ordinary
course of business consistent with past practices;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them except in the ordinary course of business
consistent with past practices;
(ix) made any individual capital expenditure in excess of
$100,000, or aggregate capital expenditures in excess of $300,000, or
additions to property, plant and equipment other than ordinary repairs
and maintenance;
(x) discontinued any franchise or the sale of any products or
product line or program; (xi) incurred any obligation or liability for
the payment of severance benefits; or
(xii) entered into any agreement or made any commitment to do any
of the foregoing.
2.8. TAXES
The Companies have each made a valid election pursuant to Section
1362(a) of the Internal Revenue Code, as amended (the "Code"), to be an "S
Corporation" within the meaning of Section 1361(a)(1) of the Code and (with
the exception of West Palm Nissan) have continued to qualify as such for all
taxable years since their formation and will continue to so qualify through
the Closing Date. The Companies and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined
or consolidated basis with the Companies any such other corporation, have
filed timely all federal, state, local and foreign tax returns, reports and
declarations required to be filed (or have obtained or timely applied for an
extension with respect to such filing) correctly reflecting the Taxes (as
defined below) and all other information required to be reported thereon and
have paid, or made adequate provision for the payment of, all Taxes
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which are due pursuant to such returns or pursuant to any assessment received
by the Companies or any such other corporation. As used herein, "Taxes" shall
mean all taxes, fees, levies or other assessments, including but not limited
to income, excise, property, sales, franchise, withholding, social security
and unemployment taxes imposed by the United States, any state, county, local
or foreign government, or any subdivision or agency thereof or taxing
authority therein, and any interest, penalties or additions to tax relating to
such taxes, charges, fees, levies or other assessments. Copies of all tax
returns for the fiscal years ended since December 31, 1992 have been furnished
or made available to UAG or its representatives to the extent available and in
the possession of the Companies and such copies are accurate and complete as
of the date hereof. The Companies have also furnished to UAG correct and
complete copies of all notices and correspondence sent or received since
December 31, 1992 by the Companies to or from any federal, state or local tax
authorities. The Companies have adequately reserved for the payment of all
Taxes with respect to periods ended on or prior to the Closing Date for which
tax returns have not yet been filed. In the ordinary course, the Companies
make adequate provision on their books for the payment of all Taxes (including
for the current fiscal period) owed by the Companies. Except to the extent
reserves therefor are reflected on the Company Balance Sheets, the Companies
are not liable, or will not become liable, for any Taxes for any period ending
on or prior to the Closing Date. Except as set forth on Schedule 2.8 hereto,
the Companies have not been subject to a federal or state tax audit of any
kind since December 31 1992, and no adjustment has been proposed by the
Internal Revenue Service ("IRS") with respect to any return for any subsequent
year. With respect to the audits referred to on Schedule 2.8 hereto and except
as indicated thereon, no such audit has resulted in an adjustment in excess of
$50,000. Neither the Companies nor any Stockholder knows of any basis for an
assertion of a deficiency for Taxes against the Companies. The Stockholders
will cooperate, and will cause their Affiliates to cooperate, with the
Companies in the filing of any returns and in any audit or refund claim
proceedings involving Taxes for which the Companies may be liable or with
respect to which the Companies may be entitled to a refund.
2.9. LEGAL MATTERS
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, and, to the knowledge of the
Companies or the Stockholders, there is no material claim threatened against
or affecting, the Companies, any ERISA Plan (as defined in Section 2.18(a)
hereof) or any of their respective properties or rights before or by any
court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, domestic or foreign, nor is any basis known to the
Stockholders or the Companies for any such Claims, and (ii) the Companies are
not subject to any judgment, decree, writ, injunction, ruling or
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order (collectively, "Judgments") of any governmental, administrative or
judicial authority, domestic or foreign. Schedule 2.9(a) hereto identifies
each Claim and Judgment disclosed thereon which is fully covered by an
insurance policy.
(b) The businesses of the Companies are being conducted in
compliance with all laws, ordinances, codes, rules, regulations, standards,
judgments and other requirements of all governmental, administrative or
judicial entities (collectively, "Legal Requirements") applicable to the
Companies or any of their respective businesses or properties except where the
failure to be in such compliance could not reasonably be expected to have a
Material Adverse Effect. The Companies hold, and are in compliance with, all
franchises, licenses, permits, registrations, certificates, consents,
approvals or authorizations (collectively, "Permits") required by all
applicable Legal Requirements. A list of all such permits is set forth on
Schedule 2.9(b) hereof.
(c) The Companies own or hold all Permits material to the conduct
of their businesses. No event has occurred and is continuing which permits, or
after notice or lapse of time or both would permit, any modification or
termination of any Permit.
2.10. PROPERTY
Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies (including all real property
owned or leased by the Stockholders (directly or indirectly) and used in the
businesses of the Companies and of all options or other contracts to acquire
any such interest (collectively, and together with the New Facility, the "Real
Property"). With respect to any leased Real Property owned by Mr. Staluppi or
any of his Affiliates, there are no defaults by either party under and no
state of facts exist which with the giving of notice or the passage of time,
or both, would constitute a default under such leases. With respect to any
leased Real Property not owned by Mr. Staluppi or any of his Affiliates,
neither the Companies nor the Stockholders have (i) received notice of any
defaults by any parties under such leases (the "Third Party Leases") or (ii)
any knowledge of any state of facts which with the giving of notice or the
passage of time, or both, would constitute a default under such leases. True
and correct copies of all leases relating to the leased Real Property,
together with any amendments and modifications thereto, are attached as
Schedule 2.10(b). All improvements to the Real Property ("Improvements") and
all machinery, equipment and other tangible property owned or used by or
leased to the Companies are fit for the particular purposes for which they are
used by the Companies. Such tangible properties and all Improvements owned or
leased by the Companies conform in all material respects with all applicable
laws, ordinances, rules and regulations and other Legal Requirements and, to
the knowledge of the Stockholders and the Companies, such Improvements do not
encroach in any respect on property of others. To the knowledge of the
Stockholders and the Companies, there are no latent defects
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with respect to the Improvements. The Real Property is currently zoned to
permit the conduct of the respective businesses of the Companies as presently
conducted. Certificates of Occupancy have been issued with respect to the
Improvements without special conditions or restrictions. All utilities
servicing the Real Property and the Improvements are provided by
publicly-dedicated utility lines and are located within public rights-of-way
and do not cross or encumber any private land. No written notice (and, to the
knowledge of the Stockholders and the Companies, no oral notice) of any
pending, threatened or contemplated action by any governmental authority or
agency having the power of eminent domain has been given to the Companies or
the Stockholders with respect to the Real Property.
2.11. ENVIRONMENTAL MATTERS
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the
Companies, the Real Property, the Improvements and any property formerly
owned, occupied or leased by the Companies are in compliance with all
Environmental Laws (provided, however, that as to the Real Property or
Improvements, such representation is limited to the knowledge of the
Stockholders and the Companies as it may relate to compliance for any period
prior to the Initial Date), (ii) the Companies have obtained all Environmental
Permits (as defined below), (iii) such Environmental Permits are in full force
and effect, and (iv) the Companies are in full compliance with all terms and
conditions of such Environmental Permits. As used in this Agreement, Initial
Date shall mean with respect to any portion of the Real Property or the
Improvements, the earlier of (i) date the Stockholders or the Companies first
acquired any ownership or leasehold interest in such property and (ii) the
date on which the Companies first began conducting operations on such
property.
(b) The Companies and the Stockholders have not violated, done or
suffered any act which could give rise to liability under, and, to the
knowledge of the Stockholders and the Companies, are not otherwise exposed to
liability under, any Environmental Law. After the Initial Date (and, to the
knowledge of the Stockholders and the Companies, with respect to events prior
to the Initial Date), no event has occurred with respect to the Real Property,
the Improvements or any property formerly owned, occupied or leased by the
Companies, which, with the passage of time or the giving of notice, or both,
would constitute a violation of or non-compliance with any applicable
Environmental Law. To the knowledge of the Stockholders and the Companies, the
Companies have no contingent liability under any Environmental Law. There are
no liens under any Environmental Law on the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) after the
Initial Date (and, to the knowledge of the Stockholders and the Companies,
with respect to any use prior to the Initial Date) neither the Companies, the
Real Property or any portion thereof, the Improvements or any property
formerly owned, occupied
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or leased by the Companies, nor, to the knowledge of the Companies or the
Stockholders, any property adjacent to the Real Property is being used or has
been used for the treatment, generation, transportation, processing, handling,
production or disposal of any Hazardous Materials or as a landfill or other
waste disposal site and there has been no spill or release of any Hazardous
Materials (provided, however, that certain petroleum products are stored and
handled on the Real Property in the ordinary course of the Companies'
businesses in full compliance with all Environmental Laws including the
existing regulations of the United States Environmental Protection Agency
requiring spill protection, overfill protection and corrosion protection by
December 22, 1998 and all secondary containment requirements with respect to
above ground storage tanks), (ii) after the Initial Date (and, to the
knowledge of the Stockholders and the Companies, with respect to
investigations prior to the Initial Date), none of the Real Property or any
portion thereof, the Improvements or any property formerly owned, occupied or
leased by the Companies has been subject to investigation by any governmental
authority evaluating the need to investigate or undertake Remedial Action at
such property, and (iii) to the knowledge of the Companies and the
Stockholders, none of the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies, or any site or location
where the Companies sent waste of any kind, is identified on the current or
proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B, (B)
Comprehensive Environmental Response Compensation and Liability Inventory
System list, or (C) any list arising from any statute analogous to CERCLA.
(d) Except as set forth on Schedule 2.11(d) hereto, after the
Initial Date (and, to the knowledge of the Stockholders and the Companies,
prior to the Initial Date), there have been and are no (i) aboveground or
underground storage tanks, subsurface disposal systems, or wastes, drums or
containers disposed of or buried on, in or under the ground or any surface
waters, (ii) asbestos or asbestos containing materials or radon gas, (iii)
polychlorinated biphenyls ("PCB") or PCB-containing equipment, including
transformers, or (iv) wetlands (as defined under any Environmental Law)
located within any portion of the Real Property, nor have any liens been
placed upon any portion of the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies in connection with any
actual or alleged liability under any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is
no pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Companies, the Real Property, the
Improvements, any property formerly owned, leased or occupied by the
Companies, any offsite contamination affecting the business of the Companies
or any operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to
any Remedial Action or other
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environmentally related claim, (iii) the Companies have not submitted notice
pursuant to Section 103 of CERCLA or analogous statute or notice under any
other applicable Environmental Law reporting a release of a Hazardous Material
into the environment, and (iv) the Companies have not received any notice,
claim, demand, suit or request for information from any governmental or
private entity with respect to any liability or alleged liability under any
Environmental Law, nor to the knowledge of the Stockholders and the Companies,
has any other entity whose liability therefor, in whole or in part, may be
attributed to the Companies, received such notice, claim, demand, suit or
request for information.
(f) The Stockholders and the Companies have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Companies and any property
formerly owned, occupied or leased by the Companies, and have permitted (or
will have permitted as of the Closing Date), the testing of the soil,
groundwater, building components, tanks, containers and equipment on the Real
Property, the Improvements, and any property formerly owned, occupied or
leased by the Companies, by UAG or UAG's agents or experts as they have or
shall have deemed necessary or appropriate to confirm the condition of such
properties. Any testing shall not be construed as a waiver of any rights which
UAG or Sub have arising out of the representations and warranties contained
herein.
2.12. INVENTORIES
The values at which inventories are carried on the Company Balance
Sheets and Company Factory Statements reflect the normal inventory valuation
policies of the Companies, and, in the case of the Company Balance Sheets,
such values are in conformity with GAAP consistently applied. All inventories
reflected on the Company Balance Sheets and Company Factory Statements or
arising since the date thereof are currently marketable and can reasonably be
anticipated to be sold at normal mark-ups within 120 days after the date
hereof in the ordinary course of business, except for spare parts inventory
which inventory is good and usable.
2.13. ACCOUNTS RECEIVABLE
All accounts receivable reflected on the Company Balance Sheets
are, and all accounts receivable that will be or will have been reflected on
the Closing Date Balance Sheets will be, good, and have been or will have been
collected or are collectible, without resort to litigation, within 120 days of
the Closing Date, and are subject to no defenses, setoffs or counterclaims
other than normal cash discounts accrued in the ordinary course of business.
2.14. INSURANCE
All material properties and assets of the Companies which are of
an insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner
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customary for companies engaged in similar businesses or owning similar
assets. Set forth on Schedule 2.14 hereto is a list and brief description
(including the name of the insurer, the type of coverage provided, the amount
of the annual premium for the current policy period, the amount of remaining
coverage and deductibles and the coverage period) of all policies for such
insurance and the Companies have made or will make available to UAG true and
complete copies of all such policies. All such policies are in full force and
effect, are sufficient for all applicable requirements of law and will not in
any way be affected by or terminated or lapsed by reason of the consummation
of the transactions contemplated by this Agreement. No notice of cancellation
or non-renewal with respect to, or disallowance of any claim under, any such
policy has been received by the Companies.
2.15. CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall
mean all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on Schedule 2.10
hereto) to which any of the Companies is a party or by which any of the
Companies or any of their respective assets or properties (including the Real
Property and the Improvements) may be bound or affected, including all
amendments, modifications, extensions or renewals of any of the foregoing. Set
forth on Schedule 2.15 hereto is a complete and accurate list of each Company
Agreement which is material to the business, operations, assets, condition
(financial or otherwise) or prospects of any of the Companies. True and
complete copies of all written Company Agreements referred to on Schedule 2.15
and Schedule 2.10 hereto, exclusive of individual vehicle titles and/or
manufacturer's certificates of origin and floor plan liens applicable to
individual vehicles, have been delivered or made available to UAG, and the
Companies have provided UAG with accurate and complete written summaries of
all such Company Agreements which are unwritten. Except as set forth on
Schedule 2.15, the Companies are not, nor, to the knowledge of the Companies
and the Stockholders is, any other party thereto, in material breach of or
default under any Company Agreement, and no event has occurred which (after
notice or lapse of time or both) would become a material breach or default
under, or would permit modification, cancellation, acceleration or termination
of, any Company Agreement or result in the creation of any material Lien upon,
or any Person obtaining any right to acquire, any properties, assets or rights
of the Companies in any such case where such breach, default or other event
would have, or could reasonably be expected to have, a Material Adverse
Effect. There are no material unresolved disputes involving any of the
Companies under any Company Agreement.
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2.16. LABOR RELATIONS
(a) The Companies have paid or made provision for the payment of
all salaries and accrued wages and have complied in all material respects with
all applicable laws, rules and regulations relating to the employment of
labor, including those relating to wages, hours, collective bargaining and the
payment and withholding of taxes, and have withheld and paid to the
appropriate governmental authority, or are holding for payment not yet due to
such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of their employees.
(b) Except as described in Section 6.13 and as set forth on
Schedule 2.16(b) hereto, none of the Companies is a party to any (i)
outstanding employment agreements or contracts with officers or employees that
are not terminable at will, or that provide for payment of any bonus or
commission, (ii) agreement, policy or practice that requires it to pay
termination or severance pay to salaried, non-exempt or hourly employees
(other than as required by law), (iii) collective bargaining agreement or
other labor union contract applicable to persons employed by the Companies,
nor do the Stockholders or the Companies know of any activities or proceedings
of any labor union to organize any such employees. The Companies have
furnished to UAG complete and correct copies of all such agreements
("Employment and Labor Agreements"). The Companies have not breached or
otherwise failed to comply with any provisions of any Employment or Labor
Agreement.
(c) Except as set forth in Schedule 2.16(c) hereto, (i) there is
no unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholders' or
the Companies' knowledge, threatened, against or affecting the Companies, and
the Companies have not experienced any strike, material slow down or material
work stoppage, lockout or other collective labor action by or with respect to
employees of the Companies, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Companies,
(iv) there are no charges with respect to or relating to the Companies pending
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment
practices, (v) the Companies have not received formal notice from any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of the Companies
and, to the knowledge of the Companies, no such investigation is in progress
and (vi) the consents of the unions that are parties to any Employment and
Labor Agreements are not required to complete the transactions contemplated by
this Agreement and the Documents.
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(d) The Companies have never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the
regulations promulgated therein.
2.17. EMPLOYEE BENEFIT PLANS
(a) Set forth on Schedule 2.17(a) hereto is a true and complete
list of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Companies or to which the Companies are required to
make contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(i) of ERISA, maintained by the Companies or to which the Companies are
required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare Benefit
Plans (collectively, "ERISA Plans") have been delivered to or made available
to UAG together with, as applicable with respect to each such ERISA Plan,
trust agreements, summary plan descriptions, all IRS determination letters or
applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and valuation or actuarial reports, accountant's
opinions, financial statements, IRS Form 5500s (or 5500-C or 5500-R) and
summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on
Schedule 2.17(b):
(i) there is no ERISA Plan which is a " multiemployer"
plan as that term is defined in Section 3(37) of ERISA ("Multiemployer
Plan");
(ii) no event has occurred or (to the knowledge of the Companies
or the Stockholders) is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of ERISA or under
Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local
or foreign Taxes.
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(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder has been exempt
from taxation under Section 501(a) of the Code and is currently in
compliance with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by
the IRS or (to the knowledge of the Companies and the Stockholders) no
such action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under Section
401(a) of the Code or that any trust established under a Pension Benefit
Plan is not exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of Section
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Companies since the effective date of ERISA and all premiums due and
owing to the PBGC have been timely paid;
(ii) the PBGC has not notified the Companies or any
Pension Benefit Plan of the commencement of proceedings under Section
4042 of ERISA to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Companies or the Stockholders)
is threatened or about to occur which would constitute a reportable
event within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA
and Section 412 of the Code); and
(v) if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Companies and (B) all benefits accrued to the day prior
to the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such
plan for valuation purposes.
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(e) With respect to each Pension Benefit Plan, Schedule 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
(f) The approximate aggregate of the amounts of contributions by
the Companies to be paid or accrued under ERISA Plans for the current fiscal
year is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"),
and the Aggregate ERISA Contributions are not expected to exceed the total
amount set forth on Schedule 2.17(f). To the extent required in accordance
with GAAP, the Company Balance Sheets reflect in the aggregate an accrual of
all amounts of employer contributions accrued but unpaid by the Companies
under the ERISA Plans as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Companies have
not, since their formation, made or suffered a "complete withdrawal" or
"partial withdrawal" as such terms are respectively defined in Sections 4203
and 4205 of ERISA; (2) there is no withdrawal liability of the Companies under
any Multiemployer Plan, computed as if a "complete withdrawal" by the
Companies had occurred under each such Plan as of December 31, 1995; and (3)
the Companies have not received notice to the effect that any Multiemployer
Plan is either in reorganization (as defined in Section 4241 of ERISA) or
insolvent (as defined in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Companies under Welfare
Benefit Plans with respect to any condition which relates to a claim
filed on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18. OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS
(a) Set forth on Schedule 2.18(a) hereto is a true and complete
list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan whether written or oral, which the Companies maintain or are
required to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with
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any current or former officer, director or consultant of the Companies
pursuant to which payments may be required to be made at any time
following the date hereof (including, without limitation, any
employment, deferred compensation, severance, supplemental pension,
termination or consulting agreement or arrangement); and
(iii) each employee of the Companies whose aggregate compensation
for the fiscal year ended December 31, 1996 exceeded $75,000. True and
complete copies of all of the written plans, arrangements and agreements
referred to on Schedule 2.18(a) ("Compensation Commitments") have been
provided to UAG together with, where prepared by or for the Companies,
any valuation, actuarial or accountant's opinion or other financial
reports with respect to each Compensation Commitment for the last three
years. An accurate and complete written summary has been provided to UAG
with respect to any Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by the
IRS or any other federal or state agency and (to the knowledge of the
Companies or the Stockholders) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance with
the reporting and disclosure requirements imposed under ERISA and the
Code.
2.19. TRANSACTIONS WITH INSIDERS
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Companies or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since December 31, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any
director or officer of the Companies, and any Affiliate, Associate or
Relative of any of the foregoing persons;
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(ii) the term "Associate" used to indicate a relationship with
any person means (A) any corporation, partnership, joint venture or
other entity of which such person is an officer or partner or is,
directly or indirectly, through one or more intermediaries, the
beneficial owner of 30% or more of (1) any class or type of equity
securities or other profits interest or (2) the combined voting power of
interests ordinarily entitled to vote for management or otherwise, and
(B) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of
the foregoing, and any member of the immediate household of such person.
2.20. PROPRIETY OF PAST PAYMENTS
No funds or assets of the Companies have been used for illegal
purposes; no unrecorded funds or assets of the Companies have been established
for any purpose; no accumulation or use of the Companies' corporate funds or
assets has been made without being properly accounted for in the respective
books and records of the Companies; all payments by or on behalf of the
Companies have been duly and properly recorded and accounted for in their
respective books and records; no false or artificial entry has been made in
the books and records of the Companies for any reason; no payment has been
made by or on behalf of the Companies with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payment; and the Companies have not made, directly
or indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state,
local or foreign government agency or entity has initiated or threatened any
investigation of any payment made by the Companies of, or alleged to be of,
the type described in this Section 2.20.
2.21. INTEREST IN COMPETITORS
Except as set forth on Schedule 2.21, neither the Companies nor
the Stockholders, nor any of their Affiliates, have any interest, either by
way of contract or by way of investment (other than as holder of not more than
2% of the outstanding capital stock of a publicly traded Person, so long as
such holder has no other connection or relationship with such Person) or
otherwise, directly or indirectly, in any Person other than the Companies that
is engaged in the retail sale of automobiles or light duty trucks.
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2.22. BROKERS
Neither the Companies, nor any director, officer or employee
thereof, nor the Stockholders or any representative of the Stockholders, has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Documents.
2.23. ACCOUNTS
Schedule 2.23 hereof correctly identifies each bank account
maintained by or on behalf or for the benefit of the Companies and the name of
each person with any power or authority to act with respect thereto.
2.24. DISCLOSURE
Neither the Companies nor the Stockholders have made any material
misrepresentation to UAG or the Sub relating to the Companies or the Shares or
the Real Property or Improvements and neither the Companies nor the
Stockholders to their knowledge have omitted to state to UAG any material fact
relating to the Companies or the Shares or the Real Property or Improvements
which is necessary in order to make the information given by or on behalf of
the Companies or the Stockholders to UAG not misleading. To the knowledge of
the Companies and the Stockholders, no fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be expected
to have, a Material Adverse Effect, which has not been disclosed in the
Company Financial Statements or the Schedules to this Agreement.
2.25. NET WORTH
On the Closing Date, the Net Worth of the Companies will be equal
to or greater than the November 30, 1996 Net Worth less the amount of any
Distributions.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that the
Schedules referred to in this Article 3 are to be delivered by the
Stockholders no later than ten (10) Business Days after the Effective Date
hereof, the Stockholders hereby represent and warrant to UAG as follows:
3.1. OWNERSHIP OF SHARES; TITLE
Each Stockholder is the owner of record and beneficially of the
Shares as set forth on Schedule 3.1 hereof and has, and shall transfer to Sub
at the Closing, good and marketable title to the Shares owned by him, free and
clear of any and all security
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interests, pledge agreements, Liens, encumbrances, proxies and voting or other
agreements except restrictions on transfer imposed by applicable federal and
state securities laws.
3.2. AUTHORITY.
The Stockholders have all requisite power and authority and have
full legal capacity and are competent to execute, deliver and perform this
Agreement and the Documents to which they are a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of the
Shares to Sub as contemplated by this Agreement). This Agreement has been duly
executed and delivered by the Stockholders and constitutes, and the Documents
to which each Stockholder is a party when executed and delivered by such
Stockholder will constitute, a valid and binding obligation of such
Stockholder, enforceable against him in accordance with its terms. Except as
set forth on Schedule 3.2, the execution, delivery and performance of this
Agreement and the Documents by the Stockholders and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to
which any of the Stockholders is a party or to which any of the
Stockholders or any of their property is subject;
(ii) violate or conflict with any Legal Requirements
applicable to the Stockholders or any of Stockholders' businesses or
properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
3.3. REAL PROPERTY AND IMPROVEMENTS.
The Real Property and Improvements owned by Mr. Staluppi or his
Affiliates are owned in fee simple, free and clear of all Liens, claims and
encumbrances, except those disclosed in Schedule 3.3(a), none of which
currently or, to the knowledge of Mr. Staluppi or his Affiliates, in the
future will materially affect the use of such Real Property or such
Improvements for the conduct of the respective businesses of the Companies as
presently conducted or, as to the New Facility, as proposed to be conducted.
No assessments have been made against any portion of the Real Property which
are unpaid (except ad valorem taxes for the current year that are not yet due
and payable), whether or not they have
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become Liens. There are no disputes concerning the location of the lines and
corners of the Real Property. No one has been granted any right to purchase or
lease such Real Property or Improvements other than the existing leases in
favor of the Companies, which are to be terminated at the Closing by agreement
between the parties and pursuant to which the owners shall acknowledge that
there are no defaults under any such leases and that the Companies have no
liability arising out of or relating to such leases. Attached as Schedule 3.3
are all surveys, title binders, title policies and copies of any exceptions to
title relating to such Real Property or Improvements.
3.4. INVESTMENT INTENT.
Mr. Staluppi has no present plan, intention or arrangement to
dispose of any of the UAG Common Stock received by him pursuant to the terms
of this Agreement.
3.5. QUALIFICATION OF STOCKHOLDERS.
Mr. Staluppi (i) is an "accredited investor" within the meaning of
Regulation D of the Securities Act of 1933, as amended (the "Securities Act"),
and is acquiring the UAG Common Stock to be issued pursuant to the terms of
this Agreement for his own account and not with a view to, or for resale in
connection with, any distribution thereof; (ii) understands and acknowledges
that such UAG Common Stock has not been registered under the Securities Act or
any state securities laws by reason of certain exemptions from the
registration provisions thereof which depend upon, among other things, the
bona fide nature of Mr. Staluppi's investment intent as expressed herein;
(iii) is able to bear the economic risk of investment in such UAG Common Stock
and has such knowledge and experience in financial and business matters that
he is capable of evaluating the risks and merits of such UAG Common Stock;
(iv) acknowledges that the UAG shares were not offered to him by means of
publicly disseminated advertisements or sales literature, or as part of a
general solicitation; (v) acknowledges that in deciding to proceed with the
transaction set forth herein he has relied solely on his own independent
investigation of UAG and upon the representations of UAG set forth herein; and
(vi) understands and acknowledges that such UAG Common Stock will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act and that the certificates representing such UAG Common Stock
will bear a legend restricting transfer unless (A) the transfer is exempt from
the registration requirements under the Securities Act and any applicable
state securities law and an opinion of counsel reasonably satisfactory to UAG
that such transfer is exempt therefrom is delivered to UAG or (B) the transfer
is made pursuant to an effective registration statement under the Securities
Act and any applicable state securities law.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgement that the
Schedules referred to in this Article 4 are to be delivered by the
Stockholders no later than ten (10) Business Days after the Effective Date
hereof, UAG and UAG East hereby represent and warrant to the Companies and the
Stockholders as follows:
4.1. ORGANIZATION AND GOOD STANDING.
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business
and to carry on its business as now being conducted. UAG is duly qualified to
do business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and the UAG Subsidiaries
(as defined below) would not, or could not reasonably be expected to, in the
aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries,
taken as a whole. UAG has made available to the Stockholders complete and
correct copies of its charter and by-laws, as amended and presently in effect.
4.2. SUBSIDIARIES.
Each of the UAG Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own, lease and
operate the properties and assets used in its business and to carry on its
business as now being conducted, and is duly qualified to do business and in
good standing as a foreign corporation in each jurisdiction where
qualification as a foreign corporation is required, except for such failures
to be qualified and in good standing, if any, which when taken together with
all other such failures of UAG and the UAG Subsidiaries would not, or could
not reasonably be expected to, in the aggregate have a Material Adverse Effect
on UAG and the UAG Subsidiaries, taken as a whole. All of the outstanding
shares of capital stock of the UAG Subsidiaries have been validly authorized
and issued, are fully paid and non-assessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law.
"UAG Subsidiary" shall mean any corporation or other entity in which UAG,
directly or indirectly, owns beneficially securities representing 50% or more
of (i) the aggregate equity or profit interests or (ii) the combined voting
power of voting interests ordinarily entitled to vote for management or
otherwise.
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4.3. CAPITALIZATION.
The authorized stock of UAG and the number of shares of capital
stock which are issued and outstanding are set forth on Schedule 4.3 hereto.
The shares listed on Schedule 4.3 hereto constitute all the issued and
outstanding shares of capital stock of UAG and have been validly authorized
and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law
and no personal liability attaches to the ownership thereof.
4.4. SEC FILINGS.
UAG has heretofore made available to Mr. Staluppi UAG's
Registration Statement on Form S-1 as declared effective by the SEC on October
23, 1996 and UAG's Quarterly Report on Form 10-Q for the period ending
September 30, 1996 (the "SEC Filings"). As of their respective dates, the SEC
filings did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.5. AUTHORITY; APPROVALS AND CONSENTS.
UAG has the corporate power and authority to enter into this
Agreement and the Documents to which it is a party and to perform its
obligations hereunder and thereunder. At the time of the Closing, the
execution, delivery and performance of this Agreement and the Documents to
which it is a party and the consummation of the transactions contemplated
hereby and thereby will have been duly authorized and approved by the Board of
Directors of UAG and no other corporate proceedings on the part of UAG will be
necessary to authorize and approve this Agreement and the Documents and the
transactions contemplated hereby and thereby. This Agreement has been, and on
the Closing Date the Documents will be, duly executed and delivered by, and
constitute a valid and binding obligation of, UAG, enforceable against UAG in
accordance with their respective terms. Except as set forth on Schedule 4.5
hereto, the execution, delivery and performance by UAG of this Agreement and
the Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws of UAG;
(ii) after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any UAG Agreement (as
defined below) or require any consent or waiver of any party to any UAG
Agreement;
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(iii) result in the creation of any security interest upon,
or any person obtaining any right to acquire, any properties, assets or
rights of UAG;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or its respective businesses or properties that would or could
reasonably be expected to have a Material Adverse Effect on UAG and the
UAG Subsidiaries, taken as a whole; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental administrative or judicial authority is necessary to be
obtained or made by UAG to enable UAG to continue to conduct its business and
operations and use its properties after the Closing in a manner which is in
all material respects consistent with that in which they are presently
conducted.
4.6. FINANCIAL STATEMENTS.
Attached as Schedule 4.6 are true and complete copies of:
(a) the consolidated balance sheet of UAG and its consolidated UAG
Subsidiaries as of December 31 in each of the years 1994 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the fiscal years ended on such dates, together with the notes thereto, in
each case examined by and accompanied by the report of Coopers & Lybrand,
independent certified public accountants; and
(b) the unaudited consolidated balance sheet of UAG and its
consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance
Sheet"), and the unaudited consolidated statements of income, stockholders'
equity and cash flows for the month periods ended on such dates, together with
the notes thereto;
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and
the UAG Subsidiaries, fairly present the consolidated financial position,
results of operations, stockholders' equity and changes in financial position
of UAG and the UAG Subsidiaries as of the dates and for the periods indicated,
in each case in conformity with GAAP consistently applied (except as otherwise
indicated in such statements) during such periods, and can be legitimately
reconciled
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with the financial statements and the financial records maintained and the
accounting methods applied by UAG and the UAG Subsidiaries for federal income
tax purposes, and the unaudited financial statements included in the UAG
Financial Statements indicate all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentations. The statements of
income included in the UAG Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified therein, and the
balance sheets included in the UAG Financial Statements do not reflect any
write-up or revaluation increasing the book value of any assets. The books and
accounts of UAG and the UAG Subsidiaries are complete and correct in all
material respects and fairly reflect all of the transactions, items of income
and expense and all assets and liabilities of the businesses of UAG and the
UAG Subsidiaries consistent with prior practices of UAG and the UAG
Subsidiaries.
4.7. TAXES.
UAG, each UAG Subsidiary and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined
or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. In the ordinary course,
UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG
Subsidiaries. Neither UAG nor any UAG Subsidiary has been subject to a federal
or state tax audit of any kind, and no adjustment has been proposed by the IRS
with respect to any return for any subsequent year. UAG knows of no basis for
an assertion of a deficiency for Taxes against UAG or any UAG Subsidiary.
4.8. ABSENCE OF UNDISCLOSED LIABILITIES.
Neither UAG nor any UAG Subsidiary has any material liability of
any nature whatsoever (whether known or unknown, due or to become due,
accrued, absolute, contingent or otherwise), including, without limitation,
liabilities for Taxes (as defined in Section 4.8), except for (i) liabilities
reflected or reserved against the most recent UAG Financial Statement, (ii)
liabilities disclosed in the SEC filings, (iii) current liabilities incurred
in the ordinary course of business and consistent with past practice after the
date of the UAG Balance Sheet which, individually and in the aggregate, do not
have, and cannot reasonably be expected to have, a material adverse effect on
UAG and the UAG Subsidiaries, taken as a whole, and (iv) liabilities disclosed
on Schedule 4.8 hereto.
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4.9. LEGAL MATTERS.
(a) Except as set forth on Schedule 4.9(a) hereto, (i) there are
no material Claims pending against, or, to the knowledge of UAG or any UAG
Subsidiary, threatened against or affecting, UAG, any UAG Subsidiary, any of
their respective officers, directors, employees, agents or Affiliates
involving, affecting or relating to any assets, properties or operations of
UAG or any UAG Subsidiary, or any of their respective properties or rights
before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, domestic or foreign, nor is any basis known
to UAG, any UAG Subsidiary or any of their directors, officers, employees or
agents for any such Claims, and (ii) neither UAG nor any UAG Subsidiary is
subject to any material Judgments of any governmental, administrative or
judicial authority, domestic or foreign.
(b) The businesses of UAG and the UAG Subsidiaries are being
conducted in compliance with all Legal Requirements applicable to UAG or any
UAG Subsidiary or any of their respective businesses or properties, except
where the failure to be in such compliance could not reasonably be expected to
have a material adverse effect on UAG and the UAG Subsidiaries, taken as a
whole. Except as set forth on Schedule 4.9(b) hereto, UAG and the UAG
Subsidiaries hold, and are in compliance with, all Permits required by all
applicable Legal Requirements except where the failure to hold or be in
compliance with such Permits could not reasonably be expected to have a
material adverse effect on UAG and the UAG Subsidiaries, taken as a whole.
(c) UAG and each UAG Subsidiary owns or holds all Permits material
to the conduct of its business. No event has occurred and is continuing which
permits, or after notice or lapse of time or both would permit, any
modification or termination of any Permit.
4.10. DISCLOSURE.
Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Companies or the Stockholders relating to this
Agreement and neither UAG nor any UAG Subsidiary has omitted to state to the
Companies or the Stockholders any material fact relating to this Agreement
which is necessary in order to make the information given by or on behalf of
UAG or any UAG Subsidiary to the Companies or the Stockholders or their
representatives at or prior to Closing not misleading. No fact, event,
condition or contingency exists or has occurred which has, or in the future
can reasonably be expected to have, a material adverse effect on UAG and the
UAG Subsidiaries, taken as a whole, which has not been disclosed in the SEC
Filings or the Schedules to this Agreement.
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4.11. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since October 28, 1996, UAG and the UAG Subsidiaries have
operated in the ordinary course of business consistent with past practice,
except as set forth on Schedule 4.11(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
UAG and the UAG Subsidiaries, taken as a whole, and no factor, event,
condition, circumstance or prospective development exists which
threatens or may threaten to have a material adverse effect on UAG and
the UAG Subsidiaries, taken as a whole.
(ii) any material loss, damage, destruction or other
casualty to the property or other assets of UAG or any UAG Subsidiary,
whether or not covered by insurance;
(iii) any change in any method of accounting or accounting
practice of UAG or any UAG Subsidiary; or
(b) Since October 28, 1996, except as set forth in Schedule
4.11(b) hereto, neither UAG nor the UAG Subsidiaries have:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice and except in
connection with the acquisition of additional dealerships;
(ii) failed to discharge or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(iv) defaulted on any material obligation;
(v) written down the value of any inventory or written
off as uncollectible any accounts receivable or any portion thereof not
reflected in the UAG Financial Statements; or
(vi) entered into any agreement or made any commitment to
do any of the foregoing that has not been terminated.
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4.12. INSURANCE.
All properties and assets of UAG and the UAG Subsidiaries which
are of an insurable character are insured against loss or damage by fire and
other risks to the extent and in the manner reasonable in light of the risks
attendant to the businesses and activities in which UAG and the UAG
Subsidiaries are or have been engaged and customary for companies engaged in
similar businesses or owning similar assets.
4.13. LABOR RELATIONS.
(a) UAG and each of the UAG Subsidiaries has paid or made
provision for the payment of all salaries and accrued wages and has complied
in all material respects with all applicable laws, rules and regulations
relating to the employment of labor, including those relating to wages, hours,
collective bargaining and the payment and withholding 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 wages or salaries of its employees.
(b) Except as set forth in Schedule 4.13(b) hereto, (i) there is
no unfair labor practice charge or complaint pending before the NLRB, (ii)
there is no labor strike, material slowdown or material work stoppage or
lockout actually pending or, to UAG's or any of the UAG Subsidiaries'
knowledge, threatened, against or affecting UAG or any UAG Subsidiary, and
neither UAG nor any UAG Subsidiary has experienced any strike, material slow
down or material work stoppage, lockout or other collective labor action by or
with respect to employees of UAG or any UAG Subsidiary, (iii) there is no
representation claim or petition pending before the NLRB or any similar
foreign agency and no question concerning representation exists relating to
the employees of UAG or any UAG Subsidiary, (iv) there are no charges with
respect to or relating to UAG or any UAG Subsidiary pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices, (v) neither
UAG nor any UAG Subsidiary has received formal notice from any federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws of an intention to conduct an investigation of UAG or any UAG Subsidiary
and no such investigation is in progress and (vi) the consents of the unions
that are parties to any UAG Employment and Labor Agreements (as defined below)
are not required to complete the transactions contemplated by this Agreement
and the Documents. As used in this agreement, the term "UAG Employment and
Labor Agreements" shall mean all (i) outstanding employment agreements or
contracts with officers or employees that are not terminable at will, or that
provide for the payment of any bonus or commission, (ii) agreements, policies
or practices that require UAG or any UAG Subsidiary to pay termination or
severance pay to salaried, non-exempt or hourly employees (other than as
required by law),
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(iii) collective bargaining agreements or other labor union contracts
applicable to persons employed by UAG or any UAG Subsidiary.
(c) Neither UAG nor any UAG Subsidiary has ever caused any "plant
closing" or "mass layoff" as such actions are defined in the Worker Adjustment
and Retraining Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109,
and the regulations promulgated therein.
4.14. CONTRACTS; ETC
As used in this Agreement, the term "UAG Agreements" shall mean
all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
to which UAG or any UAG Subsidiary is a party or by which UAG or any UAG
Subsidiary or any of their respective properties may be bound or affected,
including all amendments, modifications, extensions or renewals of any of the
foregoing which are material to the businesses, operations, assets, condition
(financial or otherwise) or prospects of UAG and the UAG Subsidiaries. Neither
UAG nor any UAG Subsidiary nor, to the knowledge of UAG and each UAG
Subsidiary, any other party thereto, is in breach of or default under any UAG
Agreement, and no event has occurred which (after notice or lapse of time or
both) would become a breach or default under, or would permit modification,
cancellation, acceleration or termination of, any UAG Agreement or result in
the creation of any security interest upon, or any person obtaining any right
to acquire, any properties, assets or rights of UAG or any UAG Subsidiary in
any such case where such breach, default or other event would have, or could
reasonably be expected to have, a material adverse effect on UAG and the UAG
Subsidiaries, taken as a whole.
4.15. BROKERS.
Neither UAG nor any UAG Subsidiary, nor any director, officer or
employee thereof, has employed any broker or finder or has incurred or will
incur any broker's, finder's or similar fees, commissions or expenses, in each
case in connection with the transactions contemplated by this Agreement or the
Documents.
4.16. PROPRIETY OF PAST PAYMENTS.
No funds or assets of UAG or any UAG Subsidiary have been used for
illegal purposes; no unrecorded funds or assets of UAG or any UAG Subsidiary
have been established for any purpose; no accumulation or use of UAG's or any
UAG Subsidiary's corporate funds or assets has been made without being
properly accounted for in the respective books and records of UAG or any UAG
Subsidiary; all payments by or on behalf of UAG and the UAG Subsidiaries have
been duly and properly recorded and accounted for in their respective books
and records; no false or artificial entry has been made in the books and
records of UAG or any UAG Subsidiary for any
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reason; no payment has been made by or on behalf of UAG or any UAG Subsidiary
with the understanding that any part of such payment is to be used for any
purpose other than that described in the documents supporting such payment;
and neither UAG nor any UAG Subsidiary has made, directly or indirectly, any
illegal contributions to any political party or candidate, either domestic or
foreign. Neither the IRS nor any other federal, state, local or foreign
government agency or entity has initiated or threatened any investigation of
any payment made by UAG or any UAG Subsidiary of, or alleged to be of, the
type described in this Section 4.16.
