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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER: 1-13461
GROUP 1 AUTOMOTIVE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0506313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 ECHO LANE, SUITE 350, HOUSTON, TEXAS 77024
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code (713)467-6268
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Securities Exchanges on which Registered
------------------- -----------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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The aggregate market value of the voting stock held by non-affiliates
of the Registrant was approximately $90,296,000 as of March 27, 1998 (based on
the last sale price of such stock as quoted on the New York Stock Exchange).
At such date there was no non-voting stock outstanding.
As of March 27, 1998, there were 16,101,209 shares of Registrant's
Common Stock, par value $.01 per share, outstanding.
Documents incorporated by reference: Proxy Statement of Group 1
Automotive, Inc. for the Annual Meeting of Stockholders to be held on May 28,
1998, which is incorporated into Part III of this Form 10-K.
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TABLE OF CONTENTS
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PART I............................................................................................................... 4
Item 1. Business.................................................................................................. 4
Item 2. Properties................................................................................................ 14
Item 3. Legal Proceedings......................................................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders....................................................... 17
PART II.............................................................................................................. 17
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters .................................... 17
Item 6. Selected Consolidated Financial Data .................................................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .................... 19
Item 8. Financial Statements and Supplementary Data .............................................................. 30
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ..................... 31
PART III ............................................................................................................ 31
Item 10. Directors and Executive Officers of the Registrant ...................................................... 31
Item 11. Executive Compensation .................................................................................. 31
Item 12. Security Ownership of Certain Beneficial Owners and Management .......................................... 31
Item 13. Certain Relationships and Related Transactions .......................................................... 31
PART IV ............................................................................................................. 32
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ........................................ 32
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
Group 1 Automotive, Inc. ("Group 1" or the "Company") was founded to
become a leading operator and consolidator in the highly fragmented automotive
retailing industry. Simultaneously with the closing of its initial public
offering ("IPO") in November 1997, Group 1 acquired four automobile dealership
groups ("Founding Groups") comprised of 30 automobile dealership franchises.
During the first quarter of 1998, the Company closed acquisitions which
comprise four additional automobile dealership franchises. The Company's
automobile dealership franchises are located in Florida, Georgia, Oklahoma and
Texas, and sell new and used cars and light trucks, provide maintenance and
repair services, sell replacement parts and arrange related financing,
insurance and extended service contracts.
BUSINESS STRATEGY
Group 1 plans to achieve its goal of becoming a leading consolidator,
while maintaining its high operating standards, in the automotive retailing
industry, by (i) emphasizing growth through acquisitions and (ii) implementing
an operating strategy that focuses on decentralized dealership operations,
nationally centralized administrative functions, the expansion of higher margin
businesses, a commitment to customer service and the implementation of new
technology initiatives. By complementing the Founding Groups' industry
leaders, management talent and proven operating capabilities with a corporate
management team which is experienced in achieving and managing long-term growth
in a consolidation environment, the Company believes that it is in a strong
position to execute this strategy.
GROWTH THROUGH ACQUISITIONS
Group 1 has implemented an aggressive, yet disciplined, acquisition
program by pursuing (i) large, profitable and well managed "platform"
acquisitions in large metropolitan and high-growth suburban geographic markets
that the Company does not currently serve and (ii) smaller "tuck-in"
acquisitions that will allow the Company to increase brand diversity,
capitalize on regional economies of scale and offer a greater breadth of
products and services in each of the markets in which it operates. In this
regard, the Company has obtained a $125 million credit facility, of which a
portion will be used, in combination with the Company's common stock, for
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Forward Looking Information and Certain Risks and Uncertainties that Could
Affect Future Operating Results".
ENTERING NEW GEOGRAPHIC MARKETS. Group 1 intends to expand into
geographic markets it does not currently serve by acquiring large, profitable
and well established megadealers that, like the Founding Groups, are leaders in
their regional markets. The Company will target new platform megadealers
having superior operational and financial management personnel which the
Company will seek to retain. Group 1 believes that the retention of existing
high quality management will enable acquired megadealers to continue to operate
effectively with management personnel who understand the local market while
allowing the Company to source future acquisitions more effectively and expand
its operations without having to employ and train untested new personnel.
Moreover, Group 1 believes that the Company will be well positioned to pursue
larger, well established acquisition candidates as a result of its depth of
management, the Company's capital structure and the reputation of the
principals of the Founding Groups as leaders in the automotive retailing
industry.
EXPANDING WITHIN EXISTING MARKETS. Group 1 plans to acquire
additional dealerships in each of the markets in which it operates, including
acquisitions that increase the brands, products or services offered in that
market. Group 1 believes that these acquisitions facilitate the Company's
operating efficiencies and cost savings on a regional level in areas such as
facility and personnel utilization, vendor consolidation and advertising.
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RECENT ACQUISITIONS. The Company has signed definitive purchase
agreements related to eight dealership acquisitions. Three of these
acquisitions are new platforms and will expand the Company's geographic
diversity to include Georgia, New Mexico and South Florida. Certain of the
remaining acquisitions are tuck-ins which will complement the Company's platform
operations in Austin and Beaumont, Texas and in South Florida. These
acquisitions will bring the Company's total number of dealership franchises to
58 and the number of brands represented to 24. The closing of each of these
acquisitions is subject to customary closing conditions, including manufacturer
approval and the completion of due diligence. The aggregate consideration paid,
or to be paid, in completing these acquisitions, including real estate acquired
and excluding the assumption of an estimated $92.5 million of inventory
financing, is $80.2 million in cash and 3,450,358 shares of Group 1 Common
Stock.
As part of certain of the acquisitions the Company has committed, for
a limited period of time, to certain sellers, that they will realize an agreed
upon minimum price upon the sale of the Common Stock received in the
acquisitions. If the Company is called upon to perform under this arrangement,
the cash payment will result in an increase in Goodwill on the balance sheet of
Group1. No Common Stock issued in the acquisitions is permitted to be sold for
a minimum of one year from the date of its issuance.
Additionally, in certain transactions, the sellers may earn contingent
consideration ("Earnouts") based on an increase in earnings before taxes of
their operations, as defined. Currently, the future amounts payable are not
determinable. When made, the contractual provisions governing the payments will
result in approximately one-half of the payments being made in Group 1 Common
Stock and one-half in cash. The Earnout amounts, if earned, will result in
increases in Goodwill on the balance sheet of Group 1.
In connection with these acquisitions, certain of the former owners
involved in the management of the dealerships will execute long-term employment
agreements with the Company that contain post-employment non-competition
covenants. Generally, the real estate and facilities comprising the acquired
dealerships are leased from affiliates of the former stockholders of the
acquired companies under long-term leases, with fair market value rental rates.
OPERATING STRATEGY
Group 1 has implemented an operating strategy that focuses on
decentralized dealership operations, nationally centralized administrative
functions, expansion of higher margin businesses, commitment to customer
service and new technology initiatives.
Group 1 has formed an operations committee comprised of the chief
operating officers of the Founding Groups and the general managers of the
dealerships in order to identify and share best practices. Group 1 intends to
incorporate the key officers and management of the Company's future
acquisitions into this operations committee. Group 1 believes that this
operations committee will promote the widespread application of the Company's
broad strategic initiatives, facilitate the integration of the future
acquisitions and improve operating efficiency and overall customer
satisfaction.
DECENTRALIZED DEALERSHIP OPERATIONS. Group 1 believes that
decentralizing the Company's dealership operations on a regional, or platform,
basis enables it to provide superior customer service and a focused,
market-specific responsiveness to sales, service, marketing and inventory
control. Local presence and an in-depth knowledge of customers' needs and
preferences are important in generating internally-driven market share growth.
By coordinating certain operations on a platform basis, the Company believes
that it will achieve cost savings in such areas as vendor consolidation,
facility and personnel utilization and advertising. Group 1 has created
incentives for the Company's entrepreneurial management teams and sales forces
at the regional level through the use of stock options and/or cash bonus
programs.
NATIONALLY CENTRALIZED ADMINISTRATIVE FUNCTIONS. The consolidation
of purchasing power on a centralized basis in the area of financing should
result in significant cost savings. For example, all of the Company's
floorplan financing has benefited from interest rate reductions. Furthermore,
Group 1 expects that significant cost savings can be achieved through the
consolidation of administrative functions such as risk management, employee
benefits and employee training. For example, Group 1 has negotiated
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insurance coverage that will result in annual cost savings to the Company of
approximately 25 to 30 percent from the costs incurred by the Founding Groups
prior to their being acquired by Group 1.
EXPAND HIGHER MARGIN ACTIVITIES. The Company is focusing on
expanding higher margin businesses such as used vehicle retail sales, parts and
service and finance and insurance. While each of the Company's platforms
operates independently in a manner consistent with its specific market's
characteristics, each platform will pursue an integrated strategy to grow each
of these higher margin businesses to enhance profitability and stimulate
internal growth. With a competitive advantage in sourcing and attractive lease
financing, new vehicle franchises are especially well positioned to capitalize
on industry growth in used vehicle sales. In addition, each of the Company's
dealerships offer an integrated parts and service department, which provides an
important source of recurring higher margin revenues. The Company also has the
opportunity on each new or used vehicle sold to generate incremental revenues
from the sale of extended service contracts, credit insurance policies and
finance and lease contracts. Each of these business areas is a focus of
internal growth.
COMMITMENT TO CUSTOMER SERVICE. The Company is focused on providing
a high level of customer service to meet the needs of an increasingly
sophisticated and demanding automotive consumer. The Company's dealerships
strive to cultivate lasting relationships with its customers, which the Company
believes enhances the opportunity for significant repeat and referral business.
For example, the dealerships regard their service and repair activities as an
integral part of their overall approach to customer service, providing an
opportunity to foster ongoing relationships with their customers and deepen
customer loyalty. The Company's dealerships will continuously review their
selling processes in their effort to satisfy their customers.
DEALERSHIP OPERATIONS
Each platform has an established management structure that promotes
and rewards entrepreneurial spirit, individual pride and responsibility and the
achievement of team goals. The general manager of each dealership is
ultimately responsible for the operation, personnel and financial performance
of the dealership. The general manager is complemented with a management team
consisting of a new vehicle sales manager, used vehicle sales manager, parts
and service managers and finance managers. Each dealership is operated as a
distinct profit center, in which dealership general managers are given a high
degree of autonomy. The general manager and the other members of the
dealership management team, as long-time members of their local communities,
are typically best able to judge how to conduct day- to-day operations based on
the team's experience in and familiarity with its local market.
NEW VEHICLE SALES. The Company currently represents 20 American and
Asian brands of economy, family, sports and luxury cars and light trucks and
sport utility vehicles. The following table sets forth for 1997, certain
information relating to the brands of new vehicles sold at retail by the
Company on a pro forma basis assuming that the acquisitions of the Founding
Groups occurred on January 1, 1997. These results may not be indicative of the
Company's post-combination results:
NUMBER OF NEW PERCENTAGE OF
MANUFACTURER VEHICLES SOLD AT RETAIL TOTAL
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Toyota ................. 5,938 25.6%
Nissan ................. 4,518 19.5
Honda ................... 2,868 12.4
Chevrolet ............... 1,597 6.9
Lexus ................... 1,279 5.5
GMC ..................... 998 4.3
Acura ................... 874 3.8
Dodge ................... 814 3.5
Mitsubishi............... 810 3.5
Pontiac ................. 700 3.0
Isuzu ................... 696 3.0
Chrysler ................ 578 2.5
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Jeep ...................... 516 2.2
Mazda ...................... 291 1.3
Mercury .................... 204 0.9
Other ...................... 520 2.1
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Total 23,201 100.0%
====================== =============
The dealerships new vehicle retail sales include traditional new
vehicle retail lease transactions and lease-type transactions, both of which
are arranged by the dealerships. New vehicle leases generally have short
terms, which brings the consumer back to the market sooner than if the purchase
were debt financed. In addition, leases provide the dealerships with a steady
source of late-model, off-lease vehicles for its used vehicle inventory.
Generally, leased vehicles remain under factory warranty for the term of the
lease, which allows the dealerships to provide repair service to the lessee
throughout the lease term.
The dealerships seek to provide customer-oriented service designed to
meet the needs of its customers and establish lasting relationships that will
result in repeat and referral business. For example, the dealerships strive
to: (i) employ more efficient selling approaches; (ii) utilize computer
technology that decreases the time necessary to purchase a vehicle; (iii)
engage in extensive follow-up after a sale in order to develop long-term
relationships with customers; and (iv) extensively train their sales staffs to
be able to meet the needs of the customer. The dealerships continually
evaluate innovative ways to improve the buying experience for their customers.
The Company believes that its ability to share best practices among its
dealerships gives it an advantage over smaller dealerships.
The dealerships acquire substantially all their new vehicle inventory
from the automobile manufacturers ("Manufacturers"). Manufacturers allocate a
limited inventory among their franchised dealers based primarily on sales
volume and input from dealers. The dealerships finance their inventory
purchases through revolving credit arrangements known in the industry as
floorplan facilities.
USED VEHICLE SALES. The Company sells used vehicles at each of its
franchised dealerships. Sales of used vehicles have become an increasingly
significant source of profit for the dealerships. Consumer demand for used
vehicles has increased as prices of new vehicles have risen and as more high
quality used vehicles have become available. Furthermore, used vehicles
typically generate higher gross margins than new vehicles because of their
limited comparability and the somewhat subjective nature of their valuation.
The Company intends to continue growing its used vehicle sales operations by
maintaining a high quality inventory, providing competitive prices and extended
service contracts for its used vehicles and continuing to promote used vehicle
sales.
Profits from sales of used vehicles are dependent primarily on the
ability of the dealerships to obtain a high quality supply of used vehicles and
effectively manage that inventory. The Company's new vehicle operations
provide the used vehicle operations with a large supply of high quality
trade-ins and off-lease vehicles, which are the best sources of high quality
used vehicles. The dealerships supplement their used vehicle inventory with
used vehicles purchased at auctions.
Each of the dealerships generally maintains a 45 to 60 day supply of
used vehicles and offers to other dealers and wholesalers used vehicles that
they do not retail to customers. Trade-ins may be transferred among
dealerships to provide balanced inventories of used vehicles at each of the
Company's dealerships. Group 1 believes that the acquisitions of additional
dealerships will expand the internal market for transfers of used vehicles
among the Company's dealerships and, therefore, increase the ability of each of
the Company's dealerships to offer the same brand of used vehicles as it sells
new and to maintain a balanced inventory of used vehicles. Group 1 intends to
develop integrated computer inventory systems that will allow it to coordinate
vehicle transfers between the Company's dealerships, primarily on a regional
basis.
The dealerships have taken several steps towards building client
confidence in their used vehicle inventory, one of which includes their
participation in the Manufacturers' certification processes which are available
only to new vehicle franchises. This process makes these used vehicles
eligible for new vehicle benefits such as new vehicle finance rates and
extended Manufacturer warranties. In addition, the dealerships offer extended
warranties covering the used vehicles that they sell.
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Group 1 believes that franchised dealership strengths in offering used
vehicles include: (i) access to trade- ins on new vehicle purchases, which are
typically lower mileage and higher quality relative to trade-ins on used car
purchases, (ii) access to late-model, low mileage off-lease vehicles, and (iii)
the availability of Manufacturer certification programs for the Company's
higher quality used vehicles. This supply of high quality trade-ins and off-
lease vehicles reduces the Company's dependence on auction vehicles, which are
typically a higher cost source of used vehicles.
PARTS AND SERVICE SALES. The Company provides parts and service at
each of its franchised dealerships primarily for the vehicle makes sold at that
dealership. The Company performs both warranty and non-warranty service work.
Historically, the automotive repair industry has been highly
fragmented. However, the Company believes that the increased use of advanced
technology in vehicles has made it difficult for independent repair shops to
retain the expertise to perform major or technical repairs. Additionally,
Manufacturers permit warranty work to be performed only at franchised
dealerships. Hence, unlike independent service stations, or independent and
superstore used car dealerships with service operations, the Company's
franchised dealerships are qualified to perform work covered by Manufacturer
warranties. Given the increasing technological complexity of motor vehicles
and the trend toward extended manufacturer and dealer warranty periods for new
vehicles, Group 1 believes that an increasing percentage of repair work will be
performed at the Company's franchised dealerships, each of which have the
sophisticated equipment and skilled personnel necessary to perform such repairs
and offer extended service contracts.
The Company attributes its profitability in parts and service to a
comprehensive management system, including the use of variable rate pricing
structures, cultivation of strong customer relationships through an emphasis on
preventive maintenance and the efficient management of parts inventory.
In charging for their mechanics' labor, the dealerships use variable
rate structures designed to reflect the difficulty and sophistication of
different types of repairs. The percentage mark-ups on parts are similarly
priced based on market conditions for different parts. The Company believes
that variable rate pricing helps the dealerships to achieve overall gross
margins in parts and service superior to those of certain competitors who rely
on fixed labor rates and percentage markups.
The dealerships seek to retain each purchaser of a vehicle as a
customer of the dealership's parts and service departments. The dealerships
have systems in place that track their customers' maintenance records and
notify owners of vehicles purchased or serviced at the dealerships when their
vehicles are due for periodic services. The dealerships regard service and
repair activities as an integral part of their overall approach to customer
service, providing an opportunity to foster ongoing relationships with the
dealership's customers and deepen customer loyalty.
The dealerships' parts departments support their respective sales and
service departments. Each of the dealerships sells factory-approved parts for
vehicle makes and models sold by that dealership. These parts are either used
in repairs made by the dealership or sold at retail to its customers or at
wholesale to independent repair shops and other franchised dealerships.
Currently, each of the dealerships employs its own parts manager and
independently controls its parts inventory and sales. Dealerships that sell
the same new vehicle makes have access to each other's computerized inventories
and frequently obtain unstocked parts from other dealerships.
OTHER DEALERSHIP REVENUES. Other dealership revenues consist
primarily of finance and insurance income. The dealerships arrange financing
for their customers' vehicle purchases, sell extended service contracts and
arrange selected types of credit insurance in connection with the financing of
vehicle sales. The dealerships place heavy emphasis on finance and insurance
("F&I") and offer advanced F&I training to their finance and insurance
managers. Typically, the dealerships forward proposed financing contracts to
Manufacturers' captive finance companies, selected commercial banks or other
financing parties. The dealerships receive a financing fee from the lender for
arranging the financing and are typically assessed a charge-back against a
portion of the financing fee if the contract is terminated prior to its
scheduled maturity for any reason, such as early repayment or default. As a
result, the dealerships must arrange financing for a customer that is
competitive (i.e., the customer is more likely to accept the financing terms
and the loan is less likely to be refinanced) and affordable (i.e., the loan is
more likely to be repaid). The Company does not own a finance company and,
generally, does not retain
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significant credit risk after a loan is made.
At the time of a new vehicle sale, the dealerships offer extended
service contracts to supplement the Manufacturer warranty. Additionally, the
dealerships sell primary service contracts for used vehicles. Currently, the
dealerships primarily sell service contracts of third party vendors, for which
they recognize a commission upon the sale of the contract.
The dealerships also offer certain types of credit insurance to
customers who arrange the financing of their vehicle purchases through the
dealerships. The dealerships sell credit life insurance policies to these
customers, which policies provide for repayment of the vehicle loan if the
obligor dies while the loan is outstanding. The dealerships also sell accident
and health insurance policies, which provide payment of the monthly loan
obligations during a period in which the obligor is disabled.
AGREEMENTS WITH MANUFACTURERS
PUBLIC ENTITY AGREEMENTS
As a condition to granting their consent to the acquisition of the
Founding Groups, American Honda Motor Co., Inc. ("American Honda"), General
Motors Corporation ("GM"), Toyota Motor Sales, U.S.A., Inc. ("Toyota Motor"),
Nissan North America, Inc. ("Nissan North America"), American Isuzu Motors,
Inc. ("American Isuzu"), Ford Motor Company ("Ford Motor") and Mitsubishi Motor
Sales of America, Inc., ("Mitsubishi Motor") imposed restrictions on the
Company. These restrictions include restrictions on (i) the acquisition of more
than a specified percentage of the Company's Common Stock (5% in the case of
American Honda; 20% in the case of GM, Toyota Motor, Nissan North America and
American Isuzu, and 50% in the case of Ford Motor and Mitsubishi Motor) by any
one person who in the opinion of the Manufacturer is unqualified to own a
dealership of such Manufacturer or has interests incompatible with the
Manufacturer, (ii) certain material changes in the Company or extraordinary
corporate transactions such as a merger or sale of a material amount of assets;
(iii) the removal of a dealership general manager without the consent of the
Manufacturer; (iv) the use of dealership facilities to sell or service new
vehicles of other Manufacturers; (v) in the case of GM, the advertising or
marketing of non-GM operations with GM operations; (vi) in the case of Ford
Motor, mandatory binding arbitration of any dispute between the Company and
Ford Motor concerning Ford Motor's franchise agreements; (vii) in the case of
Nissan Motor, a decrease in ownership of the Company's Common Stock to below
169,750 or 739,239 shares by Charles M. Smith or Robert E. Howard II,
respectively, directors of the Company, at any time during the five-year period
following the Company's execution of the new Nissan Motor franchise agreement;
(viii) in the case of GM and Mitsubishi Motor, any change in control of the
Company's Board of Directors; and (ix) in the case of Ford Motor, any change in
the Company's Board of Directors or management.
Toyota Motor policies currently applicable to Group 1 limit the number
of dealerships which may be owned by any one group to seven Toyota and three
Lexus dealerships nationally and restricts the number of dealerships that may
be owned to (i) the greater of one dealership, or 20% of the Toyota dealer
count in a "Metro" market (multiple Toyota dealership markets as defined by
Toyota Motor), (ii) a specified number (ranging from three to five) in any
Toyota region (currently 12 geographic regions), provided that if a calculation
based on retail sales of all Toyota dealerships owned in a region by Group 1 is
less than 9% of a calculation based on retail sales of all Toyota dealerships
in the region, the number of Toyota dealerships that may be acquired is
increased for each region up to seven dealerships, and (iii) two Lexus
dealerships in any one of the four Lexus geographic areas. Toyota Motor further
requires that at least nine months elapse between acquisitions of Toyota or
Lexus dealerships. Similarly, it is currently the policy of American Honda to
restrict any company from holding more than seven Honda or more than three
Acura franchises nationally and to restrict the number of franchises to (i) one
Honda dealership in a "Metro" market (a metropolitan market represented by two
or more Honda dealers) with two to 10 Honda dealership points, (ii) two Honda
dealerships in a Metro market with 11 to 20 Honda dealership points, (iii)
three Honda dealerships in a Metro market with 21 or more Honda dealership
points, (iv) no more than 4% of the Honda dealerships in any one of the 10
Honda geographic zones, (v) one Acura dealership in a Metro market (a
metropolitan market with two or more Acura dealership points), and (vi) two
Acura
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dealerships in any one of the six Acura geographic zones. Toyota Motor and
American Honda also prohibit ownership of contiguous dealerships and the
dualing of a franchise with any other brand without their consent. Because the
Company intends to pursue "platform" acquisitions in large metropolitan markets
that the Company does not currently serve, as well as "tuck-in" acquisitions
that will increase brand diversity, the Company's acquisition program will not
be dependent on its ability to acquire multiple dealerships of any one
Manufacturer in any given Metro market. Therefore, the Company does not believe
that the foregoing restrictions on ownership of contiguous dealers impose
significant limitations on its acquisition program.
American Honda also requires that 50% of the outstanding Common Stock of
the Company be owned at all times by persons approved by American Honda. Because
the Company intends to finance future acquisitions by issuing shares of Common
Stock as full or partial consideration for acquired dealerships, such
restriction could have the effect of limiting the Company's ability to implement
its acquisition program. The Company's agreement with American Honda ("Honda
Agreement") also requires American Honda's approval prior to any future public
offering of Common Stock of the Company, and provides that American Honda shall
have the right to approve the acquisition of more than 5% of the Common Stock of
the Company by any individual or entity, and any subsequent acquisition of more
than 10%, if such acquisition is reasonably deemed to be detrimental to the
interests of American Honda. The Honda Agreement provides that any such
acquisition may be reasonably deemed to be detrimental to the interests of
American Honda if the acquiring entity (a) competes with American Honda or its
parent, subsidiaries or affiliates in the manufacturing, marketing or selling of
automobile products or services, or owns a substantial economic interest in an
entity that so competes (not including any dealership that sells products of a
competing manufacturer); (b) has criminal affiliations or a criminal record; (c)
has inadequate experience in the automotive sales and service business; (d) has
an unacceptable credit rating; (e) has unacceptable customer satisfaction index
("CSI") scores; or (f) has had prior unsatisfactory relationships with American
Honda. An institutional investor may acquire up to 10% of the Common Stock of
the Company without the consent of American Honda, unless such institutional
investor (a) is owned or controlled by or has a substantial economic interest in
an entity that competes with American Honda; (b) has criminal affiliations or a
criminal record; or (c) has acquired, or has a reasonable likelihood of
acquiring a controlling interest in the Company. The Company will be required
to notify American Honda with respect to any such acquisition or proposed
acquisition, and if American Honda does not approve of such acquisition, the
Company will be required to use its best efforts to prevent such acquisition or,
if such acquisition has already occurred, to reacquire the shares so
transferred. The inability of the Company to prevent such acquisition or to
reacquire the shares will be deemed to be a material breach of the Honda
Agreement. In addition, pursuant to the Honda Agreement, each stockholder of the
Founding Groups has agreed not to sell, transfer or in any manner encumber any
of the shares of Common Stock of the Company acquired by them pursuant to the
acquisitions, or enter into any agreement or other arrangement providing for the
voting of such shares of Common Stock, without the prior written approval of
American Honda. In the event of any transfer of shares of Common Stock in
violation of such restriction, the Company will be required to inform American
Honda, and if American Honda does not approve such transfer, the inability of
the Company either to reacquire the shares or arrange for the retransfer of such
shares to a person approved by American Honda will be deemed to be a material
breach of the Honda Agreement. The Honda Agreement also provides that, in the
event a controlling interest in the Company or any subsidiary of the Company
that owns any Honda and Acura dealerships is acquired or threatened to be
acquired by an entity not approved by American Honda, American Honda will be
entitled to claim material breach of the Honda Agreement and exercise its rights
upon the occurrence thereof. In addition, American Honda's policy on public
ownership of Honda and Acura dealerships requires that individuals or entities
that acquire, own or control more than 5% of the Common Stock of the Company
must provide American Honda with copies of all filings made to the Securities
and Exchange Commission, all comparable filings made to state agencies and
annual audited financial statements.