4.17. ENVIRONMENTAL MATTERS.
UAG and the UAG Subsidiaries have not violated, done or suffered
any act which could give rise to liability under and, to the knowledge of UAG,
are not otherwise exposed to liability under, any Environmental Law which
could reasonably be expected to have a material adverse effect on the
financing condition of UAG and the UAG Subsidiaries taken as a whole.
4.18. EMPLOYEE BENEFIT PLANS.
UAG and the UAG Subsidiaries are not subject to any liability
under any employee pension benefit plans or employee welfare benefit plans (as
defined in ERISA) maintained by UAG or any UAG Subsidiary which could
reasonably be expected to have a material adverse effect on the financial
condition of UAG and the UAG Subsidiaries, taken as a whole.
ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholders and
the Companies will (i) provide to the officers and other authorized
representatives of UAG and Sub full access, during normal business hours, to
any and all premises, properties, files, books, records, documents, and other
information of the Companies and will cause their officers to furnish to UAG
and Sub and their authorized representatives any and all financial, technical
and operating data and other information pertaining to the businesses and
properties of the Companies, and (ii) make available for inspection and
copying by UAG and Sub true and complete copies of any documents relating to
the foregoing. UAG and Sub will hold in confidence (unless and to the extent
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law) all Confidential Information (as
defined below) and will not disclose the same to any third party except in
connection with obtaining financing and otherwise as may reasonably be
necessary to carry out this Agreement and the transactions contemplated
hereby, including any due diligence review by or on behalf of UAG and Sub. If
this Agreement is terminated, UAG and Sub will promptly return to the
Companies, upon
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the reasonable request of the Companies, all Confidential Information
furnished by the Companies and held by UAG and Sub, including all copies and
summaries thereof. As used herein, "Confidential Information" shall mean all
information concerning the Companies obtained by UAG or Sub from the Companies
in connection with the transactions contemplated by this Agreement, except
information (x) ascertainable or obtained from public information, (y)
received from a third party not employed by or otherwise affiliated with the
Companies unless such information is received from a third party in violation
of a duty such third party owes to the Companies not to disclose such
information, or (z) which is or becomes known to the public, other than
through a breach by UAG of this Agreement. The Stockholders will hold in
confidence (unless and to the extent compelled to disclose by judicial or
administrative process, or, in the opinion of their counsel, by other
requirements of law) all UAG Confidential Information (as defined below) and
will not disclose the same to any third party except as may reasonably be
necessary to carry out this Agreement and the transactions contemplated
hereby, including any due diligence review by or on behalf of the
Stockholders. If this Agreement is terminated, the Stockholders will promptly
return to UAG, upon the reasonable request of UAG, all UAG Confidential
Information furnished by UAG and held by the Stockholders, including all
copies and summaries thereof. As used herein, "UAG Confidential Information"
shall mean all information concerning UAG obtained by the Stockholders in
connection with the transactions contemplated by this Agreement, except
information (x) ascertained or obtained from public information, (y) received
from a third party not employed or otherwise affiliated with UAG unless such
information is received from a third party in violation of a duty such third
party owes to UAG not to disclose such information, or (z) which is or becomes
known to the public, other than a breach by the Stockholders of this
Agreement.
5.2. FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Companies, on the one hand, and UAG and
Sub, on the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the Stockholders
and the Companies or UAG and Sub, respectively, required for inclusion in any
statement or application made by UAG or the Companies to any governmental or
regulatory body or in connection with obtaining any third party consent in
connection with the transactions contemplated by this Agreement. Neither the
Stockholders nor the Companies, on the one hand, nor UAG nor Sub, on the other
hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law (including federal or state securities laws) as determined by
such parties' counsel.
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5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and Sub and the Stockholders and the Companies, as applicable,
shall each file or cause to be filed with the Federal Trade Commission and the
United States Department of Justice any notifications required to be filed by
the respective "ultimate parent" entities under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "H-S-R Act"), and the
rules and regulations promulgated thereunder, with respect to the transactions
contemplated herein. The parties shall use their best efforts to make such
filings promptly, to respond to any requests for additional information made
by either of such agencies, to cause the waiting periods under the H-S-R Act
to terminate or expire at the earliest possible date and to resist vigorously,
at their respective cost and expense (including, without limitation, the
institution or defense of legal proceedings), any assertion that the
transactions contemplated herein constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
herein; provided, however, that if UAG or the Stockholders shall determine
after issuance of any preliminary injunction that continuing such resistance
is not in its or their best interests, UAG or the Stockholders, as the case
may be, may, by written notice to the other party, terminate this Agreement
with the effect set forth in Section 8.2 hereof.
5.4. CERTAIN CHANGES AND CONDUCT OF BUSINESS OF THE COMPANIES.
(a) From and after the date of this Agreement and until the
Closing Date, the Companies shall, and the Stockholders shall cause the
Companies to, conduct their respective businesses solely in the ordinary
course consistent with past practices and, without the prior written consent
of UAG, neither the Stockholders nor the Companies will, except as required or
permitted pursuant to the terms hereof, permit the Companies to:
(i) make any material change in the conduct of their respective
businesses and operations or enter into any transaction other than in
the ordinary course of business consistent with past practices;
(ii) make any change in their Articles of Incorporation or
By-laws, issue any additional shares of capital stock or equity
securities or grant any option, warrant or right to acquire any capital
stock or equity securities or issue any security convertible into or
exchangeable for their capital stock or alter any term of any of their
outstanding securities or make any change in their outstanding shares of
capital stock or other ownership interests or its capitalization,
whether by reason of a reclassification, recapitalization, stock split
or combination, exchange or readjustment of shares, stock dividend or
otherwise;
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(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any
thereof, except pursuant to transactions in the ordinary course of
business consistent with past practices, (B) issue any securities
convertible or exchangeable for debt securities of the Companies, or (C)
issue any options or other rights to acquire from the Companies,
directly or indirectly, debt securities of the Companies or any security
convertible into or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of their assets or any part thereof, except
transactions pursuant to existing contracts set forth in Schedule 2.15
hereto and dispositions of inventory or of worn-out or obsolete
equipment for fair or reasonable value in the ordinary course of
business consistent with past practices;
(v) subject any of their assets, or any part thereof, to any
Lien or suffer such to be imposed other than such Liens as may arise in
the ordinary course of business consistent with past practices by
operation of law which will not have, or cannot reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination
thereof) in respect of any shares of their capital stock (other than
distributions of net income attributable to periods after November 30,
1996 or distributions of existing cash as of November 30, 1996 as long
as such distributions could not reasonably be expected to adversely
effect the business or operation of the Companies) or redeem, retire,
purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of
business consistent with past practices;
(viii) enter into any new (or amend any existing) employee benefit
plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general
increase in the compensation of officers or employees (including any
such increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment) or grant any increase in the compensation payable or
to become payable to any employee, except in accordance with
pre-existing contractual provisions or consistent with past practices;
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(ix) make or commit to make any individual material
capital expenditure in excess of $100,000, or aggregate capital
expenditures in excess of $300,000;
(x) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by the Companies (or on
behalf of the Companies) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP or write-down the
value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with
past practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
(xvii) take any other action that would cause any of the
representations and warranties made by the Companies in this Agreement
not to remain true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Companies will cause the Companies to use their
reasonable best efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable
for their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event the Companies shall receive notice that there exists a violation
of any Environmental Law with respect to their operations or any Real
Property, promptly (and in any event within the time period permitted by
the applicable
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governmental authority) remove or remedy such violation in accordance
with all applicable Environmental Laws except where the noticed
violation is contested in good faith and by appropriate proceedings
diligently conducted; provided, however, that any remediation or
removal shall be subject to the prior approval of UAG;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when
due all taxes, assessments, fees and other charges lawfully levied or
assessed against the Companies unless the validity thereof is contested
in good faith and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) continue to conduct their business in the ordinary
course consistent with past practices.
(c) From and after the date of this Agreement and until the
Closing Date, the Stockholders shall not, except with the prior written
consent of UAG and except as required or permitted pursuant to the terms
hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed other than
non-material Liens in the ordinary course of business consistent with
past practice;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholders in this Agreement
not to remain true and correct in all material respects; or
(iv) commit themselves to do any of the foregoing.
5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on Schedule 5.5 hereto, at the Closing there
will be no intercompany payables or intercompany receivables due and/or owing
between the Stockholders and their Affiliates (other than the Companies) on
the one hand, and the Companies, on the other hand, other than those incurred
in the
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ordinary course of business and disclosed in the Notes to the Company
Financial Statements.
5.6. NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the
termination of this Agreement pursuant to clause (ii) of Section 8.1 hereof,
no Stockholder, nor the Companies, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of
the Stockholders, the Companies or such persons, shall, directly or
indirectly, encourage, solicit, initiate or engage in discussions or
negotiations with, or provide any information to, any person (other than UAG
or its representatives) concerning any merger, sale of assets (other than in
the ordinary course of business), purchase or sale of shares of capital stock
or similar transaction involving the Companies or purchase or sale of any of
the Real Property or Improvements. The Stockholders shall promptly communicate
to UAG any inquiries or communications concerning any such transaction
(including the identity of any person making such inquiry or communication)
which any Stockholder may receive or of which any of the Stockholders may
become aware.
5.7. CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and
the Companies and UAG will use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all
third parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on their
respective parts for (A) the consummation of the transactions
contemplated by this Agreement, (B) the ownership or leasing and
operating after the Closing by the Companies of all their material
properties and (C) the conduct after the Closing by the Companies of
their respective businesses as conducted by them on the date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance
as may reasonably be requested in connection with the foregoing.
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5.8. ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Each of the parties agrees to execute and deliver any and all documents that
the respective manufacturers typically require a selling dealer or an
acquiring dealer to execute in connection with the transfer of a dealership.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties and
the proper officers of the Companies shall take all such necessary action.
5.9. INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after
the date of this Agreement, the Companies will deliver to UAG the most recent
monthly and year-to-date financial statements provided to each franchisor of
the Companies. All such statements shall fairly present the financial
position, results of operations and cash flow of the Companies and UAG, as
applicable, as at the date or for the periods indicated and shall be prepared
on a basis consistent with the Company Factory Statements attached hereto as
Schedule 2.5.
5.10. NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this
Agreement will give prompt notice in writing to the other party hereto of: (i)
any information that indicates that any representation and warranty of such
party contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Closing, (ii) the occurrence of any event
which could result in the failure to satisfy a condition specified in Article
6 or Article 7 hereof, as applicable, (iii) any notice or other communication
from any third person alleging that the consent of such third person is or may
be required in connection with the transactions contemplated by this
Agreement, and (iv) in the case of the Stockholders and the Companies, any
notice of, or other communication relating to, any default or event which,
with notice or lapse of time or both, would become a default under any Company
Agreement. The Stockholders shall (x) promptly advise UAG of any event that
has, or could in the future have, a Material Adverse Effect (y) confer on a
regular basis with one or more designated representatives of UAG to report
operational matters and to report the general status of ongoing operations,
and (z) notify UAG of any emergency or other change in the normal course of
business or in the operation of the properties of the Companies and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or adjudicatory proceedings
involving the Companies or any of their assets
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or operations, and will keep UAG fully informed of such events and permit
UAG's representatives access to all materials prepared in connection
therewith. The Stockholders shall give prompt notice to UAG of any notice or
other communication from any third person asserting any right, title or
interest in any of the Shares held by the Stockholders (including, without
limitation, any threat to commence, or notice of the commencement of any
action or other proceeding with respect to any of the Shares) or the
occurrence of any other event of which any Stockholder has knowledge which
could result in any failure to consummate the sale of the Shares as
contemplated hereby.
5.11. ASSURANCE BY THE STOCKHOLDERS.
The Stockholders shall cause each of the Companies to comply with
their respective covenants set forth in this Agreement.
5.12. PERSONAL GUARANTEES.
UAG will use reasonable efforts to cause the Stockholders to be
released from any and all personal guarantees of any loans, leases or other
indebtedness of the Companies set forth on the Company Financial Statements
(the "Personal Guarantees"). In the event that any of the Personal Guarantees
are not released by the Closing, UAG will indemnify and hold the Stockholders
harmless from any loss with respect to the Personal Guarantees which arises
after the Closing. Notwithstanding anything in this Section to the contrary,
UAG shall not be required to cause the Stockholders to be released from or
indemnify the Stockholders for any loss with respect to any Personal
Guarantees for any loans or other indebtedness relating to the Real Property
owned by the Stockholders or their Affiliates.
5.13. NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years
thereafter, the Stockholders and their Affiliates shall not knowingly
interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Companies or any supplier,
manufacturer, distributor, consultant, independent contractor or employee of
the Companies and agree not to solicit or hire any employee of the Companies
unless such employee has already terminated his employment with the Companies.
5.14. ENVIRONMENTAL AUDITS.
Prior to the Closing, UAG will pay the costs for a Phase I
environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, then the expenses of performing the Phase II environmental audit
shall be paid one-half by UAG and one-half by the Stockholders; provided,
however, that the Stockholders may elect not to pay any costs of the Phase II
audit but, if the Stockholders elect not to pay one-half of the costs of
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the Phase II audit and the results of the Phase II audit conclude that
remediation is required, the Stockholders shall pay the entire costs of the
Phase II audit. If the Phase II audit indicates that any remedial action is
required under any Environmental Laws and UAG reasonably determines that such
remedial action is required in order for (i) the applicable company to
continue to operate its business as conducted at the time of discovery of the
need for remedial action; or (ii) the applicable company not to incur any
liability to any Person as a result of the presence of the material which
prompts the recommendation for such remedial action, then the Stockholders
shall pay the costs of such remedial action; provided, however, that the
Stockholders shall only be required to pay the costs of the minimum remedial
action required to comply with applicable Environmental Laws to the extent
provided above and provided, further, that the Stockholder shall not be
required to pay any remedial costs that exceed $500,000 in the aggregate. If
the Phase II report concludes that remedial action is required in an amount
that exceeds $500,000 in the aggregate and the Stockholders decide not to pay
the costs of such remediation then UAG may, at its option, terminate this
Agreement pursuant to Section 8.1 (iv). The Stockholders shall have the right
to obtain a second opinion with respect to the necessity of such remedial
action within thirty (30) days after the Phase II audit and if the two (2)
environmental firms cannot agree, they shall chose a third environmental
company to make such determination within sixty (60) days after the first
Phase II audit. Such third environmental company shall be independent of the
parties and generally accepted by major institutional lenders.
5.15. ACCESS TO RECORDS.
After Closing, UAG shall provide the Stockholders with reasonable
access to the books and records of the Companies to the extent necessary for
the Stockholders to comply with applicable tax laws. UAG will cooperate, and
will cause its Affiliates to cooperate, with the Stockholders in the filing of
any returns and in any audit or refund claims proceeding involving Taxes for
which the Stockholders may be liable or with respect to which the Stockholders
may be entitled to a refund.
5.16. NISSAN, PRIMUS AND WORLD OMNI MORTGAGES
(a) If UAG does not accept floor plan financing from Nissan,
Primus or World Omni for each of the Companies that currently have floor plan
financing through Nissan, Primus and World Omni (on terms comparable to such
existing terms) and the failure to accept such financing causes an event of
default under the Stockholders' existing mortgages with Nissan, Primus and
World Omni which default Nissan, Primus or World Omni (as the case may be)
refuses to waive, then UAG shall secure alternative financing for the amount
of such mortgages on commercially reasonable terms.
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(b) If Primus, Nissan or World Omni do not offer floor plan
financing to UAG for each of the Companies that currently have floor plan
financing through Nissan, Primus and World Omni (on terms comparable to such
existing terms) and, as a result, there is an event of default under the
Stockholders' existing mortgages with Nissan, Primus or World Omni (as the
case may be) which default is not waived, then UAG and the Stockholders will
cooperate to secure alternative financing for the amount of such mortgages on
commercially reasonable terms. If alternative financing is not available,
either party may terminate this Agreement pursuant to Section 8.1 hereof.
5.17. CERTAIN CHANGES AND CONDUCT OF BUSINESS OF UAG.
(a) From and after the date hereof and until the Closing Date, UAG
and the UAG Subsidiaries will use their reasonable best efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable
for their current use except where to do so would not be economically
beneficial to UAG or the UAG Subsidiaries;
(ii) comply with all applicable Environmental Laws, and, in the
event UAG or the UAG Subsidiaries receive notice that there exists a
violation of any Environmental Law with respect to their operations or
any Real Property, promptly (and in any event within the time period
permitted by the applicable governmental authority) remove or remedy
such violation in accordance with all applicable Environmental Laws,
except where the notice of violation is contested in good faith and by
appropriate proceedings diligently conducted;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when
due all taxes, assessments, fees and other charges lawfully levied or
assessed against UAG or any UAG Subsidiaries unless the validity thereof
is contested in good faith and by appropriate proceedings diligently
conducted;
(iv) keep their books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve their business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) not take any other action that would cause any of the
representations or warranties made by UAG in this
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Agreement not to remain true and correct in all material respects.
5.18. 1996 FINANCIAL STATEMENTS.
Prior to the Closing, the Stockholders shall deliver to UAG
audited balance sheets of the Companies as of December 31, 1996 (the "Company
Balance Sheets") and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal year ended December 31,
1996, together with the notes thereto which statements shall be examined and
accompanied by the report of the Companies' independent certified public
accountants and, upon delivery, such statements shall be included within the
definition of Company Financial Statements. Notwithstanding the preceding
sentence, the income statement and cash flow statement for Westbury Nissan
will not be audited statements. UAG and the Stockholders shall each pay
one-half of the cost of such audit.
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at
the Closing shall be subject to the satisfaction, at or prior to the Closing,
of each of the following conditions, each of which may be waived by UAG or Sub
as provided herein except as otherwise required by applicable law:
6.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Companies and
the Stockholders contained in this Agreement shall be true and correct as of
the date hereof and (having been deemed to have been made again at and as of
the Closing) shall be true and correct in all material respects as of the
Closing. Each of the obligations of the Companies and the Stockholder required
by this Agreement to be performed by them at or prior to the Closing shall
have been duly performed and complied with in all material respects as of the
Closing. At the Closing, UAG shall have received a certificate, dated the
Closing Date and duly executed by the Stockholders, to the effect that the
conditions set forth in the two preceding sentences have been satisfied.
6.2. AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Companies. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
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(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental
and regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Companies have entered into a franchise
agreement (or comparable instrument, mortgages, floor plan lenders and other
lenders)) required to consummate the transactions contemplated hereby and all
consents or waivers shall have been made or obtained.
6.3. OPINIONS OF THE COMPANIES' AND THE STOCKHOLDERS' COUNSEL.
UAG and Sub shall have been furnished with the opinion of counsel
for the Companies and the Stockholders, dated the Closing Date, in form and
substance reasonably satisfactory to UAG and its counsel, which opinion shall
have been rendered with respect to those matters contained in Sections 2.1,
2.3, 2.4, 2.9, 3.1 and 3.2 hereof. In rendering the foregoing opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of the Companies and by government
officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such counsel may specify the state
or states in which they are admitted to practice, that they are not admitted
to the Bar in any other state or experts in the law of any other state and
that such opinions are limited to New York, Florida and federal laws.
6.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of UAG or Sub effectively to
exercise full rights of ownership of the Shares. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which UAG or Sub, in good
faith and with the advice of counsel, believes makes it undesirable to proceed
with the consummation of the transactions contemplated hereby.
6.5. NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date,
there shall not have been any material adverse change in the assets,
properties, business, operations, prospects, net income or financial condition
of the Companies.
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6.6. NET WORTH.
On the Closing Date, the Stockholder shall deliver to UAG a
balance sheet of the Companies in accordance with Section 1.3.
6.7. COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination
of the Companies, the Real Property and the Improvements and the results of
such examination, including any Phase I or Phase II environmental audits of
the Companies, shall be satisfactory to UAG and Sub.
6.8. NET INCOME.
Coopers & Lybrand or such other accounting firm as UAG may select
shall have confirmed to UAG that the 1996 Earnings of the Companies for the
year ending December 31, 1996 are no less than Eleven Million Dollars
($11,000,000). For purposes of this Section 6.8, 1996 Earnings shall be
determined using the same methodology as the earnings set forth on Schedule
6.8 hereto.
6.9. LEASES.
The Companies and the Landlords shall have entered into the Leases
and shall have agreed to the form of the New Facility Lease.
6.10. BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.11. CERTIFICATES.
The Stockholders and the Companies shall have furnished UAG and
Sub with a certificate, dated as of the Closing Date, executed by the
Stockholders certifying to the fulfillment of the conditions set forth in
Sections 6.5 and 6.6 hereof and shall have furnished UAG and Sub with such any
other certificates of its officers and others as UAG and Sub may reasonably
request to evidence compliance with the conditions set forth in this Article 6.
6.12. LEGAL MATTERS.
All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of the Stockholders and
the Companies under the provisions of this Agreement, and all other actions
and proceedings required to be taken by or on behalf of the Stockholders and
the Companies in furtherance
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of the transactions contemplated hereby, shall be reasonably satisfactory in
form and substance to counsel for UAG and Sub.
6.13. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholders and the Companies shall have obtained the
consent, authorization and approval of each of the Companies' respective
manufacturers for the transfer of the Companies to UAG or UAG East on terms no
less favorable to those granted to the Stockholders and the Companies
immediately prior to the execution of this Agreement.
6.14. NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect
to the properties that are the subject of the Leases and the Third Party
Leases.
6.15. TITLE INSURANCE.
UAG shall have obtained title insurance on behalf of the Companies
with respect to the leasehold estates arising out of the Leases and the Third
Party Leases in form and substance satisfactory to UAG.
6.16. SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG and
Sub all Schedules referred to herein and such Schedules shall be acceptable in
form and substance to UAG and Sub.
6.17. LEASE TERMINATION AGREEMENTS/MEMORANDA OF LEASE.
The appropriate parties shall have executed lease termination
agreements and memoranda of lease in form and substance satisfactory to UAG.
6.18. RESIGNATION OF THE COMPANIES' DIRECTORS
Each of the persons who is a director of the Companies on the
Closing Date shall have tendered to Sub in writing his or her resignation as
such in form and substance satisfactory to UAG.
6.19. EMPLOYMENT AGREEMENT
UAG and John A. Staluppi, Jr. shall have entered into an
employment agreement on terms mutually agreeable to such parties.
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ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Companies required to
be performed by them at the Closing shall be subject to the satisfaction, at
or prior to the Closing, of each of the following conditions, each of which
may be waived by the Companies and the Stockholders as provided herein except
as otherwise required by applicable law:
7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub
contained in this Agreement shall be true and correct on the date made and
shall be true and correct in all material respects as of the Closing. Each of
the obligations of UAG and Sub required by this Agreement to be performed by
them at or prior to the Closing shall have been duly performed and complied
with in all material respects as of the Closing. At the Closing, the
Stockholders shall have received a certificate, dated the Closing Date and
duly executed by UAG and Sub to the effect that the conditions set forth in
the preceding two sentences have been satisfied.
7.2. AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG
and Sub. All filings required to be made under the H-S-R Act in connection
with the transactions contemplated hereby shall have been made and all
applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental
and regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Companies have entered into a franchise
agreement (or comparable instrument, mortgages, floor plan lenders and other
lenders)) required to consummate the transactions contemplated hereby and all
consents or waivers shall have been made or obtained.
7.3. OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Stockholders shall have been furnished with the opinion of
Rogers & Hardin, counsel to UAG and Sub, dated the Closing Date, in form and
substance reasonably satisfactory to the Stockholders and their counsel, which
opinions, when taken together, shall have been rendered with respect to those
matters contained in Sections 4.1 and 4.2 hereof. In rendering the foregoing
opinions, such counsel may rely as to factual matters
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upon certificates or other documents furnished by officers and directors of
UAG and the Subs and by government officials, and upon such other documents
and data as such counsel deems appropriate as a basis for its opinion. Such
opinions may be limited to federal laws and the General Corporation Law of the
State of Delaware.
7.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of the Stockholders to transfer the
Shares. No action, suit or proceeding before any court or any governmental or
regulatory entity shall be pending (or threatened by any governmental or
regulatory entity), and no investigation by any governmental or regulatory
entity shall have been commenced (and be pending), seeking to restrain or
prohibit (or questioning the validity or legality of) the consummation of the
transactions contemplated by this Agreement or seeking damages in connection
therewith which the Stockholders, in good faith and with the advice of
counsel, believes makes it undesirable to proceed with the consummation of the
transactions contemplated hereby.
7.5. CERTIFICATES.
UAG and Sub shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 7 as may be reasonably requested by the
Stockholders.
7.6. LEGAL MATTERS.
All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of UAG or Sub under the
provisions of this Agreement, and all other actions and proceedings required
to be taken by or on behalf of UAG or Sub in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for the Stockholders.
7.7. REGISTRATION RIGHTS AGREEMENT.
UAG shall have entered into the Piggyback Registration Rights
Agreement.
7.8. SCHEDULES.
UAG shall have delivered to the Stockholders all Schedules
referred to in Article 4 and such Schedules shall be acceptable in form and
substance to the Stockholders.
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7.9. LEASES.
The Companies and the Landlords shall have entered into the Leases
and shall have agreed to the form of the New Facility Lease.
7.10. NO MATERIAL ADVERSE EFFECT.
During the period from October 28, 1996 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, prospects, net income or financial condition of UAG.
7.11. EMPLOYMENT AGREEMENT.
UAG and John A. Staluppi, Jr. shall have entered into an
employment agreement on terms mutually agreeable to such parties.
ARTICLE 8.
TERMINATION
8.1. TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall not
have taken place on or prior to April 30, 1997, or such later date as
shall have been approved by UAG and the Stockholders (provided that the
terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in Article
6 hereof have not been met or waived by UAG and Sub at such time as such
condition is no longer capable of satisfaction (provided UAG and Sub are
not otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement);
(v) by the Stockholders if any of the conditions specified in
Article 7 hereof have not been met or waived by the Stockholders at such
time as such condition is no longer
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capable of satisfaction (provided that neither the Stockholders nor the
Companies is otherwise in material breach of their or its
representations, warranties covenants or agreements under this
Agreement); or
(vi) by either UAG or the Stockholders if there has been a
material breach on the part of the other of any representation,
warranty, covenant or agreement set forth in this Agreement, which
breach (if capable of being cured) has not been cured within ten (10)
Business Days following receipt by the breaching party of written notice
of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
8.2. EFFECT OF TERMINATION.
Except (i) for any willful breach of this Agreement prior to its
termination, (ii) for the obligations contained in Sections 5.1 and 10.2
hereof and (iii) as set forth in Sections 9.1 and 9.2 hereof, upon the
termination of this Agreement pursuant to Section 8.1 hereof, this Agreement
shall forthwith become null and void and none of the parties hereto or any of
their respective officers, directors, employees, agents, Affiliates,
consultants, stockholders or principals shall have any liability or obligation
hereunder or with respect hereto.
ARTICLE 9.
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE STOCKHOLDERS.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholders, jointly and severally, indemnify and agree to fully defend, save
and hold harmless on an after-tax basis UAG, Sub, the Companies (after
Closing), and any of their respective officers, directors, employees,
stockholders, advisors, representatives, agents and Affiliates (each a "UAG
Indemnified Party"), if a UAG Indemnified Party (including the Companies after
the Closing Date) shall at any time or from time to time suffer any Costs (as
defined in Section 9.6 below) arising, directly or indirectly, out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
(i) any and all Events of Breach (as defined below) or (ii) any Claim before
or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, which Claim involves, affects or relates to
any assets, properties or operations of the Companies or the conduct of the
business of the Companies prior to the Closing Date (a "Stockholder Third
Party Claim"). As used herein, "Event of Breach" shall be and mean any one or
more of the following: (i) any untruth or inaccuracy in any representation of
the Stockholders or the Companies or the breach of any warranty of the
Stockholders or
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the Companies contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by the
Stockholders or the Companies (or any representative of the Stockholders or
the Companies) to UAG (or any representative of UAG) and any misrepresentation
in or omission from any document furnished to UAG in connection with the
Closing, and (ii) any failure of the Stockholders or the Companies duly to
perform or observe any term, provision, covenant, agreement or condition on
the part of the Stockholders or the Companies to be performed or observed.
9.2. INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholders, the
Companies (prior to Closing), and any of their respective officers, directors,
employees, stockholders, advisors, representatives, agents and Affiliates
(each a "Stockholder Indemnified Party"), if a Stockholder Indemnified Party
shall at any time or from time to time suffer any Costs arising, directly or
indirectly, out of or resulting from, or shall pay or become obligated to pay
any sum on account of, (i) any and all UAG Events of Breach (as defined below)
or (ii) any Claim before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, which Claim involves, affects
or relates to any assets, properties or operations of UAG or the conduct of
the business of UAG prior to the Closing Date (a "UAG Third Party Claim"). As
used herein, "UAG Event of Breach" shall be and mean any one or more of the
following: (i) any untruth or inaccuracy in any representation of UAG or Sub
or the breach of any warranty of UAG or Sub contained in this Agreement,
including, without limitation, any misrepresentation in, or omission from, any
statement, certificate, schedule, exhibit, annex or other document furnished
pursuant to this Agreement by UAG (or any representative of UAG) to the
Stockholders (or any representative of the Stockholder) and any
misrepresentation in or omission from any document furnished to the
Stockholders in connection with the Closing, and (ii) any failure of UAG duly
to perform or observe any term, provision, covenant, agreement or condition on
the part of UAG to be performed or observed.
9.3. PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholders have become obligated to a UAG
Indemnified Party pursuant to Section 9.1, or if any Stockholder Third Party
Claim is begun, made or instituted as a result of which the Stockholders may
become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of
Breach occurs or is alleged and a Stockholder Indemnified Party asserts that
UAG has become obligated to a Stockholder Indemnified Party pursuant to
Section 9.2, or if any UAG Third Party Claim is begun, made or instituted as a
result of which UAG may become obligated to a
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Stockholder Indemnified Party hereunder (for purposes of this Article 2, any
UAG Indemnified Party and any Stockholder Indemnified Party is sometimes
referred to as an "Indemnified Party" and UAG and the Stockholders are
sometimes referred to as an "Indemnifying Party," and any UAG Third Party
Claim and any Stockholder Third Party Claim is sometimes referred to as a
"Third Party Claim," in each case as the context so requires), such
Indemnified Party shall give written notice to the Indemnifying Party of its
or his obligation to provide indemnification hereunder, provided that any
failure to so notify the Indemnifying Party shall not relieve them from any
liability that it or he may have to the Indemnified Party under this Article
9. If such notice relates to a Third Party Claim, each Indemnifying Party,
jointly and severally, agrees to defend, contest or otherwise protect such
Indemnified Party against any such Third Party Claim at his or its sole cost
and expense. Such Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in the defense thereof by
counsel of such Indemnified Party's choice and shall in any event cooperate
with and assist the Indemnifying Party to the extent reasonably possible. If
the Indemnifying Party fails timely to defend, contest or otherwise protect
against such Third Party Claim, such Indemnified Party shall have the right to
do so, including, without limitation, the right to make any compromise or
settlement thereof, and such Indemnified Party shall be entitled to recover
the entire Cost thereof from the Indemnifying Party, including, without
limitation, attorneys' fees, disbursements and amounts paid (or of which such
Indemnified Party has become obligated to pay) as the result of such Third
Party Claim. Failure by the Indemnifying Party to notify such Indemnified
Party of its or their election to defend any such Third Party Claim within
fifteen (15) days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its
or their right to defend such Third Party Claim. If the Indemnifying Party
assumes the defense of the particular Third Party Claim, the Indemnifying
Party shall not, in the defense of such Third Party Claim, consent to entry of
any judgment or enter into any settlement, except with the written consent of
such Indemnified Party. In addition, the Indemnifying Party shall not enter
into any settlement of any Third Party Claim except with the written consent
of such Indemnified Party) which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to such Indemnified Party
a full release from all liability in respect of such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at their own expense in the
defense of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any Third Party Claim to the extent the
Third Party Claim seeks an order, injunction or other equitable relief against
the Indemnified Party which, if successful, could materially interfere with
the business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party.
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9.4. REMEDIES.
The rights of an Indemnified Party under this Article 9 are in
addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
9.5. DEFINITIONS.
For purposes of this Article 9 "Costs" shall mean all liabilities,
losses, reasonable costs, damages (not including consequential damages),
expenses, claims, reasonable attorneys' fees, experts' fees, consultants'
fees, and disbursements of any kind or of any nature whatsoever. For purposes
of application of the indemnity provisions of this Article 9, the amount of
any Cost arising from the breach of any representation, warranty, covenant or
agreement shall be the entire amount of any Cost suffered, paid or required to
be paid by the respective Indemnified Party as a result of such breach.
9.6. LIMITATION ON INDEMNIFICATION
(a) Indemnification by the Stockholders.
(i) A UAG Indemnified Party shall be entitled to
indemnification in connection with an Event of Breach or a Stockholder
Third Party Claim only to the extent the aggregate Costs incurred or
sustained by all UAG Indemnified Parties exceed Two Hundred Fifty
Thousand Dollars ($250,000) with respect to a breach of any provision
herein other than Section 2.11 or exceed a separate $250,000 amount with
respect to a breach under Section 2.11; provided, however, that
notwithstanding the preceding limitation, a UAG Indemnified Party shall
be entitled to indemnification for all Costs incurred or sustained by
such UAG Indemnified Party as a result of any untruth or inaccuracy in,
or breach of, a representation, warranty or covenant (or failure to
perform or observe any term, agreement or condition) contained in
Article 1 or Sections 2.3, 2.8, 3.1, 5.6 and 5.14 (to the extent
specified therein) hereof.
(ii) A UAG Indemnified Party shall be entitled to
indemnification in connection with an Event of Breach arising out of a
breach of any of the representations or warranties set forth in Articles
2 or 3 hereof or in connection with a Stockholder Third Party Claim for
a period terminating on the later of (i) the date two years after the
Closing Date, or (ii) with respect to any claim asserted with respect to
any breach of such representation or warranty pursuant to Section 9.3
hereof before the expiration of such two year period, on the date such
claim is finally liquidated or otherwise resolved; provided, however,
that a UAG Indemnified Party shall be entitled to indemnification in
connection with an Event of Breach arising out of the representations
and
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warranties in Sections 2.3, 2.8, 2.11, 2.20, and 3.1 hereof until such
claim is otherwise barred by the applicable statute of limitations.
(iii) The aggregate Costs for which the Stockholders shall be
obligated to indemnify the UAG Indemnified Parties shall not exceed
Twenty-Five Million Dollars ($25,000,000) in the case of Costs incurred
or sustained by all UAG Indemnified Parties in connection with an Event
of Breach; provided, however, that a UAG Indemnified Party shall be
entitled to indemnification for all Costs incurred or sustained by such
UAG Indemnified Party as a result of any untruth or inaccuracy in, or
breach of, a representation, warranty or covenant (or failure to perform
or observe any term, agreement or condition) contained in Article 1 or
Sections 2.3, 2.8, 2.11, 2.20 and 3.1 hereof.
(b) Indemnification by UAG.
(i) A Stockholder Indemnified Party shall be entitled to
indemnification in connection with a UAG Event of Breach or a UAG Third
Party Claim only to the extent the aggregate Costs incurred or sustained
by all Stockholder Indemnified Parties exceed Two Hundred Fifty Thousand
Dollars ($250,000); provided, however, that, notwithstanding the
preceding limitation, a Stockholder Indemnified Party shall be entitled
to indemnification for all Costs incurred or sustained by such
Stockholder Indemnified Party as a result of any untruth or inaccuracy
in, or breach of, a representation, warranty or covenant (or failure to
perform or observe any term, agreement or condition) contained in
Article 1 hereof.
(ii) A Stockholder Indemnified Party shall be entitled to
indemnification in connection with an UAG Event of Breach arising out of
a breach of any of the representations or warranties set forth in
Article 4 hereof or in connection with a UAG Third Party Claim for a
period terminating on the later of (i) the date two years after the
Closing Date, and (ii) with respect to any claim asserted with respect
to any breach of such representation or warranty pursuant to Section 9.3
hereof before the expiration of such representation or warranty, on the
date such claim is finally liquidated or otherwise resolved; provided,
however, that a Stockholder Indemnified Party shall be entitled to
indemnification in connection with an UAG Event of Breach arising out of
the representations and warranties in Sections 4.7, 4.9(b) and 4.16
hereof until such claim is otherwise barred by the applicable statute of
limitations.
(iii) The aggregate Costs for which UAG shall be obligated to
indemnify the Stockholder Indemnified Parties shall not exceed
Twenty-Five Million Dollars ($25,000,000) in the case of Costs incurred
or sustained by all Stockholder Indemnified Parties in connection with a
UAG Event of Breach;
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provided, however, that a Stockholder Indemnified Party shall be
entitled to indemnification for all Costs incurred or sustained by such
Stockholder Indemnified Party as a result of untruth or inaccuracy in,
or breach of, a representation, warranty or covenant (or failure to
perform or observe any term, agreement or condition) contained in
Article 1 or Sections 4.7, 4.9(b) and 4.16 hereof.
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, subject to
Section 10.1(b) below. In the event of a breach of any such representations,
warranties or covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for such breach
available to it under the provisions of this Agreement or otherwise, whether
at law or in equity, regardless of any disclosure to, or investigation made by
or on behalf of, such party on or before the Closing Date.
(b) Each of the representations and warranties set forth in
Article 2, Article 3 and Article 4 hereof and in any certificate delivered
pursuant to Article 6 or Article 7 hereof shall survive, and not be affected
in any respect by, the Closing for a period terminating on the later of (i)
the date two years after the Closing Date, and (ii) with respect to any claim
asserted with respect to any breach of such representation or warranty
pursuant to Section 9.3 hereof before the expiration of such representation or
warranty, on the date such claim is finally liquidated or otherwise resolved,
except with respect to the representations and warranties in Sections 2.3,
2.8, 2.11, 2.20, 3.1, 4.7, 4.9(b) and 4.16 hereof.
10.2. FEES AND EXPENSES.
If the Closing does not occur and Section 5.6 hereof is materially
breached, then the Stockholders or the Companies shall pay to UAG, within five
(5) Business Days after receipt of a request therefor, an amount equal to all
of the reasonable legal and other fees, costs and expenses incurred by UAG in
connection with this Agreement and the transactions contemplated hereby.
10.3. HEADINGS.
The section headings herein are for convenience of reference only,
do not constitute part of this Agreement and shall
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<PAGE>
not be deemed to limit or otherwise affect any of the provisions hereof.
10.4. NOTICES.
All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if
delivered by hand, recognized overnight delivery service for next business day
delivery or facsimile transmission (with original to follow by mail) or mailed
by registered or certified mail, postage prepaid (return receipt requested),
as follows:
If to the Companies before the Closing Date:
c/o Mr. John A. Staluppi
474 South Beach Road
Hobe Sound, Florida 33455
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt, LLP
900 Third Avenue
New York, New York 10022
Attn: Stuart B. Newman, Esq.
If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholders:
c/o Mr. John A. Staluppi
474 South Beach Road
Hobe Sound, Florida 33455
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<PAGE>
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt, LLP
900 Third Avenue
New York, New York 10022
Attn: Stuart B. Newman, Esq.
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been
given as of the date so delivered or three (3) days after the date so mailed;
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5. ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto (and with respect to the
Stockholders, the personal representatives and heirs of the Stockholders) and
their respective successors and permitted assigns, and the provisions of
Article 9 hereof shall inure to the benefit of the Indemnified Parties
referred to therein; provided, however, that neither this Agreement nor any of
the rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG shall have the unrestricted right to assign
this Agreement and to delegate all or any part of its obligations hereunder to
any Affiliate of UAG, but in such event UAG shall remain fully liable for the
performance of all of such obligations in the manner prescribed in this
Agreement.
10.6. ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or
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<PAGE>
understandings between the parties with respect thereto and all prior drafts
of this Agreement. There are no restrictions, agreements, promises,
warranties, covenants or undertakings with respect to the transactions
contemplated hereby other than those expressly set forth herein or in the
Documents. Prior drafts of this Agreement shall not be used as a basis for
interpreting this Agreement.
10.7. WAIVER AND AMENDMENTS.
Each of the Stockholders and the Companies as one party, and UAG
and Sub as the other party may by written notice to the other parties (i)
extend the time for the performance of any of the obligations or other actions
of the other parties, (ii) waive any inaccuracies in the representations or
warranties of the other parties contained in this Agreement, (iii) waive
compliance with any of the covenants of the other parties contained in this
Agreement, (iv) waive performance of any of the obligations of the other
parties created under this Agreement, or (v) waive fulfillment of any of the
conditions to its own obligations under this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or not similar.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by the parties hereto.
10.8. COUNTERPARTS.
This Agreement may be executed by facsimile signature(s) and in
any number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
10.9. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined
or modified in this Agreement shall have the respective meanings given to them
in accordance with GAAP.
10.10. SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the
Financial Statements shall not be considered as disclosure pursuant to any
other provision, subprovision, section or subsection of this Agreement or
Schedule to this Agreement and shall not be deemed to limit any
representations or warranties made herein.
10.11. SEVERABILITY.
If any one or more of the provisions of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law
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<PAGE>
which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.