Ford Motor currently limits the number of dealerships to the greater
of (a) 15 Ford and 15 Lincoln Mercury dealerships, or (b) the number of
dealerships with total retail sales of new vehicles in the immediately
preceding calendar year that would equal not more than 5% of total Ford and
Lincoln Mercury vehicles sold at retail in the United States during that year,
which number for each of Ford and Lincoln
10
<PAGE> 11
Mercury dealerships treated separately may not exceed (a) one Ford dealership
in those market areas as defined by Ford Motor from time to time by Ford Motor
for its dealership network having two or less authorized Ford dealerships in
them, or (b) 33 1/3% of the dealerships in any market area, as defined from
time to time by Ford Motor for its dealership network, having more than three
authorized Ford dealerships in them (estimated by the Company to be
approximately 400 dealerships assuming that each Ford and Lincoln Mercury
dealership in the United States had the same revenues). GM has limited the
number of GM dealerships that the Company may acquire prior to October 1999, to
10 additional GM dealership locations (any one dealership, however, may include
a number of different GM franchises, such as a combination of GMC, Pontiac and
Buick franchises). In addition, GM limits the maximum number of GM dealerships
that the Company may acquire to 50% of the GM dealerships, by franchise line,
in a GM-defined geographic market area (currently approximately 10,000
dealerships). However, Group 1's current agreement with GM does not include
Saturn dealerships and the Company's future acquisition of a Saturn dealership
will be subject to GM approval on a case-by-case basis.
FRANCHISE AGREEMENTS
Each of the dealerships operates pursuant to a franchise agreement
between the applicable Manufacturer and the dealership. The typical automotive
franchise agreement specifies the locations at which the dealer has the right
and the obligation to sell motor vehicles and related parts and products and to
perform certain approved services in order to serve a specified market area.
The designation of such areas and the allocation of new vehicles among
dealerships are subject to the discretion of the Manufacturer, which generally
does not guarantee exclusivity within a specified territory. A franchise
agreement may impose requirements on the dealer concerning such matters as the
showrooms, the facilities and equipment for servicing vehicles, the maintenance
of inventories of vehicles and parts, the maintenance of minimum net working
capital and the training of personnel. Compliance with these requirements is
closely monitored by the Manufacturer. In addition, Manufacturers require each
dealership to submit a financial statement of operations on a monthly and
annual basis. The franchise agreement also grants the dealer the non-exclusive
right to use and display the Manufacturer's trademarks, service marks and
designs in the form and manner approved by the Manufacturer.
Each franchise agreement sets forth the name of the person approved by
the Manufacturer to exercise full managerial authority over the dealership's
operations and the names and ownership percentages of the approved owners of
the dealership and contains provisions requiring the Manufacturer's prior
approval of changes in management or transfers of ownership of the dealership.
Each of the dealerships is owned, directly or indirectly, by Group 1, at the
subsidiary level. A number of Manufacturers prohibit the acquisition of a
substantial ownership interest in Group 1 or transactions that may affect
management control of Group 1, in each case without the approval of the
Manufacturer.
Most franchise agreements expire after a specified period of time,
ranging from one to five years, and Group 1 expects to renew any expiring
agreements in the ordinary course of business. The typical franchise agreement
provides for early termination or non-renewal by the Manufacturer under certain
circumstances such as change of management or ownership without Manufacturer
approval, insolvency or bankruptcy of the dealership, death or incapacity of
the dealer manager, conviction of a dealer manager or owner of certain crimes,
misrepresentation of certain information by the dealership, dealer manager or
owner to the Manufacturer, failure to adequately operate the dealership,
failure to maintain any license, permit or authorization required for the
conduct of business, or material breach of other provisions of the franchise
agreement. The dealership is typically entitled to terminate the franchise
agreement at any time without cause.
The automobile franchise relationship is also governed by various
federal and state laws established to protect dealerships from the general
unequal bargaining power between the parties. The following discussion of
state court and administrative holdings and various state laws is based on
management's beliefs and may not be an accurate description of the state court
and administrative holdings and various state laws. The state statutes
generally provide that it is a violation for a manufacturer to terminate or
fail to renew a franchise without good cause. These statutes also provide that
the manufacturer is prohibited from unreasonably withholding approval for a
proposed change in ownership of the dealership. Acceptable grounds for
disapproval include material reasons relating to the
11
<PAGE> 12
character, financial ability or business experience of the proposed transferee.
Accordingly, certain provisions of the franchise agreements, particularly as
they relate to a Manufacturer's rights to terminate or fail to renew the
franchise, have repeatedly been held invalid by state courts and administrative
agencies.
For example, under Texas law, despite the terms of contracts between
manufacturers and dealers, manufacturers may not unreasonably withhold approval
of a transfer of a dealership. It is unreasonable under Texas law for a
manufacturer to reject a prospective transferee of a dealership who is of good
moral character and who otherwise meets the manufacturer's written, reasonable
and uniformly applied standards or qualifications relating to the prospective
transferee's business experience and financial qualifications. In addition,
under Texas and Oklahoma law and the laws of other states, franchised
dealerships may challenge manufacturers' attempts to establish new franchises
in the franchised dealers' markets, and state regulators may deny applications
to establish new dealerships for a number of reasons, including a determination
that the Manufacturer is adequately represented in the region. Texas and
Oklahoma law limit the ability of manufacturers to terminate or fail to renew
franchises. In addition, other laws in Texas and elsewhere limit the ability of
manufacturers to withhold their approval for the relocation of a franchise or
require that disputes be arbitrated. In addition, a manufacturer's license to
distribute vehicles in Texas and Oklahoma may be revoked if, among other
things, the manufacturer has forced or attempted to force an automobile dealer
to accept delivery of motor vehicles not ordered by that dealer. In Oklahoma,
a manufacturer's license to operate in the state may be revoked or suspended
upon a finding that a manufacturer has coerced or intimidated a dealer or acted
dishonestly or failed to act in accordance with reasonable standards of fair
dealing.
COMPETITION
The automotive retailing industry is competitive. In large
metropolitan areas, consumers have a number of choices in deciding where to
purchase a new or used vehicle and where to have such vehicle serviced.
In the new vehicle area, the dealerships compete with other franchised
dealers in their marketing areas. The dealerships do not have any cost
advantage in purchasing new vehicles from the Manufacturers, and typically rely
on advertising and merchandising, sales expertise, service reputation and
location of its dealerships to sell new vehicles. In recent years, automobile
dealers have also faced increased competition in the sale or lease of new
vehicles from independent leasing companies, on-line purchasing services and
warehouse clubs.
In used vehicles, the dealerships compete with other franchised
dealers, independent used car dealers, automobile rental agencies, private
parties and used car "superstores" for supply and resale of used vehicles.
Used car "superstores" have recently opened in certain markets in which the
dealerships compete. In addition, the Company expects that additional used car
"superstores" will open in other markets in which it operates.
Group 1 believes that the principal competitive factors in vehicle
sales are the marketing campaigns conducted by Manufacturers, the ability of
dealerships to offer a wide selection of the most popular vehicles, the
location of dealerships and the quality of customer service. Other competitive
factors include customer preference for particular brands of automobiles,
pricing (including Manufacturer rebates and other special offers) and
warranties. Group 1 believes that its dealerships are competitive in all of
these areas.
The dealerships compete against franchised dealers to perform warranty
repairs and against other automobile dealers, franchised and independent
service center chains and independent garages for non-warranty repair and
routine maintenance business. The dealerships compete with other automobile
dealers, service stores and auto parts retailers in their parts operations.
Group 1 believes that the principal competitive factors in parts and service
sales are price, the use of factory-approved replacement parts, the familiarity
with a Manufacturer's brands and models and the quality of customer service. A
number of regional or national chains offer selected parts and services at
prices that may be lower than the dealerships prices.
12
<PAGE> 13
GOVERNMENTAL REGULATIONS
A number of regulations affect the Company's business of marketing,
selling, financing and servicing automobiles. The Company is also subject to
laws and regulations relating to business corporations generally.
Generally, the Company must obtain a license in order to establish,
operate or relocate a dealership or provide certain automotive repair services.
These laws also regulate the Company's conduct of business, including its
advertising and sales practices.
The Company's financing activities with its customers are subject to
federal truth in lending, consumer leasing and equal credit opportunity
regulations as well as state and local motor vehicle finance laws, installment
finance laws, insurance laws, usury laws and other installment sales laws.
Some states regulate finance fees that may be paid as a result of vehicle
sales. Penalties for violation of any of these laws or regulations may include
revocation of certain licenses, assessment of criminal and civil fines and
penalties, and in certain instances, create a private cause of action for
individuals. The Company believes that the dealerships comply substantially
with all laws and regulations affecting their business and do not have any
material liabilities under such laws and regulations and that compliance with
all such laws and regulations will not, individually or in the aggregate, have
a material adverse effect on its capital expenditures, earnings, or competitive
position.
ENVIRONMENTAL MATTERS
The Company is subject to a wide range of federal, state, and local
environmental laws and regulations, including those governing discharges to the
air and water, the storage of petroleum substances and chemicals, the handling
and disposal of wastes, and the remediation of contamination arising from
spills and releases. As with automobile dealerships generally, and parts,
service and collision service center operations in particular, the Company's
business involves the generation, use, handling and disposal of hazardous or
toxic substances or wastes. Operations involving the management of hazardous
and nonhazardous wastes are subject to requirements of the federal Resource
Conservation and Recovery Act and comparable state statutes. Pursuant to these
laws, federal and state environmental agencies have established approved
methods for storage, treatment, and disposal of regulated wastes with which the
Company must comply.
The Company's business also involves the use of aboveground and
underground storage tanks. Under applicable laws and regulations, the Company
is responsible for the proper use, maintenance and abandonment of regulated
storage tanks owned or operated by it, and for remediation of subsurface soils
and groundwater impacted by releases from such existing or abandoned
aboveground or underground storage tanks. In addition to these regulated
tanks, the Company owns, operates, or has otherwise abandoned other underground
and aboveground devices or containers (e.g., automotive lifts and service pits)
that may not be classified as regulated tanks, but which are capable of
releasing stored materials into the environment, thereby potentially obligating
the Company to remediate any soils or groundwater resulting from such releases.
The Company is also subject to laws and regulations governing
remediation of contamination at facilities it operates or to which it sends
hazardous or toxic substances or wastes for treatment, recycling or disposal.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without
regard to fault or the legality of the original conduct, on certain classes of
persons that are considered to have contributed to the release of a "hazardous
substance" into the environment. These persons include the owner or operator
of the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of the hazardous substances released at
such sites. Under CERCLA, these "responsible parties" may be subject to joint
and several liability for the costs of cleaning up the hazardous substances
that have been released into the environment, for damages to natural resources
and for the costs of certain health studies, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the release of hazardous
substances.
Further, the Federal Water Pollution Control Act, also known as the
Clean Water Act, and
13
<PAGE> 14
comparable state statutes prohibit discharges of pollutants into regulated
waters without authorized National Pollution Discharge Elimination System
(NPDES) and similar state permits, require containment of potential discharges
of oil or hazardous substances, and require preparation of spill contingency
plans. The Company expects to implement programs that address wastewater
discharge requirements as well as containment of potential discharges and spill
contingency planning.
Environmental laws and regulations have become very complex and it has
become very difficult for businesses that routinely handle hazardous and
non-hazardous wastes to achieve and maintain full compliance with all
applicable environmental laws. Like virtually any network of automobile
dealerships and vehicle service facilities, from time to time the Company,
including any future acquisitions, can be expected to experience incidents and
encounter conditions that will not be in compliance with environmental laws and
regulations. However, none of the Founding Groups have been subject to any
material environmental liabilities in the past and the Company does not
anticipate that any material environmental liabilities will be incurred by the
Founding Groups in the future. In addition, to minimize the risk of
environmental liability related to acquired dealerships, the Company generally
obtains environmental studies on such dealerships as a condition to their
acquisition. Furthermore, the Company is in the process of establishing an
environmental management program that is intended to reduce the risk of
noncompliance with environmental laws and regulations. Nevertheless,
environmental laws and regulations and their interpretation and enforcement are
changed frequently and the Company believes that the trend of more expansive
and more strict environmental legislation and regulations is likely to
continue. Hence, there can be no assurance that compliance with environmental
laws or regulations or the future discovery of unknown environmental conditions
will not require additional expenditures by the Company, or that such
expenditures would not be material.
EMPLOYEES
As of December 31, 1997, the Company employed 1,556 people, of whom
approximately 193 were employed in managerial positions, 529 were employed in
non-managerial sales positions, 612 were employed in non-managerial parts and
service positions and 222 were employed in administrative support positions.
Group 1 believes that its relationships with its employees are
favorable. None of the Company's employees are represented by a labor union.
Because of its dependence on the Manufacturers, however, the Company may be
affected by labor strikes, work slowdowns and walkouts at the Manufactures'
manufacturing facilities.
ITEM 2. PROPERTIES
Set forth in the table below is certain information relating to the
properties that the Company uses in its business.
<TABLE>
<CAPTION>
OCCUPANT LOCATION USE LEASE/OWN
-------- -------- --- ---------
<S> <C> <C> <C>
Bob Howard Automall.... 13300 N. Broadway New and used vehicle Lease; expires in 2027 and is
Extension, sales; service; F&I cancelable at the Company's option
Oklahoma City, Oklahoma in 2007 and at the end of each
subsequent five year period
13220 N. Broadway New and used vehicle Lease; expires in 2027 and is
Extension, sales; service; F&I cancelable at the Company's option
Oklahoma City, Oklahoma in 2007 and at the end of each
subsequent five year period
715 W. Memorial Road, Storage and make Lease; expires in 1999
Oklahoma City, Oklahoma ready facility
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
OCCUPANT LOCATION USE LEASE/OWN
-------- -------- --- ---------
<S> <C> <C> <C>
Bob Howard
Chevrolet........... 13130 N. Broadway New and used vehicle Lease; expires in 2027 and is
Extension, sales; service; F&I cancelable at the Company's option
Oklahoma City, Oklahoma in 2007 and at the end of each
subsequent five year period
Bob Howard Toyota..... 13200 N. Broadway New and used vehicle Lease; expires in 2027 and is
Extension, sales; service; F&I cancelable at the Company's option
Oklahoma City, Oklahoma in 2007 and at the end of each
subsequent five year period
Bob Howard
Honda/Acura......... 14137 N. Broadway New and used vehicle Lease; expires in 2001
Extension, sales; service; F&I
Edmond, Oklahoma
3700 S. Broadway Collision service Lease; expires in 1999
Extension, center
Edmond, Oklahoma
Bob Howard Dodge ..... 616 W. Memorial Road, New and used vehicle Lease; expires in 2001
Edmond, Oklahoma sales; service; F&I
Bob Howard Nissan .... 13241 N. Broadway Ext. New and used vehicle Lease; expires in 2006
Oklahoma City, Oklahoma sales; service; F&I
Sterling McCall
Toyota.............. 9400 Southwest Freeway New and used vehicle Lease; two leases which expire in
Houston, Texas sales; service; F&I 2027 and are cancelabe at the
Company's option in 2007 and at
the end of each subsequent five
year period
9400 Southwest Freeway Service Owned
Houston, Texas
Sterling McCall
Lexus............... 10422 Southwest Freeway New and used vehicle Lease; expires in 2027 and is
Houston, Texas sales; service; F&I cancelable at the Company's option
in 2007 and at the end of each
subsequent five year period
10610 Wilcrest Collision services Lease; expires in 2027 and is
Houston, Texas center cancelable at the Company's option
in 2007 and at the end of each
subsequent five year period
10430 Southwest Freeway New vehicle sales Lease; expires in 2000 with an
Houston, Texas option to extend until 2005
Courtesy Nissan....... 1777 North Central Expwy. New and used vehicle Lease; expires in 2013
Richardson, Texas sales; service; F&I
421 Industrial Boulevard Storage and make Lease; expires in 2000
Richardson, Texas ready facility
Mike Smith Autoplaza.. 1515 I-10 South New and used vehicle Lease; expires in 2027 and is
Beaumont, Texas sales; service; F&I cancelable at the Company's option
in 2007 and at the end of each
subsequent five year period
Town North ........... 9150 U.S. Highway 183 New and used vehicle Owned
Austin, Texas sales; service; F&I
9112 U.S. Highway 183 New and used vehicle Owned
Austin, Texas sales; service; F&I
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
OCCUPANT LOCATION USE LEASE/OWN
-------- -------- --- ---------
<S> <C> <C> <C>
9008 United Drive Used vehicle sales Lease; expires in 2001
Austin, Texas
9094 U.S. Highway 183 Storage Facility Lease; expires in 2001
Austin, Texas
9400 United Drive Storage Facility Lease; expires December 31, 1997
Austin, Texas and automatically renews for
successive one year terms unless
notice given by either party
8908 McCann Street Storage Facility Lease; month to month; may be
Austin, Texas terminated by either party with 30
days written notice
Round Rock Nissan..... 3050 North IH 35 New and used vehicle Lease; expires in 2027 and is
Austin, Texas sales; service; F&I cancelable at the Company's option
in 2007 and at the end of each
subsequent five year period
Acura Southwest....... 10455 Southwest Freeway New and used vehicle Owned
Houston, Texas sales; service; F&I
A.J. Foyt
Honda/Isuzu......... 22575 Highway 59 N New and used vehicle Owned
Kingwood, Texas sales; service; F&I
22577 Highway 59 N New and used vehicle Owned
Kingwood, Texas sales; service; F&I
Elgin Ford............ 1213 North Highway 290 New and used vehicle Owned
Elgin, Texas sales; service; F&I
World Ford Hollywood 3101 N. State Road #7 New and used vehicle Lease; renewable, through 2028,
Hollywood, Florida sales; service; F&I at the Company's option in 2008
and at the end of each subsequent
five year period
N. State Road #7 Storage facility Lease; renewable, through 2028,
Hollywood, Florida at the Company's option in 2008
and at the end of each subsequent
five year period
World Ford Kendall.... 15551 S. Dixie Highway New and used vehicle Lease; renewable, through 2028,
Miami, Florida sales; service; F&I at the Company's option in 2008
and at the end of each subsequent
five year period
9828 Southwest 168th Collision services Lease; renewable, through 2028,
Street center at the Company's option in 2008
Miami, Florida and at the end of each subsequent
five year period
Perimeter Ford........ 6407 Barfield Road New and used vehicle Lease; renewable, through 2028,
Atlanta, Georgia sales; service; F&I at the Company's option in 2008
and at the end of each subsequent
five year period
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company's dealerships are named in claims
involving the manufacture of automobiles, contractual disputes and other
matters arising in the ordinary course of business. Currently, no legal
proceedings are pending against or involve the Company that, in the opinion of
management,
16
<PAGE> 17
could be expected to have a material adverse effect on the business, financial
condition or results of operations of the Company.
Because of their vehicle inventory and nature of business, automobile
dealerships generally require significant levels of insurance covering a broad
variety of risks. The Company's insurance includes an umbrella policy with a
$50 million per occurrence limit as well as insurance on its real property,
comprehensive coverage for its vehicle inventory, general liability insurance,
employee dishonesty coverage and errors and omissions insurance in connection
with its vehicle sales and financing activities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 29, 1997, during the fourth quarter of the fiscal year
covered by this report, two matters were submitted to a vote of the
stockholders. By a unanimous consent of the stockholders, the 1998 Employee
Stock Purchase Plan and the second amendment to the 1996 Stock Incentive Plan
were adopted.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "GPI". There were 136 holders of record of the Common Stock
as of March 6, 1998.
Since the Company's Common Stock began trading on the NYSE after its
initial public offering in October 1997, the high and low sales prices per
share have been $13 15/16 and $7 3/4, respectively through December 31, 1997.
On March 27, 1998, the last reported sales price was $10 13/16 per share.
The Company has never declared or paid dividends on its Common Stock.
The Company intends to retain future earnings, if any, to finance the
development and expansion of its business and, therefore, does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future. The
decision whether to pay dividends will be made by the Board of Directors of the
Company in light of conditions then existing, including the Company's results
of operations, financial condition, capital requirements, general business
conditions and other factors.
Pursuant to financing agreements with floorplan lenders and the Credit
Facility, the Company is required to maintain a certain minimum working capital
and a certain aggregate net worth and is prohibited from making substantial
disbursements outside the ordinary course of business, including limitations on
the payment of cash dividends. In addition, pursuant to the automobile
franchise agreements to which the Company's dealerships are subject, all
dealerships are required to maintain a certain minimum working capital.
Group 1 has entered into agreements to purchase all of the outstanding
capital stock or purchase certain assets and assume certain liabilities of
various automobile dealerships for cash and shares of Group 1 Common Stock.
The following is a summary of the four transactions in which stock has been or
is to be issued:
DATE OF AGREEMENT ACQUISITION SHARES
------------------- ------------------------- ---------
December 17, 1997 Carroll Automotive Group 1,428,158
December 18, 1997 Maxwell Automotive Group 805,929
February 25, 1998 Johns Automotive Group 875,000
March 11, 1998 Luby Chevrolet 341,271
The Carroll Automotive Group acquisition closed on March 16, 1998, and
the remaining acquisitions are pending as of the date of this report. Group 1
is relying on Regulation D under the Securities Act of 1933, as amended as an
exemption from registration of the Common Stock to be issued in the
acquisitions. Group 1 believes it is justified in relying on such exemption
since there are only
17
<PAGE> 18
thirteen stockholders of the groups who will receive shares of Group 1 Common
Stock, each of whom is an "accredited investor" under Regulation D.
USE OF PROCEEDS
The Company's Registration Statement on Form S-1 (Registration No.
333-29893), as amended, initially filed with the Securities and Exchange
Commission on June 24, 1997, became effective concurrent with the commencement
of the IPO on October 29, 1997. The Company closed the IPO on November 4,
1997. In the IPO, the Company registered for sale 5,148,136 shares of Common
Stock at an aggregate offering price of approximately $61.8 million, for the
account of the Company, and 371,864 shares of Common Stock at an aggregate
offering price of approximately $4.5 million, for the account of the selling
stockholder. Included in the 5,148,136 shares sold by the Company were 720,000
shares sold pursuant to the underwriter's over-allotment option. All of the
shares registered for the account of the Company and for the account of the
selling stockholder were sold in the IPO for approximately $61.8 million and
approximately $4.5 million, respectively. The managing underwriters were
Goldman, Sachs & Co., Merrill Lynch & Co. and NationsBanc Montgomery
Securities, Inc. The underwriter's discount paid by the Company in connection
with the IPO totaled $4.3 million and expenses paid by the Company were
approximately $5.7 million. The net proceeds to the Company after giving
effect to the underwriter's discount and IPO expenses were approximately $51.8
million. Of the net proceeds to the Company, $5.4 million was used to pay the
cash portion of the purchase price of the acquisitions, which included $2.3
million paid to Robert E. Howard II, an officer, director and significant
stockholder of the Company. Approximately $35.4 million of the net proceeds
have been utilized to repay indebtedness with the remaining proceeds being used
for working capital purposes.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Group 1 acquired the Founding Groups on November 3, 1997. For
financial statement presentation purposes, however, the Howard Group, one of
the Founding Groups, has been identified as the accounting acquiror. As such,
the financial data as of December 31, 1993, 1994, 1995 and 1996, and for each
of the four years in the period ended December 31, 1996 represent the
historical financial data of the Howard Group on a stand-alone basis. The
financial data as of and for the year ended December 31, 1997, includes the
operations of Group1 Automotive, Inc., the parent company, and the Founding
Groups, excluding the Howard Group, beginning October 31, 1997, the effective
closing date of the acquisitions for accounting purposes. The Howard Group is
included for the entire year ended December 31, 1997. The following selected
historical financial data as of December 31, 1995, 1996 and 1997, and for each
of the four years in the period ended December 31, 1997, have been derived from
audited financial statements. The following selected historical financial data
as of December 31, 1993 and 1994 and for the period ended December 31, 1993,
have been derived from unaudited financial statements, which have been prepared
on the same basis as the audited financial statements and, in the opinion of
the Company, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data.
18
<PAGE> 19
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- ------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................... $167,252 $227,259 $254,003 $281,492 $403,967
Cost of sales.......................... 146,239 197,642 219,907 241,898 349,366
-------- -------- -------- -------- --------
Gross profit......................... 21,013 29,617 34,096 39,594 54,601
Goodwill amortization.................. - 21 27 37 170
Selling, general and
Administrative expenses.............. 16,610 24,232 26,139 30,731 44,210
-------- -------- -------- -------- --------
Income from operations............... 4,403 5,364 7,930 8,826 10,221
Other income (expense):
Interest expense, net................ (1,433) (2,452) (3,471) (3,168) (3,986)
Other income (expense), net.......... (28) 9 (80) (69) 156
-------- -------- -------- -------- --------
Income before income taxes........... 2,942 2,921 4,379 5,589 6,391
Provision for income taxes............. 367 768 744 382 573
-------- -------- -------- -------- --------
Net income............................. $2,575 $2,153 $3,635 $5,207 $5,818
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1993 1994 1995 1996 1997
-------- ------- -------- ------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................... $ 2,435 $ 2,356 $ 4,708 $ 6,436 $ 50,209
Inventories.............................. 23,180 34,699 39,573 47,674 105,421
Total assets............................. 32,955 51,124 61,641 72,874 213,149
Total debt, including current portion.... 21,199 31,601 37,320 42,887 67,858
Stockholders' equity..................... 3,637 5,346 8,620 12,210 89,372
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Group 1 was founded to become a leading operator and consolidator in the
highly fragmented automotive retailing industry. The Company owns automobile
dealership franchises located in Texas and Oklahoma. Additionally, the Company
provides maintenance and repair services at its dealerships and collision
service centers. From 1995 to 1997, the Founding Groups' pro forma revenues
increased by $172.9 million, or 23.7%, to $902.3 million from $729.4 million.
During this period, pro forma gross profit increased $27.1 million, or 27.1%,
to $127.1 million from $100.0 million, to 14.1% from 13.7% of revenues. Group
1 expects that a significant portion of its future growth will be derived from
acquisitions of additional dealerships.
The Company has diverse sources of revenues, including: new car sales, new
truck sales, used car sales, used truck sales, manufacturer remarketed vehicle
sales, parts sales, service sales, collision repair services, finance fees,
insurance commissions, extended service contract sales, documentary fees and
after-market product sales. Sales revenues include sales to retail customers,
other dealers and wholesalers. Other dealership revenue includes revenue from
the sale of financing, insurance and extended service contracts, net of a
provision for anticipated chargebacks and documentary fees charged to
customers.
The Company's gross profit will vary as the Company's merchandise mix (the
mix between new vehicle sales, used vehicle sales, parts and service sales,
collision repair services and other dealership revenues) changes. The gross
margin realized by the Company on the sale of its products and services
generally varies between approximately 7.5% and 60.0%, with new vehicle sales
generally resulting in the lowest gross margin and parts and service sales
generally resulting in the highest gross margin. Revenues from other dealership
revenues contribute a disproportionate share of gross, operating and pre-
19
<PAGE> 20
tax margins. When the Company's new vehicle sales increase or decrease at a
rate greater than the Company's other revenue sources, the Company's gross
margin will respond inversely. Factors such as seasonality, weather,
cyclicality and manufacturers' advertising and incentives may impact the
Company's merchandise mix and, therefore influence the Company's gross margin.
Selling, general and administrative expenses consist primarily of
compensation for sales, administrative, finance and general management
personnel, rent, marketing, insurance and utilities. Interest expense consists
of interest charges on interest-bearing debt, including floorplan inventory
financing, net of interest income earned. The Founding Groups had been
managed, until they were acquired by Group 1, as independent private companies
and their results of operations reflect different tax structures (S
Corporations and C Corporations) which influenced, among other things, their
historical levels of owners' compensation. These owners and certain key
employees agreed to certain reductions in their compensation and benefits in
connection with the organization of the Company.