10.12. REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in Article 8, indemnification as
set forth in Article 9, or the payment of certain fees, costs and expenses as
set forth in Section 10.2, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
10.13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
the laws of the State of New York without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
10.14. TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
----------------------------------------
Its:
[Signatures continued on following pages]
68
<PAGE>
UAG EAST, INC.
By:
----------------------------------------
Its:
AMITY AUTO PLAZA LTD., D/B/A AMITY TOYOTA
SUPERSTORE
By:
----------------------------------------
Its: President
MASSAPEQUA IMPORTS LTD., D/B/A LEXUS OF
MASSAPEQUA
By:
----------------------------------------
Its: President
WESTBURY NISSAN LTD., D/B/A WESTBURY
NISSAN SUPERSTORE
By:
----------------------------------------
Its: President
WESTBURY SUPERSTORE LTD., D/B/A WESTBURY
TOYOTA
By:
----------------------------------------
Its: President
J&S AUTO REFINISHING LTD., D/B/A PREMIER
AUTO BODY
By:
----------------------------------------
Its: President
[Signatures continued on following page]
69
<PAGE>
FLORIDA CHRYSLER PLYMOUTH JEEP EAGLE INC.
By:
----------------------------------------
Its: President
PALM AUTO PLAZA INC., D/B/A PALM BEACH
TOYOTA
By:
----------------------------------------
Its: President
WEST PALM INFINITI INC.
By:
----------------------------------------
Its: President
WEST PALM NISSAN INC.
By:
----------------------------------------
Its: President
NORTHLAKE AUTO FINISH INC., D/B/A TRAIL
AUTO BODY
By:
----------------------------------------
Its: President
/s/ John A. Staluppi
---------------------------------
JOHN A. STALUPPI
/s/ John A. Staluppi, Jr.
---------------------------------
JOHN A. STALUPPI, JR.
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<PAGE>
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT ("the Amendment")
is made and entered into this 7th day of April, 1997 between and among United
Auto Group, Inc., a Delaware corporation, UAG East, Inc., a Delaware
corporation, Amity Auto Plaza Ltd., d/b/a Amity Toyota Superstore, a New York
corporation, Massapequa Imports Ltd., d/b/a Lexus of Massapequa, a New York
corporation, Westbury Nissan Ltd., d/b/a Westbury Nissan Superstore, a New
York corporation, Westbury Superstore Ltd., d/b/a Westbury Toyota, a New York
corporation, J&S Auto Refinishing Ltd., d/b/a Premier Auto Body, a New York
corporation, Florida Chrysler Plymouth Jeep Eagle Inc., a Florida corporation,
Palm Auto Plaza Inc., d/b/a Palm Beach Toyota, a Florida corporation, West
Palm Infiniti Inc., a Florida corporation, West Palm Nissan Inc., a Florida
corporation, Northlake Auto Finish Inc., d/b/a Trail Auto Body, a Florida
corporation, Amity Nissan of Massapequa, Inc., d/b/a Amity Nissan, a New York
corporation ("Amity Nissan"), John A. Staluppi and John A. Staluppi, Jr.
W I T N E S S E T H
WHEREAS, the parties hereto (other than Amity Nissan) have entered
into that certain Stock Purchase Agreement dated February 19, 1997 (the "Stock
Purchase Agreement");
WHEREAS, the Stockholders own 100% of the issued and outstanding
capital stock of Amity Nissan;
WHEREAS, the parties hereto desire to amend the terms of the
Stock Purchase Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Stock Purchase Agreement.
2. At the Closing, in consideration for the aggregate purchase
price as set forth in Section 1.2(a) of the Stock Purchase Agreement, the
Stockholders shall sell, assign, transfer and deliver to UAG East 100% of the
issued and outstanding capital stock of Amity Nissan and shall deliver the
certificates representing such shares to UAG East accompanied by stock powers
duly executed in blank.
3. At the Closing, UAG East shall not purchase and the
Stockholders shall not sell, assign, transfer or deliver to UAG East any of
the issued and outstanding capital stock of Massapequa Lexus.
<PAGE>
4. The principal amount of the promissory notes set forth in
Section 1.2(a)(iii) shall be reduced by Two Million One Hundred Thirty-Six
Thousand and Sixty Dollars ($2,136,060).
5. The definition of Companies in the Stock Purchase Agreement
shall be amended to include Amity Nissan and to delete Massapequa Lexus.
6. This Amendment may be executed by facsimile signature(s) and in
any number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original. If any one or more of
the provisions of this Amendment shall be held to be invalid, illegal or
unenforceable, the validity, legality or unenforceability of the remaining
provisions of this Amendment shall not be affected thereby.
7. This Amendment shall be governed by and construed in accordance
with the laws of the state of New York without giving effect to any choice or
conflict of law provision or rule that would cause laws of any other
jurisdiction to apply.
8. Except as expressly stated herein, the provisions of the Stock
Purchase Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
----------------------------------------
Its:
[Signatures continued on following pages]
2
<PAGE>
UAG EAST, INC.
By:
----------------------------------------
Its:
AMITY AUTO PLAZA LTD., D/B/A AMITY TOYOTA
SUPERSTORE
By:
----------------------------------------
Its: President
MASSAPEQUA IMPORTS LTD., D/B/A LEXUS OF
MASSAPEQUA
By:
----------------------------------------
Its: President
WESTBURY NISSAN LTD., D/B/A WESTBURY
NISSAN SUPERSTORE
By:
----------------------------------------
Its: President
WESTBURY SUPERSTORE LTD., D/B/A WESTBURY
TOYOTA
By:
----------------------------------------
Its: President
J&S AUTO REFINISHING LTD., D/B/A PREMIER
AUTO BODY
By:
----------------------------------------
Its: President
[Signatures continued on following page]
3
<PAGE>
FLORIDA CHRYSLER PLYMOUTH JEEP EAGLE INC.
By:
----------------------------------------
Its: President
PALM AUTO PLAZA INC., D/B/A PALM BEACH
TOYOTA
By:
----------------------------------------
Its: President
WEST PALM INFINITI INC.
By:
----------------------------------------
Its: President
WEST PALM NISSAN INC.
By:
----------------------------------------
Its: President
NORTHLAKE AUTO FINISH INC., D/B/A TRAIL
AUTO BODY
By:
----------------------------------------
Its: President
/s/ John A. Staluppi
---------------------------------
JOHN A. STALUPPI
/s/ John A. Staluppi
---------------------------------
JOHN A. STALUPPI
4
<PAGE>
AMENDMENT NO. 2 TO
STOCK PURCHASE AGREEMENT
This AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT ("the Amendment")
is made and entered into this 30th day of April, 1997, between and among
United Auto Group, Inc., a Delaware corporation, UAG East, Inc., a Delaware
corporation, Amity Auto Plaza, Ltd., d/b/a Amity Toyota Superstore, a New York
corporation, Westbury Nissan Ltd., d/b/a Westbury Nissan Superstore, a New
York corporation, Westbury Superstore, Ltd., d/b/a Westbury Toyota, a New York
corporation, J&S Auto Refinishing, Ltd., d/b/a Premier Auto Refinishing, a New
York corporation, Florida Chrysler Plymouth, Inc., d/b/a Florida Chrysler
Plymouth Jeep/Eagle, a Florida corporation, Palm Auto Plaza, Inc., d/b/a Palm
Beach Toyota, a Florida corporation, West Palm Infiniti, Inc., d/b/a Palm
Infiniti, a Florida corporation, West Palm Nissan, Inc., d/b/a Palm Nissan, a
Florida corporation, Northlake Auto Finish, Inc., d/b/a Trail Auto Body, a
Florida corporation, Amity Nissan of Massapequa, Ltd, d/b/a Amity Nissan
Superstore, a New York corporation, Auto Mall Payroll Services, Inc., a
Florida corporation, West Palm Auto Mall, Inc., a Florida corporation, Auto
Mall Storage, Inc., a Florida corporation, JS Imports, Inc., a Florida
corporation, John A. Staluppi and John A. Staluppi, Jr.
W I T N E S S E T H
WHEREAS, certain of the parties hereto have entered into that
certain Stock Purchase Agreement dated February 19, 1997, as amended by that
certain Amendment No. 1 to Stock Purchase Agreement (collectively, the "Stock
Purchase Agreement");
WHEREAS, the parties hereto desire to amend the terms of the Stock
Purchase Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
9. All capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Stock Purchase Agreement.
10. At the Closing, in consideration for the Purchase Price as set
forth in Section 1.2(a) of the Stock Purchase Agreement, the Stockholders
shall sell, assign, transfer and deliver to UAG East 100% of the issued and
outstanding capital stock of Auto Mall Payroll Services, Inc., a Florida
corporation ("Auto Mall Payroll"), West Palm Auto Mall, Inc., a Florida
corporation ("Palm Auto Mall"), and Auto Mall Storage, Inc., a Florida
corporation ("Auto Mall Storage") and shall deliver the certificates
representing such shares to UAG East accompanied by stock powers duly executed
in blank.
<PAGE>
11. The definition of Companies in the Stock Purchase Agreement
shall be amended to include Auto Mall Payroll, Palm Auto Mall, and Auto Mall
Storage.
12. Section 1.2(a) shall be amended to read as follows:
"(a) Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholders shall
sell to UAG East, and UAG East shall purchase from the
Stockholders, the Shares for an aggregate purchase price (the
"Purchase Price") equal to (i) a promissory note in substantially
the form attached hereto as Exhibit A (the "Six Year Note") in the
aggregate principal amount of Thirty-Eight Million Three Hundred
Sixty-Three Thousand Nine Hundred and Forty Dollars ($38,363,940)
less the amount of any distributions (the "Distributions") made by
the Companies to the Stockholders from November 30, 1996 until the
Closing Date (other than distributions of net income attributable
to periods after November 30, 1996 or distributions attributable
to periods prior to November 30, 1996 which are reflected on the
November 30 Balance Sheets), with interest only payable quarterly
at the rate of six and one-half percent (6.5%) and with
Twenty-Eight Million Dollars ($28,000,000) payable on demand at
any time after the Closing Date (of which Twenty-five Million
Dollars ($25,000,000) is payable in cash and the remainder is
payable in One Hundred Twenty-Seven Thousand Six Hundred Sixty
(127,660) shares of UAG Common Stock (the "UAG Shares") issued in
the name of Mr. Staluppi bearing the restrictive legend
customarily placed on securities that have not been registered
under applicable federal and state securities laws, which shares
shall be deposited in escrow pursuant to Section 1.2(c) below) and
Ten Million Three Hundred Sixty-Three Thousand Nine Hundred and
Forty Dollars ($10,363,940) maturing on the sixth anniversary of
the Closing Date; (ii) a promissory note in substantially the form
attached hereto as Exhibit B (the "Three Year Note" and, together
with the Six Year Note, the "Notes") issued by UAG in the
aggregate principal amount of Eleven Million Five Hundred Thousand
Dollars ($11,500,000) with interest only payable quarterly at the
rate of eight and one-half percent (8.5%) per annum or such other
rate as shall be agreed to by the parties, maturing on the third
anniversary of the Closing Date. The purchase price set forth
above is subject to adjustment after the Closing as provided in
Sections 1.3, 1.7 and 1.8 below. At the Closing referred to in
Section 1.2(b) hereof:
2
<PAGE>
(i) the Stockholders shall sell, assign, transfer and
deliver to Sub the Shares representing 100% of the issued
and outstanding capital stock of the Companies and deliver
the certificates representing such Shares accompanied by
stock powers duly executed in blank; and
(ii) Sub shall accept and purchase the Shares from the
Stockholders and in payment therefor shall deliver to the
Stockholders the Notes.
13. The Stockholders agree that the Notes and the UAG Shares
shall be issued to Mr. Staluppi. Allocation and distribution between the
Stockholders of all consideration to be received by the Stockholders from UAG
shall be the sole responsibility of Mr. Staluppi.
14. Exhibit A to the Stock Purchase Agreement shall be replaced
with Exhibit A hereto.
15. Exhibit B to the Stock Purchase Agreement shall be replaced
with Exhibit B hereto.
16. The Stockholders agree to join with UAG, if UAG so requests,
in making a timely election with respect to any of the Companies to treat the
purchase and sale of the Shares relating to such Company pursuant to this
Agreement as a sale of all of such Company's assets under Section 338(h)(10)
of the Internal Revenue Code of 1986, as amended (the "Code"), as permitted
pursuant to Section 1.338(h)(10)-1(a) of the Treasury Regulations promulgated
thereunder. In the event of such an election, UAG agrees to promptly pay to
the Stockholders the amount of any additional tax (including any penalties and
interest thereon) that is imposed on the Stockholders by reason of making such
an election (including any tax imposed on the Stockholders by reason of the
"pass-through" of income or other items recognized by the Companies). Thus, in
the event that the tax imposed on the Stockholders by reason of the stock sale
(including any tax imposed on the Stockholders by reason of the "pass-through"
of income or other items recognized by the Companies) exceeds the tax that
would have been imposed if no such election had been made, UAG will be
responsible for such excess. UAG further agrees to "gross up" any payment to
the Stockholders pursuant to this paragraph to the extent that any such
payment would itself be subject to any tax. Stockholders agree to cooperate
with UAG to cause each of the Companies to timely file for federal and/or
state income tax purposes, with respect to such Company's final short period
as an S corporation under the Code through the Closing Date, any return or
extension of the due date thereof as required under the Code to effect or
reflect any such election under Section 338(h)(10) of the Code.
Notwithstanding the provision of this paragraph 8, the Stockholders shall not
be required to make any such election unless the amount and form of
indemnification is reasonably satisfactory to the Stockholders.
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<PAGE>
17. The first sentence of Section 5.12 is hereby amended to
include the following phrase at the end of the first sentence: "... as well as
such other personal guarantees of loans or other indebtedness of the Companies
incurred in the ordinary course of business which do not appear on the Company
Financial Statements, but which will appear on the Closing Date Balance Sheet.
18. UAG and/or the Sub agree to pay to the Stockholders their pro
rata portion of any incentive payments earned by UAG and/or the Sub through
the manufacturers' incentive programs of Nissan and Infiniti (the "Programs")
described on Exhibit C hereto, for the year ending December 31, 1997. The "pro
rata" period shall include January, February, March and April of 1997. Payment
of any amounts owed under this Section to the Stockholders shall be paid in
cash or its equivalent within five (5) Business Days after UAG and/or the Sub
receives such payment under the programs.
19. UAG agrees to enter into an Assignment and Assumption of Lease
with Westbury Imports, Ltd., in a form to be agreed upon by the parties (the
"Assignment Agreement"). The definition of Real Property shall be amended to
include the property located at 10-20 Brooklyn Avenue that is subject to the
Assignment Agreement (the "10-20 Property"). The Stockholders further agree to
indemnify and hold harmless any UAG Indemnified Party for any Costs incurred
by such party as the result of the 10-20 Property not being in compliance with
any applicable Environmental Laws or Environmental Permits.
20. Mr. Staluppi and West Palm Toyota agree that the New Facility
will be constructed and the New Facility Closing Conditions shall be as
provided in the lease entered into between West Palm Toyota and Gardenette
Royal Properties, Inc. of even date herewith. The last sentence of Section 1.4
shall be deleted and of no further force and effect. West Palm Toyota shall
lease the West Palm Parcel for $10,000 per month until such time as the New
Facility Closing Conditions are met as provided in such lease.
21. Within 15 days after the date hereof, the Stockholders agree
to pay in full and to satisfy (or to cause to be paid in full and satisfied)
(i) that certain mortgage held by the Bank of New York encumbering the
property located at 56 Park Place, Amityville, New York and used in the
business of Amity Auto Plaza, Ltd., (ii) that certain mortgage held by the
Bank of New York encumbering the property located at 4500 Sunrise Highway,
Massapequa, New York and used in the business of Amity Nissan of Massapequa,
Ltd., and (iii) that certain mortgage held by debis Financial Services, Inc.
encumbering the property located at 939 Old Country Road, Westbury, New York
or as a result of any rights such lenders have in any leases relating to such
properties. The Stockholders further agree to indemnify UAG, UAG East and the
Companies from any and all costs incurred by UAG, UAG East or the Companies as
the result of such mortgages.
4
<PAGE>
22. The Closing Date shall be April 30, 1997. All closing
transactions contemplated by the Stock Purchase Agreement and the related
closing documents shall be deemed effective after the close of business on the
Closing Date.
23. All references to Florida Chrysler Plymouth Jeep Eagle Inc.
shall be changed to Florida Chrysler Plymouth, Inc., a Florida corporation
d/b/a Florida Chrysler Plymouth Jeep/Eagle. The Stockholders represent that
Florida Chrysler Plymouth, Inc. holds Chrysler, Plymouth, Jeep and Eagle
franchises.
24. The Stockholders agree that prior to the Closing Date, Amity
Nissan shall transfer to Mr. Staluppi or his designee the real property
located at 4950 Sunrise Highway, Massapequa, New York and currently leased to
Massapequa Imports, Ltd. The Stockholders agree to use their best efforts to
cause Primus to release Amity Nissan from the mortage it currently holds
relating to such property. The Stockholders agree to promptly pay to UAG or
the Companies the amount of any tax (including penalties and interest thereon)
that is imposed on the Companies or UAG (or any of its affiliates) as a result
of the transfer of such property. The Stockholders further agree to fully
defend, save and hold harmless the UAG Identified Parties for any and all
Costs arising out of or relating to Amity Nissan's ownership of such property
(including, but not limited to, the mortgage on such property currently held
by Primus).
25. Section 1.3(a) of the Stock Purchase Agreement shall be
amended to provide that the Closing Date Balance Sheets or the Reviewed
Balance Sheets shall be prepared in a manner consistent with the November 30
Balance Sheets attached hereto as Exhibit D which the Stockholders represent
have been prepared in accordance with GAAP. Section 1.3(g)(i) of the Stock
Purchase Agreement shall be amended to provide that the November 30 Balance
Sheets shall be the balance sheets attached hereto as Exhibit D. The parties
acknowledge that the Net Worth of the Companies as set forth on the November
30 Balance Sheets is $2,907,994. The Net Worth as set forth on the Closing
Date Balance Sheets and the Reviewed Balance Sheets shall be adjusted to
reflect any receivables or payables from or due to Affiliates. For purposes of
the Closing Date Balance Sheets and the Reviewed Balance Sheets the cumulative
LIFO reserve shall be $5,141,135. If the Final Net Worth shall be greater than
the Net Worth of the Companies as set forth on the November 30 Balance Sheets
(the amount of any such excess being referred to herein as the "Net Worth
Surplus"), UAG shall pay the Stockholders at the Supplemental Closing an
amount equal to the Net Worth Surplus. The Final Net Worth shall reflect a
charge of $79,443 in fees relating to the 1996 audited financial statements.
26. The Stockholders, JS Imports and UAG shall enter into an asset
purchase agreement pursuant to which UAG or its designee shall agree, subject
to manufacturer approval, to acquire all of the assets of JS Imports relating
to sale or servicing of
5
<PAGE>
KIA vehicles, parts and accessories pursuant to terms and conditions mutually
acceptable to such parties.
27. The Stockholders agree to indemnify and hold the Companies,
UAG and UAG East harmless for any Costs incurred by the Company or UAG as the
result of any default under the terms of those certain mortgages held by Ella
Landau and/or 15 Kinkel Street Realty Corp. (collectively "Landau")
encumbering the property located at 939 Old Country Road, Westbury, New York
or as a result of any rights that Landau has in any leases relating to the
property.
28. Within 15 days after the date hereof, the Stockholders agree
to obtain a Subordination, Non-disturbance and Attornment agreement in a form
reasonably satisfactory to UAG from Primus Automotive Financial Services, Inc.
("Primus") in connection with the mortgage held by Primus relating to the
property located at 10-20 Brooklyn Avenue, Westbury, New York and the
Stockholders agree to cause 10-20 Brooklyn Ave. Realty, Corp. to terminate all
existing leases with respect to the 10-20 Property. In the event that the
Stockholders do not obtain such agreement, the Stockholders agree to indemnify
and hold harmless UAG and the Companies from any Costs incurred by UAG, UAG
East or the Companies as the result of any default of the Primus mortgage. The
Stockholders agree to indemnify and hold harmless UAG and the Companies from
any costs incurred by UAG, UAG East or the Companies as the result of any
prior leases relating to the 10-20 Property.
29. The Stockholders agree to indemnify and hold the Companies,
UAG and UAG East harmless from any Costs incurred by the Companies as the
result of unpaid franchise taxes and judgment liens shown on the title
commitments obtained in connection with the transactions contemplated in the
Stock Purchase Agreement.
30. Within 30 days after the date hereof, the Stockholders agree
to perform all maintenance and repairs described in that certain letter from
Toyota Motor Sales, U.S.A., Inc. ("Toyota Motor Sales") to Westbury Toyota
dated July 17, 1995, in a manner acceptable to Toyota Motor Sales. If the
Stockholders do not complete such repairs and maintenance to the satisfaction
of Toyota Motor Sales within 30 days of the date hereof, UAG shall cause
Westbury Toyota to complete such repairs and maintenance and the Stockholders
shall reimburse Westbury Toyota for all reasonable costs and expenses relating
hereto.
31. The Stockholders represent and warrant that as of the Closing
Date the Companies (and their respective assets) will not (directly or
indirectly) be liable for any loans or other indebtedness of the Stockholders
or any entity affiliated with the Stockholders (the "Stockholder Debt") and
will not guaranty or otherwise secure any Stockholder Debt. Notwithstanding
this representation and warranty, to the extent that the Companies (or any of
their respective assets) have any obligations with respect to any Stockholder
Debt, the Stockholders shall use their best
6
<PAGE>
efforts to cause the Companies (of any of their respective assets) to be
released from such obligations. In the event that any such obligations are not
released, then the Stockholders shall indemnify the Companies or hold them
harmless from any Costs arising out of or in any way relating to any
Stockholder Debt.
32. The parties acknowledge that, pursuant to the terms of the
Stock Purchase Agreement, Law Engineering and Environmental Services, Inc.
("Law") conducted Phase I environmental audits ("Phase I Reports") with
respect to the Real Property and the Companies. The Phase I Reports recommend
certain additional testing and records investigation to determine whether the
Real Property and the Companies are in compliance with applicable
Environmental Laws. At the Stockholders' request, the parties agreed not to
conduct additional testing prior to Closing. Within 30 days of the Closing,
Law (after consulting with the Companies' environmental consultants) shall
prepare a recommendation with respect to the scope of additional testing and
investigation to be conducted (the "Phase II Audit"). The cost of the Phase II
Audit testing shall be paid one-half by UAG and one-half by the Stockholders.
If the Phase II Audit indicates that any governmental filings (including
closure reports), approvals or additional testing is required by applicable
Environmental Laws or Environmental Permits, then the Stockholders shall,
cause such filings to be made and such approvals to be obtained in a timely
manner. If the Phase II Audit indicates that any remediation action is
required under any Environmental Laws or Environmental Permits, then the
Stockholders shall at their sole cost and expense, cause such remediation to
be completed in a timely manner. Notwithstanding anything in the Stock
Purchase Agreement to the contrary, the Stockholders agree to indemnify and
hold harmless the UAG Indemnified Parties from any and all Costs arising out
of any violations of any Environmental Laws or Environmental Permits indicated
on the Phase II Audit and any and all Costs relating to any Hazardous
Materials reported in the Phase II Audit (whether or not remediation is
required at this time). If the Stockholders do not take the steps, if any, set
forth in the Phase II Audit to cause the Real Property and the Companies to be
in compliance with all applicable Environmental Laws and Environmental Permits
within the time periods set forth above, then the Companies shall have the
right to take such steps and the Stockholders shall reimburse the Companies
for all costs and expenses related thereto. To the extent the Stockholders do
not reimburse any Company for such costs and expenses, such Company shall have
the right to off-set such costs and expenses against monies due under such
Company's lease agreement of even date herewith. To the extent that there are
any existing violations of any zoning requirements relating to any of the
properties leased to the Companies and any third party requires that such
zoning violations be corrected in order for the Companies to continue to
operate in the ordinary course of business, then the Stockholders shall, at
their sole cost and expense, cause these violations to be corrected to the
satisfaction of such third party. To the extent the Stockholders do not remedy
such violations, then the Stockholders shall indemnify and hold harmless any
UAG
7
<PAGE>
Indemnified Party to the extent such UAG Indemnified Party incurs any Costs
relating to such violations.
33. Except as expressly stated herein, the provisions of the Stock
Purchase Agreement shall remain in full force and effect.
34. This Amendment may be executed by facsimile signature(s) and
in any number of counterparts, all of which shall be considered one and the
same agreement and each of which shall be deemed an original. If any one or
more of the provisions of this Amendment shall be held to be invalid, illegal
or unenforceable, the validity, legality or enforceability of the remaining
provisions of this Amendment shall not be affected thereby.
35. This Amendment shall be governed by and construed in
accordance with the laws of the state of New York without giving effect to
any choice or conflict of law provision or rule
that would cause laws of any other jurisdiction to apply.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the day and year first above written.
[Signatures begin on following page]
8
<PAGE>
UNITED AUTO GROUP, INC.
By: /s/ George G. Lowrance
----------------------------------------
George G. Lowrance
Executive Vice President
UAG EAST, INC.
By: /s/ George G. Lowrance
----------------------------------------
George G. Lowrance
Vice President
AMITY AUTO PLAZA, LTD., D/B/A AMITY
TOYOTA SUPERSTORE
By: /s/ John A. Staluppi
----------------------------------------
John A. Staluppi, President
WESTBURY NISSAN LTD., D/B/A WESTBURY
NISSAN SUPERSTORE
By: /s/ John A. Staluppi
----------------------------------------
John A. Staluppi, President
WESTBURY SUPERSTORE, LTD., D/B/A WESTBURY
TOYOTA
By: /s/ John A. Staluppi
----------------------------------------
John A. Staluppi, President
J&S AUTO REFINISHING, LTD., D/B/A PREMIER
AUTO REFINISHING
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
[Signatures continued on following pages]
9
<PAGE>
FLORIDA CHRYSLER PLYMOUTH, INC., D/B/A
FLORIDA CHRYSLER PLYMOUTH JEEP/EAGLE
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
PALM AUTO PLAZA, INC., D/B/A PALM BEACH
TOYOTA
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
WEST PALM INFINITI INC.
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
[Signatures continued on following pages]
WEST PALM NISSAN INC.
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
NORTHLAKE AUTO FINISH, INC., D/B/A TRAIL
AUTO BODY
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
JS IMPORTS, INC.
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
[Signatures continued on following page]
10
<PAGE>
AMITY NISSAN OF MASSAPEQUA, LTD. D/B/A
AMITY NISSAN SUPERSTORE
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
AUTO MALL PAYROLL SERVICES, INC.
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
WEST PALM AUTO MALL, INC.
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
AUTO MALL STORAGE, INC.
By: /s/ John A. Stalupppi
----------------------------------------
John A. Staluppi, President
/s/ John A. Stalupppi
---------------------------------
JOHN A. STALUPPI, individually
/s/ John A. Stalupppi, Jr.
------------------------------------
JOHN A. STALUPPI, JR., individually
11
<PAGE>
STOCK PURCHASE AGREEMENT
DATED APRIL 12, 1997
AMONG
UNITED AUTO GROUP, INC.
AND
GENE REED CHEVROLET, INC., A SOUTH CAROLINA CORPORATION,
MICHAEL CHEVROLET-OLDSMOBILE, INC., A SOUTH CAROLINA CORPORATION,
REED-LALLIER CHEVROLET, INC., A NORTH CAROLINA CORPORATION,
AND
GENE REED, JR.
MICHAEL L. REED
MICHAEL G. LALLIER
DEBORAH B. LALLIER
JOHN P. JONES
CHARLES J. BRADSHAW
CHARLES J. BRADSHAW, JR.
JULIA D. BRADSHAW
WILLIAM B. BRADSHAW
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. PURCHASE AND SALE OF SHARES...................................1
1.1. Certain Definitions...........................................1
1.2. Purchase and Sale of the Shares...............................6
1.3. New Facility..................................................8
1.4. Earnings Adjustment..........................................10
1.5. Net Worth Adjustment.........................................10
1.6. Stock Price Adjustment.......................................12
1.7. Effective Date...............................................12
1.8. Post-Closing Note Adjustment.................................12
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
AND THE STOCKHOLDERS.........................................13
2.1. Organization and Good Standing...............................13
2.2. Subsidiaries.................................................13
2.3. Capitalization...............................................13
2.4. Authority; Approvals and Consents............................14
2.5. Financial Statements.........................................15
2.6. Absence of Undisclosed Liabilities...........................16
2.7. Absence of Material Adverse Effect; Conduct
of Business..................................................16
2.8. Taxes........................................................18
2.9. Legal Matters................................................19
2.10. Property.....................................................20
2.11. Environmental Matters........................................20
2.12. Inventories..................................................23
2.13. Accounts Receivable..........................................23
2.14. Insurance....................................................23
2.15. Contracts; etc...............................................24
2.16. Labor Relations..............................................24
2.17. Employee Benefit Plans.......................................25
2.18. Other Benefit and Compensation Plans or Arrangements.........28
2.19. Transactions with Insiders...................................29
2.20. Propriety of Past Payments...................................29
2.21. Interest in Competitors......................................30
2.22. Brokers......................................................30
2.23. Accounts.....................................................30
2.24. Disclosure...................................................30
2.25. Net Worth....................................................31
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS.................................................31
3.1. Ownership of Shares; Title...................................31
3.2. Authority....................................................31
3.3. Real Property and Improvements...............................32
3.4. Investment Intent............................................32
3.5. Qualification of Stockholders................................32
<PAGE>
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG........................33
4.1. Organization and Good Standing...............................33
4.2. Capitalization...............................................34
4.3. SEC Filings..................................................34
4.4. Authority; Approvals and Consents............................34
4.5. Financial Statements.........................................35
4.6. Taxes........................................................37
4.7. Absence of Undisclosed Liabilities...........................37
4.8. Disclosure...................................................37
4.9. Absence of Material Adverse Effect; Conduct of Business......38
4.10. Insurance....................................................38
4.11. Brokers......................................................39
4.12. Propriety of Past Payments...................................39
4.13. Environmental Matters........................................39
4.14. Employee Benefit Plans.......................................39
ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS..........................39
5.1. Access; Confidentiality......................................40
5.2. Furnishing Information; Announcements........................41
5.3. Antitrust Improvements Act Compliance........................41
5.4. Certain Changes and Conduct of Business of the Companies.....42
5.5. No Intercompany Payables or Receivables......................45
5.6. Negotiations.................................................45
5.7. Consents; Cooperation........................................46
5.8. Additional Agreements........................................46
5.9. Interim Financial Statements.................................46
5.10. Notification of Certain Matters..............................47
5.11. Assurance by the Stockholders................................47
5.12. Section 338(h)(10) Election..................................48
5.13. Non-Interference.............................................48
5.14. Environmental Audits.........................................48
5.15. Access to Records............................................49
5.16. Certain Changes and Conduct of Business of UAG...............49
5.17. Loan for Tax Obligation......................................50
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG TO
EFFECT THE CLOSING...........................................51
6.1. Representations and Warranties; Agreements; Covenants........51
6.2. Authorization; Consents......................................51
6.3. Opinions of the Companies' and the Stockholders's Counsel....52
6.4. Absence of Litigation........................................53
6.5. No Material Adverse Effect...................................53
6.6. Net Worth....................................................53
6.7. Completion of Due Diligence..................................53
6.8. Net Income...................................................53
6.9. Leases.......................................................54
6.10. Board Approval...............................................54
6.11. Certificates.................................................54
6.12. Legal Matters................................................54
6.13. Approval of Manufacturers and Distributors...................54
<PAGE>
6.14. Nondisturbance Agreements/Estoppel Certificates..............54
6.15. Title Insurance..............................................54
6.16. Schedules....................................................55
6.17. Lease Termination Agreements/Memoranda of Lease..............55
6.18. Resignation of the Companies' Directors......................55
6.19. Employment Agreements........................................55
6.20. Consulting Agreement.........................................55
ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE
STOCKHOLDERS TO EFFECT THE CLOSING...........................55
7.1. Representations and Warranties; Agreements...................55
7.2. Authorization of the Agreement, Consents.....................56
7.3. Opinions of UAG's Counsel....................................56
7.4. Absence of Litigation........................................56
7.5. Certificates.................................................57
7.6. Legal Matters................................................57
7.7. Schedules....................................................57
7.8. Leases.......................................................57
7.9. No Material Adverse Effect...................................57
7.10. Employment Agreements........................................58
7.11. Registration Rights Agreement................................58
7.12. Consulting Agreement.........................................58
ARTICLE 8. TERMINATION.................................................58
8.1. Termination..................................................58
8.2. Effect of Termination........................................59
ARTICLE 9. INDEMNIFICATION.............................................59
9.1. Indemnification by the Stockholders..........................59
9.2. Indemnification by UAG.......................................60
9.3. Procedures...................................................60
9.4. Offset.......................................................62
9.5. Remedies.....................................................62
9.6. Definitions..................................................62
9.7. Limitation on Indemnification................................62
ARTICLE 10. MISCELLANEOUS...............................................63
10.1. Survival of Provisions.......................................64
10.2. Fees and Expenses............................................64
10.3. Headings.....................................................64
10.4. Notices......................................................64
10.5. Assignment...................................................67
10.6. Entire Agreement.............................................67
10.7. Waiver and Amendments........................................67
10.8. Counterparts.................................................67
10.9. Accounting Terms.............................................68
10.10. Schedules....................................................68
10.11. Severability.................................................68
10.12. Remedies.....................................................68
10.13. Governing Law................................................68
10.14. Time is of the Essence.......................................68
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), dated April 12, 1997,
is by and among United Auto Group, Inc., a Delaware corporation ("UAG"), Gene
Reed Chevrolet, Inc., a South Carolina corporation ("Gene Reed Chevrolet"),
Michael Chevrolet-Oldsmobile, Inc., a South Carolina corporation, ("Michael
Chevrolet"), and Reed-Lallier Chevrolet, Inc., a North Carolina corporation,
("Reed-Lallier Chevrolet" and, together with Gene Reed Chevrolet and Michael
Chevrolet-Old the "Companies") and Mr. Gene Reed, Jr. ("Mr. Reed"), Michael L.
Reed, Michael G. Lallier, Deborah B. Lallier, John P. Jones, Charles J.
Bradshaw, Charles J. Bradshaw, Jr., Julia D. Bradshaw, William B. Bradshaw (Mr.
Reed and, together with such other persons, the "Stockholders").
W I T N E S E T H:
WHEREAS, the Companies operate franchise automobile dealerships and
related businesses in North Charleston and Summerville, South Carolina and
Fayetteville, North Carolina;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of the capital stock of the Companies (the "Shares"); and
WHEREAS, UAG desires to purchase the Shares from the Stockholders, and
the Stockholders desire to sell the Shares to UAG (in each case upon the terms
and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG will own one
hundred percent (100%) of the issued and outstanding shares of the capital
stock of the Companies, on a fully diluted basis.
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF SHARES
1.1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "ADJUSTMENT AMOUNT" shall have the meaning ascribed to it in
Section 1.6.
(b) "AFFILIATE" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, his spouse, his issue,
<PAGE>
his parents, his estate and any trust for the benefit of his spouse and/or
issue.
(c) "ASSOCIATE" when used to indicate a relationship with any person
means (A) any corporation, partnership, joint venture or other entity of which
such person is an officer or partner or is, directly or indirectly, through one
or more intermediaries, the beneficial owner of 30% or more of (1) any class or
type of equity securities or other profits interest or (2) the combined voting
power of interests ordinarily entitled to vote for management or otherwise, and
(B) any trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar fiduciary
capacity.
(d) "BUSINESS DAY" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(e) "CLAIMS" shall have the meaning ascribed to it in Section 2.9(a).
(f) "CLOSING" shall have the meaning ascribed to it in Section 1.2(b).
(g) "CLOSING DATE" shall have the meaning ascribed to it in Section
1.2(b).
(h) "CLOSING DATE BALANCE SHEETS" shall have the meaning ascribed to
it in Section 1.5(a).
(i) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(j) "COMPANY AGREEMENTS" shall have the meaning ascribed to it in
Section 2.15.
(k) "COMPANY BALANCE SHEETS" shall have the meaning ascribed to it in
Section 2.5(i).
(l) "COMPANY FACTORY STATEMENTS" shall have the meaning ascribed to it
in Section 2.5(ii).
(m) "COMPANY FINANCIAL STATEMENTS" shall have the meaning ascribed to
it in Section 2.5.
(n) "CONFIDENTIAL INFORMATION" shall have the meaning ascribed to it
in Section 5.1.
(o) "COSTS" shall have the meaning ascribed to it in Section 9.6.
(p) "DOCUMENTS" shall have the meaning ascribed to it in Section 2.4.
2
<PAGE>
(q) "EFFECTIVE DATE" shall have the meaning ascribed to it in Section
1.7 hereof.
(r) "EMPLOYMENT AND LABOR AGREEMENTS" shall have the meaning ascribed
to it in Section 2.16(b).
(s) "ENVIRONMENTAL LAWS" shall mean all applicable requirements of
environmental, public or employee health and safety, public or community
right-to-know, ecological or natural resource laws or regulations or controls,
including all applicable requirements imposed by any law (including, without
limitation, common law), rule, order, or regulations of any federal, state, or
local executive, legislative, judicial, regulatory, or administrative agency,
board, or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to, (i) noise, (ii) pollution or
protection of the air, surface water, groundwater, or soil, (iii) solid,
gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or (v)
regulation of the manufacture, processing, distribution and commerce, use, or
storage of Hazardous Materials.
(t) "ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation of
the Companies' businesses or the Real Property or Improvements.
(u) "ERISA PLAN" shall have the meaning ascribed to it in Section
2.17(a).
(v) "EVENT OF BREACH" shall have the meaning ascribed to it in Section
9.1.
(w) "FINAL NET WORTH" shall have the meaning ascribed to it in Section
1.5(g)(i).
(x) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(y) "HAZARDOUS MATERIALS" shall mean, collectively, (i) those
substances included within the definitions of or identified as "hazardous
chemicals," "hazardous waste," "hazardous substances," "hazardous materials,"
"toxic substances" or similar terms in or pursuant to, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980 (42
U.S.C. 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and
Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.) ("RCRA"),
the Occupational Safety and Health Act of 1970 (29 U.S.C. ss. 651 et seq.)
("OSHA"), and the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801
3
<PAGE>
et seq. ("HMTA"), and in the regulations promulgated pursuant to such laws, all
as amended, (ii) those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR part 302 and amendments thereto), (iii) any material, waste
or substance which is or contains (A) petroleum, including crude oil or any
fraction thereof, natural gas, or synthetic gas usable for fuel or any mixture
thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.
ss. 1251 et seq. (33 U.S.C. ss. 1321) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. ss. 1317), (E) flammable explosives, (F) radioactive
materials, and (iv) such other substances, materials and wastes which are or
become regulated or classified as hazardous, toxic or as "special wastes" under
any Environmental Laws.
(z) "H-S-R ACT" shall have the meaning ascribed to it in Section 5.3.
(a) "IMPROVEMENTS" shall have the meaning ascribed to it in Section
2.10.
(ab) "INSIDER" shall mean the Stockholders, any director or officer of
the Companies, and any Affiliate, Associate or Relative of any of the foregoing
persons
(ac) "JUDGMENTS" shall have the meaning ascribed to it in Section
2.9(a).
(ad) "KNOWLEDGE" shall mean, with respect to the Stockholders, that
the Stockholders know of the particular matter referred to; with respect to the
Companies, that any person responsible for overseeing the day to day operations
of any of the Companies or any general manager, executive manager, new or used
car sales manager, service manager, office manager (or any person with similar
such responsibilities regardless of title) know of the particular matter
referred to; and, with respect to UAG, that the President or any Vice-President
of UAG knows of the particular matter referred to.
(ae) "LEASES" shall have the meaning ascribed to it in Section
1.2(c)(iii).
(af) "LEGAL REQUIREMENTS" shall have the meaning ascribed to it in
Section 2.9(b).
(ag) "LIENS" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or similar charges.
4
<PAGE>
(ah) "MATERIAL ADVERSE EFFECT" shall mean, with respect to the
Companies, any change in, or effect on, any of the Companies (including the
respective businesses thereof) which is, or might be, materially adverse to the
business, operations, assets, condition (financial or otherwise) or prospects
of such Company when taken as a whole; and, with respect to UAG, any change in,
or effect on, UAG (including the businesses thereof) which is, or might be,
materially adverse to the business, operations, assets, condition (financial or
otherwise) or prospects of UAG when taken as a whole.
(ai) "NET WORTH" shall have the meaning ascribed to it in Section
1.5(g)(ii).
(aj) "NET WORTH DEFICIENCY" shall have the meaning ascribed to it in
Section 1.5(g)(i).
(ak) "PERMITS" shall have the meaning ascribed to it in Section 2.9(b).
(al) "PERSON" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(am) "PRE-TAX EARNINGS" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
(an) "REAL PROPERTY" shall have the meaning ascribed to it in Section
2.10.
(ao) "RELATIVE" of a person shall mean such person's spouse, such
person's parents, sisters, brothers, children and the spouses of the foregoing,
and any member of the immediate household of such person.