Group 1 is integrating certain functions and installing practices that have
been successful at other franchises and in other retail segments ("best
practices"). This integration of functions and installation of best practices
may present opportunities to increase revenues and reduce costs but may also
necessitate additional costs and expenditures for corporate administration,
including expenses necessary to implement the Company's acquisition strategy.
These various costs and possible cost-savings and revenue enhancements may make
historical operating results not comparable to, or indicative of, future
performance.
PRO FORMA COMBINED FOUNDING GROUPS' DATA
The pro forma combined Founding Groups' data for 1995, 1996 and 1997 do not
purport to present the combined Founding Groups in accordance with generally
accepted accounting principles, but represent a summation of certain data of
the individual Founding Groups on an historical basis including the effects of
the pro forma adjustments. This data will not be comparable to and may not be
indicative of the Company's post-combination results of operations because (i)
the Founding Groups were not under common control of management and had
different tax structures (S Corporations and C Corporations) during the periods
presented and (ii) the Company used the purchase method to establish a new
basis of accounting to record the acquisitions.
20
<PAGE> 21
PARTS AND SERVICE DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1996 1997
------- ------- -------
(dollars in thousands)
<S> <C> <C> <C>
Sales revenue......................... $65,599 $73,451 $77,215
Gross profit.......................... $31,408 $35,978 $40,691
Gross margin.......................... 47.9% 49.0% 52.7%
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
REVENUES. Revenues increased $80.4 million, or 9.8%, from $821.9 million
for the year ended December 31, 1996 to $902.3 million for the year ended
December 31, 1997. New vehicle revenues increased $44.6 million, or 9.5% from
$469.3 million for the year ended December 31, 1996 to $513.9 million for the
year ended December 31, 1997. The increase in revenue was primarily
attributable to significant revenue growth from maturing Round Rock Nissan and
Bob Howard Dodge franchise operations, successful marketing efforts and strong
customer acceptance of the Founding Groups' products, particularly Lexus. Used
vehicle revenues increased $30.0 million, or 11.6%, from $258.0 million for the
year ended December 31, 1996 to $288.0 million for the year ended December 31,
1997. The increase was primarily attributable to the maturing franchise
operations, successful marketing efforts and an emphasis on used vehicle sales
in the Oklahoma market to mitigate the impact of lower than expected new
vehicle demand. Parts and service sales increased $3.7 million, or 5.0%, from
$73.5 million for the year ended December 31, 1996 to $77.2 million for the
year ended December 31, 1997. The increase was primarily attributable to the
maturing dealership operations and increased vehicle sales. Other dealership
revenues increased $2.1 million or 10.0% from $21.1 million for the year ended
December 31, 1996 to $23.2 million for the year ended December 31, 1997. The
increase was due primarily to an increase in the number of retail new and used
vehicle sales.
GROSS PROFIT. Gross profit increased $11.0 million, or 9.5%, from $116.1
million for the year ended December 31, 1996 to $127.1 million for the year
ended December 31, 1997. The increase was attributable to increased revenues
and a stable overall gross margin. The gross margin on new retail vehicle
sales increased from 8.0% for the year ended December 31, 1996 to 8.2% for the
year ended December 31, 1997 primarily due to stronger margins in the Lexus and
Nissan product lines, partially offset by reduced margins in the Oklahoma
market. The gross margin for used retail vehicle sales declined from 9.7% for
the year ended December 31, 1996 to 8.9% for the year ended December 31, 1997.
The decline was primarily attributable to efforts to increase market share in
the Oklahoma market while customer demand for new vehicles was not as strong as
in prior years. Parts and service gross margin increased from 49.0% for the
year ended December 31, 1996 to 52.7% for the year ended December 31, 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
REVENUES. Revenues increased $92.5 million, or 12.7%, from $729.4 million
for the year ended December 31, 1995 to $821.9 million for the year ended
December 31, 1996. New vehicle revenues increased $47.0 million, or 11.1%,
from $422.3 million for the year ended December 31, 1995 to $469.3 million for
the year ended December 31, 1996. This increase was primarily attributable to
increased sales at all but one of the Founding Groups with the McCall Group
accounting for $40.6 million of the increase. New and expanded franchise
operations, primarily the Howard Group's new Dodge franchise, successful
marketing efforts and strong customer acceptance of the Founding Groups'
products, particularly Toyota, Lexus and Chevrolet, contributed to the
increase. The Smith Group had an $8.0 million decline in new vehicle revenues
caused by reduced unit sales at its Dallas Nissan franchise. Used vehicle
revenues increased $35.6 million, or 16.0%, from $222.4 million for the year
ended December 31, 1995 to $258.0 million for the year ended December 31, 1996.
All of the Founding Groups had increases in used vehicle revenues with the
McCall Group accounting for $22.6 million of the increase. The increase was
attributable primarily to a strong used vehicle market and successful marketing
efforts. Parts and service
22
<PAGE> 22
The following tables set forth certain unaudited pro forma combined data of
the Founding Groups for the periods indicated:
OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1995 1996 1997
--------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- -------- --------- ------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues
New vehicle sales........ $422,348 57.9% $469,318 57.1% $513,864 56.9%
Used vehicle sales....... 222,373 30.5 258,027 31.4 288,010 31.9
Parts and service sales.. 65,599 9.0 73,451 8.9 77,215 8.6
Other dealership
revenues, net.......... 19,033 2.6 21,117 2.6 23,206 2.6
-------- ----- -------- ----- -------- -----
Total revenues.... 729,353 100.0 821,913 100.0 902,295 100.0
Cost of sales............ 629,305 86.3 705,783 85.9 775,164 85.9
-------- ----- -------- ----- -------- -----
Gross profit............. $100,048 13.7% $116,130 14.1% $127,131 14.1%
======== ===== ======== ===== ======== =====
</TABLE>
NEW VEHICLE DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1996 1997
------------ -------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Retail unit sales............... 20,357 21,378 23,201
Retail sales revenue............ $422,348 $469,318 $513,864
Gross profit.................... $32,047 $37,677 $42,199
Gross margin.................... 7.6% 8.0% 8.2%
Average gross profit per retail
unit sold..................... $1,574 $1,762 $1,819
</TABLE>
USED VEHICLE DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1996 1997
------------ -------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Retail unit sales............... 15,358 17,220 18,130
Retail sales revenue (1)........ $185,665 $219,183 $235,353
Gross profit.................... $17,560 $21,358 $21,035
Gross margin.................... 9.5% 9.7% 8.9%
Average gross profit per retail
unit sold..................... $1,143 $1,240 $1,160
</TABLE>
_________________
(1) Excludes wholesale revenues.
21
<PAGE> 23
sales increased $7.9 million, or 12.0%, from $65.6 million for the year ended
December 31, 1995 to $73.5 million for the year ended December 31, 1996. The
increase was primarily attributable to new and expanded operations at McCall
Lexus, and increased vehicle sales. Other dealership revenues increased $2.1
million or 11.1% from $19.0 million for the year ended December 31, 1995 to
$21.1 million for the year ended December 31, 1996. The increase was due
primarily to an increase in the number of retail new and used vehicle sales.
GROSS PROFIT. Gross profit increased $16.1 million, or 16.1%, from $100.0
million for the year ended December 31, 1995 to $116.1 million for the year
ended December 31, 1996. The increase was attributable to increased revenues
and an increase in gross margin from 13.7% for the year ended December 31, 1995
to 14.1% for the year ended December 31, 1996. The increase in gross margin
was primarily due to a change in the merchandise mix as used vehicle sales
became a greater percentage of total revenues and margins on vehicle and parts
and service sales grew. The gross margin on new retail vehicle sales increased
from 7.6% for the year ended December 31, 1995 to 8.0% for the year ended
December 31, 1996. The gross margin on used retail vehicle sales increased
from 9.5% for the year ended December 31, 1995 to 9.7% for the year ended
December 31, 1996. The gross margin on parts and service sales increased from
47.9% for the year ended December 31, 1995 to 49.0% for the year ended December
31, 1996.
HISTORICAL RESULTS OF OPERATIONS - GROUP 1 AUTOMOTIVE, INC.
The historical results of operations for the years ended December 31, 1995,
1996 and 1997 are a presentation in accordance with generally accepted
accounting principles. For historical presentation purposes, the Howard Group
has been identified as the accounting acquiror. As such, the financial data
for the years ended December 31, 1995 and 1996 represent the historical results
of operations of the Howard Group on a stand-alone basis. The financial data
for the year ended December 31, 1997, includes the operations of Group 1
Automotive, Inc., the parent company, and the Founding Groups, excluding the
Howard Group, beginning October 31, 1997, the effective closing date of the
acquisitions for accounting purposes. The Howard Group is included for the
entire year ended December 31, 1997. During the periods presented, the
companies within the Howard Group operated under different tax structures (S
Corporations and C Corporations). All S Corporation entities were converted to
C Corporations as of October 31, 1997.
The following table sets forth certain selected financial data and data as
a percentage of revenues for the Company for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1995 1996 1997
--------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------- ------- ---------- ------- ---------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales............ $151,227 59.5% $164,979 58.6% $228,044 56.5%
Used vehicle sales........... 79,448 31.3 88,477 31.4 135,507 33.5
Parts and service sales...... 16,940 6.7 20,649 7.4 30,006 7.4
Other dealership
revenues, net.............. 6,388 2.5 7,387 2.6 10,410 2.6
-------- ----- -------- ----- -------- -----
Total Revenues........ 254,003 100.0 281,492 100.0 403,967 100.0
Cost of sales................ 219,906 86.6 241,898 85.9 349,366 86.5
-------- ----- -------- ----- -------- -----
Gross profit................. 34,097 13.4 39,594 14.1 54,601 13.5
-------- ----- -------- ----- -------- -----
Goodwill amortization........ 27 - 37 - 170 .1
Selling, general and
administrative expenses.... 26,139 10.3 30,731 10.9 44,210 10.9
-------- ----- -------- ----- -------- -----
Income from operations....... 7,931 3.1 8,826 3.2 10,221 2.5
Other income and expense:
Interest expense, net...... (3,471) (1.4) (3,168) (1.2) (3,986) (1.0)
Other income (expense),
net....................... (81) - (69) - 156 0.1
-------- ----- -------- ----- -------- -----
Income before income taxes... 4,379 1.7 5,589 2.0 6,391 1.6
Provision for income taxes... 744 0.3 382 0.1 573 0.1
-------- ----- -------- ----- -------- -----
Net income................... $3,635 1.4% $5,207 1.9% $5,818 1.5%
======== ===== ======== ===== ======== =====
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
S Corporation pro forma
income taxes............... 990 0.4 1,831 0.7 1,465 0.4
-------- ----- ------- ---- ------- ----
Pro forma net income......... 2,645 1.0% $3,376 1.2% $4,353 1.1%
======== ===== ======= ==== ======= ====
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
REVENUES. Revenues increased by $122.5 million, or 43.5%, from $281.5
million for the year ended December 31, 1996 to $404.0 million for the year
ended December 31, 1997. New vehicle sales increased $63.0 million, or 38.2%,
from $165.0 million for the year ended December 31, 1996 to $228.0 million for
the year ended December 31, 1997. Used vehicle sales increased $47.0 million,
or 53.1%, from $88.5 million for the year ended December 31, 1996 to $135.5
million for the year ended December 31, 1997. Parts and service sales
increased $9.4 million, or 45.6%, from $20.6 million for the year ended
December 31, 1996 to $30.0 million for the year ended December 31, 1997. Other
dealership revenues increased $3.0 million, or 40.5%, from $7.4 million for the
year ended December 31, 1996 to $10.4 million for the year ended December 31,
1997. These increases were due primarily to the inclusion of the acquisitions
of the McCall, Smith and Kingwood Groups for the last two months of the year.
GROSS PROFIT. Gross profit increased by $15.0 million, or 37.9%, from
$39.6 million for the year ended December 31, 1996 to $54.6 million for the
year ended December 31, 1997. The increase was attributable to the inclusion
of the acquisitions for the last two months of the year, which was partially
offset by a reduced gross margin from 14.1% for the year ended December 31,
1996 to 13.5% for the year ended December 31, 1997. This decline was due
primarily to reduced vehicle gross margins. The reduced vehicle margin was
caused by an emphasis on increasing market share in the Oklahoma market while
customer demand was not as strong as in prior years.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $13.4 million, or 43.5%, from $30.8 million
for the year ended December 31, 1996 to $44.2 million for the year ended
December 31, 1997. The increase was primarily attributable to the inclusion of
the acquisitions for last two months of the year and a one time $825,000
non-cash compensation charge recorded by the Howard Group for grants of equity
to certain key employees of the Howard Group. Selling, general and
administrative expenses remained constant as a percentage of revenues at 10.9%
for the years ended December 31, 1996 and 1997. Excluding the impact of the
one-time $825,000 non- cash compensation charge, selling, general and
administrative expense would have declined to 10.7% of revenues for the year
ended December 31, 1997.
INTEREST EXPENSE, NET. Interest expense, net, increased $0.8 million,
or 25.0%, from $3.2 million for the year ended December 31, 1996 to $4.0
million for the year ended December 31, 1997. The increase was primarily
attributable to the inclusion of the acquisitions for the last two months of
the year.