(ap) "REMEDIAL ACTION" shall mean any action required to (i) clean up,
remove or treat Hazardous Materials, (ii) prevent a release or threat of
release of any Hazardous Material, (iii) perform pre-remedial studies,
investigations or post-remedial monitoring and care, (iv) cure a violation of
Environmental Law or (v) take corrective action under sections 3004(u), 3004(v)
or 3008(h) of RCRA or analogous state law.
(aq) "REVIEWED BALANCE SHEETS" shall have the meaning ascribed to it
in Section 1.5(b).
(ar) "REVIEWER" shall have the meaning ascribed to it in Section
1.5(b).
(as) "STOCKHOLDERS INDEMNIFIED PARTY" shall have the meaning ascribed
to it in Section 9.2.
5
<PAGE>
(at) "STOCKHOLDERS THIRD PARTY CLAIM" shall have the meaning ascribed
to it in Section 9.1.
(au) "STOCK PRICE DEFICIENCY" shall have the meaning ascribed to it in
Section 1.6.
(av) "SUPPLEMENTAL CLOSING" shall have the meaning ascribed to it in
Section 1.5(c).
(aw) "TAXES" shall have the meaning ascribed to it in Section 2.8.
(ax) "UAG AGREEMENTS" shall have the meaning ascribed to it in Section
4.14.
(ay) "UAG COMMON STOCK" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(az) "UAG CONFIDENTIAL INFORMATION" shall have the meaning ascribed to
it in Section 5.1.
(ba) "UAG EVENT OF BREACH" shall have the meaning ascribed to it in
Section 9.2.
(bb) "UAG INDEMNIFIED PARTY" shall have the meaning ascribed to it in
Section 9.1.
(bc) "UAG MARKET VALUE" shall mean the arithmetic average of the daily
closing price per share of UAG Common Stock, rounded to four decimal places, as
reported on the New York Stock Exchange Composite Tape for each of the ten (10)
consecutive trading days ending (and including) the trading day that occurs one
trading day prior to the date on which the UAG Market Value is to be
determined.
(bd) "UAG THIRD PARTY CLAIM" shall have the meaning ascribed to it in
Section 9.2.
1.2. PURCHASE AND SALE OF THE SHARES.
(a) Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholders shall sell to UAG,
and UAG shall purchase from the Stockholders, the Shares for an aggregate
purchase price (the "Purchase Price") equal to (i) Seventeen Million Dollars
($17,000,000) in cash (the "Base Price"), which Base Price is subject to
adjustment at the Closing as provided in Section 1.4 below and after the
Closing as provided in Section 1.5 below; (ii) UAG Common Stock, having an
aggregate UAG Market Value on the date hereof equal to Thirteen Million
Dollars ($13,000,000) (the "Aggregate Value") bearing the restrictive legend
customarily placed on securities of UAG that have not been registered under
applicable federal and state securities laws (the shares of UAG Common Stock
issued to the Stockholders in connection herewith are referred to hereinafter
6
<PAGE>
as the "UAG Shares"); and (iii) a promissory note (the "Note") in a form
mutually acceptable to the parties for the principal amount of Four Million
Dollars ($4,000,000) with interest payable quarterly at 6.5% per annum, with
the principal maturing on the thirty-eighth (38th) month anniversary of the
Closing Date; provided, however, that the principal amount of the Note is
subject to adjustment after Closing pursuant to the provisions of Section 1.8
hereof. At the Closing referred to in Section 1.2(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver to
UAG the Shares representing 100% of the issued and outstanding capital
stock of the Companies and deliver the certificates representing such
Shares accompanied by stock powers duly executed in blank; and
(ii) UAG shall accept and purchase the Shares from the
Stockholders and in payment therefor shall (A) deliver to the
Stockholders immediately available funds in an aggregate amount equal to
the Base Price by wire transfer to an account designated in writing by
the Stockholders or by certified funds; (B) deliver to UAG's transfer
agent instructions directing the transfer agent to deliver to the
Stockholders the certificates representing the UAG Shares bearing the
restrictive legend customarily placed on securities of UAG that have not
been registered under applicable federal or state securities laws; and
(C) deliver to the Stockholders the Note.
(b) Closing. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place as soon as practicable following the date on which all
conditions to the obligations of the parties hereunder (other than those
requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived but no
later than June 15, 1997. The date on which the Closing occurs is herein
referred to as the "Closing Date".
(c) Deliveries at the Closing. Subject to the conditions set forth in
this Agreement, at the Closing:
(i) the Stockholders shall deliver to UAG certificates
representing the Shares accompanied by stock powers as required by
Section 1.2(a)(i) hereof, and any other documents that are necessary to
transfer to UAG good title to all the Shares, and (B) all opinions,
certificates and other instruments and documents required to be
delivered by the Stockholders or the Companies at or prior to the
Closing or otherwise required in connection herewith;
(ii) UAG shall (A) pay to the Stockholders funds as required by
Section 1.2(a)(ii) hereof; (B) instruct the transfer agent to deliver to
the Stockholders the Shares;
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(C) deliver to the Stockholders the Note; and (D) deliver to the
Stockholders all opinions, certificates and other instruments and
documents required to be delivered by UAG at or prior to the Closing or
otherwise required in connection herewith;
(iii) Each of the Companies and Mr. Reed (each a "Landlord" and
collectively the "Landlords") shall enter into a lease for the real
property on which such Company operates in a form mutually acceptable to
the parties (each a "Lease" and collectively the "Leases"), such form to
be agreed to by the parties within twenty (20) Business Days of the date
of this Agreement. Each Lease shall be for a twenty (20) year term
commencing on the Closing Date and the lessee shall have the option to
renew the Lease for two additional five year terms (with the lease rate
adjusted to fair market value at the time each such period commences).
Each Lease shall be a triple net lease and the initial monthly lease
rate for each Lease shall be an amount equal to the current lease rate
being paid by each Company. On the second anniversary of the Closing
Date and every two years thereafter, the lease rate for each Lease shall
increase to an amount equal to the lease rate then in effect plus an
amount equal to a percentage of the lease rate then in effect, which
percentage shall be equal to the percentage increase in the Consumer
Price Index published from time to time by the United States Department
of Labor ("CPI") for the metropolitan area in which such Company
operates from the time of the last adjustment. Mr. Reed represents and
warrants that the initial lease rates do not exceed the fair market
lease rate for such property as determined by taking into account the
property's fair market value.
1.3. NEW FACILITY
The parties acknowledge that Mr. Reed is in the process of developing a
New Facility for the operation of Michael Chevrolet. The lease relating to
Michael Chevrolet (the "Michael Chevrolet Lease") shall include the parcel of
land on which the New Facility is being developed. The New Facility is to be
developed pursuant to plans and specifications that have been delivered to UAG
(the "Plans) provided, however, that such Plans are subject to UAG's approval.
Mr. Reed agrees that the New Facility construction will not disrupt the
operations of Michael Chevrolet. Upon completion of the New Facility and
satisfaction of the New Facility Closing Conditions (as hereinafter defined)
the lease rate for the Michael Chevrolet Lease shall increase to an amount
equal to the fair market lease rate as determined by an independent appraiser
mutually acceptable to the parties (which appraisal shall take into account
the New Facility). After such adjustment, the Michael Chevrolet Lease shall
adjust every two years in the manner set forth in Schedule 1.2(c)(iii).
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For purposes of this Agreement, "New Facility Closing Conditions" shall mean
(i) the completion of the New Facility substantially in accordance with the
Plans including but not limited to substantially all material punch list items
as certified by the architect for such New Facility; provided, however, that
if UAG disputes such certificate it may retain its own architect to determine
such New Facility has been completed substantially in accordance with such
Plans; (ii) the issuance of a permanent Certificate of Occupancy by the local
governmental authorities with respect to such New Facility without condition;
(iii) Michael Chevrolet having received any necessary consents or approvals
from General Motors or Chevrolet to relocate its operations to the New
Facility; (iv) delivery of an ALTA "as-built" survey of the New Facility and
the property upon which it is located reflecting no encroachments on adjoining
land or into set-back areas and that all utilities serve the New Facility
through publicly dedicated rights-of-way and tie into public utilities, such
survey to be certified to UAG, Michael Chevrolet and a title insurance company
chosen by UAG; (v) UAG's obtaining a leasehold title insurance policy, without
standard exceptions insuring Michael Chevrolet's leasehold estate in the New
Facility subject to no prior ground lease, mortgage, deed of trust or other
security instrument or if so encumbered, Mr. Reed's obtaining a
non-disturbance agreement from the holder thereof in favor of Michael
Chevrolet in form and substance reasonably satisfactory to UAG in recordable
form and insured by such title company and otherwise subject to only those
exceptions to title as are reasonably acceptable to UAG and providing such
endorsements as UAG shall require including, but not limited to coverage over
mechanics and materialman's liens; (vi) UAG confirming that the New Facility
complies with all zoning requirements and the title company is prepared to
issue a zoning endorsement; and (vii) UAG obtaining an updated Phase I
environmental report reflecting that (x) there are no Hazardous Materials on
or in the New Facility or the land upon which it is located other than any
that may be disclosed in the initial Phase I conducted by UAG, (y) there are
no violations of Environmental Laws at the New Facility or the land upon which
it is located; and (z) there is no recommendation for further investigation or
action with respect to the New Facility or such land, which report shall be
for the benefit of UAG and Michael Chevrolet. In addition, Mr. Reed shall
complete all remaining punch list items within sixty (60) days after the New
Facility Closing Conditions have been satisfied and shall use his best efforts
to obtain standard warranties for construction and equipment (including roofs)
and to assign such warranties to UAG or Michael Chevrolet. Mr. Reed also
agrees that all equipment and fixtures necessary for a "turn-key" car
dealership similar to the existing Michael Chevrolet dealership shall be
relocated from the existing Michael Chevrolet dealership to the New Facility.
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1.4. EARNINGS ADJUSTMENT.
If the Companies, on a combined basis, have Pre-Tax Earnings as
further adjusted (in accordance with Schedule 1.4 hereto) to reflect the pro
forma results of operations for the year ending December 31, 1996 ("1996
Earnings") of less than Six Million Two Hundred Thousand Dollars ($6,200,000),
then the Purchase Price shall be reduced by an amount equal to [($6,200,000 -
1996 Earnings) x 4.84]. If the 1996 Earnings are greater than $6,200,000, then
the Purchase Price shall be increased by an amount equal to [(1996 Earnings -
6,200,000) x 4.84] (such increase or reduction, as applicable, the "Earnings
Adjustment"). The Earnings Adjustment, if any, shall be made at the Closing
and shall be divided proportionately between the Base Price and the Aggregate
Value (such that 17/30ths of any such adjustment shall be made to the Base
Price and 13/30ths of any such adjustment shall be made to the Aggregate
Value).
1.5. NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable after the
Closing Date, the Stockholders shall deliver to UAG balance sheets of the
Companies dated as of the Closing Date (such balance sheets so delivered are
referred to herein as the "Closing Date Balance Sheets"). The Closing Date
Balance Sheets shall be prepared in good faith in accordance with GAAP. In
connection with the preparation of the Closing Date Balance Sheets, the
Stockholders and the Companies shall permit the Reviewer (as defined below)
and other representatives of UAG to conduct a physical inventory at each
location where inventory is held by the Companies.
(b) Within sixty (60) days after delivery of the Closing Date
Balance Sheets, (i) Coopers & Lybrand or such other accounting firm (the
"Reviewer") as may be selected by UAG shall audit or otherwise review the
Closing Date Balance Sheets in such manner as UAG and the Reviewer deem
appropriate, and (ii) UAG shall deliver such reviewed balance sheet (the
"Reviewed Balance Sheets"), together with the Reviewer's report thereon, to
the Stockholders. The Reviewed Balance Sheets (i) shall be prepared in
accordance with GAAP and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in Section 1.5(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in Section 1.5(g)(ii)
hereof. UAG and the Reviewer shall have the opportunity to consult with the
Stockholders, the Companies and each of the accountants and other
representatives of the Stockholders and the Companies and to examine the work
papers, schedules and other documents prepared by the Stockholders, the
Companies and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheets. The Stockholders and the
Stockholders' independent public accountants shall have the opportunity to
consult with the Reviewer and to examine the work papers,
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schedules and other documents prepared by the Reviewer during the preparation
of the Reviewed Balance Sheets.
(c) The Stockholders shall have a period of forty-five (45) days
after delivery of the Reviewed Balance Sheets to present in writing to UAG all
objections the Stockholders may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail.
If no objections are raised within such 45-day period, the Reviewed Balance
Sheets shall be deemed accepted and approved by the Stockholders and a
supplemental closing (the "Supplemental Closing") shall take place within five
(5) Business Days following the expiration of such 45-day period, or on such
other date as may be mutually agreed upon in writing by UAG and the
Stockholders.
(d) If the Stockholders shall raise any objection within such
45-day period, UAG and the Stockholders shall attempt to resolve the matter or
matters in dispute and, if resolved, the Supplemental Closing shall take place
within five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within seventy-five (75) days after the delivery of the Reviewed Balance
Sheets, then the specific matters in dispute shall be submitted to a firm of
independent public accountants mutually acceptable to UAG and the
Stockholders, which firm shall make a final and binding determination as to
such matter or matters. Such accounting firm shall send its written
determination to UAG and the Stockholders and the Supplemental Closing, if
any, shall take place five (5) Business Days following the receipt of such
determination by UAG and the Stockholders. The fees and expenses of the
accounting firm referred to in this Section 1.5(e) shall be paid one-half by
UAG and one-half by the Stockholders.
(f) UAG and the Stockholders agree to cooperate with each other
and each other's authorized representatives and with any accounting firm
selected by UAG and the Stockholders pursuant to Section 1.5(e) hereof in
order that any and all matters in dispute shall be resolved as soon as
practicable.
(g) (i) If the aggregate Net Worth as shown on the Reviewed
Balance Sheets as finally determined through the operation of Sections 1.5 (a)
through (e) hereof (such amount being referred to herein as the "Final Net
Worth") shall be less than the Net Worth of the Companies as set forth on the
Company Balance Sheets (which balance sheets are attached hereto as Schedule
2.5) (the amount of any such deficiency being referred to herein as the "Net
Worth Deficiency") less Four Hundred Eighty Three Thousand Ninety ($483,096)
Dollars, the Stockholders shall pay to UAG at the Supplemental Closing, by
wire transfer of immediately available funds to an account designated in
writing by UAG at least two (2) Business Days prior to the date of the
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Supplemental Closing, an amount equal to the Net Worth Deficiency.
(ii) "Net Worth", computed in connection with the Closing Date Balance
Sheets, the Company Balance Sheets and the Reviewed Balance Sheets, shall mean
the amount by which the total assets (not including intangible assets) exceed
the total liabilities reflected, in each case, on the balance sheets of
Companies comprising the Closing Date Balance Sheets, the Company Balance
Sheets or the Reviewed Balance Sheets, as the case may be.
1.6. STOCK PRICE ADJUSTMENT
If, on the Adjustment Date (as defined below), the UAG Shares have
an aggregate UAG Market Value of less than Thirteen Million Dollars
($13,000,000) (the amount of any such deficiency being referred to herein as
the "Stock Price Deficiency") then, no later than thirty (30) days after the
Adjustment Date, UAG shall pay the Stockholders cash in an amount (the
"Adjustment Amount") equal to the Stock Price Deficiency. For purposes of this
Agreement, the Adjustment Date shall mean the earlier of (i) the date on which
the Stockholders may sell the UAG Shares in reliance on Rule 144 promulgated
by the Securities and Exchange Commission ("SEC") pursuant to the Securities
Act of 1933, as amended ("Rule 144") or (ii) the date on which the
Stockholders may sell the UAG Shares pursuant to the Registration Rights
Agreement (as defined in Section 7.11).
1.7. EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect
until the parties have notified the Chevrolet division of General Motors (the
"Effective Date").
1.8. POST-CLOSING NOTE ADJUSTMENT.
If the Companies, on a combined basis, have Pre-Tax Earnings (as
adjusted in accordance with Schedule 1.8) of less than (1.5 x 4,890,523) for
the eighteen month period beginning on the first day of the calendar month
immediately following the Closing Date, then Two Million Dollars ($2,000,000)
of the principal amount of the Note shall be accelerated and shall be due on
the twentieth month anniversary of the Closing Date. If the Companies, on a
combined basis, have Pre-Tax Earnings (as adjusted in accordance with Schedule
1.8) of less than (3 x 4,890,523) for the three year period beginning on the
first day of the calendar month immediately following the Closing Date, then
the principal amount of the Note shall be reduced by the remaining principal
and no principal payment shall be due on the thirty-eighth month of the
anniversary of the Closing Date. UAG shall deliver to Mr. Reed monthly factory
statements with respect to the Companies within 5 days after delivery of such
statements to the manufacturer during the term of the Note. Mr. Reed agrees to
keep such statements confidential.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 2 are to be delivered by the Companies
and the Stockholders no later than twenty (20) Business Days after the
Effective Date hereof, the Companies and the Stockholders hereby jointly and
severally represent and warrant to UAG as follows:
2.1. ORGANIZATION AND GOOD STANDING.
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own, lease and
operate the properties used in its businesses and to carry on their businesses
as now being conducted. The Companies are duly qualified to do business and
are in good standing as a foreign corporation in each state and jurisdiction
where qualification as a foreign corporation is required, except for such
failures to be qualified and in good standing, if any, which when taken
together with all other such failures of the Companies would not, or could not
reasonably be expected to, in the aggregate have a Material Adverse Effect.
Schedule 2.1 hereto lists (i) the states and other jurisdictions where the
Companies are so qualified and (ii) the assumed names under which the
Companies conduct business. Attached to Schedule 2.1(b) hereto are complete
and correct copies of the Companies' Articles of Incorporation and Bylaws
(including comparable governing instruments with different names), as amended
and presently in effect.
2.2. SUBSIDIARIES.
The Companies do not have any interest or investment in any
Person.
2.3. CAPITALIZATION.
The authorized stock of each of the Companies and the number of
shares of capital stock which are issued and outstanding are set forth on
Schedule 2.3 hereto. The shares listed on Schedule 2.3 hereto constitute all
the issued and outstanding shares of capital stock of the Companies and have
been validly authorized and issued, are fully paid and nonassessable, have not
been issued in violation of any preemptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
There is no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent,
that directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Companies or any securities
convertible
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into, or other rights to acquire, any shares of capital stock of the Companies,
or (ii) obligates the Companies to grant, offer or enter into any of the
foregoing, or (iii) relates to the voting or control of such capital stock,
securities or rights, except as set forth on Schedule 2.3 hereto. The Companies
have not agreed to register any securities under the Securities Act of 1933, as
amended (the "Securities Act").
2.4. AUTHORITY; APPROVALS AND CONSENTS.
The Companies have the corporate power and authority to enter into
this Agreement and the documents referred to herein (the "Documents") to which
they are a party and to perform their obligations hereunder and thereunder.
The execution, delivery and performance of this Agreement and the Documents to
which they are a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by the Board of
Directors of each of the Companies and no other corporate proceedings on the
part of the Companies are necessary to authorize and approve this Agreement
and the Documents and the transactions contemplated hereby and thereby. This
Agreement has been, and on the Closing Date the Documents will be, duly
executed and delivered by, and constitute valid and binding obligations of,
each of the Companies, enforceable against the Companies in accordance with
their respective terms. The execution, delivery and performance by each of the
Companies and the Stockholders of this Agreement and the Documents to which it
or he is a party and the consummation of the transactions contemplated hereby
and thereby do not and will not:
(i) contravene any provisions of the Articles of Incorporation
or Bylaws (including any comparable governing instrument with a
different name) of any of the Companies;
(ii) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement or,
except as set forth on Schedule 2.4 hereto, require any consent or
waiver of any party to any Company Agreement;
(iii) result in the creation of any security interest upon, or any
person obtaining any right to acquire, any properties, assets or rights
of the Companies (other than the rights of UAG to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in Section 2.9 hereof) applicable to the Companies or any of their
respective businesses or properties; or
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(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to
be obtained or made by the Companies to enable the Companies to continue to
conduct their respective businesses and operations and use their respective
properties after the Closing in a manner which is in all material respects
consistent with that in which they are presently conducted.
2.5. FINANCIAL STATEMENTS.
Except as otherwise indicated below, attached as Schedule 2.5 are
true and complete copies of:
(i) (A) the reviewed balance sheets of Michael Chevrolet and Reed
Lallier Chevrolet the Companies as of December 31, 1995 and December 31,
1996 and the related consolidated statements of income, stockholders'
equity and cash flow for the fiscal years ended December 31, 1995 and
December 31, 1996, together with the notes thereto in each case reviewed
by and accompanied by the report of independent certified public
accountants;
(B) the reviewed balance sheet of Gene Reed Chevrolet as of
July 31, 1995 and July 31, 1996 and the related consolidated statements
of income, stockholders' equity and cash flow for the fiscal years ended
July 31, 1995 and July 31, 1996, together with the notes thereto in each
case reviewed by and accompanied by the report independent certified
public accountants; and
(C) The combined balance sheet of the Companies as of
December 31, 1996 (the "Company Balance Sheets"); and
(ii) the most recent monthly and year-to-date financial statements
provided to each franchiser of the Companies (each, a "Company Factory
Statement" and, collectively, the "Company Factory
Statements")
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Company Financial Statements"). The
Company Financial Statements are in accordance with the books and records of
the Companies, fairly present the financial position, results of operations,
stockholders' equity and changes in financial position of the Companies as of
the dates and for the periods indicated, in the case of the financial
statements referred to in clause (i) above
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in conformity with GAAP consistently applied (except as otherwise indicated in
such statements) during such periods, and can be legitimately reconciled with
the financial statements and the financial records maintained and the
accounting methods applied by the Companies for federal income tax purposes,
and the unaudited financial statements included in the Company Financial
Statements indicate all adjustments, which consist of only normal recurring
accruals, necessary for such fair presentations. The statements of income
included in the Company Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified therein, and the
balance sheets included in the Company Financial Statements do not reflect any
write-up or revaluation increasing the book value of any assets. The books and
accounts of the Companies are complete and correct in all material respects and
fairly reflect all of the transactions, items of income and expense and all
assets and liabilities of the businesses of the Companies.
2.6. ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Section 2.17 and 2.18
hereof or liabilities for Taxes, except for (i) liabilities reflected or
reserved against on the most recent Company Financial Statements, (ii) current
liabilities incurred in the ordinary course of business and consistent with
past practice after the date of the Company Balance Sheets which, individually
and in the aggregate, do not have, and cannot reasonably be expected to have,
a Material Adverse Effect, and (iii) liabilities disclosed on Schedule 2.6
hereto. The Companies are not parties to any Company Agreement, or subject to
any charter or bylaw provision, any other corporate limitation or any Legal
Requirement, which has, or can reasonably be expected to have, a Material
Adverse Effect.
2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1996 (and with respect to Gene Reed
Chevrolet, since July 31, 1996), the Companies have operated in the ordinary
course of business consistent with past practice, except as set forth on
Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the Companies, and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have a
Material Adverse Effect;
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(ii) any material loss, damage, destruction or other casualty to
the property or other assets of the Companies, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, new car sales manager, used car sales manager, service
manager or any equivalent employee of any of the Companies.
(b) Since December 31, 1996 (and with respect to Gene Reed
Chevrolet, July 31, 1996), except as set forth in Schedule 2.7(b) hereto, the
Companies have not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics liens and liens for taxes
not yet due and payable;
(iv) sold or transferred any assets or canceled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not
reflected in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them except in the ordinary course of business
consistent with past practice;
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(ix) made any individual capital expenditure in excess of $75,000,
or aggregate capital expenditures in excess of $200,000, or additions to
property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any products or
product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to do
any of the foregoing.
2.8. TAXES.
The Companies have each made a valid election pursuant to Section
1362(a) of the Internal Revenue Code, as amended (the "Code"), to be an "S
Corporation" within the meaning of Section 1361(a)(1) of the Code and have
continued to qualify as such for all taxable years since their formation and
will continue to so qualify through the Closing Date. The Companies and, for
any period during all or part of which the tax liability of any other
corporation was determined on a combined or consolidated basis with the
Companies, any such other corporation, have filed timely all federal, state,
local and foreign tax returns, reports and declarations required to be filed
(or have obtained or timely applied for an extension with respect to such
filing) correctly reflecting the Taxes (as defined below) and all other
information required to be reported thereon and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by the Companies or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments, including but not limited to income, excise, property,
sales, franchise, withholding, social security and unemployment taxes imposed
by the United States, any state, county, local or foreign government, or any
subdivision or agency thereof or taxing authority therein, and any interest,
penalties or additions to tax relating to such taxes, charges, fees, levies or
other assessments. Copies of all tax returns for the fiscal years ended since
December 31, 1992 have been furnished or made available to UAG or its
representatives to the extent available and in the possession of the Companies
and such copies are accurate and complete as of the date hereof. The Companies
have also furnished to UAG correct and complete copies of all notices and
correspondence sent or received since December 31, 1992 by the Companies to or
from any federal, state or local tax authorities. The Companies have
adequately reserved for the payment of all Taxes with respect to periods ended
on or prior to the Closing Date for which tax returns have not yet been filed.
In the ordinary course, the Companies make adequate provision on their books
for the payment of all Taxes (including for the current fiscal period) owed by
the Companies. Except to the
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extent reserves therefor are reflected on the Company Balance Sheets, the
Companies are not liable, or will not become liable, for any Taxes for any
period ending on or prior to the Closing Date. Except as set forth on Schedule
2.8 hereto, the Companies have not been subject to a federal or state tax audit
of any kind since December 31, 1992, and no adjustment has been proposed by the
Internal Revenue Service ("IRS") with respect to any return for any subsequent
year. With respect to the audits referred to on Schedule 2.8 hereto and except
as indicated thereon, no such audit has resulted in an adjustment in excess of
$50,000. Neither the Companies nor the Stockholders know of any basis for an
assertion of a deficiency for Taxes against the Companies. The Stockholders
will cooperate, and will cause his Affiliates to cooperate, with the Companies
in the filing of any returns and in any audit or refund claim proceedings
involving Taxes for which the Companies may be liable or with respect to which
the Companies may be entitled to a refund.
2.9. LEGAL MATTERS.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, and, to the knowledge of the
Companies or the Stockholders, there is no material claim threatened against
or affecting, the Companies, any ERISA Plan (as defined in Section 2.17(a)
hereof) or any of their respective properties or rights before or by any
court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, domestic or foreign, nor is any basis known to the
Stockholders or the Companies for any such Claims, and (ii) the Companies are
not subject to any judgment, decree, writ, injunction, ruling or order
(collectively, "Judgments") of any governmental, administrative or judicial
authority, domestic or foreign. Schedule 2.9(a) hereto identifies each Claim
and Judgment disclosed thereon which is fully covered by an insurance policy.
(b) The businesses of the Companies are being conducted in
compliance with all laws, ordinances, codes, rules, regulations, standards,
judgments and other requirements of all governmental, administrative or
judicial entities (collectively, "Legal Requirements") applicable to the
Companies or any of their respective businesses or properties except where the
failure to be in such compliance could not reasonably be expected to have a
Material Adverse Effect. The Companies hold, and are in compliance with, all
franchises, licenses, permits, registrations, certificates, consents,
approvals or authorizations (collectively, "Permits") required by all
applicable Legal Requirements. A list of all such permits is set forth on
Schedule 2.9(b) hereof.
(c) The Companies own or hold all Permits material to the conduct
of their businesses. No event has occurred and is
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continuing which permits, or after notice or lapse of time or both would
permit, any modification or termination of any Permit.
2.10. PROPERTY.
Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies, including all real property
owned or leased by the Stockholders (directly or indirectly) and used in the
businesses of the Companies and of all options or other contracts to acquire
any such interest (collectively, the "Real Property"). With respect to any
leased Real Property, there are no defaults by either party under and no state
of facts exist which with the giving of notice or the passage of time, or
both, would constitute a default under such leases. True and correct copies of
all leases relating to the Real Property, together with any amendments and
modifications thereto, are attached as Schedule 2.10(b). All improvements to
the Real Property ("Improvements") and all machinery, equipment and other
tangible property owned or used by or leased to the Companies are fit for the
particular purposes for which they are used by the Companies. Such tangible
properties and all Improvements owned or leased by the Companies conform in
all material respects with all applicable laws, ordinances, rules and
regulations and other Legal Requirements and, to the knowledge of the
Stockholders and the Companies, such Improvements do not encroach in any
respect on property of others. To the knowledge of the Stockholders and the
Companies, there are no latent defects with respect to the Improvements. The
Real Property is currently zoned to permit the conduct of the respective
businesses of the Companies as presently conducted. Certificates of Occupancy
have been issued with respect to the Improvements without special conditions
or restrictions. All utilities servicing the Real Property and the
Improvements are provided by publicly-dedicated utility lines and are located
within public rights-of-way and do not cross or encumber any private land. No
written notice (and, to the knowledge of the Stockholders and the Companies,
no oral notice) of any pending, threatened or contemplated action by any
governmental authority or agency having the power of eminent domain has been
given to the Companies or the Stockholders with respect to the Real Property.
2.11. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the
Companies, the Real Property, the Improvements and any property formerly
owned, occupied or leased by the Companies are in compliance with all
Environmental Laws (provided, however, that as to the Real Property or
Improvements, such representation is limited to the knowledge of the
Stockholders and the Companies as it may relate to compliance for any period
prior to the Initial Date), (ii) the Companies have obtained all Environmental
Permits, (iii) such Environmental Permits are in full force and effect, and
(iv) the Companies are in full compliance with all
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terms and conditions of such Environmental Permits. As used in this Agreement,
Initial Date shall mean with respect to any portion of the Real Property or the
Improvements, the earlier of (i) date the Stockholders or the Companies first
acquired any ownership or leasehold interest in such property and (ii) the date
on which the Companies first began conducting operations on such property.
(b) The Companies and the Stockholders have not violated, done or
suffered any act which could give rise to liability under, and, to the
knowledge of the Stockholders and the Companies, are not otherwise exposed to
liability under, any Environmental Law. After the Initial Date (and, to the
knowledge of the Stockholders and the Companies, with respect to events prior
to the Initial Date), no event has occurred with respect to the Real Property,
the Improvements or any property formerly owned, occupied or leased by the
Companies, which, with the passage of time or the giving of notice, or both,
would constitute a violation of or non-compliance with any applicable
Environmental Law. To the knowledge of the Stockholders and the Companies, the
Companies have no contingent liability under any Environmental Law. There are
no liens under any Environmental Law on the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) after the
Initial Date (and, to the knowledge of the Stockholders and the Companies,
with respect to any use prior to the Initial Date) neither the Companies, the
Real Property or any portion thereof, the Improvements or any property
formerly owned, occupied or leased by the Companies, nor, to the knowledge of
the Companies or the Stockholders, any property adjacent to the Real Property
is being used or has been used for the treatment, generation, transportation,
processing, handling, production or disposal of any Hazardous Materials or as
a landfill or other waste disposal site and there has been no spill or release
of any Hazardous Materials (provided, however, that certain petroleum products
are stored and handled on the Real Property in the ordinary course of the
Companies' businesses in full compliance with all Environmental Laws including
the existing regulations of the United States Environmental Protection Agency
requiring spill protection, overfill protection and corrosion protection by
December 22, 1998 and all secondary containment requirements with respect to
above ground storage tanks), (ii) after the Initial Date (and, to the
knowledge of the Stockholders and the Companies, with respect to
investigations prior to the Initial Date), none of the Real Property or any
portion thereof, the Improvements or any property formerly owned, occupied or
leased by the Companies has been subject to investigation by any governmental
authority evaluating the need to investigate or undertake Remedial Action at
such property, and (iii) to the knowledge of the Companies and the
Stockholders, none of the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies, or any site or location
where the Companies sent waste of any kind, is identified on the current or
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proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B, (B)
Comprehensive Environmental Response Compensation and Liability Inventory
System list, or (C) any list arising from any statute analogous to CERCLA.
(d) Except as set forth on Schedule 2.11(d) hereto, after the
Initial Date (and, to the knowledge of the Stockholders and the Companies,
prior to the Initial Date), there have been and are no (i) aboveground or
underground storage tanks, subsurface disposal systems, or wastes, drums or
containers disposed of or buried on, in or under the ground or any surface
waters, (ii) asbestos or asbestos containing materials or radon gas, (iii)
polychlorinated biphenyls ("PCB") or PCB-containing equipment, including
transformers, or (iv) wetlands (as defined under any Environmental Law)
located within any portion of the Real Property, nor have any liens been
placed upon any portion of the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies in connection with any
actual or alleged liability under any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is
no pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Companies, the Real Property, the
Improvements, any property formerly owned, leased or occupied by the
Companies, any offsite contamination affecting the business of the Companies
or any operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to
any Remedial Action or other environmentally related claim, (iii) the
Companies have not submitted notice pursuant to Section 103 of CERCLA or
analogous statute or notice under any other applicable Environmental Law
reporting a release of a Hazardous Material into the environment, and (iv) the
Companies have not received any notice, claim, demand, suit or request for
information from any governmental or private entity with respect to any
liability or alleged liability under any Environmental Law, nor to the
knowledge of the Stockholders and the Companies, has any other entity whose
liability therefor, in whole or in part, may be attributed to the Companies,
received such notice, claim, demand, suit or request for information.
(f) The Stockholders and the Companies have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Companies and any property
formerly owned, occupied or leased by the Companies, and have permitted (or
will have permitted as of the Closing Date), the testing of the soil,
groundwater, building components, tanks, containers and equipment on the Real
Property, the Improvements, and any property formerly owned, occupied or
leased by the Companies, by UAG or UAG's agents or experts as they have or
shall have deemed necessary or appropriate to confirm the condition of such
properties. Any
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testing shall not be construed as a waiver of any rights which UAG has arising
out of the representations and warranties contained herein.
2.12. INVENTORIES.
The values at which inventories are carried on the Company
Financial Statements reflect the normal inventory valuation policies of the
Companies, and, in the case of the Company Balance Sheets, such values are in
conformity with GAAP consistently applied. All inventories reflected on the
Company Balance Sheets and Company Factory Statements or arising since the
date thereof are currently marketable and can reasonably be anticipated to be
sold at normal mark-ups within 90 days after the date hereof in the ordinary
course of business, except for spare parts inventory which inventory is
carried at the lower of cost or market (with market being equal to the amount
of any refund that would be paid by manufacturer if the parts are returned).
2.13. ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Balance Sheets
(net of reserves) are, and all accounts receivable that will be or will have
been reflected on the Closing Date Balance Sheets will be, good, and have been
or will have been collected or are collectible, without resort to litigation,
within 90 days of the Closing Date, and are subject to no defenses, setoffs or
counterclaims other than normal cash discounts accrued in the ordinary course
of business.
2.14. INSURANCE.
All material properties and assets of the Companies which are of
an insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner customary for companies engaged in
similar businesses or owning similar assets. Set forth on Schedule 2.14 hereto
is a list and brief description (including the name of the insurer, the type
of coverage provided, the amount of the annual premium for the current policy
period, the amount of remaining coverage and deductibles and the coverage
period) of all policies for such insurance and the Companies have made or will
make available to UAG true and complete copies of all such policies. All such
policies are in full force and effect, are sufficient for all applicable
requirements of law and will not in any way be affected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement. No notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by the
Companies.
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2.15. CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall
mean all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on Schedule 2.10
hereto) to which any of the Companies is a party or by which any of the
Companies or any of their respective assets or properties (including the Real
Property and the Improvements) may be bound or affected, including all
amendments, modifications, extensions or renewals of any of the foregoing. Set
forth on Schedule 2.15 hereto is a complete and accurate list of each Company
Agreement which is material to the business, operations, assets, condition
(financial or otherwise) or prospects of any of the Companies. True and
complete copies of all written Company Agreements referred to on Schedule 2.15
and Schedule 2.10 hereto, exclusive of individual vehicle titles and/or
manufacturer's certificates of origin and floor plan liens applicable to
individual vehicles, have been delivered or made available to UAG, and the
Companies have provided UAG with accurate and complete written summaries of
all such Company Agreements which are unwritten. Except as set forth on
Schedule 2.15, the Companies are not, nor, to the knowledge of the Companies
and the Stockholders is, any other party thereto, in material breach of or
default under any Company Agreement, and no event has occurred which (after
notice or lapse of time or both) would become a material breach or default
under, or would permit modification, cancellation, acceleration or termination
of, any Company Agreement or result in the creation of any Lien upon, or any
Person obtaining any right to acquire, any properties, assets or rights of the
Companies in any such case where such breach, default or other event would
have, or could reasonably be expected to have, a Material Adverse Effect.
There are no material unresolved disputes involving any of the Companies under
any Company Agreement.
2.16. LABOR RELATIONS.
(a) The Companies have paid or made provision for the payment of
all salaries and accrued wages and have complied in all material respects with
all applicable laws, rules and regulations relating to the employment of
labor, including those relating to wages, hours, collective bargaining and the
payment and withholding of taxes, and have withheld and paid to the
appropriate governmental authority, or are holding for payment not yet due to
such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of their employees.
(b) Except as set forth on Schedule 2.16(b) hereto, none of the
Companies is a party to any (i) outstanding employment agreements or contracts
with officers or employees that are not terminable at will, or that provide
for payment of
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any bonus or commission, (ii) agreement, policy or practice that requires it to
pay termination or severance pay to salaried, non-exempt or hourly employees
(other than as required by law), (iii) collective bargaining agreement or other
labor union contract applicable to persons employed by the Companies, nor do
the Stockholders or the Companies know of any activities or proceedings of any
labor union to organize any such employees. The Companies have furnished to UAG
complete and correct copies of all such agreements ("Employment and Labor
Agreements"). The Companies have not breached or otherwise failed to comply
with any provisions of any Employment or Labor Agreement.
(c) Except as set forth in Schedule 2.16(c) hereto, (i) there is
no unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholders' or
the Companies' knowledge, threatened, against or affecting the Companies, and
the Companies have not experienced any strike, material slow down or material
work stoppage, lockout or other collective labor action by or with respect to
employees of the Companies, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Companies,
(iv) there are no charges with respect to or relating to the Companies pending
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment
practices, (v) the Companies have not received formal notice from any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of the Companies
and, to the knowledge of the Companies, no such investigation is in progress
and (vi) the consents of the unions that are parties to any Employment and
Labor Agreements are not required to complete the transactions contemplated by
this Agreement and the Documents.
(d) The Companies have never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the
regulations promulgated therein.
2.17. EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete
list of:
(i) each employee pension benefit plan, as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Companies or to which the Companies are required to
make contributions ("Pension Benefit Plan"); and
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(ii) each employee welfare benefit plan, as defined in Section
3(i) of ERISA, maintained by the Companies or to which the Companies are
required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare Benefit
Plans (collectively, "ERISA Plans") have been delivered to or made available
to UAG together with, as applicable with respect to each such ERISA Plan,
trust agreements, summary plan descriptions, all IRS determination letters or
applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(a) of the Code, and valuation or actuarial
reports, accountant's opinions, financial statements, IRS Form 5500s (or
5500-C or 5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on
Schedule 2.17(b):
(i) there is no ERISA Plan which is a " multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Companies
or the Stockholders) is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of ERISA or under
Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by the
IRS or (to the knowledge of the Companies and the Stockholders) no such
action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under Section
401(a) of the
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Code or that any trust established under a Pension Benefit
Plan is not exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of Section
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Companies since the effective date of ERISA and all premiums due and
owing to the PBGC have been timely paid;
(ii) the PBGC has not notified the Companies or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of
ERISA to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Companies or the Stockholders)
is threatened or about to occur which would constitute a reportable
event within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412
of the Code); and
(v) if any of such Pension Benefit Plans were to be terminated on
the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Companies and (B) all benefits accrued to the day prior
to the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such
plan for valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
(f) The approximate aggregate of the amounts of contributions by
the Companies to be paid or accrued under ERISA Plans for the current fiscal
year is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"),
and the Aggregate ERISA Contributions are not expected to exceed the total
amount set forth on Schedule 2.17(f). To the extent required in accordance
with GAAP, the Company Balance Sheets reflect in the aggregate an accrual of
all amounts of employer contributions accrued but unpaid by the Companies
under the ERISA Plans as of the date of the Company Balance Sheet.
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(g) With respect to any Multiemployer Plan (1) the Companies have
not, since their formation, made or suffered a "complete withdrawal" or
"partial withdrawal" as such terms are respectively defined in Sections 4203
and 4205 of ERISA; (2) there is no withdrawal liability of the Companies under
any Multiemployer Plan, computed as if a "complete withdrawal" by the
Companies had occurred under each such Plan as of December 31, 1996; and (3)
the Companies have not received notice to the effect that any Multiemployer
Plan is either in reorganization (as defined in Section 4241 of ERISA) or
insolvent (as defined in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Companies under Welfare
Benefit Plans with respect to any condition which relates to a claim
filed on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18. OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on Schedule 2.18(a) hereto is a true and complete
list of:
(i) each employee stock purchase, employee stock option, employee
stock ownership, deferred compensation, performance, bonus, incentive,
vacation pay, holiday pay, insurance, severance, retirement, excess
benefit or other plan, trust or arrangement which is not an ERISA Plan
whether written or oral, which the Companies maintain or are required to
make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Companies pursuant to
which payments may be required to be made at any time following the date
hereof (including, without limitation, any employment, deferred
compensation, severance, supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of the Companies whose aggregate compensation
for the fiscal year ended December 31, 1996 exceeded $75,000. True and
complete copies of all of the written plans, arrangements and agreements
referred to on Schedule 2.18(a) ("Compensation Commitments") have been
provided to UAG together with, where prepared by or for the Companies,
any valuation, actuarial or accountant's opinion or other financial
reports with respect to each Compensation Commitment for the last three
years. An accurate and complete written summary has been provided to UAG
with respect to any Compensation Commitment which is unwritten.
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(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by the
IRS or any other federal or state agency and (to the knowledge of the
Companies or the Stockholders) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance with
the reporting and disclosure requirements imposed under ERISA and the
Code.
2.19. TRANSACTIONS WITH INSIDERS.
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Companies or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since December 31, 1996 (or July 31, 1996 with respect to Gene Reed
Chevrolet).
2.20. PROPRIETY OF PAST PAYMENTS.
No funds or assets of the Companies have been used for illegal
purposes; no unrecorded funds or assets of the Companies have been established
for any purpose; no accumulation or use of the Companies' corporate funds or
assets has been made without being properly accounted for in the respective
books and records of the Companies; all payments by or on behalf of the
Companies have been duly and properly recorded and accounted for in their
respective books and records; no false or artificial entry has been made in
the books and records of the Companies for any reason; no payment has been
made by or on behalf of the Companies with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payment; and the Companies have not made, directly
or indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state,
local or foreign government agency or entity has initiated or threatened any
investigation of any payment made by the Companies of, or alleged to be of,
the type described in this Section 2.20.
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2.21. INTEREST IN COMPETITORS.
Except as set forth on Schedule 2.21, neither the Companies nor
the Stockholders, nor any of their Affiliates, have any interest, either by
way of contract or by way of investment (other than as holder of not more than
2% of the outstanding capital stock of a publicly traded Person, so long as
such holder has no other connection or relationship with such Person) or
otherwise, directly or indirectly, in any Person other than the Companies that
is engaged in the retail sale of automobiles or light duty trucks.
2.22. BROKERS.
Neither the Companies, nor any director, officer or employee
thereof, nor the Stockholders or any representative of the Stockholders, has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Documents.
2.23. ACCOUNTS.
Schedule 2.23 hereof correctly identifies each bank account
maintained by or on behalf or for the benefit of the Companies and the name of
each person with any power or authority to act with respect thereto.
2.24. DISCLOSURE.
Neither the Companies nor the Stockholders have made any material
misrepresentation to UAG relating to the Companies or the Shares or the Real
Property or Improvements and neither the Companies nor the Stockholders have
omitted to state to UAG any material fact relating to the Companies or the
Shares or the Real Property or Improvements which is necessary in order to
make the information given by or on behalf of the Companies or the
Stockholders to UAG not misleading. To the knowledge of the Companies and the
Stockholders, no fact, event, condition or contingency exists or has occurred
which has, or in the future can reasonably be expected to have, a Material
Adverse Effect, which has not been disclosed in the Company Financial
Statements or the Schedules to this Agreement.
2.25. NET WORTH.
On the Closing Date, the Net Worth of the Companies will be equal
to or greater than the Net Worth set forth on the Company Balance Sheets less
Four Hundred Eighty Three Thousand Ninety-Six Dollars ($483,096).
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 3 are to be delivered by the
Stockholders no later than twenty (20) Business Days after the Effective Date
hereof, the Stockholders hereby represents and warrants to UAG as follows:
3.1. OWNERSHIP OF SHARES; TITLE.
The Stockholders are the owner of record and beneficially of the
Shares as set forth on Schedule 3.1 hereof and has, and shall transfer to UAG
at the Closing, good and marketable title to the Shares owned by him, free and
clear of any and all security interests, pledge agreements, Liens,
encumbrances, proxies and voting or other agreements except restrictions on
transfer imposed by applicable federal and state securities laws.
3.2. AUTHORITY.
The Stockholders has full legal capacity and is competent to
execute, deliver and perform this Agreement and the Documents to which he is a
party and to consummate the transactions contemplated hereby and thereby
(including the disposition of the Shares to UAG as contemplated by this
Agreement). This Agreement has been duly executed and delivered by the
Stockholders and constitutes, and the Documents to which the Stockholders are
parties when executed and delivered by the Stockholders will constitute, valid
and binding obligations of the Stockholders, enforceable against them in
accordance with their terms. Except as set forth on Schedule 3.2, the
execution, delivery and performance of this Agreement and the Documents by the
Stockholders and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to
which the Stockholders are a party or to which the Stockholders or any
of their property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Stockholders or any of the Stockholders' businesses or
properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or
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judicial authority, except in connection with or in compliance with the
provisions of the H-S-R Act.
3.3. REAL PROPERTY AND IMPROVEMENTS.
The Real Property and Improvements owned by Mr. Reed or his
Affiliates are owned in fee simple, free and clear of all Liens, claims and
encumbrances, except those disclosed in Schedule 3.3(a), none of which
currently or, to the knowledge of Mr. Reed or his Affiliates, in the future
will materially affect the use of such Real Property or such Improvements for
the conduct of the respective businesses of the Companies as presently
conducted. No assessments have been made against any portion of the Real
Property which are unpaid (except ad valorem taxes for the current year that
are not yet due and payable), whether or not they have become Liens. There are
no disputes concerning the location of the lines and corners of the Real
Property. No one has been granted any right to purchase or lease such Real
Property or Improvements other than the existing leases in favor of the
Companies, which are to be terminated at the Closing by agreement between the
parties and pursuant to which the owners shall acknowledge that there are no
defaults under any such leases and that the Companies have no liability
arising out of or relating to such leases. Attached as Schedule 3.3(b) are all
surveys, title binders, title policies and copies of any exceptions to title
relating to such Real Property or Improvements.
3.4. INVESTMENT INTENT.
The Stockholders have no present plan, intention or arrangement to
dispose of any of the UAG Common Stock received by them pursuant to the terms
of this Agreement.
3.5. QUALIFICATION OF STOCKHOLDERS.
Each Stockholder (i) is an "accredited investor" within the
meaning of Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), and is acquiring the UAG Common Stock to be issued pursuant
to the terms of this Agreement for his own account and not with a view to, or
for resale in connection with, any distribution thereof; (ii) understands and
acknowledges that such UAG Common Stock has not been registered under the
Securities Act or any state securities laws by reason of certain exemptions
from the registration provisions thereof which depend upon, among other
things, the bona fide nature of Mr. Reed's investment intent as expressed
herein; (iii) is able to bear the economic risk of investment in such UAG
Common Stock and has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of such UAG
Common Stock; (iv) acknowledges that the UAG shares were not offered to him by
means of publicly disseminated advertisements or sales literature, or as part
of a general solicitation; (v) acknowledges that in deciding to proceed with
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the transaction set forth herein he has relied solely on his own independent
investigation of UAG and upon the representations of UAG set forth herein; and
(vi) understands and acknowledges that such UAG Common Stock will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act and that the certificates representing such UAG Common Stock
will bear a legend restricting transfer unless (A) the transfer is exempt from
the registration requirements under the Securities Act and any applicable
state securities law and an opinion of counsel reasonably satisfactory to UAG
that such transfer is exempt therefrom is delivered to UAG or (B) the transfer
is made pursuant to an effective registration statement under the Securities
Act and any applicable state securities law.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 4 are to be delivered by UAG no later
than twenty (20) Business Days after the Effective Date hereof, UAG hereby
represents and warrants to the Companies and the Stockholders as follows:
4.1. ORGANIZATION AND GOOD STANDING.
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business
and to carry on its business as now being conducted. UAG is duly qualified to
do business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG would not, or could not
reasonably be expected to, in the aggregate have a Material Adverse Effect on
UAG, taken as a whole. UAG has made available to the Stockholders complete and
correct copies of its charter and by-laws, as amended and presently in effect.
4.2. CAPITALIZATION.
The authorized stock of UAG and the number of shares of capital
stock which are issued and outstanding are set forth on Schedule 4.2 hereto.
The shares listed on Schedule 4.2 hereto constitute all the issued and
outstanding shares of capital stock of UAG and have been validly authorized
and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law
and no personal liability attaches to the ownership thereof.
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4.3. SEC FILINGS.
UAG has heretofore made available to Mr. Reed UAG's Registration
Statement on Form S-1 as declared effective by the SEC on October 23, 1996,
and UAG's Annual Report on Form 10-K for the period ending December 31, 1996
(the "SEC Filings"). As of their respective dates, the SEC filings did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.4. AUTHORITY; APPROVALS AND CONSENTS.
UAG has the corporate power and authority to enter into this
Agreement and the Documents to which it is a party and to perform its
obligations hereunder and thereunder. At the time of the Closing, the
execution, delivery and performance of this Agreement and the Documents to
which it is a party and the consummation of the transactions contemplated
hereby and thereby will have been duly authorized and approved by the Board of
Directors of UAG and no other corporate proceedings on the part of UAG will be
necessary to authorize and approve this Agreement and the Documents and the
transactions contemplated hereby and thereby. This Agreement has been, and on
the Closing Date the Documents will be, duly executed and delivered by, and
constitute a valid and binding obligation of, UAG, enforceable against UAG in
accordance with their respective terms. Except as set forth on Schedule 4.4
hereto, the execution, delivery and performance by UAG of this Agreement and
the Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or Bylaws of UAG;
(ii) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any UAG Agreement or require
any consent or waiver of any party to any UAG Agreement;
(iii) result in the creation of any security interest upon, or any
person obtaining any right to acquire, any properties, assets or rights
of UAG;
(iv) violate or conflict with any Legal Requirements applicable to
UAG or its respective businesses or properties that would or could
reasonably be expected to have a Material Adverse Effect on UAG, taken
as a whole; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or
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qualification with, any governmental, administrative or judicial
authority, except in connection with or in compliance with the provisions
of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental administrative or judicial authority is necessary to be
obtained or made by UAG to enable UAG to continue to conduct its business and
operations and use its properties after the Closing in a manner which is in
all material respects consistent with that in which they are presently
conducted.
4.5. FINANCIAL STATEMENTS.
Attached as Schedule 4.5 are true and complete copies of:
(a) the consolidated balance sheet of UAG as of December 31, 1996,
and the related consolidated statements of income, stockholders' equity and
cash flows for the fiscal years ended on such dates, together with the notes
thereto, in each case examined by and accompanied by the report of Coopers &
Lybrand, independent certified public accountants.
The foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG,
fairly present the consolidated financial position, results of operations,
stockholders' equity and changes in financial position of UAG as of the dates
and for the periods indicated, in each case in conformity with GAAP
consistently applied (except as otherwise indicated in such statements) during
such periods, and can be legitimately reconciled with the financial statements
and the financial records maintained and the accounting methods applied by UAG
for federal income tax purposes, and the unaudited financial statements
included in the UAG Financial Statements indicate all adjustments, which
consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the UAG Financial
Statements do not contain any items of special or nonrecurring income except
as expressly specified therein, and the balance sheets included in the UAG
Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets. The books and accounts of UAG are complete and
correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses
of UAG consistent with prior practices of UAG.
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4.6. TAXES.
UAG and, for any period during all or part of which the tax
liability of any other corporation was determined on a combined or
consolidated basis with UAG, any such other corporation, have filed timely all
federal, state, local and foreign tax returns, reports and declarations
required to be filed (or have obtained or timely applied for an extension with
respect to such filing) correctly reflecting the Taxes and all other
information required to be reported thereon and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by UAG or any such other corporation.
In the ordinary course, UAG makes adequate provision on its books for the
payment of all Taxes (including for the current fiscal period) owed by UAG.
UAG has not been subject to a federal or state tax audit of any kind, and no
adjustment has been proposed by the IRS with respect to any return for any
subsequent year. UAG knows of no basis for an assertion of a deficiency for
Taxes against UAG.
4.7. ABSENCE OF UNDISCLOSED LIABILITIES.
UAG does not have any material liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, liabilities for Taxes (as
defined in Section 4.6), except for (i) liabilities reflected or reserved
against the most recent UAG Financial Statement, (ii) liabilities disclosed in
the SEC filings, (iii) current liabilities incurred in the ordinary course of
business and consistent with past practice after the date of the UAG Balance
Sheet which, individually and in the aggregate, do not have, and cannot
reasonably be expected to have a Material Adverse Effect on UAG, taken as a
whole, and (iv) liabilities disclosed on Schedule 4.7 hereto.
4.8. DISCLOSURE.
UAG has not made any material misrepresentation to the Companies
or the Stockholders relating to this Agreement and UAG has not omitted to
state to the Companies or the Stockholders any material fact relating to this
Agreement which is necessary in order to make the information given by or on
behalf of UAG to the Companies or the Stockholders or their representatives at
or prior to Closing not misleading. To the Knowledge of UAG, no fact, event,
condition or contingency exists or has occurred which has, or in the future
can reasonably be expected to have, a Material Adverse Effect on UAG, taken as
a whole, which has not been disclosed in the SEC Filings or the Schedules to
this Agreement.
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4.9. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1996, UAG has operated in the ordinary
course of business consistent with past practice, except as set forth on
Schedule 4.9(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
UAG , taken as a whole, and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have a
Material Adverse Effect on UAG, taken as a whole.
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of UAG , whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of UAG ; or
(b) Since December 31, 1996, except as set forth in Schedule
4.9(b) hereto, UAG has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice and except in
connection with the acquisition of additional dealerships;
(ii) failed to discharge or satisfy any lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) sold or transferred any assets or canceled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(iv) defaulted on any material obligation;
(v) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not
reflected in the UAG Financial Statements; or
(vi) entered into any agreement or made any commitment to do any
of the foregoing that has not been terminated.
4.10. INSURANCE.
All properties and assets of UAG which are of an insurable
character are insured against loss or damage by fire and other risks to the
extent and in the manner reasonable in light of the risks attendant to the
businesses and activities in
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which UAG is or has been engaged and customary for companies engaged in similar
businesses or owning similar assets.
4.11. BROKERS.
Neither UAG nor any director, officer or employee thereof, has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Documents.
4.12. PROPRIETY OF PAST PAYMENTS.
No funds or assets of UAG have been used for illegal purposes; no
unrecorded funds or assets of UAG have been established for any purpose; no
accumulation or use of UAG's corporate funds or assets has been made without
being properly accounted for in the respective books and records of UAG; all
payments by or on behalf of UAG have been duly and properly recorded and
accounted for in their respective books and records; no false or artificial
entry has been made in the books and records of UAG for any reason; no payment
has been made by or on behalf of UAG with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payment; and UAG has not made, directly or
indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state,
local or foreign government agency or entity has initiated or threatened any
investigation of any payment made by UAG of, or alleged to be of, the type
described in this Section 4.12.
4.13. ENVIRONMENTAL MATTERS.
UAG and the UAG Subsidiaries have not violated, done or suffered
any act which could give rise to liability under and, to the knowledge of UAG,
are not otherwise exposed to liability under, any Environmental Law which
could reasonably be expected to have a material adverse effect on the
financing condition of UAG and the UAG Subsidiaries taken as a whole.
4.14. EMPLOYEE BENEFIT PLANS.
UAG and the UAG Subsidiaries are not subject to any liability
under any employee pension benefit plans or employee welfare benefit plans (as
defined in ERISA) maintained by UAG or any UAG Subsidiary which could
reasonably be expected to have a material adverse effect on the financial
condition of UAG and the UAG Subsidiaries, taken as a whole.
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ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholders
and the Companies will (i) provide to the officers and other authorized
representatives of UAG full access, during normal business hours, to any and
all premises, properties, files, books, records, documents, and other
information of the Companies and will cause their officers to furnish to UAG
and their authorized representatives any and all financial, technical and
operating data and other information pertaining to the businesses and
properties of the Companies, and (ii) make available for inspection and
copying by UAG true and complete copies of any documents relating to the
foregoing. UAG will hold in confidence (unless and to the extent compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law) all Confidential Information (as
defined below) and will not disclose the same to any third party except in
connection with obtaining financing and otherwise as may reasonably be
necessary to carry out this Agreement and the transactions contemplated
hereby, including any due diligence review by or on behalf of UAG. If this
Agreement is terminated, UAG will promptly return to the Companies, upon the
reasonable request of the Companies, all Confidential Information furnished by
the Companies and held by UAG, including all copies and summaries thereof. As
used herein, "Confidential Information" shall mean all information concerning
the Companies obtained by UAG from the Companies in connection with the
transactions contemplated by this Agreement, except information (x)
ascertainable or obtained from public information, (y) received from a third
party not employed by or otherwise affiliated with the Companies unless such
information is received from a third party in violation of a duty such third
party owes to the Companies not to disclose such information, or (z) which is
or becomes known to the public, other than through a breach by UAG of this
Agreement. The Stockholders will hold in confidence (unless and to the extent
compelled to disclose by judicial or administrative process, or, in the
opinion of his counsel, by other requirements of law) all UAG Confidential
Information (as defined below) and will not disclose the same to any third
party except as may reasonably be necessary to carry out this Agreement and
the transactions contemplated hereby, including any due diligence review by or
on behalf of the Stockholders. If this Agreement is terminated, the
Stockholders will promptly return to UAG, upon the reasonable request of UAG,
all UAG Confidential Information furnished by UAG and held by the
Stockholders, including all copies and summaries thereof. As used herein, "UAG
Confidential Information" shall mean all information concerning UAG obtained
by the Stockholders in connection with the transactions contemplated by this
Agreement, except information (x) ascertained or obtained from public
information, (y) received from a third party not employed or otherwise
affiliated with UAG
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unless such information is received from a third party in violation of a duty
such third party owes to UAG not to disclose such information, or (z) which is
or becomes known to the public, other than through a breach by the Stockholders
of this Agreement.
5.2. FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Companies, on the one hand, and UAG, on
the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the Stockholders
and the Companies or UAG, respectively, required for inclusion in any
statement or application made by UAG or the Companies to any governmental or
regulatory body or in connection with obtaining any third party consent in
connection with the transactions contemplated by this Agreement. Neither the
Stockholders nor the Companies, on the one hand, nor UAG, on the other hand,
or any representative thereof, shall issue any press releases or otherwise
make any public statement with respect to the transactions contemplated hereby
without the prior consent of the other, except as may be required by law
(including federal or state securities laws) as determined by such parties'
counsel.
5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG, the Stockholders and the Companies, as applicable, shall each
file or cause to be filed with the Federal Trade Commission and the United
States Department of Justice any notifications required to be filed by the
respective "ultimate parent" entities under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules and
regulations promulgated thereunder, with respect to the transactions
contemplated herein. The parties shall use their best efforts to make such
filings promptly, to respond to any requests for additional information made
by either of such agencies, to cause the waiting periods under the H-S-R Act
to terminate or expire at the earliest possible date and to resist vigorously,
at their respective cost and expense (including, without limitation, the
institution or defense of legal proceedings), any assertion that the
transactions contemplated herein constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
herein; provided, however, that if UAG or the Stockholders shall determine
after issuance of any preliminary injunction that continuing such resistance
is not in its or his best interests, UAG or the Stockholders, as the case may
be, may, by written notice to the other party, terminate this Agreement with
the effect set forth in Section 8.2 hereof.
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5.4. CERTAIN CHANGES AND CONDUCT OF BUSINESS OF THE COMPANIES.
(a) From and after the date of this Agreement and until the
Closing Date, the Companies shall, and the Stockholders shall cause the
Companies to, conduct their respective businesses solely in the ordinary
course consistent with past practice and, without the prior written consent of
UAG, neither the Stockholders nor the Companies will, except as required or
permitted pursuant to the terms hereof, permit the Companies to:
(i) make any material change in the conduct of their respective
businesses and operations or enter into any transaction other than in
the ordinary course of business consistent with past practice;
(ii) make any change in their Articles of Incorporation or Bylaws,
issue any additional shares of capital stock or equity securities or
grant any option, warrant or right to acquire any capital stock or
equity securities or issue any security convertible into or exchangeable
for their capital stock or alter any term of any of their outstanding
securities or make any change in their outstanding shares of capital
stock or other ownership interests or their capitalization, whether by
reason of a reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, stock dividend or
otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for borrowed
money, issue any notes, bonds, debentures or other corporate securities
or grant any option, warrant or right to purchase any thereof, except
pursuant to transactions in the ordinary course of business consistent
with past practice, (B) issue any securities convertible or exchangeable
for debt securities of the Companies, or (C) issue any options or other
rights to acquire from the Companies, directly or indirectly, debt
securities of the Companies or any security convertible into or
exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of their assets or any part thereof, except
transactions pursuant to existing contracts set forth in Schedule 2.15
hereto and dispositions of inventory or of worn-out or obsolete
equipment for fair or reasonable value in the ordinary course of
business consistent with past practices;
(v) subject any of their assets, or any part thereof, to any Lien
or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by operation
of law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
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(vi) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination
thereof) in respect of any shares of their capital stock (other than
distributions of net income attributable to periods after December 31,
1996 as long as such distributions could not reasonably be expected to
adversely effect the business or operation of the Companies) or redeem,
retire, purchase or otherwise acquire, directly or indirectly, any
shares of their capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of
business consistent with past practices;
(viii) enter into any new (or amend any existing) employee benefit
plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general
increase in the compensation of officers or employees (including any
such increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment) or grant any increase in the compensation payable or
to become payable to any employee, except in accordance with
pre-existing contractual provisions or consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $200,000;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by the Companies (or on
behalf of the Companies) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP or write-down the
value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with
past practices;
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(xv) settle, release or forgive any material claim or litigation
or waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
(xvii) take any other action that would cause any of the
representations and warranties made by the Companies in this Agreement
not to remain true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date of this Agreement and until the
Closing Date, the Companies shall, and the Stockholders shall cause the
Companies to, use their reasonable best efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable
for their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event the Companies shall receive notice that there exists a violation
of any Environmental Law with respect to their operations or any Real
Property, promptly (and in any event within the time period permitted by
the applicable governmental authority) remove or remedy such violation
in accordance with all applicable Environmental Laws except where the
noticed violation is contested in good faith and by appropriate
proceedings diligently conducted; provided, however, that any
remediation or removal shall be subject to the prior approval of UAG;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when
due all taxes, assessments, fees and other charges lawfully levied or
assessed against the Companies unless the validity thereof is contested
in good faith and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) continue to conduct their respective businesses in the
ordinary course consistent with past practices.
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(c) From and after the date of this Agreement and until the
Closing Date, the Stockholders shall not, except with the prior written
consent of UAG and except as required or permitted pursuant to the terms
hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed other than
non-material Liens in the ordinary course of business consistent with
past practice;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholders in this Agreement
not to remain true and correct in all material respects; or
(iv) commit himself to do any of the foregoing.
5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on Schedule 5.5 hereto, at the Closing there
will be no intercompany payables or intercompany receivables due and/or owing
between the Stockholders and his Affiliates (other than the Companies) on the
one hand, and the Companies, on the other hand, other than those incurred in
the ordinary course of business and disclosed in the Notes to the Company
Financial Statements.
5.6. NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the
termination of this Agreement pursuant to clause (ii) of Section 8.1 hereof,
neither the Stockholders, nor the Companies, nor their officers, directors,
employees, advisors, agents, representatives, Affiliates or anyone acting on
behalf of the Stockholders, the Companies or such persons, shall, directly or
indirectly, encourage, solicit, initiate or engage in discussions or
negotiations with, or provide any information to, any person (other than UAG
or its representatives) concerning any merger, sale of assets (other than in
the ordinary course of business), purchase or sale of shares of capital stock
or similar transaction involving the Companies or purchase or sale of any of
the Real Property or Improvements. The Stockholders shall promptly communicate
to UAG any inquiries or communications concerning any such transaction
(including the identity of any person making such inquiry or communication)
which the Stockholders may receive or of which the Stockholders may become
aware.
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5.7. CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the Companies
and UAG will use their respective best efforts at their own expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all
third parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on their
respective parts for (A) the consummation of the transactions
contemplated by this Agreement, (B) the ownership or leasing and
operating after the Closing by the Companies of all their material
properties and (C) the conduct after the Closing by the Companies of
their respective businesses as conducted by them on the date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
5.8. ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Each of the parties agrees to execute and deliver any and all documents that
the respective manufacturers typically require a selling dealer or an
acquiring dealer to execute in connection with the transfer of a dealership.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the parties and
the proper officers of the Companies shall take all such necessary action.
5.9. INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after
the date of this Agreement, the Companies will deliver to UAG the most recent
monthly and year-to-date financial statements provided to each franchiser of
the Companies. All
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such statements shall fairly present the financial position, results of
operations and cash flow of the Companies as at the date or for the periods
indicated and shall be prepared on a basis consistent with the Company Factory
Statements attached hereto as Schedule 2.5.
5.10. NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement will
give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in Article 6 or
Article 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions contemplated by this Agreement,
and (iv) in the case of the Stockholders and the Companies, any notice of, or
other communication relating to, any default or event which, with notice or
lapse of time or both, would become a default under any Company Agreement. The
Stockholders shall (x) promptly advise UAG of any event that has, or could in
the future have, a Material Adverse Effect (y) confer on a regular basis with
one or more designated representatives of UAG to report operational matters
and to report the general status of ongoing operations, and (z) notify UAG of
any emergency or other change in the normal course of business or in the
operation of the properties of the Companies and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) or adjudicatory proceedings involving the Companies
or any of their assets or operations, and will keep UAG fully informed of such
events and permit UAG's representatives access to all materials prepared in
connection therewith. The Stockholders shall give prompt notice to UAG of any
notice or other communication from any third person asserting any right, title
or interest in any of the Shares held by the Stockholders (including, without
limitation, any threat to commence, or notice of the commencement of any
action or other proceeding with respect to any of the Shares) or the
occurrence of any other event of which the Stockholders have knowledge which
could result in any failure to consummate the sale of the Shares as
contemplated hereby.
5.11. ASSURANCE BY THE STOCKHOLDERS.
The Stockholders shall cause each of the Companies to comply with
their respective covenants set forth in this Agreement.
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5.12. SECTION 338(H)(10) ELECTION.
The Stockholders agrees to join with UAG, if UAG so requests, in
making a timely election with respect to any of the Companies to treat the
purchase and sale of the Shares relating to such Company pursuant to this
Agreement as a sale of all of such Companies' assets under Section 338(h)(10)
of the Internal Revenue Code of 1986, as amended (the "Code"), as permitted
pursuant to Section 1.338(h)(10)-1(a) of the Treasury Regulations promulgated
thereunder. In the event of such an election, UAG agrees to promptly pay to
the Stockholders the amount of any additional federal, state or other tax
(including any penalties and interest thereon) that is imposed on the
Stockholders by reason of making such an election. Thus, in the event that the
federal, state and/or other tax imposed on the Stockholders by reason of the
stock sale exceeds the tax that would have been imposed if no such election
had been made, UAG will be responsible for such excess. UAG further agrees to
"gross up" any payment to the Stockholder pursuant to this paragraph to take
into account that any such payment would itself be subject to income tax.
Stockholders agree to cooperate with UAG to cause the Company to timely file
for federal and/or state income tax purposes, with respect to the Company's
final short period as an S corporation under the Code through the Closing
Date, any return or extension of the due date thereof as required under the
Code to effect or reflect any such election under Section 338(h) (10) of the
Code.
5.13. NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years
thereafter, the Stockholders and their Affiliates shall not knowingly
interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Companies or any customer,
supplier, manufacturer, distributor, consultant, independent contractor or
employee of the Companies and agrees not to solicit or hire any employee of
the Companies unless such employee has already terminated his or her
employment with the Companies.
5.14. ENVIRONMENTAL AUDITS.
Prior to the Closing, UAG will pay the costs for a Phase I
environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, then the expenses of performing the Phase II environmental audit
shall be paid one-half by UAG and one-half by the Stockholders; provided,
however, that the Stockholders may elect not to pay any costs of the Phase II
audit but, if the Stockholders elect not to pay one-half of the costs of the
Phase II audit and the results of the Phase II audit conclude that remediation
is required, the Stockholders shall pay the entire costs of the Phase II
audit. If the Phase II audit indicates that any remedial action is required
under any
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Environmental Laws and UAG reasonably determines that such remedial action is
required in order for (i) the applicable company to continue to operate its
business as conducted at the time of discovery of the need for remedial
action; or (ii) the applicable company not to incur any liability to any
Person as a result of the presence of the material which prompts the
recommendation for such remedial action, then the Stockholders shall pay the
costs of such remedial action; provided, however, that the Stockholders shall
only be required to pay the costs of the minimum remedial action required to
comply with applicable Environmental Laws to the extent provided above and
provided, further, that the Stockholders shall not be required to pay any
remedial costs that exceed $500,000 in the aggregate. If the Phase II report
concludes that remedial action is required in an amount that exceeds $500,000
in the aggregate and the Stockholders decide not to pay the costs of such
remediation then UAG may, at its option, terminate this Agreement pursuant to
Section 8.1 (iv). The Stockholders shall have the right to obtain a second
opinion with respect to the necessity of such remedial action within twenty
(20) days after the Phase II audit and if the two (2) environmental firms
cannot agree, they shall chose a third environmental company to make such
determination within thirty (30) days after the first Phase II audit. Such
third environmental company shall be independent of the parties and generally
accepted by major institutional lenders.
5.15. ACCESS TO RECORDS.
After Closing, UAG shall provide the Stockholders with reasonable
access to the books and records of the Companies to the extent necessary for
the Stockholders to comply with applicable tax laws. UAG will cooperate, and
will cause its Affiliates to cooperate, with the Stockholders in the filing of
any returns and in any audit or refund claims proceeding involving Taxes for
which the Stockholders may be liable or with respect to which the Stockholders
may be entitled to a refund.
5.16. CERTAIN CHANGES AND CONDUCT OF BUSINESS OF UAG.
(a) From and after the date hereof and until the Closing Date,
UAG will use its reasonable best efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable
for its current use except where to do so would not be economically
beneficial to UAG;
(ii) comply with all applicable Environmental Laws, and, in the
event UAG receive notices that there exists a violation of any
Environmental Law with respect to its operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy such violation in
accordance with all applicable Environmental Laws, except
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where the notice of violation is contested in good faith and by
appropriate proceedings diligently conducted;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when
due all taxes, assessments, fees and other charges lawfully levied or
assessed against UAG unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) not take any other action that would cause any of the
representations or warranties made by UAG in this Agreement not to
remain true and correct in all material respects.
5.17. LOAN FOR TAX OBLIGATION.
On April 15, 1998, UAG shall loan to the Stockholders cash in an
aggregate amount equal to the amount of Stockholders obligation to pay federal
and state income taxes as a result of the receipt of the UAG Shares. The
Stockholders shall tender a non-interest bearing note for the amount of such
loan, which note shall be due and payable on the day after the Adjustment
Date. The Stockholders shall provide reasonable security for the loan to be
agreed upon by the parties prior to UAG making the loan.
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ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
The obligations of UAG required to be performed by it at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG as
provided herein except as otherwise required by applicable law:
6.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Companies and
the Stockholders contained in this Agreement shall be true and correct as of
the date hereof and (having been deemed to have been made again at and as of
the Closing) shall be true and correct in all material respects as of the
Closing. Each of the obligations of the Companies and the Stockholders
required by this Agreement to be performed by them at or prior to the Closing
shall have been duly performed and complied with in all material respects as
of the Closing. At the Closing, UAG shall have received a certificate, dated
the Closing Date and duly executed by the Stockholders, to the effect that the
conditions set forth in the two preceding sentences have been satisfied.
6.2. AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Companies. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental
and regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Companies have entered into a franchise
agreement (or comparable instrument, mortgages, floor plan lenders and other
lenders)) required to consummate the transactions contemplated hereby and all
consents or waivers shall have been made or obtained.
6.3. OPINIONS OF THE COMPANIES' AND THE STOCKHOLDERS'S COUNSEL.
UAG shall have been furnished with the opinion of counsel for the
Companies and the Stockholders, dated the Closing
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Date, in form and substance reasonably satisfactory to UAG and its counsel,
which opinion shall have been rendered with respect to those matters contained
in Sections 2.1, 2.3, 2.4, 2.9, 3.1 and 3.2 hereof. In rendering the foregoing
opinion, such counsel may rely as to factual matters upon certificates or
other documents furnished by officers and directors of the Companies and by
government officials and upon such other documents and data as such counsel
deem appropriate as a basis for their opinions. Such counsel may specify the
state or states in which they are admitted to practice, that they are not
admitted to the Bar in any other state or experts in the law of any other
state and that such opinions are limited to North Carolina, South Carolina and
federal laws.
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6.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of UAG effectively to exercise full
rights of ownership of the Shares. No action, suit or proceeding before any
court or any governmental or regulatory entity shall be pending (or threatened
by any governmental or regulatory entity), and no investigation by any
governmental or regulatory entity shall have been commenced (and be pending),
seeking to restrain or prohibit (or questioning the validity or legality of)
the consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which UAG, in good faith and with the advice
of counsel, believes makes it undesirable to proceed with the consummation of
the transactions contemplated hereby.
6.5. NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 (and with respect to Gene
Reed Chevrolet from July 31, 1996) to the Closing Date, there shall not have
been any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of the Companies,
taken as a whole, and no factor, event, condition, circumstance or prospective
development exists which threatens or may threaten to have a Material Adverse
Effect on the Companies.
6.6. NET WORTH.
On the Closing Date, the Stockholders shall deliver to UAG a
balance sheet of the Companies in accordance with Section 1.4.
6.7. COMPLETION OF DUE DILIGENCE.
UAG shall have completed its due diligence examination of the
Companies, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Companies, shall be satisfactory to UAG.
6.8. NET INCOME.
Coopers & Lybrand or such other accounting firm as UAG may select
shall have confirmed to UAG that the 1996 Earnings (as defined in Section 1.4)
of the Companies are no less than Six Million Two Hundred Thousand Dollars
($6,200,000).
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6.9. LEASES.
The Companies and the Stockholders shall have entered into the
Leases.
6.10. BOARD APPROVAL.
The Board of Directors of UAG shall have approved the consummation
of all of the transactions contemplated by this Agreement.
6.11. CERTIFICATES.
The Stockholders and the Companies shall have furnished UAG with
such other certificates of its officers and others as UAG may reasonably
request to evidence compliance with the conditions set forth in this Article
6.
6.12. LEGAL MATTERS.
All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of the Stockholders and
the Companies under the provisions of this Agreement, and all other actions
and proceedings required to be taken by or on behalf of the Stockholders and
the Companies in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG.
6.13. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholders and the Companies shall have obtained the
consent, authorization and approval of each of the Companies' respective
manufacturers for the transfer of the Companies to UAG on terms no less
favorable to those granted to the Stockholders and the Companies immediately
prior to the execution of this Agreement.
6.14. NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect
to the properties that are the subject of the Leases.
6.15. TITLE INSURANCE.
UAG shall have obtained title insurance on behalf of the Companies
with respect to the leasehold estates arising out of the Leases in form and
substance satisfactory to UAG.
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6.16. SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG all
Schedules referred to herein and such Schedules shall be acceptable in form
and substance to UAG.
6.17. LEASE TERMINATION AGREEMENTS/MEMORANDA OF LEASE.
The appropriate parties shall have executed lease termination
agreements and memoranda of lease in form and substance satisfactory to UAG.
6.18. RESIGNATION OF THE COMPANIES' DIRECTORS.
Each of the persons who is a director of the Companies on the
Closing Date shall have tendered to UAG in writing his or her resignation as
such in form and substance satisfactory to UAG.
6.19. EMPLOYMENT AGREEMENTS.
UAG and Michael G. Lallier, Michael L. Reed and John P. Jones
shall have entered into an employment agreement in a form mutually agreeable
to such persons (the "Employment Agreements").
6.20. CONSULTING AGREEMENT.
UAG and Mr. Reed shall have entered into a Consulting Agreement
in a form mutually agreeable to UAG and Mr. Reed (the "Consulting Agreement").
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Companies required to
be performed by them at the Closing shall be subject to the satisfaction, at
or prior to the Closing, of each of the following conditions, each of which
may be waived by the Companies and the Stockholders as provided herein except
as otherwise required by applicable law:
7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG contained in
this Agreement shall be true and correct on the date made and shall be true
and correct in all material respects as of the Closing. Each of the
obligations of UAG required by this Agreement to be performed by it at or
prior to the Closing shall have been duly performed and complied with in all
material respects as of the Closing. At the Closing, the Stockholders shall
have received a certificate, dated the Closing Date and
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duly executed by UAG to the effect that the conditions set forth in the
preceding two sentences have been satisfied.
7.2. AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by
UAG. All filings required to be made under the H-S-R Act in connection with
the transactions contemplated hereby shall have been made and all applicable
waiting periods with respect to each such filing, including extensions
thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental
and regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Companies have entered into a franchise
agreement (or comparable instrument, mortgages, floor plan lenders and other
lenders)) required to consummate the transactions contemplated hereby and all
consents or waivers shall have been made or obtained.
7.3. OPINIONS OF UAG'S COUNSEL.
The Stockholders shall have been furnished with the opinion of
Rogers & Hardin, counsel to UAG, dated the Closing Date, in form and substance
reasonably satisfactory to the Stockholders and their counsel, which opinions,
when taken together, shall have been rendered with respect to those matters
contained in Section 4.1 hereof. In rendering the foregoing opinions, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of UAG and by government officials, and
upon such other documents and data as such counsel deems appropriate as a
basis for its opinion. Such opinions may be limited to federal laws and the
General Corporation Law of the State of Delaware.
7.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of the Stockholders to transfer the
Shares. No action, suit or proceeding before any court or any governmental or
regulatory entity shall be pending (or threatened by any governmental or
regulatory entity), and no investigation by any governmental or regulatory
entity shall have been commenced (and be pending), seeking to restrain or
prohibit (or questioning the validity or legality of) the consummation of the
transactions contemplated by this Agreement or seeking damages in connection
therewith which the Stockholders, in good faith and
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with the advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.
7.5. CERTIFICATES.
UAG shall have furnished the Stockholders with such certificates
of its officers and others to evidence compliance with the conditions set
forth in this Article 7 as may be reasonably requested by the Stockholders.
7.6. LEGAL MATTERS.
All certificates, instruments, opinions and other documents
required to be executed or delivered by or on behalf of UAG under the
provisions of this Agreement, and all other actions and proceedings required
to be taken by or on behalf of UAG in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for the Stockholders.
7.7. SCHEDULES.
UAG shall have delivered to the Stockholders all Schedules referred to in
Article 4 and such Schedules shall be acceptable in form and substance to the
Stockholders.
7.8. LEASES.
The Companies and the Stockholders shall have entered into the Leases.
7.9. NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 to the Closing Date, there shall not
have been any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of UAG, taken as a
whole, and no factor, event, condition, circumstance or prospective
development exists which threatens or may threaten to have a Material Adverse
Effect on UAG, taken as a whole.
7.10. EMPLOYMENT AGREEMENTS.
The appropriate persons and UAG shall have entered into the Employment
Agreements.
7.11. REGISTRATION RIGHTS AGREEMENT.
UAG shall have entered into a piggyback registration rights agreement in a
form to be agreed to by the parties which agreement shall be subject to any
existing contractual rights of third parties (the "Registration Rights
Agreement").
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7.12. CONSULTING AGREEMENT.
Mr. Reed and UAG shall have entered into the Consulting Agreement.
ARTICLE 8.
TERMINATION
8.1. TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall not
have taken place on or prior to June 15, 1997, or such later date as
shall have been approved by UAG and the Stockholders (provided that the
terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG if any of the conditions specified in Article 6 hereof
have not been met or waived by UAG at such time as such condition is no
longer capable of satisfaction (provided UAG is not otherwise in
material breach of its representations, warranties, covenants or
agreements under this Agreement);
(v) by the Stockholders if any of the conditions specified in
Article 7 hereof have not been met or waived by the Stockholders at such
time as such condition is no longer capable of satisfaction (provided
that neither the Stockholders nor the Companies is otherwise in material
breach of their or its representations, warranties covenants or
agreements under this Agreement); or
(vi) by either UAG or the Stockholders if there has been a
material breach on the part of the other of any representation,
warranty, covenant or agreement set forth in this Agreement, which
breach (if capable of being cured) has not been cured within ten (10)
Business Days following receipt by the breaching party of written notice
of such breach.
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If UAG or the Stockholders shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effected by notice to the
other party specifying the provision hereof pursuant to which such termination
is made.
8.2. EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its
termination, (ii) for the obligations contained in Sections 5.1 and 10.2
hereof and (iii) as set forth in Sections 9.1 and 9.2 hereof, upon the
termination of this Agreement pursuant to Section 8.1 hereof, this Agreement
shall forthwith become null and void and none of the parties hereto or any of
their respective officers, directors, employees, agents, Affiliates,
consultants, stockholders or principals shall have any liability or obligation
hereunder or with respect hereto.
ARTICLE 9.