PRO FORMA NET INCOME. Pro forma net income increased $1.0 million or
29.4% from $3.4 million for the year ended December 31, 1996 to $4.4 million
for the year ended December 31, 1997. Excluding the net income impact of the
$825,000 non-cash compensation charge, pro forma net income as a percentage of
revenues remained constant at 1.2% for the years ended December 31, 1996 and
1997. The increase in pro forma net income was primarily attributable to the
inclusion of the acquisitions for the last two months of the year.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
REVENUES. Revenues increased by $27.5 million, or 10.8%, from $254.0
million for the year ended December 31, 1995 to $281.5 million for the year
ended December 31, 1996. New vehicle sales increased $13.8 million, or 9.1%,
from $151.2 million for the year ended December 31, 1995 to $165.0 million for
the year ended December 31, 1996. The increase was primarily attributable to
strong sales at the Chevrolet franchise and the acquisition of Bob Howard
Dodge, offset by reduced sales at Bob Howard Automall. Used vehicle revenues
increased $9.1 million, or 11.5%, from $79.4 million for the year ended
December 31, 1995 to $88.5 million for the year ended December 31, 1996. This
increase was attributable to the acquisition of Bob Howard Dodge and the Howard
Group's successful marketing efforts at all of the Howard Group's other
franchises. Parts and service sales increased $3.7 million, or 21.9%,
24
<PAGE> 25
from $16.9 million for the year ended December 31, 1995 to $20.6 million for
the year ended December 31, 1996. The increase was attributable to increased
sales at each of the Howard Group's franchises and new sales from the
acquisition of Bob Howard Dodge. Other dealership revenues increased $1.0
million, or 15.6%, from $6.4 million for the year ended December 31, 1995 to
$7.4 million for the year ended December 31, 1996. The increase was due
primarily to an increase in the number of retail new and used vehicle sales.
GROSS PROFIT. Gross profit increased by $5.5 million, or 16.1%, from
$34.1 million for the year ended December 31, 1995 to $39.6 million for the
year ended December 31, 1996. The increase was attributable to increased sales
and improvement in the Howard Group's gross profit margin from 13.4% for the
year ended December 31, 1995 to 14.1% for the year ended December 31, 1996.
The gross margin improved as revenues from parts and service and other
dealership revenues became a greater percentage of total revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $4.6 million, or 17.6%, from $26.2 million
for the year ended December 31, 1995 to $30.8 million for the year ended
December 31, 1996. The increase was primarily attributable to costs related to
the newly acquired Bob Howard Dodge and variable incentive pay to employees
which was related to the increase in revenues. As a percentage of total
revenues, selling, general and administrative expenses increased from 10.3% for
the year ended December 31, 1995 to 10.9% for the year ended December 31, 1996.
INTEREST EXPENSE, NET. Interest expense, net, decreased $0.3 million,
or 8.6%, from $3.5 million for the year ended December 31, 1995 to $3.2 million
for the year ended December 31, 1996. The decrease was attributable to an
approximately 50 basis point decrease in the average floorplan interest rate,
partially offset by interest expense incurred by the newly acquired Bob Howard
Dodge.
PRO FORMA NET INCOME. Pro forma net income increased $0.8 million, or
30.8%, from $2.6 million for the year ended December 31, 1995 to $3.4 million
for the year ended December 31, 1996. Pro forma net income as a percentage of
revenues increased from 1.0% for the year ended December 31, 1995 to 1.2% for
the year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash on hand, cash
from operations, floorplan financing and its credit facility.
The following table sets forth historical selected information from
the Company's statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997
---------- ---------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Net cash provided by (used in)
operating activities............. $7,197 $7,332 $(26,601)
Net cash provided by (used in)
investing activities............. (1,303) (4,615) 10,661
Net cash provided by (used in)
financing activities............. (520) (1,558) 39,352
------ ------ -------
Net increase in cash and cash
Equivalents...................... $5,374 $1,159 $23,412
====== ====== =======
</TABLE>
CASH FLOWS
Total cash and cash equivalents at December 31, 1997, were $35.1
million.
For the three-year period ended December 31, 1997, the Company used
$12.1 million in net cash in operating activities, as net income plus
depreciation and amortization were offset by utilization of the
25
<PAGE> 26
IPO proceeds to pay down floorplan debt. At December 31, 1997, the Company had
paid down its floorplan debt in the amount of $33.5 million. The Company has
the ability to draw on it floorplan facilities in the amount of $33.5 million
in order to complete acquisitions or for working capital or other corporate
purposes.
The change in net cash provided by investing activities was
attributable to cash paid in completing acquisitions offset by the cash
balances obtained in the acquisitions and purchases of property and equipment.
The change in net cash provided by financing activities was primarily
attributable to the net proceeds of the Company's IPO of approximately $51.8
million.
ACQUISITION FINANCING
The Company anticipates that its primary use of cash will be for the
completion of acquisitions. The Company expects the cash needed to complete
its acquisitions will come from the operating cash flows of the existing
dealerships, borrowings under its current credit facilities, other borrowings
or equity/debt offerings. Currently, the Company has adequate cash resources
to meet its contractual obligations. But, in order to continue to implement
the Company's growth through acquisition strategy, the Company will need to
raise additional funds or primarily utilize its Common Stock to complete
acquisitions. See "Forward Looking Information and Certain Risks and
Uncertainties that Could Affect Future Operations Risks Related to
Acquisition Financing; Future Capital Requirements".
Credit Facility
On December 31, 1997, Group 1 entered into a $125 million, three-year
revolving Credit Agreement with a bank group (the "Credit Facility"). The
Credit Facility provides for a floorplan line of credit of $75 million for the
financing of vehicle inventories and an acquisition line of credit of $50
million, for the financing of acquisitions, general corporate purposes or
capital expenditures. There were no amounts drawn on the acquisition line of
credit of the Credit Facility as of March 27, 1998. The amount of funds
available under the acquisition line is dependent upon a calculation based on
the Company's cash flow and maintaining certain financial ratios. At Group 1's
option the acquisition line of credit of the Credit Facility may bear interest
based on the London Interbank Offered Rate plus a margin varying from 150 to
275 basis points, dependent upon certain financial ratios. Additionally, the
loan agreement contains various covenants including financial ratios and other
requirements which must be maintained by the Company. The agreement also
limits the amount the Company may pay as cash dividends.
In January 1998, the Company entered into a three-year interest rate
swap agreement with a bank. The effect of this swap will be to convert the
interest rate on $75 million of debt to a fixed rate of approximately 7.16%.
FLOORPLAN FINANCING
The Company currently obtains floorplan financing for its vehicle
inventory primarily through its Credit Facility and Toyota Motor Credit
Corporation. This debt bears interest at rates of LIBOR plus 150 basis points
and Prime minus 75 basis points to Prime minus 100 basis, based on certain
conditions.
LEASES
The Company leases various real estate, facilities and equipment under
long-term operating lease agreements, including leases with related parties.
Substantially all related-party leases have terms of 30 years and are
cancelable at the Company's option ten years from execution of the lease and at
the end of each subsequent five-year period.
26
<PAGE> 27
OTHER
The Company had working capital of $50.2 million as of December 31,
1997. Historically, the Company has funded its operations with internally
generated cash flow and borrowings from lenders. While there can be no
assurance, based on current facts and circumstances, management believes it has
adequate cash flows and financing alternatives to fund its current operations,
exclusive of acquisitions.
FORWARD LOOKING INFORMATION AND CERTAIN RISKS AND UNCERTAINTIES THAT COULD
AFFECT FUTURE OPERATING RESULTS
This Annual Report and Management's Discussion and Analysis of Results
of Operations and Financial Condition include certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements other than
statements of historical facts included in this document, including statements
regarding potential acquisitions, expected cost savings, planned capital
expenditures, the Company's future financial position, business strategy and
other plans and objectives for future operations are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, such statements are based upon
assumptions and anticipated results that are subject to numerous uncertainties.
Actual results may vary significantly from those anticipated due to many
factors, including industry conditions, future demand for new and used
vehicles, the ability to obtain Manufacturer consents to acquisitions, the
availability of capital resources and the willingness of acquisition candidates
to accept the Company's capital stock as currency. These important factors,
risks and uncertainties include, but are not limited to, those described in the
following paragraphs and in the discussion above in this Annual Report under
the heading "Business", including, without limitation, the discussions under
the subheadings "Agreements with Manufacturers", "Competition", "Governmental
Regulations" and "Environmental Matters". All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by such factors.
DEPENDENCE ON ACQUISITIONS FOR GROWTH
Growth in the Company's revenues and earnings will depend
significantly on the Company's ability to acquire and consolidate profitable
dealerships. There can be no assurance that the Company will be able to
identify, acquire or profitably manage and integrate additional dealerships, if
any, into the Company, or that it will be able to do so without substantial
costs, delays or other operational or financial problems. In addition,
increased competition for acquisition candidates may develop, which could
result in fewer acquisitions opportunities available to the Company and/or
higher acquisition prices. Further, acquisitions involve a number of special
risks, including possible adverse effects on the Company's operating results,
diversion of resources and management's attention, inability to retain key
acquired personnel, risks associated with unanticipated events or liabilities
and amortization of acquired intangible assets, some or all of which could have
a material adverse effect on the Company's business, financial condition and
results of operations. Finally, the ability of the Company to grow through
acquisitions could be significantly affected by the price of the Common Stock
since the Company intends to grow substantially through the issuance of its
Common Stock in acquisitions. Any substantial decline in the price of the
Common Stock could, therefore, have a material adverse effect on the Company's
growth strategy.
The Company will be required to obtain the consent of the applicable
Manufacturer prior to the acquisition of any dealership franchises. Obtaining
the consent of the Manufacturers for acquisitions of dealerships could take a
significant amount of time. Obtaining the approvals of the Manufacturers for
the acquisition of the Founding Groups took almost one year. Although the
Company believes that subsequent acquisitions by the Company will take
significantly less time since the Company has current completed applications
and/or agreements with all Manufacturers, there can be no assurance that future
approvals will not involve delays. The Manufacturers have not advised the
Company that approvals for subsequent acquisitions will take significantly less
time, and, if the Company experiences delays in obtaining, or fails to obtain,
approvals of the Manufacturers for acquisitions of dealerships, the Company's
growth strategy could be materially adversely affected. In determining whether
to approve an acquisition,
27
<PAGE> 28
the Manufacturers may consider many factors, including the moral character,
business experience, financial condition, ownership structure and CSI scores of
the Company. In addition, certain Manufacturers limit the number of such
Manufacturers' dealerships that may be owned by the Company or the number that
may be owned in a particular geographic area. See "Business - Agreements with
Manufacturers".
RISKS RELATING TO FAILURE TO MEET MANUFACTURER CSI SCORES
Many Manufacturers attempt to measure customers' satisfaction with
automobile dealerships through systems generally known as the customer
satisfaction index. These manufacturers may use a dealership's CSI scores as a
factor in evaluating applications for additional dealership acquisitions and
participation by a dealership in incentive programs. Certain of the Company's
dealerships have had difficulty from time to time meeting their Manufacturers'
CSI standards. The components of the various manufacturer CSI scores have been
modified from time to time in the past, and there is no assurance that such
components will not be further modified or replaced by different systems in the
future. The Company's dealerships' CSI scores in the past have not had a
material adverse effect on these dealerships. However, the CSI scores of the
Howard Group's GM dealerships are currently below GM levels as required under
the GM publication Policies for Changes in GM Dealership Ownership/Management
("GM Policies"), and as a result, the acquisition of a Chevrolet dealership in
Tulsa, Oklahoma by Bob Howard East, an affiliate of the Company has been denied
by GM. Under the GM Policies each GM dealership must maintain CSI scores that
are at or above its respective zone/branch average for the overall dealership
purchase/delivery category and the overall dealership service visit category.
Exceptions will be considered if (i) the score in each category is no lower
than 0.2 points below the applicable zone/branch average or 0.12 points below
national divisional 12 month averages; and (ii) a business plan for the
dealership is provided to improve CSI results in the categories to zone/branch
average within two years; and/or (iii) a positive sustaining trend has been
displayed in the dealership's CSI results in the categories. If such CSI
scores fail to reach required levels, the Company's ability to acquire GM
dealerships could be adversely affected. Moreover, failure of the Company's
dealerships to comply with the CSI standards of GM as well as other
Manufacturers at any given time in the future could adversely affect the growth
strategy of the Company.
MANUFACTURERS' LIMITATIONS ON ACQUISITIONS
The Company's acquisition program may be limited to some extent by the
Manufacturers. Under the limitations currently imposed by the Manufacturers,
the Company could acquire no more than five additional Toyota dealerships, two
additional Lexus dealerships, four additional Honda dealerships, one additional
Acura dealership, approximately 400 additional Ford and Lincoln Mercury
dealerships and 10 additional GM dealership locations prior to October 1999,
subject to being increased. The Company owns: two Toyota, one Lexus, three
Honda, two Acura, four Ford, one Lincoln and one Mercury franchise and three GM
dealership locations. The other Manufacturers, which have no such limitations,
accounted for the following estimated number of dealerships in the United
States, as of December 31, 1997: Chrysler Corporation, 13,000 (at 4,600
locations); Nissan, 1,200; Mitsubishi, 500; Isuzu, 500; Suzuki, 300. However,
not all of these existing dealership locations and franchises may be eligible
for acquisition. In addition, all of the Manufacturers, whether or not they
have numerical limitations on the number of dealerships that may be acquired,
will require the Company to obtain the consent of the applicable Manufacturer
prior to the acquisition of any dealership franchises of such Manufacturer, and
may withhold such consents based on other considerations, such as the failure
of existing dealerships to comply with their franchise agreements or to meet
required CSI scores, or the ownership by the Company of dealerships of
competing Manufacturers. Also, as a condition to granting its consent to the
transfer of the three Honda and two Acura dealerships acquired by Group 1 in
November 1997, American Honda imposed additional restrictions on the Company,
including a requirement that more than 50% of the outstanding Common Stock of
the Company be owned at all times by persons approved by American Honda,
restrictions on transfers of the shares of Common Stock acquired by the
stockholders of the Founding Groups pursuant to the acquisitions, and the
requirement that American Honda approve the ownership by any stockholder of 5%
or more of the Common Stock of the Company (other than certain institutional
investors, which may own up to 10%), as well as any future public offering of
Common Stock
28
<PAGE> 29
of the Company. All of the foregoing could have the effect of limiting the
Company's ability to implement its acquisition program. In addition, American
Honda's policy on public ownership of Honda and Acura dealerships requires that
individuals or entities that acquire, own or control more than 5% of the Common
Stock of the Company must provide American Honda with copies of all filings
made to the Securities and Exchange Commission, all comparable filings made to
state agencies and annual audited financial statements.
RISKS RELATED TO ACQUISITION FINANCING; FUTURE CAPITAL REQUIREMENTS
The Company currently intends to finance future acquisitions by
issuing shares of Common Stock as full or partial consideration for acquired
dealerships. The extent to which the Company will be able or willing to issue
Common Stock for acquisitions will depend on the market value of the Common
Stock from time to time and the willingness of potential acquisition candidates
to accept Common Stock as part of the consideration for the sale of their
businesses. Since the Company will focus initially on large "platform"
acquisitions, it is possible that the Company will issue a significant number
of additional shares of Common Stock in connection with such acquisitions in
the near future. Such additional shares of Common Stock could be as much as, or
more than, the number of outstanding shares of Common Stock. To the extent
that the Company is unable or unwilling to do so, the Company may be required
to use available cash or other sources of debt or equity financing. The
Company's Credit Facility provides it with a secured revolving line of credit
of up to $125 million, of which $50 million may be used for general corporate
purposes, acquisitions, capital expenditures and working capital and $75
million may be used for floorplan financing. As of December 31, 1997, there
were no amounts drawn under the Credit Facility. The Company currently expects
that available cash, other existing resources and the Credit Facility will be
sufficient to fund the Company's contractual cash needs for at least the next
12 months. But, in order to continue to implement the Company's growth through
acquisition strategy, the Company will need to raise additional funds or
primarily utilize the Company's Common Stock to complete acquisitions.
However, no assurance can be given that the available cash, other existing
resources and the Credit Facility will be sufficient to fund the Company's
contractual cash needs, or that the Company will be able to obtain adequate
additional capital from other sources.
DEPENDENCE ON AUTOMOBILE MANUFACTURERS
The success of each of the Company's dealerships will be highly
dependent upon the overall success of the line of vehicles that each dealership
sells. The Company's business will be affected to varying degrees by the
demand for its Manufacturers' vehicles, and by the financial condition,
management, marketing, production and distribution capabilities of such
Manufacturers. In addition, the timing, structure and amount of Manufacturer
sales incentives and rebates will impact the timing and profitability of the
Company's sales transactions and such incentives and rebates change frequently
based on decisions of the Manufacturers. Events such as labor disputes and
other production disruptions that may adversely affect a Manufacturer may also
adversely affect the Company. Similarly, the delivery of vehicles from
Manufacturers later than scheduled, which may occur particularly during periods
of new product introductions, can lead to reduced sales during such periods.
Moreover, any event that causes adverse publicity involving such Manufacturers
may have an adverse effect on the Company regardless of whether such event
involves any of the Company's dealerships.
The Company will also depend on its Manufacturers to provide it with a
desirable mix of new vehicles. The most popular vehicles generally produce the
highest profit margins and are frequently the most difficult to obtain from the
Manufacturers. If the Company is unable to obtain sufficient quantities of the
most popular models its profitability may be adversely affected. In some
instances, in order to obtain additional allocations of these vehicles, the
Company may elect to purchase a larger number of less desirable models than it
would otherwise purchase. Sales of less desirable models may result in lower
profit margins than sales of the more popular vehicles.
The Company's franchise agreements with its Manufacturers will not
give the Company the exclusive right to sell a Manufacturer's product within a
given geographic area. Accordingly, a Manufacturer could grant another dealer a
franchise to start a new dealership in proximity to one or more
29
<PAGE> 30
of the Company's locations or an existing dealer could move its dealership to a
location which would compete directly with the Company, although certain state
laws provide a mechanism for challenging such action in advance through
administrative or legal proceedings. If the Company cannot prevent a
Manufacturer from granting a new franchise near to one of the Company's
dealerships, such grant could have a material adverse effect on the Company and
its operations.
YEAR 2000 CONVERSION
Year 2000 issues result from the inability of computer programs or
computerized equipment to accurately calculate, store or use a date subsequent
to December 31, 1999. The erroneous date can be interpreted in a number of
different ways; typically the year 2000 is represented as the year 1900. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
Group 1 has recognized the need to ensure that its computer systems,
equipment and operations will not be adversely impacted by the change to the
calendar year 2000. As such, the Company has taken steps to identify potential
areas of risk and has begun addressing these in its planning, purchasing and
daily operations. The Company has not set a timetable for completion of its
year 2000 review. The total cost of converting all internal systems, equipment
and operations for the year 2000 has not been fully quantified, but it is not
expected to be material to Group 1. The Company is currently reviewing the
potential adverse impact resulting from the failure of third party service
providers and vendors to prepare for the year 2000. Failure by the Company or
its vendors to address the year 2000 issue could have a material adverse effect
on the Company. The Company is primarily dependent upon the Manufacturers for
the production and delivery of vehicles and parts and is unable to require the
Manufacturers to address the year 2000 issues faced by them. A shortage of
vehicles or other adverse effects on the relationship between the Company and
the Manufacturers caused by the Manufacturers failure to address the year 2000
issue could have a material adverse effect on the Company.
CYCLICALITY
The Company's operations, like the automotive retailing industry in
general, can be impacted by a number of factors relating to general economic
conditions, including consumer business cycles, consumer confidence, economic
conditions, availability of consumer credit and interest rates. Although the
above factors, among others, may impact the Company's business, Group 1
believes the impact on the Company's operations of future negative trends in
such factors will be somewhat mitigated by its (i) strong parts, service and
collision repair services, (ii) variable cost salary structure, (iii)
geographic diversity and (iv) product diversity.
SEASONALITY
The Company's operations are subject to seasonal variations, with the
second and third quarters generally contributing more operating profit than the
first and fourth quarters. This seasonality is driven by three primary forces:
(i) Manufacturer-related factors, primarily the historical timing of major
manufacturer incentive programs and model changeovers, (ii) weather-related
factors and (iii) consumer buying patterns.
ITEM 7A. MARKET RISK DISCLOSURE
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Financial Statements for the information required by this
item.
30
<PAGE> 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
For information concerning:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the definitive Proxy Statement of Group 1 Automotive, Inc. for
the Annual Meeting of Stockholders to be held May 28, 1998, which will be filed
with the Securities and Exchange Commission and is incorporated herein by
reference.
31
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this Annual Report on
Form 10-K.
(b) Reports on Form 8-K
On December 24, 1997, the Company filed a Current Report on
Form 8-K reporting under Item 5 thereof and including exhibits
under Item 7 thereof.
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 -- Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit
3.1 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
3.2 -- Certificate of Designation of Series A Junior Participating Preferred Stock (Incorporated by
reference to Exhibit 3.2 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
3.3 -- Bylaws of the Company (Incorporated by reference to Exhibit 3.3 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
4.1 -- Specimen Common Stock certificate (Incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
10.1 -- Employment Agreement between the Company and B.B. Hollingsworth, Jr. dated November 3, 1997.
10.2 -- Employment Agreement between the Company and Robert E. Howard II dated November 3, 1997.
10.3 -- Employment Agreement between the Company and Sterling B. McCall, Jr. dated November 3, 1997.
10.4 -- Employment Agreement between the Company and Charles M. Smith dated November 3, 1997.
10.5 -- Employment Agreement between the Company and John T. Turner dated November 3, 1997.
10.6 -- Employment Agreement between the Company and Scott L. Thompson dated November 3, 1997.
10.7 -- Employment Agreement between the Company and Kevin H. Whalen dated November 3, 1997.
10.8 -- Employment Agreement between the Company and James S. Carroll dated March 16, 1998.
10.9 -- 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 10.7 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
10.10 -- First Amendment to 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8 of
the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.11 -- Lease Agreement between Round Rock Nissan and SKLR Round Rock, L.C. (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.12 -- Lease Agreement between SMC Luxury Cars and SBM-L F.L.P.(Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.13 -- Lease Agreement between Southwest Toyota and SBM-T F.L.P. (Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.14 -- Lease Agreement between Southwest Toyota and SBM-T I&E F.L.P. (Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.15 -- Lease Agreement between SMC Luxury Cars and SBM-L I&E F.L.P. (Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.16 -- Lease Agreement between SMC Luxury Cars and SBM-L F.L.P. (Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.17 -- Lease Agreement between Southwest Toyota and SMC Investment, Inc. (Incorporated by reference
to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-
29893)
10.18 -- Lease Agreement between Southwest Toyota and Dodge Financial F.L.P. (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.19 -- Lease Agreement between Howard Pontiac GMC and Robert E. Howard II (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.20 -- Lease Agreement between Bob Howard Motors and Robert E. Howard II (Incorporated by reference
to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-
29893)
10.21 -- Lease Agreement between Bob Howard Chevrolet and Robert E. Howard II (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.22 -- Lease Agreement between Bob Howard Automotive-H and North Broadway Real Estate,
(Incorporated by reference to Exhibit 10.9 of the Company's Registration Statement on Form
S-1 Registration No. 333-29893)
10.23 -- Lease Agreement between Mike Smith Autoplaza and Olds-Honda Realty (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.24 -- Rights Agreement between Group 1 Automotive, Inc. and ChaseMellon Shareholder Services,
L.L.C., as rights agent dated October 3, 1997 (Incorporated by reference to Exhibit 10.10 of
the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.25 -- 1998 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.26 -- Form of Agreement between Toyota Motor Sales, U.S.A., and Group 1 Automotive, Inc.
(Incorporated by reference to Exhibit 10.12 of the Company's Registration Statement on Form
S-1 Registration No. 333-29893)
10.27 -- Form of Supplemental Agreement to General Motors Corporation Dealer Sales and Service
Agreement (Incorporated by reference to Exhibit 10.13 of the Company's Registration
Statement on Form S-1 Registration No. 333-29893)
10.28 -- Approval Letter dated December 11, 1996 from Nissan Motor Corporation U.S.A. (Incorporated
by reference to Exhibit 10.14 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.29 -- Amendment to Approval Letter from Nissan Motor Corporation U.S.A. dated September 29, 1997
(Incorporated by reference to Exhibit 10.15 of the Company's Registration Statement on Form
S-1 Registration No. 333-29893)
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.30 -- Supplemental Terms and Conditions between Ford Motor Company and Group 1 Automotive, Inc.
dated September 4, 1997 (Incorporated by reference to Exhibit 10.16 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
10.31 -- Toyota Dealer Agreement between Gulf States Toyota, Inc. and Southwest Toyota, Inc. dated
April 5, 1993 (Incorporated by reference to Exhibit 10.17 of the Company's Registration
Statement on Form S-1 Registration No. 333-29893)
10.32 -- Lexus Dealer Agreement between Toyota Motor Sales, U.S.A., Inc. and SMC Luxury Cars, Inc.
dated August 21, 1995 (Incorporated by reference to Exhibit 10.18 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
10.33 -- Letter Agreement between Mitsubishi Motor Sales of America, Inc. and Group 1 Automotive,
Inc. dated June 20, 1997 (Incorporated by reference to Exhibit 10.20 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
10.34 -- Supplemental Agreement to Dealer Sales and Service Agreement (Public Traded Company) among
Foyt Motors, Inc., Group 1 Automotive, Inc. and American Isuzu Motors Inc. (Incorporated by
reference to Exhibit 10.21 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.35 -- Stock Purchase Agreement Among Howard Pontiac-GMC, Inc., Bob Howard Automotive-East, Inc.
and the Stockholder of Bob Howard Automotive-East, Inc. dated as of September 12, 1997
(Incorporated by reference to Exhibit 10.22 of the Company's Registration Statement on Form
S-1 Registration No. 333-29893)
10.36 -- Agreement between American Honda Motor Co., Inc. and the Dealership Parties dated October
23, 1997 (Incorporated by reference to Exhibit 10.24 of the Company's Registration Statement
on Form S-1 Registration No. 333-29893)
10.37 -- Form of General Motors Corporation U.S.A. Sales and Service Agreement (Incorporated by
reference to Exhibit 10.25 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.38 -- Form of Nissan Motor Corporation Sales and Service Agreement (Incorporated by reference to
Exhibit 10.26 of the Company's Registration Statement on Form S-1 Registration No. 333-
29893)
10.39 -- Agreement and Plan of Reorganization by and among Group 1 Automotive, Inc., Koons Merger,
Inc., Koons Ford, Inc. and the stockholders of Koons Ford, Inc. dated December 17, 1997.
10.40 -- Agreement and Plan of Reorganization by and among Group 1 Automotive, Inc., PF Merger, Inc.,
Perimeter Ford, Inc. and the stockholders of Perimeter Ford, Inc. dated December 17, 1997.
10.41 -- Agreement and Plan of Reorganization by and among Group 1 Automotive, Inc., Courtesy Merger,
Inc., Courtesy Ford, Inc. and the stockholders of Courtesy Ford, Inc. dated December 17,
1997.
10.42 -- Lease Agreement between World Partner Enterprises Ltd. and Koons Ford, Inc. dated March 16,
1998.
10.43 -- Operations/Lease Agreement between K.C. Partnership and Perimeter Ford, Inc. dated March 16,
1998.
10.44 -- Lease Agreement between K.C. Partnership and Courtesy Ford, Inc. dated March 16, 1998.
10.45 -- Amended and Restated Sublease Agreement between Koons Development Co. and Koons Ford, Inc.