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE STOCKHOLDERS.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholders indemnify and agree to fully defend, save and hold harmless on an
after-tax basis UAG, the Companies (after Closing), and any of their
respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "UAG Indemnified Party"), if a
UAG Indemnified Party (including the Companies after the Closing Date) shall
at any time or from time to time suffer any Costs arising, directly or
indirectly, out of or resulting from, or shall pay or become obligated to pay
any sum on account of, (i) any and all Events of Breach (as defined below) or
(ii) any Claim before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, which Claim involves, affects
or relates to any assets, properties or operations of the Companies or the
conduct of the business of the Companies prior to the Closing Date (a
"Stockholders Third Party Claim"). As used herein, "Event of Breach" shall be
and mean any one or more of the following: (i) any untruth or inaccuracy in
any representation of the Stockholders or the Companies or the breach of any
warranty of the Stockholders or the Companies contained in this Agreement,
including, without limitation, any misrepresentation in, or omission from, any
statement, certificate, schedule, exhibit, annex or other document furnished
pursuant to this Agreement by the Stockholders or the Companies (or any
representative of the Stockholders or the Companies) to UAG (or any
representative of UAG) and any misrepresentation in or omission from any
document furnished to UAG in connection with the Closing, and (ii) any failure
of the Stockholders or the Companies duly to perform or observe any term,
provision, covenant, agreement or condition on the part of the Stockholders or
the Companies to be performed or observed.
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9.2. INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholders, the
Companies (prior to Closing), and any of their respective officers, directors,
employees, stockholders, advisors, representatives, agents and Affiliates
(each a "Stockholders Indemnified Party"), if a Stockholders Indemnified Party
shall at any time or from time to time suffer any Costs arising, directly or
indirectly, out of or resulting from, or shall pay or become obligated to pay
any sum on account of, (i) any and all UAG Events of Breach (as defined below)
or (ii) any Claim before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, which Claim involves, affects
or relates to any assets, properties or operations of UAG or the conduct of
the business of UAG prior to the Closing Date (a "UAG Third Party Claim"). As
used herein, "UAG Event of Breach" shall be and mean any one or more of the
following: (i) any untruth or inaccuracy in any representation of UAG or the
breach of any warranty of UAG contained in this Agreement, including, without
limitation, any misrepresentation in, or omission from, any statement,
certificate, schedule, exhibit, annex or other document furnished pursuant to
this Agreement by UAG (or any representative of UAG) to the Stockholders (or
any representative of the Stockholders) and any misrepresentation in or
omission from any document furnished to the Stockholders in connection with
the Closing, and (ii) any failure of UAG duly to perform or observe any term,
provision, covenant, agreement or condition on the part of UAG to be performed
or observed.
9.3. PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholders have become obligated to a UAG
Indemnified Party pursuant to Section 9.1, or if any Stockholders Third Party
Claim is begun, made or instituted as a result of which the Stockholders may
become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of
Breach occurs or is alleged and a Stockholders Indemnified Party asserts that
UAG has become obligated to a Stockholders Indemnified Party pursuant to
Section 9.2, or if any UAG Third Party Claim is begun, made or instituted as a
result of which UAG may become obligated to a Stockholders Indemnified Party
hereunder (for purposes of this Article 9, any UAG Indemnified Party and any
Stockholders Indemnified Party is sometimes referred to as an "Indemnified
Party" and UAG and the Stockholders are sometimes referred to as an
"Indemnifying Party," and any UAG Third Party Claim and any Stockholders Third
Party Claim is sometimes referred to as a "Third Party Claim," in each case as
the context so requires), such Indemnified Party shall give written notice to
the Indemnifying Party of its or his obligation to provide indemnification
hereunder, provided that any failure to so notify the Indemnifying Party shall
not relieve them from any liability that it or he may have to the Indemnified
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Party under this Article 9. If such notice relates to a Third Party Claim,
each Indemnifying Party, jointly and severally, agrees to defend, contest or
otherwise protect such Indemnified Party against any such Third Party Claim at
his or its sole cost and expense. Such Indemnified Party shall have the right,
but not the obligation, to participate at its own expense in the defense
thereof by counsel of such Indemnified Party's choice and shall in any event
cooperate with and assist the Indemnifying Party to the extent reasonably
possible. If the Indemnifying Party fails timely to defend, contest or
otherwise protect against such Third Party Claim, such Indemnified Party shall
have the right to do so, including, without limitation, the right to make any
compromise or settlement thereof, and such Indemnified Party shall be entitled
to recover the entire Cost thereof from the Indemnifying Party, including,
without limitation, attorneys' fees, disbursements and amounts paid (or of
which such Indemnified Party has become obligated to pay) as the result of
such Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party
Claim within fifteen (15) days after notice thereof shall have been given to
the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of
its or their right to defend such Third Party Claim. If the Indemnifying Party
assumes the defense of the particular Third Party Claim, the Indemnifying
Party shall not, in the defense of such Third Party Claim, consent to entry of
any judgment or enter into any settlement, except with the written consent of
such Indemnified Party. In addition, the Indemnifying Party shall not enter
into any settlement of any Third Party Claim (except with the written consent
of such Indemnified Party) which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to such Indemnified Party
a full release from all liability in respect of such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at their own expense in the
defense of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any Third Party Claim to the extent the
Third Party Claim seeks an order, injunction or other equitable relief against
the Indemnified Party which, if successful, could materially interfere with
the business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party.
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9.4. OFFSET.
In addition to and not in limitation of all rights of offset that
an Indemnified Party may have under applicable law, the parties agree that, at
any Indemnified Party's option, any or all amounts owing to such Indemnified
Party under this Article 9 or any other provision of this Agreement or any
other liability of the other parties (or any Affiliate of the other parties)
to such Indemnified Party in connection with any of the Documents, may be
recovered by the Indemnified Party by an offset against any or all amounts due
to such other parties pursuant to this Agreement or the Documents.
9.5. REMEDIES.
The rights of an Indemnified Party under this Article 9 are in
addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
9.6. DEFINITIONS.
For purposes of this Article 9 "Costs" shall mean all liabilities,
losses, reasonable costs, damages (not including consequential damages),
expenses, claims, reasonable attorneys' fees, experts' fees, consultants'
fees, and disbursements of any kind or of any nature whatsoever. For purposes
of application of the indemnity provisions of this Article 9, the amount of
any Cost arising from the breach of any representation, warranty, covenant or
agreement shall be the entire amount of any Cost suffered, paid or required to
be paid by the respective Indemnified Party as a result of such breach.
9.7. LIMITATION ON INDEMNIFICATION.
(a) Indemnification by the Stockholders.
(i) A UAG Indemnified Party shall be entitled to indemnification
in connection with an Event of Breach or a Stockholders Third Party
Claim only to the extent the aggregate Costs incurred or sustained by
all UAG Indemnified Parties exceed One Hundred Thousand Dollars
($100,000) with respect to a breach of any provision herein; provided,
however, that notwithstanding the preceding limitation, a UAG
Indemnified Party shall be entitled to indemnification for all Costs
incurred or sustained by such UAG Indemnified Party as a result of any
untruth or inaccuracy in, or breach of, a representation, warranty or
covenant (or failure to perform or observe any term, agreement or
condition) contained in Article 1 or Sections 2.3, 2.8, 3.1, 5.6 and
5.14 (to the extent specified therein) hereof.
(ii) The aggregate Costs for which the Stockholders shall be
obligated to indemnify the UAG Indemnified Parties
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shall not exceed Seventeen Million Dollars ($17,000,000) in the case of
Costs incurred or sustained by all UAG Indemnified Parties in connection
with an Event of Breach; provided, however, that a UAG Indemnified Party
shall be entitled to indemnification for all Costs incurred or sustained
by such UAG Indemnified Party as a result of any untruth or inaccuracy
in, or breach of, a representation, warranty or covenant (or failure to
perform or observe any term, agreement or condition) contained in
Article 1 or Sections 2.3, 2.8, 2.20 and 3.1 hereof.
(b) Indemnification by UAG.
(i) A Stockholder Indemnified Party shall be entitled to
indemnification in connection with a UAG Event of Breach or a UAG Third
Party Claim only to the extent the aggregate Costs incurred or sustained
by all Stockholders Indemnified Parties exceed One Hundred Thousand
Dollars ($100,000); provided, however, that, notwithstanding the
preceding limitation, a Stockholder Indemnified Party shall be entitled
to indemnification for all Costs incurred or sustained by such
Stockholder Indemnified Party as a result of any untruth or inaccuracy
in, or breach of, a representation, warranty or covenant (or failure to
perform or observe any term, agreement or condition) contained in
Article 1 hereof.
(ii) The aggregate Costs for which UAG shall be obligated to
indemnify the Stockholder Indemnified Parties shall not exceed Seventeen
Million Dollars ($17,000,000) in the case of Costs incurred or sustained
by all Stockholders Indemnified Parties in connection with a UAG Event
of Breach; provided, however, that a Stockholder Indemnified Party shall
be entitled to indemnification for all Costs incurred or sustained by
such Stockholder Indemnified Party as a result of any untruth or
inaccuracy in, or breach of, a representation, warranty or covenant (or
failure to perform or observe any term, agreement or condition)
contained in Article 1 or Sections 4.6, and 4.2 hereof.
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, subject to
Section 10.1(b) below. In the event of a breach of any such representations,
warranties or covenants, the party to whom such
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representations, warranties or covenants have been made shall have all rights
and remedies for such breach available to it under the provisions of this
Agreement or otherwise, whether at law or in equity, regardless of any
disclosure to, or investigation made by or on behalf of, such party on or
before the Closing Date.
(b) Each of the representations and warranties set forth in
Article 2, Article 3 and Article 4 hereof and in any certificate delivered
pursuant to Article 6 or Article 7 hereof, shall survive, and not be affected
in any respect by, the Closing for a period terminating on the later of (i)
the date three years after the Closing Date, and (ii) with respect to any
claim asserted with respect to any breach of such representation or warranty
pursuant to Section 9.3 hereof before the expiration of such representation or
warranty, on the date such claim is finally liquidated or otherwise resolved;
provided, however, that the representations and warranties in Sections 2.3,
2.8, 2.11, 2.20, 3.1, 4.2, 4.6 and 4.12 hereof, shall survive and not be
affected in any respect by the Closing until any claim asserted with respect
to any breach of such representation or warranty is finally liquidated or
otherwise resolved.
10.2. FEES AND EXPENSES.
If the Closing does not occur and Section 5.6 hereof is breached,
then the Stockholders or the Companies shall pay to UAG, within five (5)
Business Days after receipt of a request therefor, an amount equal to all of
the reasonable legal and other fees, costs and expenses incurred by UAG in
connection with this Agreement and the transactions contemplated hereby.
10.3. HEADINGS.
The section headings herein are for convenience of reference only,
do not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4. NOTICES.
All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if
delivered by hand, recognized overnight delivery service for next business day
delivery or facsimile transmission (with original to follow by mail) or mailed
by registered or certified mail, postage prepaid (return receipt requested),
as follows:
If to the Companies before the Closing Date:
c/o Mr. Gene Reed
Gene Reed Enterprises
63
<PAGE>
7519 Rivers Avenue
North Charleston, S.C. 29406
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
Attn: Stuart Newman, Esq.
If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholders:
Mr. Gene Reed
Gene Reed Enterprises
7519 Rivers Avenue
North Charleston, S.C. 29406
with a copy to:
Newman Tannenbaum Helpern
64
<PAGE>
Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
Attn: Stuart Newman, Esq.
If to UAG:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been
given as of the date so delivered or three (3) days after the date so mailed;
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5. ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto (and with respect to the
Stockholders, the personal representatives and heirs of the Stockholders) and
their respective successors and permitted assigns, and the provisions of
Article 9 hereof shall inure to the benefit of the Indemnified Parties
referred to therein; provided, however, that neither this Agreement nor any of
the rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG shall have the unrestricted right to assign
this Agreement and to delegate all or any part of its obligations
65
<PAGE>
hereunder to any Affiliate of UAG, but in such event UAG shall remain fully
liable for the performance of all such obligations in the manner prescribed in
this Agreement.
10.6. ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to
the transactions contemplated hereby other than those expressly set forth
herein or in the Documents. Prior drafts of this Agreement shall not be used
as a basis for interpreting this Agreement.
10.7. WAIVER AND AMENDMENTS.
The Stockholders and the Companies as one party, and UAG as the
other party may by written notice to the other parties (i) extend the time for
the performance of any of the obligations or other actions of the other
parties, (ii) waive any inaccuracies in the representations or warranties of
the other parties contained in this Agreement, (iii) waive compliance with any
of the covenants of the other parties contained in this Agreement, (iv) waive
performance of any of the obligations of the other parties created under this
Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach, whether or not similar. This Agreement may be
amended, modified or supplemented only by a written instrument executed by the
parties hereto.
10.8. COUNTERPARTS.
This Agreement may be executed by facsimile signature(s) and in
any number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
10.9. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined
or modified in this Agreement shall have the respective meanings given to them
in accordance with GAAP.
10.10. SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the
Financial Statements shall not be considered as disclosure pursuant to any
other provision, subprovision, section or
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<PAGE>
subsection of this Agreement or Schedule to this Agreement and shall not be
deemed to limit any representations or warranties made herein.
10.11. SEVERABILITY.
If any one or more of the provisions of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.12. REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in Article 8, indemnification as
set forth in Article 9, or the payment of certain fees, costs and expenses as
set forth in Section 10.2, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
10.13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
the laws of the State of New York without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
10.14. TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By:______________________________
Its:
GENE REED CHEVROLET, INC., A SOUTH
CAROLINA CORPORATION (D/B/A "GENE
REED CHEVROLET"),
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<PAGE>
By:______________________________
Its:
MICHAEL CHEVROLET-OLDSMOBILE, INC.,
A SOUTH CAROLINA CORPORATION
(D/B/A "MICHAEL CHEVROLET-OLDS")
By:________________________________
Its:
REED-LALLIER CHEVROLET, INC., A NORTH
CAROLINA CORPORATION, (D/B/A
"REED-LALLIER CHEVROLET")
By:___________________________
Its:
/s/ Gene Reed, Jr.
---------------------------------
GENE REED, JR.
/s/ Michael L. Reed
---------------------------------
MICHAEL L. REED
/s/ Michael G. Lallier
---------------------------------
MICHAEL G. LALLIER
/s/ Deborah B. Lallier
---------------------------------
DEBORAH B. LALLIER
/s/ John P. Jones
----------------------------------
JOHN P. JONES
/s/ Charles J. Bradshaw
----------------------------------
CHARLES J. BRADSHAW
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<PAGE>
/s/ Charles J. Bradshaw, Jr.
--------------------------------
CHARLES J. BRADSHAW, JR.
/s/ Julia D. Bradshaw
--------------------------------
JULIA D. BRADSHAW
/s/ William B. Bradshaw
--------------------------------
WILLIAM B. BRADSHAW
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<PAGE>
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (the "Amendment") is
made and entered into this 31st day of May, 1997, by and among United Auto
Group, Inc., a Delaware corporation ("UAG"), UAG Carolina, Inc., a Delaware
corporation ("UAG Carolina"), Gene Reed Chevrolet, Inc. ("Gene Reed
Chevrolet"), Michael Chevrolet-Oldsmobile, Inc. ("Michael Chevrolet") and
Reed-Lallier Chevrolet, Inc. ("Reed-Lallier Chevrolet" and, together with
Gene Reed Chevrolet and Michael Chevrolet, the "Companies"), Gene Reed, Jr.
("Mr. Reed"), Michael L. Reed, Michael G. Lallier, Deborah B. Lallier, John
P. Jones, Charles J. Bradshaw, Charles J. Bradshaw, Jr., Julia D. Bradshaw
and William B. Bradshaw (collectively with Mr. Reed, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the parties hereto (other than UAG Carolina) have entered into
that certain Stock Purchase Agreement dated April 12, 1997 (the "Stock
Purchase Agreement");
WHEREAS, UAG has formed a wholly-owned subsidiary, UAG Carolina;
WHEREAS, the parties hereto desire to amend the terms of the Stock
Purchase Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Stock Purchase Agreement.
2. At the Closing, in return for the consideration set forth in Article
1 of the Stock Purchase Agreement, the Stockholders shall sell to UAG Carolina
the Shares and shall deliver to UAG Carolina certificates representing the
Shares, accompanied by stock powers duly executed and blank, and all other
documents that are necessary to transfer to UAG Carolina good title to the
Shares.
3. The references to UAG in Articles 2, 3, 4, 5, 6, 7, 8 and 9 of the
Stock Purchase Agreement are amended to include UAG Carolina.
4. The first sentence of Section 1.8 of the Stock Purchase Agreement
shall be amended to delete the word "less" and replace it with the phrase
"equal to or greater".
<PAGE>
5. The Stockholders represent and warrant that as of the Closing Date,
the Companies (and their respective assets) will not (directly or indirectly)
be liable for any loans or other indebtedness of any of the Stockholders or
any entity affiliated with the Stockholders (the "Stockholders Debt") and will
not guaranty or otherwise secure any Stockholders Debt. Notwithstanding this
representation and warranty, to the extent that the Companies (or any of their
respective assets) have any obligations with respect to any Stockholders Debt,
Stockholders shall use their best efforts to cause the Companies (or any of
their respective assets) to be released from such obligations. In the event
that any such obligations are not released, then the Stockholders shall fully
indemnify UAG, UAG Carolina and the Companies and hold them harmless from any
Costs arising out of or in any way relating to any Stockholders Debt.
6. The Closing Date shall be May 31, 1997. All closing transactions
contemplated by the Stock Purchase Agreement and all related closing documents
shall be deemed effective after the close of business on the Closing Date.
7. Mr. Reed agrees to fully indemnify and hold harmless UAG, UAG
Carolina and the Companies for any Costs incurred by UAG, UAG Carolina or the
Companies as a result of any breach of or default under (i) that certain
Environmental Indemnity Agreement between General Motors Acceptance
Corporation, Gene Reed, Jr. and Gene Reed Chevrolet, Inc. dated June 6, 1994,
together with any amendments or modifications thereto; (ii) that certain
Environmental Indemnity Agreement between General Motors Acceptance
Corporation, Gene Reed, Jr. and Reed-Lallier Chevrolet, Inc. dated August 22,
1994, together with any amendments or modifications thereto; or (iii) any
other indemnity agreement entered into prior to Closing between any of the
Companies and GMAC relating to the Real Property.
8. The Parties acknowledge that the employees of the Companies, through
Gene Reed Enterprises, Inc. ("Gene Reed Enterprises"), are currently eligible
to participate in group medical, group life and AD&D insurance, group long and
short-term disability and group dental plans with the Guardian Life Insurance
Company of America ("Guardian") (collectively the "Employee Benefit Plans").
The Stockholders acknowledge that Guardian has agreed to maintain the current
contract with Gene Reed Enterprises through December 31, 1997. Accordingly,
the Stockholders agree to cause Gene Reed Enterprises to continue to maintain
the Employee Benefit Plans on behalf of the employees of the Companies on the
same terms that such plans are currently offered to employees of the Companies
from the date hereof until December 31, 1997 and, thereafter, for such longer
time as is requested by the Companies and agreed to by Guardian (provided,
however, that notwithstanding the above, the Stockholders shall not be
required to cause Gene Reed Enterprises to maintain the Employee Benefit Plans
after December 31, 1998).
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<PAGE>
9. Michael Chevrolet currently leases property from Henry A. Peters (now
deceased) pursuant to a Lease dated August 27, 1991 (the "Lease"). UAG
Carolina requested, but Stockholders have not been able to obtain, an Estoppel
Certificate with respect to the Lease. The Stockholders agree to use their
best efforts to obtain an Estoppel Certificate in the form previously provided
by UAG within thirty (30) days after the date hereof. Regardless of whether
Stockholders are able to obtain such Estoppel Certificate, the Stockholders
hereby indemnify and agree to hold harmless UAG, UAG Carolina and Michael
Chevrolet of and from all Costs arising in connection with any default under
the Lease prior to the date hereof. UAG, UAG Carolina and Michael Chevrolet
acknowledge that Mr. Reed has personally guaranteed the obligations of Michael
Chevrolet under the Lease. In the event that Mr. Reed is not released from
such guaranty, UAG, UAG Carolina and Michael Chevrolet agree to indemnify and
hold harmless Mr. Reed from any Costs to Mr. Reed arising out of such guaranty
in connection with any default or other event first occurring after the date
hereof so long as such is not the result of an environmental matter covered by
the Indemnification Agreement of even date between Mr. Reed, UAG and others.
10. Mr. Reed hereby agrees that the real property more particularly
described on Exhibit "A" attached hereto and incorporated herein by reference
("Property") which is being leased to Michael Chevrolet shall be properly
platted in accordance with the requirements of all local governing laws within
thirty (30) days after the date hereof and evidence thereof shall be provided
to Michael Chevrolet within such time period. Mr. Reed shall indemnify and
hold harmless UAG, UAG Carolina, and Michael Chevrolet from all Costs arising
as a result of the failure by Mr. Reed to properly subdivide and plat such
property; such property forming a portion of the property leased by Mr. Reed
to Michael Chevrolet of even date herewith.
11. The parties acknowledge that Coopers & Lybrand is in the process of
completing its audit of the Companies' financial statements for the year ended
December 31, 1996 and that the earnings adjustment set forth in Section 1.4 of
the Stock Purchase Agreement shall be deferred until the completion of such
audit which shall be completed no later than twenty-one (21) days after the
Closing Date. For purposes of Section 1.4 of the Stock Purchase Agreement, the
1996 Earnings shall be as determined by Coopers & Lybrand after completion of
their audit; provided, however, that such results are subject to confirmation
by the Stockholders or, at the Stockholder's discretion, by the Stockholders'
independent certified public accountants. In the event that the parties do not
agree upon the amount of the 1996 Earnings, any dispute with respect thereto
shall be resolved by a third independent certified public accounting firm
agreed to by the parties. The earnings adjustment set forth in Section 1.4
shall take place no later than three (3) days after the amount of the 1996
Earnings is finally determined (in accordance herewith).
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<PAGE>
12. Except as expressly stated herein, the provisions of the Stock
Purchase Agreement shall remain in full force and effect.
13. This Amendment shall be governed by and construed in accordance with
the laws of the state of New York without giving effect any choice or conflict
of law provision or rule that would cause laws of any other jurisdiction to
apply.
14. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, legal
representatives, successors, transferees and assigns.
15. This Amendment may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original. If any one or more of
the provisions of this Amendment shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions of this Amendment shall not be affected thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ George G. Lowrance
-------------------------------
George G. Lowrance
Executive Vice President
UAG CAROLINA, INC.
By: /s/ George G. Lowrance
-------------------------------
George G. Lowrance
Vice President
GENE REED CHEVROLET, INC.
By:
-------------------------------
Its:
------------------------------
MICHAEL CHEVROLET-
OLDSMOBILE, INC.
By:
-------------------------------
Its:
------------------------------
REED-LALLIER CHEVROLET, INC.
By:
-------------------------------
Its:
------------------------------
/s/ Gene Reed, Jr.
----------------------------------
GENE REED, JR.
-5-
<PAGE>
/s/ Michael L. Reed
----------------------------------
Michael L. Reed
/s/ Michael G. Lallier
----------------------------------
Michael G. Lallier
/s/ Deborah B. Lallier
----------------------------------
Deborah B. Lallier
/s/ John P. Jones
----------------------------------
John P. Jones
/s/ Charles J. Bradshaw
----------------------------------
Charles J. Bradshaw
/s/ Charles J. Bradshaw
----------------------------------
Charles J. Bradshaw
/s/ Julia D. Bradshaw
----------------------------------
Julia D. Bradshaw
/s/ William B. Bradshaw
----------------------------------
William B. Bradshaw
-6-
<PAGE>
EXHIBIT "A"
AN APPROXIMATELY .908 ACRE PORTION OF ALL that certain piece, parcel or tract
of land, situate, lying and being in Dorchester County, Town of Summerville,
State of South Carolina, know and designated as 6.77 acres, more or less, as
shown on a plat prepared by John David Bass, P.L.S., dated April 6, 1994,
entitled "Plat Showing a 7.22 Acres Owned by Evelyn C. Segelken, located in the
Town of Summerville, in Dorchester County, South Carolina and establishing 0.45
of an Acre about to be conveyed to The Presbyterian Home of South Carolina and
6.77 Acres about to be conveyed to The George Segelken Charitable Trust
Agreement", said parcel having such size, shape, dimensions, buttings and
boundings as will be shown by reference to the aforesaid plat.
BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: All that certain piece parcel
or lot of land, situate, lying and being in the County of Dorchester, Town
of Summerville, State of South Carolina containing 0.908 acres and being shown
on that certain plat dated May 26, 1997 prepared by James F. Bennett as follows:
Beginning at an iron rod and running 395.36 Feet South 25 Degrees and 21 Minutes
16 Seconds East to iron rod, thence running for a distance of 443.07 Feet South
52 Degrees 03 Minutes 35 Seconds East to an iron rod thence, running 200 Feet
North 64 Degrees 38 Minutes 44 Seconds East to the point of beginning.
<PAGE>
EXHIBIT A
---------
All that tract of land situate, lying and being Northeast of the Town of
Summerville, in the County of Dorchester and State of South Carolina, on US
Highway 17A, measuring and containing Eight (8) acres, more or less, and shown
and designated on "Plat of Several Parcels of Land near Summerville, Surveyed
for Buford Blanton" by G.E. Miley, RLS, dated October 29, 1971 said plat being
recorded in the RMC Office for Dorchester County in Plat Book 19, Page 271;
SAVING AND EXCEPTING therefrom the area shaded in red. Said real estate having
a frontage on highway 17A of 236.80 feet.
<PAGE>
WHOLESALE SECURITY AGREEMENT
To: General Motors Acceptance Corporation (GMAC)
In the course of our business, we acquire new and used cars,
trucks and chassis ("Vehicles") from manufacturers or distributors. We desire
you to finance the acquisition of such vehicles and to pay the manufacturers
or distributors therefor.
We agree upon demand to pay to GMAC the amount it advances or is
obligated to advance to the manufacturer or distributor for each vehicle with
interest at the rate per annum designated by GMAC from time to time and then
in force under the GMAC Wholesale Plan.
We also agree that to secure collectively the payment by us of the
amounts of all advances and obligations to advance made by GMAC to the
manufacturer, distributor or other sellers, and the interest due thereon, GMAC
is hereby granted a security interest in the vehicles and the proceeds of sale
thereof ("Collateral") as more fully described herein.
The collateral subject to this Wholesale Security Agreement is new
vehicles held for sale or lease and used vehicles acquired from manufacturers
or distributors and held for sale or lease, and all vehicles of like kinds or
types now owned or hereafter acquired from manufacturers, distributors or
sellers by way of replacement, substitution, addition or otherwise, and all
additions and accessions thereto and all proceeds of such vehicles, including
insurance proceeds.
Our possession of the vehicles shall be for the purpose of storing
and exhibiting same for retail sale in the regular course of business. We
shall keep the vehicles brand new and we shall not use them illegally,
improperly or for hire. GMAC shall at all times have the right of access to
and inspection of the vehicles and the right to examine our books and records
pertaining to the vehicles.
We agree to keep the vehicles free of all taxes, liens and
encumbrances, and any sum of money that may be paid by GMAC in release or
discharge thereof shall be paid to GMAC on demand as an additional part of the
obligation secured hereunder. We shall not mortgage, pledge or loan the
vehicles and shall not transfer or otherwise dispose of them except as next
hereinafter more particularly provided. We shall execute in favor of GMAC any
form of document which may be required for the amounts advanced to the
manufacturer, distributor or seller, and shall execute such additional
documents as GMAC may at any time request in order to confirm or perfect title
or security in the vehicles. Execution by us of any instrument for the amount
advanced shall be deemed evidence of our obligation and not payment therefor.
We authorize GMAC or any of its officers or employees or agents to execute
such documents in our behalf and to supply any omitted information and correct
patent errors in any document executed by us.
We understand that we may sell and lease the vehicles at retail in
the ordinary course of business. We further agree that as each vehicle is
sold, or leased, we will, faithfully and promptly remit to you the amount you
advanced or have become obligated to advance on our behalf to the
manufacturer, distributor or seller, with interest at the designated rate per
annum then in effect under the GMAC Wholesale Plan. The GMAC Wholesale Plan is
hereby incorporated by reference.
GMAC's security interest in the vehicles shall attach to the full
extent provided or permitted by law to the proceeds, in whatever form, of any
retail sale or lease thereof by us until such proceeds are accounted for as
aforesaid, and to the proceeds of any other disposition of said vehicles or
any part thereof.
In the event we default in payment under and according to this
agreement, or in due performance or compliance with any of the terms and
conditions hereof, or in the event of a proceeding in bankruptcy, insolvency
or receivership instituted by or against us or our property, or in the event
that GMAC deems itself insecure or said vehicles are in danger of misuse,
loss, seizure or confiscation, GMAC may take immediate possession of said
vehicles, without demand or further notice and without legal process for the
<PAGE>
purpose and in furtherance thereof, we shall, if GMAC so requests, assemble
said vehicles and make them available to GMAC at a reasonable convenient place
designated by it, and GMAC shall have the right, and we hereby authorize and
empower GMAC, to enter upon the premises wherever said vehicles may be and
remove same. We shall pay all expenses and reimburse GMAC for any
expenditures, including reasonable attorney's fees and legal expenses, in
connection with GMAC's exercise of any of its rights and remedies under this
agreement.
In the event of repossession of the vehicles by GMAC, then the
rights and remedies applicable under the Uniform Commercial Code shall apply.
Any provision hereof prohibited by law shall be ineffective to the
extent of such prohibition without invalidating the remaining provisions
hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed by its duly authorized representative this 1st day of April,
1981.
Witness and Attest:
Gene Reed Chevrolet, Inc.
- ----------------------------- ----------------------------------
Dealer's Name
Accepted By:
-------------------------------
GENERAL MOTORS ACCEPTANCE
CORPORATION Its: President
------------------------------
By: Ass't. Sect. Dorchester Rd., Charleston Heights, S.C.
-------------------------- ----------------------------------------
Its Authorized Agent Address of Dealer
217E Savannah Hwy., Charleston, S.C. 29407
- ------------------------------------------
Address
-2-
<PAGE>
AGREEMENT AMENDING THE WHOLESALE SECURITY
AGREEMENT AND CONDITIONALLY AUTHORIZING
THE SALE OF NEW FLOOR PLAN VEHICLES ON A
DELAYED PAYMENT PRIVILEGE BASIS
This Agreement is made and executed by and between the undersigned dealer
("Dealer") and General Motors Acceptance Corporation ("GMAC") effective the
date set forth below.
WHEREAS, the Dealer previously, or simultaneous with the execution of this
Agreement, executed and delivered to GMAC a Wholesale Security Agreement, by
which, among other things, (a) GMAC provides wholesale floor plan financing of
motor vehicles for Dealer, and Dealer agrees to promptly pay to GMAC the
actual amount financed, as each such financed motor vehicle is sold or leased
by Dealer (the "Vehicle Amount Financed"); and (b) GMAC consents to Dealer
selling and leasing such financed motor vehicles at retail in the ordinary
course of business (the "Routine Disposition of Vehicles"); and
WHEREAS, Dealer has requested the privilege of delaying payment of the Vehicle
Amount Financed in the limited instance where such financed motor vehicles are
sold by Dealer to a purchaser for whom both Dealer and GMAC have agreed to a
delayed payment period (the "Delayed Payment Privilege"); and
WHEREAS, Dealer and GMAC may have previously executed an Agreement for the
Delayed Payment Privilege for New Floor Plan Units, which the parties hereby
intend be superseded by this Agreement for all such transactions arising on or
after the effective date hereof; and
WHEREAS, Dealer and GMAC desire and intend hereby to retain, in full force and
effect, the validity, enforceability and relative priority of GMAC's security
interest in any and all such financed motor vehicles as are sold or leased by
Dealer pursuant to the Delayed Payment Privilege, notwithstanding GMAC's prior
consent to the Routine Disposition of Vehicles, unless and until GMAC receives
the Vehicle Amount Financed under the terms and conditions as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises, the covenants herein set
forth, and for other good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, Dealer and GMAC hereby agree as
follows:
1. The aforementioned Wholesale Security Agreement and any and all
documents, plans, instruments or agreements relating, modifying, substituting
or attendant thereto, executed between Dealer and GMAC are hereby amended in
form and substance by inserting therein the following language as a separate
and distinct paragraph:
"Notwithstanding anything contained herein to the contrary, Dealer
(i.e., we) agree that GMAC's security interest in any and all
vehicles sold or leased, more than one Vehicle per individual
transaction, to a customer, and in which the full payment thereof
by cash or on a properly perfected retail installment contract or
other security agreement basis is not made contemporaneous with
the delivery of such Vehicles by Dealer (the "Delayed Payment
Vehicles"), shall remain in full force and effect in such Delayed
Payment Vehicles and shall not be relinquished, extinguished,
released or terminated as a consequence of such sale or release
unless and until the customer makes payment therefore directly to
GMAC or jointly to Dealer and GMAC. Moreover, Dealer is expressly
prohibited and shall not have any express, implied or apparent
authority to sell, lease, transfer or otherwise dispose of any
Delayed Payment Vehicles unless and until the express written
permission of GMAC is first obtained, and then such authority
shall be, in each and every instance, limited to the terms and
conditions of such permission; it being further agreed that the
terms of this paragraph shall not be altered, modified,
supplemented, qualified, waived or amended by reason of any
agreement (unless in writing executed by Dealer and GMAC), or by
<PAGE>
the course of performance, course of dealing, or usage of trade by
Dealer and GMAC, of either of them.
2. Any previously executed Agreement for the Delayed Payment Privilege for
New Floor Plan Units between Dealer and GMAC is superseded by the terms and
conditions of this Agreement for all Delayed Payment Privilege transactions
arising on or after the effective date thereof.
3. Dealer shall advise GMAC of each and every potential transaction in
which Dealer requests GMAC to grant the Delayed Payment Privilege, and the
period of time for which the Delayed Payment Privilege is being requested.
Such request shall be made of GMAC in writing and on a form of the type and
kind provided by GMAC from time to time. GMAC's consent, if any, to the
request must be obtained prior to the sale, lease, transfer or delivery of any
vehicles proposed by Dealer to be disposed by the Delayed Payment Privilege
(the "Delayed Payment Privilege Vehicles").
4. GMAC's consent to the Dealer's request for disposition of Delayed
Payment Privilege Vehicles shall be further subject and contingent upon the
following additional terms and conditions:
(a) GMAC may, in its sole and exclusive discretion limit the number of
Vehicles, amount outstanding and terms and conditions for which the
Delayed Payment Privilege is requested by Dealer.
(b) GMAC may, in its sole and exclusive discretion withdraw, cancel, or
suspend the Delayed Payment Privilege at anytime and for any reason
upon a ten-day advance written notice and immediately if Dealer is in
default of any agreement which Dealer has with GMAC; provided,
however, that such withdrawal, cancellation or suspension shall not
affect the rights, interests and duties under this Agreement prior
thereto.
(c) Dealer shall complete, execute and deliver to GMAC, immediately upon
the delivery of Delayed Payment Privilege Vehicles, a form of the
type and kind provided by GMAC from time to time (the "Delivery
Schedule").
(d) Dealer shall immediately pay GMAC the Vehicle Amount Financed upon
the earliest of (i) demand by GMAC; or (ii) receipt of the amount due
from the disposition of each of the Delayed Payment Privilege
Vehicles; or (iii) the "Purchaser Payment Date" set forth on the
applicable Delivery Schedule.
(e) Dealer shall obtain from the person acquiring the Delayed Payment
Privilege Vehicle a duly authorized and executed acknowledgment from
the Purchaser confirming that the terms of sale include the
continuation of GMAC's security interest in the Delayed Payment
Privilege Vehicles. The acknowledgment shall be in writing and on a
form of the type and kind provided by GMAC from time to time, which
shall be delivered to GMAC prior to any sale, lease, transfer or
delivery of any Delayed Payment Privilege Vehicle to such person (the
"Acknowledgment of Purchaser").
(f) The grant and exercise of the Delayed Payment Privilege by Dealer
shall in no way extinguish, release or terminate GMAC's security
interest in the Delayed Payment Privilege Vehicles unless and until
the conditions described in the amending paragraph set forth in
paragraph 1 of this Agreement and the aforesaid Acknowledgment of
Purchaser are first fulfilled, which shall then and thereafter
continue in the proceeds thereof.
5. GMAC shall have no duty or obligation to examine, review or consider
the creditworthiness of any proposed or actual customer of Dealer for which
Dealer seeks GMAC's consent to the Delayed Payment Privilege and any such
examination, review or consideration by GMAC shall be for its sole and
exclusive use
-2-
<PAGE>
and purposes; the Dealer expressly agreeing that any receipt or reliance on
such information from GMAC would be gratuitous and unreasonable, respectively.
6. Dealer's obligation to pay GMAC for the Vehicle Amount Financed shall
be absolute, unconditional and primary, notwithstanding (a) GMAC consenting to
the Delayed Payment Privilege; or (b) default in the payment or acquisition
terms by the customer of the Dealer for Delayed Payment Privilege Vehicles, or
that of any of customer's surety, guarantor, co-obligor or lender; or (c)
rejection or revocation of acceptance of any Delayed Payment Privilege
Vehicles by such customer; or (d) the acceptance by GMAC of any assignment or
proceeds from any delayed Payment Privilege Vehicles; provided, however, that
nothing in this paragraph 6 is intended to permit payment to GMAC of any more
than the greaser of (i) the Vehicle Amounts Financed or (ii) the value of
GMAC's security interest in the Delayed Payment Privilege Vehicles.
7. Upon demand by GMAC, Dealer shall provide GMAC with an assignment of
all right, title and interest of the Dealer in and to the accounts, contract
rights, sale proceeds or any other interest Dealer may then or thereafter have
in the Delayed Payment Privilege Vehicle. Said assignment shall be for the
purpose of additional security only and shall be on a form of the type and
kind provided by GMAC from time to time.
8. GMAC may take such actions as it deems appropriate to assure and
enforce compliance with this Agreement, including requesting, for audit
purposes, verification from Dealer's customers the fact of delivery,
possession, and amount, date and circumstances of payment of any Delayed
Payment Privilege Vehicles, and the notification to appropriate persons of any
security interest, assignment or other claim in the Delayed Payment Privilege
Vehicles of GMAC.
In witness whereof the parties hereto execute this agreement the 3rd day of
September, 1992.
Gene Reed Chevrolet, Inc.
----------------------------------
(Dealer's Name)
GENERAL MOTORS ACCEPTANCE CORPORATION By:
-------------------------------
By: Its: President
------------------------------- ------------------------------
(Title)
Its:
------------------------------
(Title)
-3-
<PAGE>
AMENDMENT TO WHOLESALE SECURITY AGREEMENT
This Amendment, dated as of the date below, amends the Wholesale Security
Agreement dated 4/02, 1981 between the undersigned Dealer and General Motors
Acceptance Corporation ("GMAC"), hereinafter the "Agreement."
Whereas, Dealer acquires certain used motor vehicles through auctions approved
by General Motors Corporation ("GM") or GMAC; and
Whereas, Dealer desires GMAC to finance the acquisition of such vehicles;
Now, therefore, Dealer and GMAC agree as follows:
Wherever the term "vehicles" appears in the Agreement, such term shall include
used motor vehicles Dealer acquires through auctions approved by GM or GMAC,
if the immediate prior owner of such vehicles was GM, GMAC, or an affiliate of
GM or GMAC ("Auction Vehicles"). Dealer agrees upon demand to pay to GMAC the
amount it advances or is obligated to advance for each vehicle at the rate per
annum designated by GMAC from time to time and then in force under the GMAC
Wholesale Plan.
The collateral subject to the Agreement, and in which Dealer grants GMAC a
security interest, shall include Auction Vehicles and all additions and
accessions thereto, and all proceeds, including insurance proceeds, now owned
or hereafter acquired, wherever such collateral is located.
Executed April 3, 1995.
Witness and Attest:
Gene Reed Chevrolet, Inc.
- ---------------------------------- ----------------------------------
Dealer's Name
GENERAL MOTORS ACCEPTANCE CORPORATION By:
-------------------------------
Title: Controller
----------------------------
By: 8199 Rivers Avenue
------------------------------- ----------------------------------
Address
Title: Asst. Sec.
----------------------------
P.O. Box 9168, Greenville, SC 29602
- ------------------------------------
Address
<PAGE>
Amendment to Wholesale Security Agreement
This agreement, effective the date set forth below, amends the Wholesale
Security Agreement dated April 1, 1981, executed by and between the
undersigned dealer ("Dealer") and General Motors Acceptance Corporation
("GMAC"), and any other amendment thereto (the "Wholesale Security
Agreement").
RECITALS
Whereas, pursuant to the terms and conditions of the Wholesale Security
Agreement, GMAC has agreed to finance the purchase of new and used vehicles
which the Dealer acquires from manufacturers and distributors; and
Whereas, from time to time Dealer acquires new and used vehicles from other
sellers, including, without limitation, auctioneers, dealers, merchants,
customers, brokers, leasing and rental companies, and other suppliers (the
"Sellers") which vehicles Dealer desires GMAC to finance (the "Other
Vehicles").
Whereas, GMAC is willing to finance Dealer's acquisition of the "Other
Vehicles", pursuant to the terms and conditions of the Wholesale Security
Agreement and this amendment thereto.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, Dealer and GMAC agree as
follows:
1) The Wholesale Security Agreement is hereby amended so that the word
"vehicles" as used throughout the Wholesale Security Agreement, shall --
in addition to the description contained therein -- mean and include all
Other Vehicles which GMAC elects to finance for Dealer from time to time
(the "Other Vehicle Advances").
2) Upon request from GMAC, Dealer shall provide it with satisfactory evidence
of the identity, ownership, value, source, status, and other information
concerning the Other Vehicles in connection with Other Vehicle Advances,
including completion of the GMAC Floor Plan Advice Form (GMAC 178-1).
3) GMAC may deliver the proceeds from Other Vehicle Advances directly to
Dealer or Sellers.
4) For all intents and purposes, the Wholesale Security Agreement remains in
full force and effect, including, without limitation, that
a) Dealer agrees upon demand to pay to GMAC the amount it advances or is
obligated to advance for each of the Other Vehicles at a rate of
interest per annum designated by GMAC from time to time and then in
force; and
b) Any and all credit lines provided by GMAC to Dealer are expressly
subject to the written terms of the Wholesale Security Agreement,
including this amendment, and are discretionary in that they may be
modified, suspended or terminated at GMAC's election; and
c) To further secure all of the obligations which Dealer now or
hereafter owes to GMAC pursuant to the Wholesale Security Agreement,
Dealer grants to GMAC a security interest in each of the Other
Vehicles now owned or hereafter acquired by Dealer, and any and all
additions, replacements, substitutions and accessions pertaining
thereto, and the proceeds thereof.
<PAGE>
IN WITNESS WHEREOF, GMAC and Dealer have caused this agreement to be executed
and delivered by its duly authorized representatives effective the 27 day of
9, 1996.
General Motors Acceptance Corporation Gene Reed Chevrolet, Inc.
-----------------------------
(Dealer's Name)
By: By:
------------------------------- -------------------------------
Its: Assistant Secretary Its:
-------------------------------
-2-
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 8, 1997
AMONG
UNITED AUTO GROUP, INC.
LANDERS AUTO SALES, INC.
LANDERS UNITED AUTO GROUP NO. 4, INC.
LANDERS BUICK PONTIAC, INC.
AND
LANCE LANDERS
<PAGE>
This STOCK PURCHASE AGREEMENT, dated as of January 8, 1997, is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), Landers Auto
Sales, Inc., an Arkansas corporation ("LAS"), Landers United Auto Group No. 4,
Inc. an Arkansas Corporation, ("Sub"), Landers Buick Pontiac, Inc., an
Arkansas, corporation (the "Company") and Lance Landers, an individual
resident of the state of Arkansas ("Landers" or the "Stockholder").
W I T N E S S E T H:
-------------------
WHEREAS, Sub is a wholly-owned subsidiary of LAS;
WHEREAS, the Company operates franchise automobile dealerships and
related businesses;
WHEREAS, Sub desires to purchase all right and title to the "Landers"
name in connection with the sale of motor vehicles, automotive parts and
accessories and 100% of the shares of the Company Common Stock from Landers
(the "Shares"), and Landers desires to sell all right and title to the
"Landers" name in connection with the sale of motor vehicles, automotive parts
and accessories and the Shares to Sub (upon the terms and subject to the
conditions set forth in this Agreement);
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF SHARES
SECTION 1.1. PURCHASE AND SALE OF THE SHARES.
(a) Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, the Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, all right and title to the "Landers" name in
connection with the sale of motor vehicles, automotive parts and accessories
and the Shares for an aggregate purchase price (the "Purchase Price") equal to
(i) Two Million Eight Hundred Thousand Dollars ($2,800,000) (the "Base
Price"), which Base Price is subject to adjustment after Closing as provided
in Section 1.2 below and (ii) unregistered shares of common stock of UAG, par
value $0.0001 per share, having a market value of $175,000 at Closing based on
the average closing price of such shares on the New York Stock Exchange for
thirty days of trading immediately prior to Closing (the "UAG Shares");
provided that if Landers still owns the UAG Shares and if the market value for
the UAG Shares should be less than $175,000 on the date two years from the
Closing, then in such event, UAG will issue to Landers additional shares of
its stock to equal an aggregate market value of $175,000. Stockholder shall be
entitled to any earnings, but shall also be responsible for payment to Sub for
any losses between October 31,
<PAGE>
1996 and the Closing. At the Closing referred to in Section 1.1 (b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to Sub the
Shares representing 100% of the outstanding Company Common Stock and
deliver the certificates representing such Shares accompanied by stock
powers duly executed in blank; and
(ii) Sub shall accept and purchase the Shares from the Stockholder and
in payment therefor shall deliver to the Stockholder the UAG Shares and
immediately available funds in an aggregate amount equal to the Base
Price by wire transfer to an account designated in writing by the
Stockholder or by certified funds.
(b) Closing. Subject to the conditions set forth in this Agreement, the
purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place at the offices of Horne, Hollingsworth & Parker, 401 W.
Capitol Avenue, Suite 501, Little Rock, Arkansas, 72201, or such other
location as the parties shall agree upon, at 10:00 a.m. as soon as practicable
following the date on which all conditions to the obligations of the parties
hereunder (other than those requiring an exchange of certificates, opinions or
other documents, or the taking of other action, at the Closing) have been
satisfied or waived but no later than June 30, 1997. The date on which the
Closing is to occur is herein referred to as the "Closing Date".
(c) Deliveries at the Closing. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) The Stockholder shall deliver to Sub (A) certificates representing
the Shares bearing the restrictive legend customarily placed on
securities that have not been registered under applicable federal and
state securities laws and accompanied by stock powers as required by
Section 1.1(a)(i) hereof, and any other documents that are necessary to
transfer to Sub good title to all the Shares, and (B) all opinions,
certificates and other instruments and documents required to be
delivered by the Stockholder at or prior to the Closing or otherwise
required in connection herewith;
(ii) Sub shall pay and deliver to the Stockholder (A) funds and UAG
Shares as required by Section 1.1(a)(ii) hereof, and (B) all
certificates and other instruments and documents required to be
delivered by LAS at or prior to the Closing or otherwise required in
connection herewith;
(iii) Landers, Sub and Company shall enter into a lease for the real
property used in the business of the Company in a form mutually
acceptable to the parties (the "Lease") and UAG and LAS shall guarantee
collection by Stockholder of the payment of the obligations thereunder.
LAS shall cause and
-2-
<PAGE>
be responsible for completion of the building known as the
"Buick-Pontiac Building." The Lease shall be a triple net lease and be
for a twenty (20) year term commencing on the Closing Date. The initial
lease rate for the Lease shall be $276,000 per year (the "Base Rate"),
payable monthly, and on the third anniversary of the Closing Date shall
increase to an amount equal to the Base Rate plus an amount equal to a
percentage of the Base Rate, which percentage shall be the percentage
increase in the Consumer Price Index published from time to time by the
United States Department of Labor between the Closing Date and the Third
Anniversary with similar increases every two years thereafter during the
term of the Lease.
(iv) Landers shall enter into a noncompetition agreement with Sub and
Company agreeing to not compete in the sale of new motor vehicles within
the state of Arkansas for a period of five years following the Closing
Date; and
(v) Landers, Sub and Company shall cause the pending litigation styled
Landers Auto Sales, Inc. v. Landers Buick Pontiac, Inc., Saline County
Chancery Court Case No. E 951241-3 to be dismissed with prejudice.
SECTION 1.2. NET WORTH ADJUSTMENT.
(a) If the Closing Date is on or before the fifteenth (15th) of any
month, as soon as practicable after the Closing Date, the Stockholder shall
deliver to LAS balance sheets of the Company dated as of the last day of the
month immediately preceding the Closing Date, and if the Closing Date is after
the fifteenth (15th) of any month, as soon as practicable after the Closing
Date, the Stockholder shall deliver to Sub balance sheets of the Company dated
as of the last day of the month in which the Closing Date occurred (such
balance sheets so delivered are referred to herein as the "Closing Date
Balance Sheets"). The Closing Date Balance Sheets shall be prepared in good
faith on the same basis and in accordance with the accounting principles,
methods and practices used in preparing the Company Financial Statements (as
defined in Section 2.5 hereof), subject to the modifications, adjustments and
exceptions to such accounting principles, methods and practices as shall be
agreed upon by Sub and the Stockholder within thirty (30) days (or such other
number of days as the parties shall agree upon) of the date hereof and set
forth on Schedule 1.2(a) hereto, and shall also include mutually agreed upon
procedures to adjust for any earnings and/or distributions of the Company
between the date of the Closing Date Balance Sheets and the Closing Date (such
accounting principles, methods and practices as so modified and adjusted, and
such procedures, are referred to herein as the "Accounting Principles"). In
connection with the preparation of the Closing Date Balance Sheets, the
Stockholder and the Company shall permit the Reviewer (as defined below) and
other representatives of LAS to conduct a physical inventory at the location
where inventory
-3-
<PAGE>
is held by the Company. From the results of such inventory and prior to the
Closing Date, LAS and the Stockholder (or the respective representatives
thereof) will prepare a schedule, which shall be signed by LAS and the
Stockholder, setting forth the nature and quality of such inventory and such
other items as shall be agreed upon by LAS, Sub and the Stockholder.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheets, (i) Coopers & Lybrand or such other accounting firm (the
"Reviewer") selected by LAS shall audit or otherwise review the Closing Date
Balance Sheets in such manner as LAS and the Reviewer deem appropriate, and
(ii) LAS shall deliver such reviewed balance sheets (the "Reviewed Balance
Sheets"), together with the Reviewer's report thereon, to the Stockholder. The
Reviewed Balance Sheets (i) shall be prepared on the same basis and in
accordance with the Accounting Principles and (ii) shall include a schedule
showing the computation of the Final Net Worth (as defined in Section
1.2(g)(i) hereof), computed in accordance with the definition of Net Worth set
forth in Section 1. 2 (g) (ii) hereof. LAS and the Reviewer shall have the
opportunity to consult with the Stockholder, the Company and each of the
accountants and other representatives of the Stockholder and the Company and
examine the work papers, schedules and other documents prepared by the
Stockholder, the Company and each of such accountants and other
representatives during the preparation of the Closing Date Balance Sheets. The
Stockholder and the Stockholder's independent public accountants shall have
the opportunity to consult with the Reviewer and examine the work papers,
schedules and other documents prepared by LAS and the Reviewer during the
preparation of the Reviewed Balance Sheets.
(c) The stockholder shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheets to present in writing to LAS all
objections the Stockholder may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail.
If no objections are raised within such 45-day period, the Reviewed Balance
Sheets shall be deemed accepted and approved by the Stockholder and a
supplemental closing (the "Supplemental Closing") shall take place within five
(5) Business Days following the expiration of such 45-day period, or on such
other date as may be mutually agreed upon in writing by LAS and the
Stockholder.
(d) If the Stockholder shall raise any objection within the 45-day
period, LAS and the Stockholder shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by LAS and the Stockholder within
sixty (60) days after the delivery of the Reviewed Balance Sheets, then the
specific matters in dispute shall be submitted to a firm of independent public
accountants
-4-
<PAGE>
mutually acceptable to LAS and the Stockholder, which firm shall make a final
and binding determination as to such matter or matters. Such accounting firm
shall send its written determination to LAS and the Stockholder and the
Supplemental Closing, if any, shall take place five (5) Business Days
following the receipt of such determination by LAS and the Stockholder. The
fees and expenses of the accounting firm referred to in this Section 1.2(e)
shall be paid one half by LAS and one-half by the Stockholder.
(f) LAS and the Stockholder agree to cooperate with each other and each
other's authorized representatives and with any accounting firm selected by
LAS and the Stockholders pursuant to Section 1.2 (e) hereof in order that any
and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheets as
finally determined through the operation of Sections 1.2(a) through (e) hereof
(such amounts being referred to herein as the "Final Net Worth") shall be less
than One Million Nine Hundred Ninety-Six Thousand One Hundred Forty-Six
Dollars ($1,996,146) for the Company (the amount of any such deficiencies
being referred to herein as the "Net Worth Deficiency"), the Stockholder shall
pay to LAS at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing by Sub within two (2)
Business Days of the date of the Supplemental Closing, an amount equal to the
Net Worth Deficiency, together with interest on such amount from the Closing
Date to the date of the Supplemental Closing at the prime rate or its
equivalent (as announced from time to time by Citibank, N.A.).
(ii) "Net Worth" computed in connection with the Closing Date Balance
Sheets and the Reviewed Balance Sheets shall mean the amount by which
the total assets exceed the total liabilities reflected, in each case,
on the balance sheet of Company comprising the Closing Date Balance
Sheets or the Reviewed Balance Sheets, as the case may be; provided,
however, in computing Net Worth as required by Section 1.2 hereof, no
adjustment shall be made to the used car inventory of the Company.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDER
Subject to the parties, agreement and acknowledgment that certain of the
Schedules referenced in this Article 2 are to be delivered by the Company and
the Stockholder after the execution and delivery of this Agreement, the
Company and the Stockholder hereby jointly and severally represent and warrant
to LAS and Sub as follows:
-5-
<PAGE>
SECTION 2.1. ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Arkansas and has the corporate
power and authority to own, lease and operate the properties used in its
business and to carry on its business as now being conducted. The Company is
duly qualified to do business and is in good standing as a foreign corporation
in each state and jurisdiction where qualification as a foreign corporation is
required, except for such failures to be qualified and in good standing, if
any, which when taken together with all other such failures of the Company
would not, or could not reasonably be expected to, in the aggregate have a
Material Adverse Effect (as defined in Section 10.10 hereof). Schedule 2.1
hereto lists (i) the states and other jurisdictions where the Company is so
qualified and (ii) the assumed names under which the Company conducts
business. The Company has previously delivered to LAS complete and correct
copies of its certificate of incorporation and by-laws (including comparable
governing instruments with different names), as amended and presently in
effect.
SECTION 2.2. SUBSIDIARIES.
The Company does not have any interest or investment in any Person (as
defined in Section 10.10 hereof).
SECTION 2.3. CAPITALIZATION.
The authorized stock of the Company and the number of shares of capital
stock which are issued and outstanding are set forth on Schedule 2.3 hereto.
The shares listed on Schedule 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and has been validly
authorized and issued, are fully paid and nonassessable, has not been issued
in violation of any preemptive rights or of any federal or state securities
law and no personal liability attaches to the ownership thereof. There is no
security, option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of
any shares of capital stock of the Company or any securities convertible into,
or other rights to acquire, any shares of capital stock of the Company, or
(ii) obligates the Company to grant, offer or enter into any of the foregoing,
or (iii) relates to the voting or control of such capital stock, securities or
rights, except as set forth on Schedule 2.3 hereto. The Company has not agreed
to register any securities under the Securities Act of 1933, as amended (the
"Securities Act").
SECTION 2.4. AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and the Documents (as defined in Section
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10.10 hereof) to which it is a party and to perform their obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and the Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the Documents and the transactions contemplated hereby and
thereby. This Agreement has been, and on the Closing Date the Documents will
be, duly executed and delivered by, and constitute valid and binding
obligations of, the Company, enforceable against the Company in accordance
with their respective terms. The execution, delivery and performance by the
Company and the Stockholder of this Agreement and the Documents to which it or
he is a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation or
By-Laws (including any comparable governing instrument with a different
name) of the Company;
(ii) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement (as
defined in Section 2.15 hereof) or, except as set forth on Schedule 2.4
hereto, require any consent or waiver of any party to any Company
Agreement;
(iii) result in the creation of any Security Interest upon, or any
person obtaining any right to acquire, any properties, assets or rights
of the Company (other than the rights of Sub to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined in
Section 2.9. hereof) applicable to the Company or any of its business
or properties; or
(v) require any authorization, consent, order, permit or approval of, or
notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act (as defined
in Section 5.3 hereof).
Except as set forth or referred to above, no authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any governmental administrative or judicial authority is
necessary to be obtained or made by the Company to enable the Company to
continue to conduct its business and operations and use its properties after
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the Closing in a manner which is in all material respects consistent with that
in which it is presently conducted.
SECTION 2.5. FINANCIAL STATEMENTS.
Except as otherwise indicated below, attached as Schedule 2.5 are true
and complete copies of:
(i) the balance sheet of the Company as of December 31, 1995, and
the related consolidated statements of income,
stockholders, equity and cash flow for the fiscal year ended December
31, 1995, together with the notes thereto;
(ii) the unaudited balance sheet of the Company as of October 31, 1996
(the "Company Balance Sheet") and the unaudited statements of income,
stockholders, equity and cash flow for the month periods ended on such
date, together with the notes thereto; and
(iii) the most recent monthly and year-to-date financial statements
provided to each franchiser of the Company (each, a "Company Factory
Statement" and, collectively, the "Company Factory Statements");
(all the foregoing financial statements (except for the financial statements
referred to in clause (iii) above), including the notes thereto, being
referred to herein collectively as the "Company Financial Statements"). The
Company Financial Statements are in accordance with the books and records of
the Company, fairly present the financial position, results of operations,
stockholders' equity and changes in financial position of the Company as of
the dates and for the periods indicated in conformity with GAAP consistently
applied (except as otherwise indicated in such statements) during such
periods, and can be legitimately reconciled with the financial statements and
the financial records maintained and the accounting methods applied by the
Company for federal income tax purposes, and the unaudited financial
statements included in the Company Financial Statements indicate all
adjustments, which consist of only normal recurring accruals, necessary for
such fair presentations. The statements of income included in the Company
Financial Statements do not contain any items of special or nonrecurring
income except as expressly specified therein, and the balance sheets included
in the Company Financial Statements do not reflect any write-up or revaluation
increasing the book value of any assets. The books and accounts of the Company
are complete and correct in all material respects and fairly reflect all of
the transactions, items of income and expense and all assets and liabilities
of the business of the Company consistent with prior practices of the Company.
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SECTION 2.6. ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Section 2.17 and 2. 18
hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for
(i) liabilities reflected or reserved against on the most recent Company
Financial Statement, (ii) current liabilities incurred in the ordinary course
of business and consistent with past practice after the date of the Company
Balance Sheet which, individually and in the aggregate, do not have, and
cannot reasonably be expected to have, a Material Adverse Effect, and (iii)
liabilities disclosed on Schedule 2.6 hereto. The Company is not parties to
any Company Agreement, or subject to any charter or by-law provision, any
other corporate limitation or any Legal Requirement, which has, or can
reasonably be expected to have, a Material Adverse Effect.
SECTION 2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, the Company has operated in the ordinary
course of business consistent with past practice, except as set forth on
Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of the Company,
and no factor, event, condition, circumstance or prospective development
exists which threatens or may threaten to have a Material Adverse
Effect;
(ii) any material loss, damage, destruction or other casualty to the
property or other assets of the Company, whether or not covered by
insurance;
(iii) any material change in any method of accounting or accounting
practice of the Company; or
(iv) any material loss of the employment, services or benefits of any
key employee of the Company.
(b) Since December 31, 1995, except as set forth in Schedule 2.7(b)
hereto, the Company has not:
(i) incurred any material obligation or liability (whether absolute,
accrued, contingent or otherwise), except in the ordinary course of
business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities
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being contested in good faith and for which adequate reserves have been
provided;
(iii) mortgaged, pledged or subjected to any lien any of its property or
other assets, except for mechanics, liens and liens for taxes not yet
due and payable;
(iv) sold or transferred any assets or cancelled any debts or claims or
waived any rights, except in the ordinary course of business consistent
with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the ordinary
course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not
reflected in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of employees
other than increases in accordance with past practice not exceeding 10%
or entered into any employment or severance agreement or arrangement
with any of them;
(ix) made any individual capital expenditure in excess of $75,000, or
aggregate capital expenditures in excess of $200,000, or additions to
property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any products or product
line or program;
(xi) incurred any obligation or liability for the payment of severance
benefits; or
(xii) entered into any agreement or made any commitment to do any of
the foregoing.
SECTION 2.8. TAXES.
The Company has filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes (as defined below) and all other information required to
be reported thereon and has paid, or made adequate provision for the payment
of, all Taxes which are due pursuant to such returns or pursuant to any
assessment received by the Company or any such other corporation. As used
herein, "Taxes" shall mean all taxes, fees, levies or other assessments,
including but not limited to income, excise, property, sales, franchise,
withholding, social security and unemployment taxes imposed by the United
States, any state, county, local or foreign government, or any subdivision or
agency
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thereof or taxing authority therein, and any interest, penalties or additions
to tax relating to such taxes, charges, fees, levies or other assessments.
Copies of all tax returns for the Company have been furnished to LAS or its
representatives and such copies are accurate and complete as of the date
hereof. The Company has also furnished to LAS correct and complete copies of
all notices and correspondence sent or received by the Company to or from any
federal, state or local tax authorities. The Company has adequately reserved
for the payment of all Taxes with respect to periods ended on, prior to or
through the Closing Date for which tax returns have not yet been filed. In the
ordinary course, the Company make adequate provision on its books for the
payment of all Taxes (including for the current fiscal period) owed by the
Company. Except to the extent reserves therefor are reflected on the Company
Balance Sheet, the Company is not liable, or will not become liable, for any
Taxes for any period ending on, prior to or through the Closing Date. Except
as set forth on Schedule 2.8 hereto, the Company has not been subject to a
federal or state tax audit of any kind, and no adjustment has been proposed by
the Internal Revenue Service ("IRS") with respect to any return for any
subsequent year. With respect to the audits referred to on Schedule 2.8
hereto, no such audit has resulted in an adjustment in excess of $50,000.
Neither the Company nor any Stockholder knows of any basis for an assertion of
a deficiency for Taxes against the Company. The Stockholder will cooperate,
and will cause their Affiliates to cooperate, with the Company in the filing
of any returns and in any audit or refund claim proceedings involving Taxes
for which the Company may be liable or with respect to which the Company may
be entitled to a refund.
SECTION 2.9. LEGAL MATTERS.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company
or the Stockholder, threatened against or affecting, the Company, any ERISA
Plan (as defined in Section 2.17(a) hereof) or any of its respective
properties or rights before or by any court, arbitrator, panel, agency or
other governmental, administrative or judicial entity, domestic or foreign,
nor is any basis known to the Stockholder or the Company for any such Claims,
and (ii) the Company is not subject to any judgment, decree, writ, injunction,
ruling or order (collectively, "Judgments") of any governmental,
administrative or judicial authority, domestic or foreign. Schedule 2.9(a)
hereto identifies each Claim and Judgment disclosed thereon which is fully
covered by an insurance policy.
(b) The business of the Company is being conducted in compliance with
all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Company or any of its
business or properties, except where the failure to be in such compliance
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could not reasonably be expected to have a Material Adverse Effect. The
Company holds, and is in compliance with, all franchises, licenses, permits,
registrations, certificates, consents, approvals or authorizations
(collectively, "Permits") required by all applicable Legal Requirements except
where the failure to hold or be in compliance with such Permits could not
reasonably be expected to have a Material Adverse Effect. A list of all such
permits is set forth on Schedule 2.9(b) hereof.
(c) The Company owns or holds all Permits material to the conduct of its
business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination
of any Permit.
SECTION 2.10. PROPERTY.
(a) The properties and assets owned by or leased to the Company are
adequate for the conduct of the business of the Company as presently
conducted. Set forth on Schedule 2.10, hereto is a list of all interests in
real property owned by or leased to the Company (including all real property
owned or leased by the Stockholder (directly or indirectly) and used in the
business of the Company) and of all options or other contracts to acquire any
such interest (collectively, the "Real Property"). All improvements to the
Real Property ("Improvements") and all machinery, equipment and other tangible
property owned or used by or leased to the Company are in good operating
condition and in good repair and are fit for the particular purposes for which
they are used by the Company, subject only to ordinary wear and tear. Such
tangible properties and all Improvements owned or leased by the Company
conform in all material respects with all applicable laws, ordinances, rules
and regulations and other Legal Requirements and such Improvements do not
encroach in any respect on property of others. There are no latent defects
with respect to the Improvements. The Real Property is currently zoned to
permit the conduct of the business of the Company as presently conducted.
Certificates of Occupancy have been issued with respect to the Improvements
without special conditions or restrictions. All utilities servicing the Real
Property and the Improvements are provided by publicly-dedicated utility lines
and are located within public rights-of-way and do not cross or encumber any
private land. No notice of any pending, threatened or contemplated action by
any governmental authority or agency having the power of eminent domain has
been given to the Company or the Stockholder with respect to the Real
Property.
SECTION 2.11. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Company, the
Real Property, the Improvements and any property formerly owned, occupied or
leased by the Company are in full compliance with all Environmental Laws (as
defined below), (ii) the Company has obtained all Environmental Permits (as
defined
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below), (iii) such Environmental Permits are in full force and effect, and
(iv) the Company is in full compliance with all terms and conditions of such
Environmental Permits. As used herein, "Environmental Laws" shall mean all
applicable requirements of environmental, public or employee health and
safety, public or community right-to-know, ecological or natural resource laws
or regulations or controls, including all applicable requirements imposed by
any law (including without limitation common law), rule, order, or regulations
of any federal, state, or local executive, legislative, judicial, regulatory,
or administrative agency, board, or authority, or any applicable private
agreement (such as covenants, conditions and restrictions), which relate to,
(i) noise, (ii) pollution or protection of the air, surface water,
groundwater, or soil, (iii) solid, gaseous, or liquid waste generation,
treatment, storage, disposal or transportation, (iv) exposure to Hazardous
Materials (as defined below), or (v) regulation of the manufacture,
processing, distribution and commerce, use, or storage of Hazardous Materials.
As used herein, "Environmental Permits" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Law in connection with the ownership, use and/or operation of
the Company's business or the Real Property or Improvements.
As used in this Section 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous
substances," "hazardous materials," "toxic substances" or similar terms in or
pursuant to, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as
amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L.
99-499, 100 State, 1613), the Resource Conservation and Recovery Act of 1976
(42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Occupational Safety and Health Act
of 1970 (29 U.S.C. ss. 651 et seq.) ("OSHA"), and the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1801 et seq. ("HMTA"), and in the
regulations promulgated pursuant to such laws, all as amended, (ii) those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency
(or any successor agency) as hazardous substances (40 CFR part 302 and
amendments thereto), (iii) any material, waste or substance which is or
contains (A) petroleum, including crude oil or any fraction thereof, natural
gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos,
(C) polychlorinated biphenyls, (D) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. ss. 1251 et seq. (33
U.S.C. ss. 1321) or listed pursuant to Section 307 of the Clean Water Act (33
U.S.C. ss. 1317), (E) flammable explosives, (F) radioactive materials, and
(iv) such other substances, materials and wastes which are or become regulated
or classified as hazardous, toxic or as "special wastes" under any
Environmental Laws.
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(b) The Company and the Stockholder have not violated, done or suffered
any act which could give rise to liability under, and are not otherwise
exposed to liability under, any Environmental Law. No event has occurred with
respect to the Real Property, the Improvements or any property formerly owned,
occupied or leased by the Company, which, with the passage of time or the
giving of notice, or both, would constitute a violation of or non-compliance
with any applicable Environmental Law. The Company has no contingent liability
under any Environmental Law. There are no liens under any Environmental Law on
the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) neither the
Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Company or the Stockholder, any property adjacent to the Real
Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site (provided, however,
that certain petroleum products are stored and handled on the Real Property in
the ordinary course of the Company's business in full compliance with all
Environmental Laws including the existing regulations of the United States
Environmental Protection Agency requiring spill protection, overfill
protection and corrosion protection by December 22, 1998), (ii) none of the
Real Property or portion thereof, the Improvements or any property formerly
owned, occupied or leased by the Company has been subject to investigation by
any governmental authority evaluating the need to investigate or undertake
Remedial Action (as defined below) at such property, and (iii) none of the
Real Property, the Improvements or any property formerly owned, occupied or
leased by the Company, or, to the knowledge of the Company or the Stockholder,
any site or location where the Company sent waste of any kind, is identified
on the current or proposed (A) National Priorities List under 40 C.F.R. 300
Appendix B, (B) Comprehensive Environmental Response Compensation and
Liability Inventory System list, or (C) any list arising from any statute
analogous to CERCLA. As used herein, "Remedial Action" shall mean any action
required to (i) clean up, remove or treat Hazardous Materials, (ii) prevent a
release or threat of release of any Hazardous Material, (iii) perform
preremedial studies, investigations or post-remedial monitoring and care, (iv)
cure a violation of Environmental Law or (v) take corrective action under
sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on Schedule 2.11(d) hereto, there have been and
are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB
containing equipment, including transformers, or (iv)
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wetlands (as defined under any Environmental Law) located within any portion
of the Real Property, nor have any liens been placed upon any portion of the
Real Property, the Improvements or any property formerly owned, occupied or
leased by the Company in connection with any actual or alleged liability under
any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Company, the Real Property, the
Improvements, any property formerly owned, leased or occupied by the Company,
any offsite contamination affecting the business of the Company or any
operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to
any Remedial Action or other environmentally related claim, (iii) the Company
has not submitted notice pursuant to Section 103 of CERCLA or analogous
statute or notice under any other applicable Environmental Law reporting a
release of a Hazardous Material into the environment, and (iv) the Company has
not received any notice, claim, demand, suit or request for information from
any governmental or private entity with respect to any liability or alleged
liability under any Environmental Law, nor to knowledge of the Stockholder and
the Company, has any other entity whose liability therefor, in whole or in
part, may be attributed to the Company, received such notice, claim, demand,
suit or request for information.
(f) The Stockholder and the Company has provided to LAS all
environmental studies and reports obtained by it or known to it pertaining to
the Real Property, the Improvements, the Company and any property formerly
owned, occupied or leased by the Company, and has permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, and any property formerly owned, occupied or leased by the
Company, by LAS or LAS's agents or experts as they have or shall have deemed
necessary or appropriate to confirm the condition of such properties.
SECTION 2.12. INVENTORIES.
The values at which inventories are carried on the Company Balance Sheet
and Company Factory Statements of the Company reflect the normal inventory
valuation policies of the Company. Except for the used car inventory, all
inventory reflected on the Company Balance Sheet and Company Factory
Statements or arising since the date thereof are currently marketable and can
reasonably be anticipated to be sold at normal mark-ups within 120 days after
the date hereof in the ordinary course of business (subject to the reserve for
obsolete, offgrade or slow-moving items that is reflected in the Company
Balance Sheet, except for spare parts inventory which inventory is good and
usable.
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SECTION 2.13. ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Balance Sheet are, and
all accounts receivable that will be or will have been reflected on the
Closing Date Balance Sheet will be, good, and have been or will have been
collected or are collectible, without resort to litigation, within 90 days of
the Closing Date, and are subject to no defenses, setoffs or counterclaims
other than normal cash discounts accrued in the ordinary course of business.
SECTION 2.14. INSURANCE.
All material properties and assets of the Company which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Company is engaged and customary
for companies engaged in similar businesses or owning similar assets. Set
forth on Schedule 2.14. hereto is a list and brief description (including the
name of the insurer, the type of coverage provided, the amount of the annual
premium for the current policy period, the amount of remaining coverage and
deductibles and the coverage period) of all policies for such insurance and
the Company has made or will make available to LAS true and complete copies of
all such policies. All such policies are in full force and effect sufficient
for all applicable requirements of law and will not in any way be effected by
or terminated or lapsed by reason of the consummation of the transactions
contemplated by this Agreement and the Lease. No notice of cancellation or
non-renewal with respect to, or disallowance of any claim under, any such
policy has been received by the Company.
SECTION 2.15. CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean all
mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on Schedule 2.10
hereto) to which either of the Company is a party or by which the Company or
any of its assets or properties (including the Real Property and the
Improvements) may be bound or affected, including all amendments,
modifications, extensions or renewals of any of the foregoing. Set forth on
Schedule 2.15 hereto is a complete and accurate list of each Company Agreement
which is material to the business, operations, assets, condition (financial or
otherwise) or prospects of the Company. True and complete copies of all
written Company Agreements referred to on Schedule 2.15, and Schedule 2.10
hereto, exclusive of individual vehicle titles and/or manufacturer's
certificates of origin and floor plan liens applicable to individual vehicles,
have been delivered or made available to LAS, and the Company has provided LAS
with accurate
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and complete written summaries of all such Company Agreements which are
unwritten. Except as set forth on Schedule 2.15, the Company is not, nor, to
the knowledge of the Company and the Stockholder is, any other party thereto,
in breach of or default under any Company Agreement, and no event has occurred
which (after notice or lapse of time or both) would become a breach or default
under, or would permit modification, cancellation, acceleration or termination
of, any Company Agreement or result in the creation of any Lien upon, or any
Person obtaining any right to acquire, any properties, assets or rights of the
Company in any such case where such breach, default or other event would have,
or could reasonably be expected to have, a Material Adverse Effect. There are
no material unresolved disputes involving the Company under any Company
Agreement.
SECTION 2.16. LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the
payment and withholding 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
wages or salaries of its employees.
(b) Except as described in Section 2.18(a) and as set forth on Schedule
2.16(b) hereto, the Company is not a party to any (i) outstanding employment
agreements or contracts with officers or employees that are not terminable at
will, or that provide for payment of any bonus or commission, (ii) agreement,
policy or practice that requires it to pay termination or severance pay to
salaried, non-exempt or hourly employees (other than as required by law),
(iii) collective bargaining agreement or other labor union contract applicable
to persons employed by the Company, nor does the Stockholder or the Company
know of any activities or proceedings of any labor union to organize any such
employees. The Company has furnished to LAS complete and correct copies of all
such agreements ("Employment and Labor Agreements"). The Company has not
breached or otherwise failed to comply with any provisions of any Employment
or Labor Agreement.
(c) Except as set forth in Schedule 2.16(c) hereto, (i) there is no
unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholder, or
the Company, knowledge, threatened, against or affecting the Company, and the
Company has not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any
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similar foreign agency and no question concerning representation exists
relating to the employees of the Company, (iv) there are no charges with
respect to or relating to the Company pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for
the prevention of unlawful employment-practices, (v) the Company has not
received formal notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Company and, to the knowledge of the Company,
no such investigation is in progress and (vi) the consents of the unions that
are parties to any Employment and Labor Agreements are not required to
complete the transactions contemplated by this Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass layoff" as
such actions are defined in the Worker Adjustment and Retraining Notification
Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the regulations
promulgated therein.
SECTION 2.17. EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Company or to which the Company is required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section 3(i) of
ERISA, maintained by the Company or to which the Company is required to
make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to LAS together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination
letters or applications therefor with respect to any Pension Benefit Plan
intended to be qualified pursuant to Section 401 (a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and valuation or actuarial reports,
accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or
5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on Schedule
2.17(b):
(i) there is no ERISA Plan which is a "multi-employer" plan as that term
is defined in Section 3(37) of ERISA ("Multiemployer Plan");
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(ii) no event has occurred or (to the knowledge of the Company or the
Stockholder) is threatened or about to occur which would constitute a
prohibited transaction under Section 406 of ERISA or under Section 4975
of the Code;
(iii) each ERISA Plan has operated since its inception in accordance
with the reporting and disclosure requirements imposed under ERISA and
the Code and has timely filed Form 5500 (or 5500-C or 5500-R) and
predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or foreign
Taxes.
(c) Each Pension Benefit Plan intended to be qualified under Section
401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a) of the
Code, and the trust established thereunder has been exempt from taxation
under Section 501(a) of the Code and is currently in compliance with
applicable federal laws;
(ii) has been operated, since its inception, in accordance with its
terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by the IRS
or (to the knowledge of the Company or the Stockholder) no such action
is contemplated or under consideration and the IRS has not asserted that
any Pension Benefit Plan is not qualified under Section 401(a) of the
Code or that any trust established under a Pension Benefit Plan is not
exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined benefit
plan under Section 414(j) and, for the purpose solely of Section 2.17(d)(iv)
hereof, each defined contribution plan under Section 414(i) of the Code:
(i) no liability to the Pension Benefit Guaranty Corporation ("PBGC")
under Sections 4062-4064 of ERISA has been incurred by the Company since
the effective date of ERISA and all premiums due and owing to the PBGC
have been timely paid;
(ii) the PBGC has not notified the Company or any Pension Benefit Plan
of the commencement of proceedings under Section 4042 of ERISA to
terminate any such plan;
(iii) no event has occurred since the inception of any Pension Benefit
Plan or (to the knowledge of the Company or the Stockholder) is
threatened or about to occur which would constitute a reportable event
within the meaning of Section 4043(b) of ERISA;
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(iv) no Pension Benefit Plan ever has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code); and
(v) if any of such Pension Benefit Plans were to be terminated on the
Closing Date (A) no liability under Title IV of ERISA would be incurred
by the Company and (B) all benefits accrued to the day prior to the
Closing Date (whether or not vested) would be fully funded in accordance
with the actuarial assumptions and method utilized by such plan for
valuation purposes.
(e) With respect to each Pension Benefit Plan, Schedule 2.17(e) contains
a list of all Pension Benefit Plans to which ERISA has applied which have been
or are being terminated, or for which a termination is contemplated, and a
description of the actions taken by the PBGC and the IRS with respect thereto.
(f) The approximate aggregate of the amounts of contributions by the
Company to be paid or accrued under ERISA Plans for the current fiscal year is
set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"), and the
Aggregate ERISA Contributions are not expected to exceed the total amount set
forth on Schedule 2.17(f). To the extent required in accordance with GAAP, the
Company Balance Sheet reflects in the aggregate an accrual of all amounts of
employer contributions accrued but unpaid by the Company under the ERISA Plans
as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205
of ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined
in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare Benefit Plans
with respect to any condition which relates to a claim filed on or
before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
SECTION 2.18. OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on Schedule 2.18(a) hereto is a true and complete list
of:
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(i) each employee stock purchase, employee stock option, employee stock
ownership, deferred compensation, performance, bonus, incentive,
vacation pay, holiday pay, insurance, severance, retirement, excess
benefit or other plan, trust or arrangement which is not an ERISA Plan
whether written or oral, which the Company maintains or is required to
make contributions to;
(ii) each other agreement, arrangement, commitment and understanding of
any kind, whether written or oral, with any current or former officer,
director or consultant of the Company pursuant to which payments may be
required to be made at any time following the date hereof (including,
without limitation, any employment, deferred compensation, severance,
supplemental pension, termination or consulting agreement or
arrangement); and
(iii) each employee of the Company whose aggregate compensation for the
fiscal year ended December 31, 1995 exceeded, and whose aggregate
compensation for the fiscal year ended December 31, 1996 is likely to
exceed, $50,000. True and complete copies of all of the written plans,
arrangements and agreements referred to on Schedule 2.18(a)
("Compensation Commitments") have been provided to LAS together with,
where prepared by or for the Company, any valuation, actuarial or
accountant's opinion or other financial reports with respect to each
Compensation Commitment for the last three years. An accurate and
complete written summary has been provided to LAS with respect to any
Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material respects in
accordance with its terms;
(ii) is not currently under investigation, audit or review by the IRS or
any other federal or state agency and (to the knowledge of the Company
or the Stockholder) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance with the
reporting and disclosure requirements imposed under ERISA and the Code.
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SECTION 2.19. TRANSACTIONS WITH INSIDERS.
Set forth on Schedule 2.19 hereto is a complete and accurate description
of all material transactions between the Company or any ERISA Plan, on the one
hand, and any Insider, on the other hand, that have occurred since January 1,
1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any director or
officer of the Company, and any Affiliate, Associate or Relative of any
of the foregoing persons;
(ii) the term "Associate" used to indicate a relationship with any
person means (A) any corporation, partnership, joint venture or other
entity of which such person is an officer or partner or is, directly or
indirectly, through one or more intermediaries, the beneficial owner of
30% or more of (1) any class or type of equity securities or other
profits interest or (2) the combined voting power of interests
ordinarily entitled to vote for management or otherwise, and (B) any
trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse, such
person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
SECTION 2.20. PROPRIETY OF PAST PAYMENTS.
No funds or assets of the Company have been used for illegal purposes;
no unrecorded funds or assets of the Company has been established for any
purpose; no accumulation or use of the Company's corporate funds or assets has
been made without being properly accounted for in the respective books and
records of the Company; all payments by or on behalf of the Company has been
duly and properly recorded and accounted for in their respective books and
records; no false or artificial entry has been made in the books and records
of the Company for any reason; no payment has been made by or on behalf of the
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such
payment; and the Company has not made, directly or indirectly, any illegal
contributions to any political party or candidate, either domestic or foreign.
Neither the IRS nor any other federal, state, local or foreign government
agency or entity has initiated or threatened any investigation of any payment
made by the Company of, or alleged to be of, the type described in this
Section 2.20.
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SECTION 2.21. INTEREST IN COMPETITORS.
Except as set forth on Schedule 2.21, neither the Company nor the
Stockholder, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2%. of
the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or otherwise,
directly or indirectly, in any Person other than the Company that is engaged
in the retail sale of automobiles.
SECTION 2.22. BROKERS.
Neither the Company, nor any director, officer or employee thereof, nor
the Stockholder or any representative of the Stockholder, has employed any
broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement or the Lease.
SECTION 2.23. ACCOUNTS.
Schedule 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Company and the name of each person
with any power or authority to act with respect thereto.
SECTION 2.24. DISCLOSURE.
Neither the Company nor the Stockholder has made any material
misrepresentation to LAS or Sub relating to the Company or the Shares and
neither the Company nor the Stockholder have omitted to state to LAS any
material fact relating to the Company or the Shares which is necessary in
order to make the information given by or on behalf of the Company or the
Stockholder to LAS not misleading or which if disclosed would reasonably
affect the decision of a person considering an acquisition of the Shares. No
fact, event, condition or contingency exists or has occurred which has, or in
the future can reasonably be expected to have, a Material Adverse Effect,
which has not been disclosed in the Company Financial Statements or the
schedules to this Agreement.
SECTION 2.25. NET WORTH.
The Net Worth of the Company, as determined in accordance with the
Accounting Principles, will be equal to or greater than One Million Nine
Hundred Ninety-Six Thousand One Hundred Forty Six Dollars ($1,996,146) as set
forth in Section 1.2 hereof.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
Subject to the parties, agreement and acknowledgment that certain of the
Schedules referenced in this Article 3 are to be delivered by the Stockholder
after the execution and delivery of this Agreement, the Stockholder hereby
further represents and warrants to LAS and Sub as follows:
SECTION 3.1. OWNERSHIP OF SHARES; TITLE.
The Stockholder is the owner of record and beneficially of the Shares
set forth on Schedule 3.1 hereof and has, and shall transfer to Sub at the
Closing, good and marketable title to the Shares, free and clear of any and
all Security Interests, proxies and voting or other agreements except
restrictions on transfer imposed by applicable federal and state securities
laws.
SECTION 3.2. AUTHORITY.
The Stockholder has all requisite power and authority and has full legal
capacity and is competent to execute, deliver and perform this Agreement and
the Documents to which he is a party and to consummate the transactions
contemplated hereby and thereby (including the disposition of the Shares to
Sub as contemplated by this Agreement). This Agreement has been duly executed
and delivered by the Stockholder and constitutes, and the Documents to which
the Stockholder is a party when executed and delivered by the Stockholder will
constitute, a valid and binding obligation of the Stockholder, enforceable
against the Stockholder in accordance with its terms. Except as set forth on
Schedule 3.2, the execution, delivery and performance of this Agreement and
the Documents by the Stockholder and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of
termination or acceleration in respect of any material contract,
agreement, commitment, understanding, arrangement or restriction to
which the Stockholder is a party or to which the Stockholder or any of
the Stockholder's property is subject;
(ii) violate or conflict with any Legal Requirements applicable to the
Stockholder or any of the Stockholder's businesses or properties; or
(iii) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any
governmental, administrative or
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judicial authority, except in connection with or in compliance with
the provisions of the H-S-R Act.
SECTION 3.3. REAL PROPERTY AND IMPROVEMENTS.
Landers owns the real property and improvements used in the business of
Company ("Company Real Property and Improvements") in fee simple, free and
clear of all liens, claims and encumbrances, except those disclosed in
Schedule 3.3 hereto, none of which currently or, to his knowledge, in the
future will affect the use of the Company Real Property and Improvements for
the conduct of the business of Company as presently conducted. No assessments
have been made against any portion of the Company Real Property which are
unpaid (except ad valorem taxes for the current year that are not yet due and
payable), whether or not they have become liens. To the Stockholder's
knowledge, there are no disputes concerning the location of the lines and
corners of the Company Real Property and Improvements. No one has been granted
any right to purchase or lease the Company Real Property and Improvements
other than the existing lease in favor of Company, which is to be terminated
at Closing.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF LAS AND SUB
LAS and Sub hereby jointly and severally represent and warrant to the
Company and the Stockholder as follows:
SECTION 4.1. INCORPORATION OF LAS AND SUB.
Each of LAS and Sub is a corporation duly organized, validly existing
and in good standing under the laws of the state of Arkansas.
SECTION 4.2. POWER; AUTHORIZATION; CONSENTS.
Each of LAS and Sub has the corporate power and authority to enter into
this Agreement and the Documents to which it is a party and to perform its
obligations hereunder and thereunder. The execution, delivery and performance
of this Agreement and the Documents and the consummation of the transactions
contemplated hereby and thereby have been, or at the Closing will have been,
duly authorized and approved by the Board of Directors of each of LAS and Sub
and no other corporate proceedings on the part of LAS or Sub are necessary, or
will be necessary, to authorize and approve this Agreement and the Documents
and the transactions contemplated hereby and thereby. This Agreement has been
duly executed and delivered by each of LAS and Sub, and constitutes, and the
Documents to which it is a party when executed and delivered by LAS or Sub, as
the case may be, will constitute, a valid and binding obligation of LAS or
Sub, as they case may be, enforceable against LAS or Sub, as the case may be,
in accordance with their respective terms. The execution, delivery
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and performance of this Agreement and the Documents to which it is a part by
LAS and Sub and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation or
By-Laws of LAS or Sub;
(ii) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of
termination or acceleration in respect of any material contract,
agreement, commitment, understanding, arrangement or restriction to
which LAS or Sub is a party to or which LAS or Sub or any of LAS' or
Sub's property is subject;
(iii) violate or conflict with any Legal Requirements applicable to LAS
or Sub or any subsidiary of LAS or Sub or any of their respective
businesses or properties; or
(iv) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
SECTION 4.3. BROKERS.
Neither LAS, Sub, nor any director, officer or employee of LAS or Sub,
has employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Documents.
ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
SECTION 5.1. ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholder and the
Company will (i) provide to the officers and other authorized representatives
of LAS and Sub full access, during normal business hours, to any and all
premises, properties, files, books, records, documents, and other information
of the Company and will cause their officers to furnish to LAS and Sub and
their authorized representatives any and all financial technical and operating
data and other information pertaining to the businesses and properties of the
Company, and (ii) make available for inspection and copying by LAS and Sub
true and complete copies of any documents relating to the foregoing. LAS and
Sub will hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law) all Confidential Information (as defined below) and will
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not disclose the same to any third party except in connection with obtaining
financing and otherwise as may reasonably be necessary to carry out this
Agreement and the transactions contemplated hereby, including any due
diligence review by or on behalf of LAS and Sub. If this Agreement is
terminated, LAS and Sub will promptly return to the Company, upon the
reasonable request of the Company, all Confidential Information furnished by
the Company and held by LAS and Sub, including all copies and summaries
thereof. As used herein, "Confidential Information" shall mean all information
concerning the Company obtained by LAS or Sub from the Company in connection
with the transactions contemplated by this Agreement, except information (x)
ascertainable or obtained from public information, (y) received from a third
party not employed by or otherwise affiliated with the Company or (z) which is
or becomes known to the public, other than through a breach by LAS of this
Agreement.
SECTION 5.2. FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Company, on the one hand, and LAS and Sub, on
the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the Stockholder
and the Company or LAS and Sub, respectively, required for inclusion in any
statement or application made by LAS or the Company to any governmental or
regulatory body or in connection with obtaining any third party consent in
connection with the transactions contemplated by this Agreement. Neither the
Stockholder nor the Company, on the one hand, nor LAS nor Sub, on the other
hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law.
SECTION 5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
LAS and Sub and the Stockholder and the Company, as applicable, shall,
if required, each file or cause to be filed with the Federal Trade Commission
and the United States Department of Justice any notifications required to be
filed by the respective "ultimate parent" entities under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "H-S-R Act"), and the
rules and regulations promulgated thereunder, with respect to the transactions
contemplated herein. The parties shall use their best efforts to make such
filings promptly, to respond to any requests for additional information made
by either of such agencies, to cause the waiting periods under the H-S-R Act
to terminate or expire at the earliest possible date and to resist vigorously,
at their respective cost and expense (including, without limitation, the
institution or defense of legal proceedings), any assertion that the
transactions contemplated herein constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
herein; provided, however, that if LAS or the
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Stockholder shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or his best interests, LAS or the
Stockholder, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in Section 8.2 hereof.
SECTION 5.4. CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholder shall cause the Company to,
conduct its business solely in the ordinary course consistent with past
practices and, without the prior written consent of LAS, neither the
Stockholder nor the Company will, except as required or permitted pursuant to
the terms hereof, permit the Company to:
(i) make any material change in the conduct of its business and
operations or enter into any transaction other than in the ordinary
course of business consistent with past practices;
(ii) make any change in its Certificate of Incorporation or By-laws,
issue any additional shares of capital stock or equity securities or
grant any option, warrant or right to acquire any capital stock or
equity securities or issue any security convertible into or exchangeable
for its capital stock or alter any material term of any of its
outstanding securities or make any change in its outstanding shares of
capital stock or other ownership interests or its capitalization,
whether by reason of a reclassification, recapitalization, stock split
or combination, exchange or readjustment of shares, stock dividend or
otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for borrowed
money, issue any notes, bonds, debentures or other corporate securities
or grant any option, warrant or right to purchase any thereof, except
pursuant to transactions in the ordinary course of business consistent
with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Company, or (C) issue any
options or other rights to acquire from the Company, directly or
indirectly, debt securities of the Company or any security convertible
into or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to existing contracts set forth in Schedule 2.16, hereto and
dispositions of inventory or of wornout or obsolete equipment for fair
or reasonable value in the ordinary course of business consistent with
past practices;
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(v) subject any of its assets, or any part thereof, to any lien or
suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practices by operation
of law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other distribution
(whether in cash, stock, property or any combination thereof) in respect
of any shares of its capital stock if, after such dividend or
distribution, the Net Worth of Company would be less than $1,996,146 or
redeem, retire, purchase or otherwise acquire, directly or indirectly,
any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter into any
other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee benefit plan,
program or arrangement or any new (or amend any existing) employment,
severance or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to
become payable to any employee, except in accordance with pre-existing
contractual provisions or consistent with past practices;
(ix) make or commit to make any individual material capital expenditure
in excess of $25,000, or aggregate capital expenditures in excess of
$100,000;
(x) pay, loan or advance any amount to, or sell, transfer or lease any
properties or assets to, or enter into any agreement or arrangement
with, any of its Affiliates;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable in
amount and scope to coverage maintained by the Company (or on behalf of
the Company) on the date hereof;
(xiii) make any loan, advance or capital contribution to or investment
in any person;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP or write-down the
value of any inventory or write-off as uncollectible any accounts
receivable except in
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the ordinary course of business consistent with past practices;
(xv) settle, release or forgive any material claim or litigation or
waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
(xvii) take any other action that would cause any of the representations
and warranties made by the Company in this Agreement not to remain true
and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholder and the Company will cause the Company to use its reasonable best
efforts to:
(i) continue to maintain, in all material respects, its properties in
accordance with present practices in a condition suitable for their
current use;
(ii) comply with all applicable Environmental Laws, and, in the event
the Company shall receive notice that there exists a violation of any
Environmental Law with respect to its operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy such violation in
accordance with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and other tax
returns and other reports required to be filed and pay when due all
taxes, assessments, fees and other charges lawfully levied or assessed
against the Company unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practices;
(v) preserve its business organization intact and continue to maintain
existing business relationships with suppliers, customers and others
with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
(vi) continue to conduct their business in the ordinary course
consistent with past practices.
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SECTION 5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on Schedule 5.4, at the Closing there will be no
intercompany payables or intercompany receivables due and/or owing between the
Stockholder and its Affiliates (other than the Company) on the one hand, and
the Company, on the other hand, other than those incurred in the ordinary
course of business and generally disclosed in the Notes to the Company
Financial Statements.
SECTION 5.6. NEGOTIATIONS.
Until the earlier of 210 days from the date hereof and the termination
of this Agreement pursuant to clause (ii) of Section 8.1 hereof, neither the
Stockholder, nor the Company, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of
the Stockholder, the Company or such persons, shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations with, or
provide any information to, any person (other than LAS or its representatives)
concerning any merger, sale of assets (other than in the ordinary course of
business), purchase or sale of shares of capital stock or similar transaction
involving the Company. The Stockholder shall promptly communicate to LAS any
inquiries or communications concerning any such transaction (including the
identity of any person making such inquiry or communication) which the
Stockholder may receive or of which the Stockholder may become aware.
SECTION 5.7. CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder and the
Company and LAS will use their respective best efforts at their own expense:
(i) to obtain prior to the earlier of the date required (if so required)
or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations
with governmental authorities which are required on their respective
parts for (A) the consummation of the transactions contemplated by this
Agreement, (B) the ownership or leasing and operating after the Closing
by the Company of all their material properties and (C) the conduct
after the Closing by the Company of its business as conducted by them on
the date hereof;
(ii) to defend, consistent with applicable principles and requirements
of law, any lawsuit or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third
persons (including
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governmental authorities) challenging this Agreement or the transactions
contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
SECTION 5.8. ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers of
the Company shall take all such necessary action. Following the Closing, LAS
will use its best efforts to have Landers removed from any personal guaranties
relating to obligations of the Company.
SECTION 5.9. INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after the
date of this Agreement, the Company will deliver to LAS unaudited consolidated
balance sheets of the Company as at the end of such calendar month and at the
end of the corresponding calendar month of the preceding fiscal year, together
with the related unaudited consolidated statements of income for the fiscal
months then ended. All such financial statements shall fairly present the
financial position, results of operations and cash flow of the Company as at
the date or for the periods indicated. All unaudited financial statements
delivered pursuant to this Section 5.9 shall be prepared on a basis consistent
with the Company Financial Statements.
SECTION 5.10. NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in Article 6 or
Article 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions contemplated by this Agreement,
and (iv) in the case of the Stockholder and the Company, any notice of, or
other communication relating to, any default or event which, with notice or
lapse of time or both, would become a default under any Company Agreement.
Each party hereto will (x)
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promptly advise the other party hereto of any event that has, or could in the
future have, a Material Adverse Effect or material adverse effect on LAS and
the its subsidiaries, taken as a whole, as applicable, (y) confer on a regular
and frequent basis with one or more designated representatives of the other
party to report operational matters and to report the general status of
ongoing operations, and (z) notify the other party of any emergency or other
change in the normal course of business or in the operation of the properties
of the Company and of any governmental complaints, investigations or hearings
(or communications indicating that the same may be contemplated) or
adjudicatory proceedings involving any property of the Company or LAS, as
applicable, and will keep the other party fully informed of such events and
permit LAS's representatives access to all materials prepared in connection
therewith. The Stockholder shall give prompt notice to LAS of any notice or
other communication from any third person asserting any right, title or
interest in any of the Shares held by the Stockholder (including, without
limitation, any threat to commence, or notice of the commencement of any
action or other proceeding with respect to the Shares) or the occurrence of
any other event of which the Stockholder has knowledge which could result in
any failure to consummate the sale of the Shares as contemplated hereby.
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS
OF LAS TO EFFECT THE CLOSING
The obligations of LAS and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by LAS or Sub as
provided herein except as otherwise required by applicable law:
SECTION 6.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Company and the
Stockholder contained in this Agreement shall be true and correct as of the
date hereof and (having been deemed to have been made again at and as of the
Closing) shall be true and correct as of the Closing. Each of the obligations
of the Company and the Stockholder required by this Agreement to be performed
by them at or prior to the Closing shall have been duly performed and complied
with in all respects as of the Closing. At the Closing, LAS shall have
received a certificate, dated the Closing Date and duly executed by Landers to
the effect that the conditions set forth in the two preceding sentences have
been satisfied.
SECTION 6.2. AUTHORIZATION: CONSENTS.
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the
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Documents, and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Company. All filings
required to be made under the H-S-R Act in connection with the transactions
contemplated hereby shall have been made and all applicable waiting periods
with respect to each such filing, including any extensions thereof, shall have
expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
SECTION 6.3. OPINIONS OF THE COMPANY, AND THE STOCKHOLDER'S COUNSEL.
LAS and Sub shall have been furnished with the opinion of counsel for
the Company and the Stockholder, dated the Closing Date, in form and substance
satisfactory to LAS, Sub and their counsel.
SECTION 6.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of LAS or Sub effectively to
exercise full rights of ownership of the Shares. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which LAS or Sub, in good
faith and with the advice of counsel, believes makes it undesirable to proceed
with the consummation of the transactions contemplated hereby.
SECTION 6.5. NO MATERIAL ADVERSE EFFECT.
During the period from October 31, 1996 to the Closing Date, there shall
not have been any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of the Company.
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SECTION 6.6. COMPLETION OF DUE DILIGENCE.
LAS and Sub shall have completed their due diligence examination of the
Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to LAS and Sub; LAS will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, LAS determines that a Phase II environmental audit is
required, then the expenses of performing the Phase II environmental audit
shall be shared equally by the Company and LAS.
SECTION 6.7. COMPANY LEASE.
Landers and Company shall have entered into the Lease.
SECTION 6.8. BOARD APPROVAL.
The Board of Directors of LAS and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
SECTION 6.9. CERTIFICATES.
The Stockholder and the Company shall have furnished LAS and Sub with a
certificate, dated as of the Closing Date, executed by the Stockholder
certifying to the fulfillment of the conditions set forth in Section 6.5, 6.6
and 6.14 hereof and shall have furnished LAS and Sub with such any other
certificates of its officers and others as LAS and Sub may reasonably request
to evidence compliance with the conditions set forth in this Article 6.
SECTION 6.10. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of the Stockholder and the Company
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of the Stockholder and the Company in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for LAS and Sub.
SECTION 6.11. APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
The Stockholder and the Company shall have obtained the consent,
authorization and approval of General Motors Corporation and Isuzu on terms no
less favorable to those granted to the Company immediately prior to Closing.
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SECTION 6.12. ENVIRONMENTAL LAWS.
The Companies shall be in compliance with all applicable Environmental
Laws.
SECTION 6.13. NONDISTURBANCE AGREEMENTS.
Landers shall have obtained a nondisturbance and subordination agreement
in form and substance satisfactory to Company and LAS with respect to the
property that is the subject of the Lease.
SECTION 6.14. TITLE INSURANCE.
LAS shall have obtained title insurance on behalf of the Company with
respect to the Company leasehold estates in form and substance satisfactory to
LAS.
SECTION 6.15. MEMORANDUM OF LEASE.
The appropriate parties shall have executed a Memorandum of Lease in
form and substance satisfactory to LAS.
SECTION 6.16. SCHEDULES.
The Company and the Stockholder shall have delivered to LAS and Sub all
Schedules referred to in Articles 2 and 3 and such Schedules shall be
acceptable in form and substance to LAS and Sub.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDER AND THE COMPANY TO EFFECT THE CLOSING
The obligations of the Stockholder and the Company required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may
be waived by the Company and the Stockholder as provided herein except as
otherwise required by applicable law:
SECTION 7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of LAS and Sub contained in
this Agreement shall be true and correct on the date made and shall be true
and correct in all material respects as of the Closing. Each of the
obligations of LAS and Sub required by this Agreement to be performed by them
at or prior to the Closing shall have been duly performed and complied with in
all material respects as of the Closing. At the Closing, the Stockholder shall
have received a certificate, dated the Closing Date and duly executed by the
chief financial officer of LAS and of Sub to the effect that the conditions
set forth in the preceding two sentences have been satisfied.
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SECTION 7.2. AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by LAS and Sub. All
filings required to be made under the H-S-R Act in connection with the
transactions contemplated hereby shall have been made and all applicable
waiting periods with respect to each such filing, including extensions
thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
SECTION 7.3. ABSENCE OF LITIGATION.
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the
transactions contemplated hereby.
SECTION 7.4. LEASE.
Company and Sub shall have entered into the Lease.
SECTION 7.5. CERTIFICATES.
LAS and Sub shall have furnished the Stockholder with such certificates
of its officers and others to evidence compliance with the conditions set
forth in this Article 7 as may be reasonably requested by the Stockholder.
SECTION 7.6. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of LAS or Sub under the provisions of
this Agreement, and all other actions and proceedings required to be taken by
or on behalf of LAS or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholder.
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ARTICLE 8.
TERMINATION
SECTION 8.1. TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of LAS and the Stockholder;
(ii) by either LAS or the Stockholder if the Closing shall not have
taken place on or prior to June 30, 1997, or such later date as shall
have been approved by LAS, Sub and the Stockholder (provided that the
terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(iii) by LAS or the Stockholder if any court of competent jurisdiction
in the United States or other United States governmental body shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have
become final and non-appealable;
(iv) by LAS or Sub if any of the conditions specified in Article 6
hereof have not been met or waived by LAS and Sub at such time as such
condition is no longer capable of satisfaction (provided LAS and Sub are
not otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement);
(v) by the Stockholder if any of the conditions specified in Article 7
hereof have not been met or waived by the Stockholder at such time as
such condition is no longer capable of satisfaction (provided that
neither the Stockholder nor the Company is otherwise in material breach
of his or its representations, warranties covenants or agreements under
this Agreement); or
(vi) by either LAS or the Stockholder if there has been a material
breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured within ten (10) Business Days following receipt by the
breaching party of written notice of such breach.
If LAS or the Stockholder shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
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SECTION 8.2. EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
(ii) for the obligations contained in Sections 5. 1 and 10.2 hereof and (iii)
as set forth in Section 9.1 hereof, upon the termination of this Agreement
pursuant to Section 8.1, hereof, this Agreement shall forthwith become null
and void and none of the parties hereto or any of their respective officers,
directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9.
INDEMNIFICATION
SECTION 9.1. INDEMNIFICATION BY THE STOCKHOLDER.
Notwithstanding the Closing or the delivery of the Shares, each
Stockholder, jointly and severally, indemnities and agrees to fully defend,
save and hold harmless on an after-tax basis LAS, Sub, the Company (after
Closing), and any of their respective officers, directors, employees,
stockholders, advisors, representatives, agents and Affiliates (each a "LAS
Indemnified Party"), if a LAS Indemnified Party (including the Company after
the Closing Date) shall at any time or from time to time suffer any Costs (as
defined in Section 9.6 below) arising, directly or indirectly, out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
(i) any and all Events of Breach (as defined below) or (ii) any Claim before
or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, which Claim involves, affects or relates to
any assets, properties or operations of the Company or the conduct of the
business of the Company prior to the Closing Date (a "Stockholder Third Party
Claim"). As used herein, "Event of Breach" shall be and mean any one or more
of the following: (i) any untruth or inaccuracy in any representation of the
Stockholder or the Company or the breach of any warranty of the Stockholder or
the Company contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by the
Stockholder or the Company (or any representative of the Stockholder or the
Company) to LAS (or any representative of LAS) and any misrepresentation in or
omission from any document furnished to LAS in connection with the Closing,
and (ii) any failure of the Stockholder or the Company duly to perform or
observe any term, provision, covenant, agreement or condition on the part of
the Stockholder or the Company to be performed or observed.
SECTION 9.2. INDEMNIFICATION BY LAS.
Notwithstanding the Closing, LAS indemnities and agrees to fully defend,
save and hold harmless on an after-tax basis the
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Stockholder, the Company (prior to Closing), and any of their respective
officers, directors, employees, stockholders, advisors, representatives,
agents and Affiliates (each a "Stockholder Indemnified Party"), if a
Stockholder Indemnified Party shall at any time or from time to time suffer
any Costs arising, directly or indirectly, out of or resulting from, or shall
pay or become obligated to pay any sum on account of, (i) any and all LAS
Events of Breach (as defined below) or (ii) any Claim before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, which Claim involves, affects or relates to any assets, properties or
operations of LAS or the conduct of the business of LAS prior to the Closing
Date (a "LAS Third Party Claim"). As used herein, "LAS Event of Breach" shall
be and mean any one or more of the following: (i) any untruth or inaccuracy in
any representation of LAS or the breach of any warranty of LAS contained in
this Agreement, including, without limitation, any misrepresentation in, or
omission from, any statement, certificate, schedule, exhibit, annex or other
document furnished pursuant to this Agreement by LAS (or any representative of
LAS) to the Stockholder (or any representative of the Stockholder) and any
misrepresentation in or omission from any document furnished to the
Stockholder in connection with the Closing, and (ii) any failure of LAS duly
to perform or observe any term, provision, covenant, agreement or condition on
the part of LAS to be performed or observed.
SECTION 9.3. PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a LAS Indemnified
Party asserts that a Stockholder has become obligated to a LAS Indemnified
Party pursuant to Section 9.1, or if any Stockholder Third Party Claim is
begun, made or instituted as a result of which a Stockholder may become
obligated to a LAS Indemnified Party hereunder, or (ii) a LAS Event of Breach
occurs or is alleged and a Stockholder Indemnified Party asserts that LAS has
become obligated to a Stockholder Indemnified Party pursuant to Section 9.2,
or if any LAS Third Party Claim is begun, made or instituted as a result of
which LAS may become obligated to a Stockholder Indemnified Party hereunder
(for purposes of this Article 9, any LAS Indemnified Party and any Stockholder
Indemnified Party is sometimes referred to as an "Indemnified Party" and LAS
and the Stockholder are sometimes referred to as an "Indemnifying Party," and
any LAS Third Party Claim and any Stockholder Third Party Claim is sometimes
referred to as a "Third Party Claim," in each case as the context so
requires), such Indemnified Party shall give written notice to the
Indemnifying Party of its or his obligation to provide indemnification
hereunder, provided that any failure to so notify the Indemnifying Party shall
not relieve them from any liability that it or he may have to the Indemnified
Party under this Article 9. If such notice relates to a Third Party Claim,
each Indemnifying Party, jointly and severally, agrees to defend, contest or
otherwise protect such Indemnified Party against any
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such Third Party Claim at his or its sole cost and expense. Such Indemnified
Party shall have the right, but not the obligation, to participate at its own
expense in the defense thereof by counsel of such Indemnified Party's choice
and shall in any event cooperate with and assist the Indemnifying Party to the
extent reasonably possible. If the Indemnifying Party fails timely to defend,
contest or otherwise protect against such Third Party Claim, such Indemnified
Party shall have the right to do so, including, without limitation, the right
to make any compromise or settlement thereof, and such Indemnified Party shall
be entitled to recover the entire Cost thereof from the Indemnifying Party,
including, without limitation, attorneys' fees, disbursements and amounts paid
(or of which such Indemnified Party has become obligated to pay) as the result
of such Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party
Claim within fifteen (15) days after notice thereof shall have been given to
the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of
its or their right to defend such Third Party Claim. If the Indemnifying Party
assumes the defense of the particular Third Party Claim, the Indemnifying
Party shall not, in the defense of such Third Party Claim, consent to entry of
any judgment or enter into any settlement, except with the written consent of
such Indemnified Party. In addition, the Indemnifying Party shall not enter
into any settlement of any Third Party Claim except with the written consent
of such Indemnified Party) which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to such Indemnified Party
a full release from all liability in respect of such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at their own expense in the
defense of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any Third Party Claim to the extent the
Third Party Claim seeks an order, injunction or other equitable relief against
the Indemnified Party which, if successful, could materially interfere with
the business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party.
SECTION 9.4. OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law, the parties agree that, at
any Indemnified Party's option, any or all amounts owing to such Indemnified
Party under this Article 9 or any other provision of this Agreement or any
other liability of the other parties (or any Affiliate of the other parties)
to such Indemnified Party in connection with any of the Documents, may be
recovered by the Indemnified Party by an offset against any or all amounts due
to such other parties pursuant to this Agreement or the Documents.
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SECTION 9.5. REMEDIES.
The rights of an Indemnified Party under this Article 9 are in addition
to such other rights and remedies which such Indemnified Party may have under
this Agreement, applicable law or otherwise.
SECTION 9.6. DEFINITIONS.
For purposes of this Article 9 "Costs" shall mean all liabilities,
losses, costs, damages (not including consequential damages), expenses,
claims, attorneys, fees, experts' fees, consultants' fees, and disbursements
of any kind or of any nature whatsoever. For purposes of application of the
indemnity provisions of this Article 9, the amount of any Cost arising from
the breach of any representation, warranty, covenant or agreement shall be the
entire amount of any Cost suffered, paid or required to be paid by the
respective Indemnified Party as a result of such breach.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.1. SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement (except covenants and agreements
which are expressly required to be performed and are performed in full on or
before the Closing Date) shall survive the Closing Date and the consummation
of the transactions contemplated by this Agreement, subject to Section 10.1(b)
below. In the event of a breach of any such representations, warranties or
covenants, the party to whom such representations, warranties or covenants
have been made shall have all rights and remedies for such breach available to
it under the provisions of this Agreement or otherwise, whether at law or in
equity, regardless of any disclosure to, or investigation made by or on behalf
of, such party on or before the Closing Date.
(b) Each of the representations and warranties set forth in Article 2,
Article 3 and Article 4 hereof and in any certificate delivered pursuant to
Article 6 or Article 7 hereof shall survive, and not be affected in any
respect by, the Closing for a period terminating on the later of (i) the date
three years after the Closing Date, and (ii) with respect to any claim
asserted with respect to any breach of such representations or warranty or
pursuant to Section 9.3 hereof before the expiration of such representation or
warranty, on the date such claim is finally liquidated or otherwise resolved,
except with respect to the representations and warranties in Sections 2.11 and
3.3 hereof, which shall survive the Closing Date for a period terminating on
the later of (y) the date five years after the Closing Date, and (z) with
respect to any claims asserted with respect to any
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breach of such representations or warranties, on the date such claim is
finally liquidated or otherwise resolved, and (bb) with respect to any claims
asserted with respect to any breach of such representations or warranties, on
the date such claim is finally liquidated or otherwise resolved.
SECTION 10.2. FEES AND EXPENSES.
Except as otherwise expressly provided in this Agreement, all legal and
other fees, costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby through the Closing Date shall be paid by
the party incurring such fees, costs or expenses; provided, however, that if
the Closing does not occur and Section 5.6 hereof is breached, then the
Stockholder or the Company shall pay to LAS, within five (5) Business Days
after receipt of a request therefor, an amount equal to all of the legal and
other fees, costs and expenses incurred by LAS in connection with this
Agreement and the transactions contemplated hereby.
SECTION 10.3. HEADINGS.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
SECTION 10.4. NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service or facsimile transmission or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Company before the Closing Date:
Lance Landers
19236 Interstate 30
Benton, AR 72015
with a copy to:
Dan Moudy, Esq.
1511 A West Sevier
Benton, AR 72015
If to the Company after the Closing Date (in addition to the foregoing
addresses):
Landers Auto Sales, Inc.
17821 I-30
Benton, AR 72015
ATTN: Steve Landers, President
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with a copy to:
Horne, Hollingsworth & Parker
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 62203
Attn: Garland W. Binns, Jr., Esq.
If to the Stockholder:
Lance Landers
3152 Highway 5
Benton, AR 72015
with a copy to:
Dan Moudy, Esq.
1511 A West Sevier
Benton, AR 72015
If to UAG:
United Auto Group, Inc.
375 Park Avenue
New York, NY 10022
ATTN: George Lowrance, Esq.
Executive Vice President
If to LAS:
Landers Auto Sales, Inc. 17821 I-30
Benton, AR 72015
ATTN: Steve Landers, President
with a copy to:
Horne, Hollingsworth & Parker 401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 62203
Attn: Garland W. Binns, Jr., Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been
given as of the date so delivered or three (3) days after the date so mailed;
provided, however, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
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SECTION 10.5. ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto (and with respect to the
Stockholder, the personal representatives and heirs of the Stockholder) and
their respective successors and permitted assigns, and the provisions of
Article 9 hereof shall inure to the benefit of the Indemnified Parties
referred to therein; provided, however, that neither this Agreement nor any of
the rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, LAS shall have the unrestricted right to assign
this Agreement and to delegate all or any part of its obligations hereunder to
any Affiliate of LAS, but in such event LAS shall remain fully liable for the
performance of all of its obligations in the manner prescribed in this
Agreement.
SECTION 10.6. ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents embody
the entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to
the transactions contemplated hereby other than those expressly set forth
herein or in the Documents. Prior drafts of this Agreement shall not be used
as a basis for interpreting this Agreement.
SECTION 10.7. WAIVER AND AMENDMENTS.
The Stockholder and the Company as one Party, and LAS and Sub as the
other Party may by written notice to the other parties (i) extend the time for
the performance of any of the obligations or other actions of the other
parties, (ii) waive any inaccuracies in the representations or warranties of
the other parties contained in this Agreement, (iii) waive compliance with any
of the covenants of the other parties contained in this Agreement, (iv) waive
performance of any of the obligations of the other parties created under this
Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach, whether or not similar. This Agreement may be
amended, modified or supplemented only by a written instrument executed by the
parties hereto.
SECTION 10.8. COUNTERPARTS.
This Agreement may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered
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<PAGE>
one and the same agreement and each of which shall be deemed an original.
SECTION 10.9. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined or
modified in this Agreement shall have the respective meanings given to them in
accordance with GAAP.
SECTION 10.10. CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person specified, and in the case of
a specified Person who is a natural person, his spouse, his issue, his
parents, his estate and any trust entirely for the benefit of his spouse
and/or issue.
(b) "Best efforts" shall be deemed to not include any obligation on the
part of any Person to undertake any liabilities, expend any funds or perform
acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such Person; provided, however,
that notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions which are normally incident to or reasonably
foreseeable in connection with such obligation or the transactions
contemplated hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and any
day which is a legal holiday under Federal law.
(d) "GAAP" shall mean generally accepted accounting principles which,
for purposes of Sections 1.3 and 1.4 hereof, are in effect in the United
States on the Closing Date.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment
sale agreements, encumbrances or charges of any kind.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Person specified (including the businesses thereof) which is, or might be,
materially adverse to the business, operations, assets, condition (financial
or otherwise) or prospects of such Person.
(g) "Person" shall mean and include an individual, corporation,
partnership, joint venture, association, trust, any
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<PAGE>
other unincorporated organization or entity and a governmental entity or any
department or agency thereto.
SECTION 10.11. SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the financial
statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule
to this Agreement.
SECTION 10.12. SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality or enforceability
of the remaining provisions of this Agreement shall not be affected thereby.
To the extent permitted by applicable law, each party waives any provision of
law which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.
SECTION 10.13. REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in Article 8, indemnification as
set forth in Article 9, the payment of certain fees, costs and expenses as set
forth in Section 10.2 or specific performance as set forth in this Section
10.13, shall be the exclusive remedy of either party for a breach of this
Agreement. The parties hereto shall have the right to seek any other remedy in
law or equity in lieu of or in addition to any remedies provided in this
Agreement, including an action for damages for breach of contract.
SECTION 10.14. GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the
laws of the state of Arkansas.
SECTION 10.15. TIME OF THE ESSENCE.
Time is of the essence with respect to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
----------------------------------
Title: Executive Vice President
-------------------------------
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<PAGE>
LANDERS AUTO SALES, INC.
By: /s/ Steve Landers
------------------------------
Title: President
---------------------------
LANDERS UNITED AUTO SALES NO. 4, INC.
/s/ Steve Landers
---------------------------------
By: Steve Landers
President
LANDERS BUICK PONTIAC, INC.
/s/ Lance Landers
---------------------------------
By: Lance Landers
President
THE STOCKHOLDER:
/s/ Lance Landers
---------------------------------
Lance Landers
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<PAGE>
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
This Amendment No. 1 to the Stock Purchase Agreement dated as of January
8, 1997 by and between United Auto Group, Inc., a Delaware corporation
("UAG"), Landers Auto Sales, Inc., an Arkansas corporation, Landers United
Auto Group No. 4, Inc., an Arkansas corporation, Landers Buick Pontiac, Inc.,
an Arkansas corporation and Lance Landers, an individual resident of the state
of Arkansas ("Stockholder").
Whereas it is the intent of the parties to reduce the consideration to
be paid to the Stockholder by eliminating the shares of UAG which would have
been issued to Stockholder at the Closing.
NOW, THEREFORE, in consideration and the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree to amend
Section 1.1 of the Stock Purchase Agreement to read as follows:
SECTION 1.1 PURCHASE AND SALE OF THE SHARES.
(a) Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholder shall sell to
Sub, and Sub shall purchase from the Stockholder, all right and title to
the "Landers" name in connection with the sale of motor vehicles,
automotive parts and accessories and the Shares for an aggregate
purchase price (the "Purchase Price") equal to Two Million Eight Hundred
Thousand Dollars ($2,800,000)(the "Base Price"), which Base Price is
subject to adjustment after Closing as provided in Section 1.2 below.
Stockholder shall be entitled to any earnings, but shall also be
responsible for payment to Sub for any losses between October 31, 1996
and the Closing. At the Closing referred to in Section 1.1(b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to
Sub the Shares representing 100% of the outstanding Company Common
Stock and deliver the certificates representing such Shares
accompanied by stock powers duly executed in blank; and
(ii) Sub shall accept and purchase the Shares from the Stockholder
and in payment therefor shall deliver to the Stockholder
immediately available funds in an aggregate amount equal to the
Base Price by wire transfer to an account designated in writing by
the Stockholder or by certified funds.
(b) Closing. Subject to the conditions set forth in this
Agreement, the purchase and sale of the Shares pursuant
<PAGE>
to this Agreement (the "Closing") shall take place at the offices of
Horne, Hollingsworth & Parker, 401 W. Capitol Avenue, Suite 501, Little
Rock, Arkansas, 72201, or such other location as the parties shall agree
upon, at 10:00 a.m. as soon as practicable following the date on which
all conditions to the obligations of the parties hereunder (other than
those requiring an exchange of certificates, opinions or other
documents, or the taking of other action, at the Closing) have been
satisfied or waived but no later than June 30, 1997. The date on which
the Closing is to occur is herein referred to as the "Closing Date".
(c) Deliveries at the Closing. Subject to the conditions set
forth in this Agreement, at the Closing:
(i) The Stockholder shall deliver to Sub (A) certificates
representing the Shares bearing the restrictive legend customary
placed on securities that have not been registered under
applicable federal and state securities laws and accompanied by
stock powers as required by Section 1.1(a)(i) hereof, and any
other documents that are necessary to transfer to Sub good title
to all the Shares, and (B) all opinions, certificates and other
instruments and documents required to be delivered by the
Stockholder at or prior to the Closing or otherwise required in
connection herewith;
(ii) Sub shall pay and deliver to the Stockholder (A) funds as
required by Section 1.1(a)(ii) hereof, and (B) all certificates
and other instruments and documents required to be delivered by
LAS at or prior to the Closing or otherwise required in connection
herewith;
(iii) Landers, Sub and Company shall enter into a lease for the
real property used in the business of the Company in a form
mutually acceptable to the parties (the "Lease") and UAG and LAS
shall guarantee collection by Stockholder of the payment of the
obligations thereunder. LAS shall cause and be responsible for
completion of the building known as the "Buick-Pontiac Building."
The Lease shall be a triple net lease and be for a twenty (20)
year term commencing on the Closing Date. The initial lease rate
for the Lease shall be $276,000 per year (the "Base Rate"),
payable monthly, and on the third anniversary of the Closing Date
shall increase to an amount equal to the Base Rate plus an amount
equal to a percentage of the Base Rate, which percentage shall be
the percentage increase in the Consumer Price Index published from
time to time by the United States Department of Labor between the
Closing Date and the Third Anniversary with similar increases
every two years thereafter during the term of the Lease.
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<PAGE>
(iv) Landers shall enter into a noncompetition agreement with Sub
and Company agreeing to not compete in the sale of new motor
vehicles within the state of Arkansas for a period of five years
following the Closing Date; and
(v) Landers, Sub and Company shall cause the pending
litigation styled Landers Auto Sales, Inc. v. Landers Buick
Pontiac, Inc., Saline County Chancery Court Case No. E 95-1241-3
to be dismissed with prejudice.
The remaining portions of the Stock Purchase Agreement shall remain in
full force and effect.
This Amendment No. 1 dated this 9th day of April, 1997.
UNITED AUTO GROUP, INC.
By: /s/
----------------------------------
Title: Vice President
LANDERS AUTO SALES, INC.
/s/ Steve Landers
----------------------------------------
By: Steve Landers
President
LANDERS UNITED AUTO SALES NO. 4, INC.
/s/ Steve Landers
----------------------------------------
By: Steve Landers
President
LANDERS BUICK PONTIAC, INC.
/s/ Lance Landers
----------------------------------------
By: Lance Landers
President
-3-
<PAGE>
THE STOCKHOLDER:
/s/ Lance Landers
----------------------------------------
Lance Landers
-4-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-01-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 43,318 66,875
<SECURITIES> 0 0
<RECEIVABLES> 85,699 53,241
<ALLOWANCES> 4,816 1,223
<INVENTORY> 262,937 168,855
<CURRENT-ASSETS> 399,481 299,571
<PP&E> 37,286 25,967
<DEPRECIATION> 4,346 3,626
<TOTAL-ASSETS> 755,594 522,950
<CURRENT-LIABILITIES> 331,680 221,455
<BONDS> 93,722 11,121
0 0
0 0
<COMMON> 2 2
<OTHER-SE> 317,527 281,466
<TOTAL-LIABILITY-AND-EQUITY> 55,594 522,950
<SALES> 915,158 1,302,031
<TOTAL-REVENUES> 917,540 1,303,829
<CGS> 798,896 1,157,368
<TOTAL-COSTS> 896,643 1,284,479
<OTHER-EXPENSES> 97 103
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,506 4,716
<INCOME-PRETAX> 18,391 13,731
<INCOME-TAX> 7,378 6,270
<INCOME-CONTINUING> 10,916 7,461
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 4,987
<CHANGES> 0 0
<NET-INCOME> 10,916 2,474
<EPS-PRIMARY> 0.61 0.23
<EPS-DILUTED> 0.61 0.23
</TABLE>