Dated March 16, 1998.
10.46 -- Multi-Party Agreement by and among K.C. Partnership, Ford Leasing Development Company,
Perimeter Ford, Inc., PF Merger, Inc. and Comerica Bank dated March 16, 1998.
10.47 -- Purchase Agreement by and among Group 1 Automotive, Inc., MSAP Merger Corp., the limited partners
of Prestige Chrysler Plymouth South, Ltd. and the stockholders of Prestige Chrysler Plymouth,
Inc. dated December 18, 1997.
10.48 -- Purchase Agreement by and among Group 1 Automotive, Inc., ST Merger Corp., the limited
partners of Maxwell Chrysler Plymouth Dodge Jeep Eagle, Ltd. and the stockholders of Maxwell
Chrysler Plymouth Dodge, Inc. dated December 18, 1997.
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C>
10.49 -- Purchase Agreement by and among Group 1 Automotive, Inc., RRN Merger Corp., the limited
partners of Prestige Chrysler Plymouth Northwest, Ltd. and the stockholders of MMK
Interests, Inc. dated December 18, 1997.
10.50 -- Asset Purchase Agreement by and among Group 1 Automotive, Inc., Casa Chevrolet Inc., United
Management, Inc. and the stockholders of United Management, Inc. dated February 25, 1998.
10.51 -- Asset Purchase Agreement by and among Group 1 Automotive, Inc., Casa Chrysler
Plymouth Jeep Inc., United Management, Inc. and the stockholders of United Management, Inc.,
dated February 25, 1998.
10.52 -- Purchase Agreement by and among Group 1 Automotive, Inc. and the stockholder of
Bob Howard Nissan, Inc. dated December 30, 1997.
10.53 -- Revolving Credit Agreement dated December 31, 1997.
10.54 -- Stock Pledge Agreement dated December 19, 1997.
10.55 -- Swap Transaction Letter Agreement dated January 23, 1998.
21.1 -- Group 1 Automotive, Inc. Subsidiary List.
23.1 -- Consent of Arthur Andersen LLP.
27.1 -- Financial Data Schedule.
</TABLE>
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the city of
Houston, Texas, on the 30th day of March, 1998.
Group 1 Automotive, Inc.
By:/s/ B.B. HOLLINGSWORTH, JR.
--------------------------------
B.B. Hollingsworth, Jr.
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on the 30th day of March, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ B.B. HOLLINGSWORTH, JR. Chairman, President and Chief Executive
- ------------------------------------------------------- Officer and Director (Principal Executive Officer)
B.B. Hollingsworth, Jr.
/s/ SCOTT L. THOMPSON Senior Vice President, Chief Financial
- ------------------------------------------------------- Officer and Treasurer (Chief Financial and Accounting
Scott L. Thompson Officer)
/s/ ROBERT E. HOWARD II Director
- -------------------------------------------------------
Robert E. Howard II
/s/ STERLING B. MCCALL, JR. Director
- -------------------------------------------------------
Sterling B. McCall, Jr.
/s/ CHARLES M. SMITH Director
- -------------------------------------------------------
Charles M. Smith
/s/ JOHN DUNCAN Director
- -------------------------------------------------------
John H. Duncan
/s/ BENNETT E. BIDWELL Director
- -------------------------------------------------------
Bennett E. Bidwell
</TABLE>
36
<PAGE> 37
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Group 1 Automotive, Inc. and Subsidiaries -- Consolidated Financial Statements
Report of Independent Public Accountants............................................................ F-2
Consolidated Balance Sheets......................................................................... F-3
Consolidated Statements of Operations............................................................... F-4
Consolidated Statements of Stockholders' Equity..................................................... F-5
Consolidated Statements of Cash Flows............................................................... F-6
Notes to Consolidated Financial Statements.......................................................... F-7
McCall Group -- Combined Financial Statements
Report of Independent Public Accountants............................................................ F-17
Combined Balance Sheet.............................................................................. F-18
Combined Statements of Operations................................................................... F-19
Combined Statements of Stockholders' Equity (Deficit)............................................... F-20
Combined Statements of Cash Flows................................................................... F-21
Notes to Combined Financial Statements.............................................................. F-22
Smith Group -- Combined Financial Statements
Report of Independent Public Accountants............................................................ F-30
Combined Balance Sheet.............................................................................. F-31
Combined Statements of Operations................................................................... F-32
Combined Statements of Stockholders' Equity......................................................... F-33
Combined Statements of Cash Flows................................................................... F-34
Notes to Combined Financial Statements.............................................................. F-35
</TABLE>
F-1
<PAGE> 38
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Group 1 Automotive, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Group 1
Automotive, Inc. and Subsidiaries (a Delaware corporation) (the Company) as of
December 31, 1996 and 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1996 and 1997, and the results of its operations and cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Houston, Texas
March 6, 1998
F-2
<PAGE> 39
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997
ASSETS ------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................ $11,679,050 $ 35,091,188
Accounts receivable, net ............................ 5,898,736 9,748,947
Inventories .......................................... 47,674,462 105,421,371
Notes receivable, net ................................ - 861,823
Prepaid expenses .................................... 858,886 1,865,883
Deferred income taxes ................................ - 8,692,447
----------- ------------
Total current assets ............................ 66,111,134 161,681,659
----------- ------------
PROPERTY AND EQUIPMENT, net ................................ 4,128,880 21,586,401
NOTES RECEIVABLE, net ...................................... 417,675 1,336,738
GOODWILL, net .............................................. 1,456,833 27,077,875
OTHER ASSETS .............................................. 759,714 1,466,480
----------- ------------
Total assets .................................... $72,874,236 $213,149,153
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floorplan notes payable .............................. $42,543,902 $ 58,487,845
Current maturities of long-term debt ................ 33,685 2,316,432
Deferred income taxes ................................ 357,172 -
Accounts payable and accrued expenses ................ 16,740,525 50,668,326
----------- ------------
Total current liabilities ...................... 59,675,284 111,472,603
----------- ------------
LONG-TERM DEBT, net of current maturities .................. 309,779 7,053,467
LONG-TERM DEFERRED INCOME TAXES ............................ 58,604 3,698,838
OTHER LONG-TERM LIABILITIES ................................ 620,896 1,552,739
COMMITMENTS AND CONTINGENCIES ..............................
STOCKHOLDERS' EQUITY:
Preferred stock, 1,000,000 shares authorized, none
issued or outstanding ................................ - -
Common stock, $.01 par value, 50,000,000 shares
authorized, 3,570,302 and 14,673,051 issued
and outstanding ...................................... 35,703 146,730
Additional paid-in capital .......................... 6,269,801 91,846,257
Retained earnings (deficit) .......................... 5,904,169 (2,529,006)
Treasury stock, at cost, 10,000 shares .............. - (92,475)
----------- ------------
Total stockholders' equity ...................... 12,209,673 89,371,506
----------- ------------
Total liabilities and stockholders'
equity .................................... $72,874,236 $213,149,153
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE> 40
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION> Pro Forma
Year Ended December 31, Year Ended
----------------------------------------- December 31,
1995 1996 1997 1997
------------ ------------ ---------- ------------
(unaudited)
<S> <C> <C> <C> <C>
REVENUES:
New vehicle sales .................. $151,226,737 $164,978,710 $228,043,546 $513,863,494
Used vehicle sales ................. 79,447,701 88,477,330 135,507,523 288,010,274
Parts and service sales............. 16,940,622 20,648,962 30,005,678 77,215,320
Other dealership revenues, net ..... 6,388,131 7,386,747 10,410,150 23,205,754
------------ ------------ ------------ ------------
Total revenues ........... 254,003,191 281,491,749 403,966,897 902,294,842
------------ ------------ ------------ ------------
COST OF SALES:
New vehicle sales .................. 140,086,087 152,708,620 212,349,242 471,664,355
Used vehicle sales ................. 71,553,967 78,911,645 123,931,626 266,975,770
Parts and service sales ............ 8,266,771 10,277,097 13,085,450 36,524,219
------------ ------------ ------------ ------------
Total cost of sales ...... 219,906,825 241,897,362 349,366,318 775,164,344
------------ ------------ ------------ ------------
GROSS PROFIT ............................ 34,096,366 39,594,387 54,600,579 127,130,498
GOODWILL AMORTIZATION ................... 27,152 36,982 170,267 790,414
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ................ 26,138,383 30,731,251 44,209,231 100,928,222
------------ ------------ ------------ ------------
Income from operations ... 7,930,831 8,826,154 10,221,081 25,411,862
OTHER INCOME AND EXPENSES:
Interest expense, net .................. (3,470,879) (3,168,086) (3,985,621) (6,120,396)
Other income (expense), net ............ (80,446) (69,328) 155,510 88,497
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES .............. 4,379,506 5,588,740 6,390,970 19,379,963
PROVISION FOR INCOME TAXES .............. 744,316 381,752 573,254 7,967,299
------------ ------------ ------------ ------------
NET INCOME .............................. $3,635,190 $5,206,988 $5,817,716 $11,412,664
============ ============ =========== ============
S Corporation pro forma income
taxes (unaudited) ...................... 989,968 1,831,389 1,464,834
------------ ------------ ------------
Pro forma net income (unaudited)......... $2,645,222 $3,375,599 $4,352,882
============ ============ ============
Earnings per share on pro forma net
Income:
Basic ................................. $0.78
Diluted ................................ $0.76
Weighted average shares outstanding:
Basic .................................. 14,672,804
Diluted ................................ 15,098,594
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE> 41
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------------- Paid-In Earnings Treasury
Shares Amounts Capital (Deficit) Stock Total
----------- -------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994.... 3,353,461 $ 33,535 $3,046,969 $2,265,774 $ - $ 5,346,278
Net income .................. - - - 3,635,190 - 3,635,190
Capital contribution ........ - - 1,725,000 - - 1,725,000
Dividends ................... - - - (2,086,181) - (2,086,181)
----------- -------- ----------- ----------- -------- -----------
BALANCE, December 31, 1995.... 3,353,461 33,535 4,771,969 3,814,783 - 8,620,287
Net income................... - - - 5,206,988 - 5,206,988
Issuance of common
stock ...................... 216,841 2,168 1,497,832 - - 1,500,000
Dividends .................... - - - (3,117,602) - (3,117,602)
----------- -------- ----------- ----------- -------- -----------
BALANCE, December 31, 1996..... 3,570,302 35,703 6,269,801 5,904,169 - 12,209,673
Acquisition of founding
companies................... 5,954,613 59,546 33,294,322 - - 33,353,868
Initial public offering,
net ........................ 5,148,136 51,481 51,707,134 - - 51,758,615
Purchase of treasury stock.... - - - - (92,475) (92,475)
Stock transfer by
shareholder, net of tax .... - - 575,000 - - 575,000
Net income ................... - - - 5,817,716 - 5,817,716
Dividends ................... - - - (14,250,891) - (14,250,891)
----------- -------- ----------- ----------- -------- -----------
BALANCE, December 31, 1997.... 14,673,051 $146,730 $91,846,257 $(2,529,006) $(92,475) $89,371,506
=========== ======== =========== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 42
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $3,635,190 $5,206,988 $5,817,716
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities -
Depreciation and amortization.......................... 538,493 740,811 1,020,073
Non-cash compensation, net of tax...................... - - 575,000
Deferred income taxes.................................. 190,787 (315,631) (1,014,705)
Provision for doubtful accounts and uncollectible
notes............................................ 84,833 108,068 270,047
Loss (gain) on sale of assets.......................... 15,313 18,350 (111,637)
Changes in assets and liabilities -
Accounts receivable ................................... 197,696 294,888 1,563,713
Inventories............................................ (4,873,611) (6,106,872) 5,686,292
Prepaid expenses and other assets...................... 196,943 (514,167) 3,608,725
Due from affiliates, net............................... - - 491,475
Floorplan notes payable................................ 3,876,738 5,508,254 (38,896,004)
Accounts payable and accrued expenses.................. 3,334,511 2,391,588 (5,611,583)
----------- ----------- -----------
Total adjustments................................... 3,561,703 2,125,289 (32,418,604)
----------- ----------- -----------
Net cash provided by (used in) operating
activities.................................. 7,196,893 7,332,277 (26,600,888)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable........................... (374,826) (235,054) (362,422)
Collections on notes receivable........................ - 192,205 87,787
Purchases of property and equipment.................... (928,017) (1,977,075) (2,163,793)
Proceeds from sale of property and equipment........... - - 1,935,346
Cash received in acquisitions, net of cash paid........ - (2,594,994) 11,163,785
----------- ----------- -----------
Net cash provided by (used in) investing
activities.................................. (1,302,843) (4,614,918) 10,660,703
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt.................... (171,910) (152,807) (470,612)
Borrowings of long-term debt............................ 13,111 212,329 108,488
Issuance of common stock................................ - 1,500,000 -
Initial public offering, net............................ - - 51,758,615
Purchase of treasury stock.............................. - - (92,475)
Contribution from stockholders.......................... 1,725,000 - -
Dividends paid in cash.................................. (2,086,181) (3,117,602) (11,951,693)
----------- ----------- -----------
Net cash provided by (used in) financing
activities.................................. (519,980) (1,558,080) 39,352,323
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................ 5,374,070 1,159,279 23,412,138
CASH AND CASH EQUIVALENTS, beginning of period........... 5,145,701 10,519,771 11,679,050
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of Period................. $10,519,771 $11,679,050 $35,091,188
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for -
Interest................................................ $3,427,813 $3,117,601 $4,199,664
Taxes................................................... 475,000 924,456 130,991
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 43
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Group 1 Automotive, Inc. and subsidiaries (Group 1 or the Company) was
founded in December 1995 to become a leading consolidator in the highly
fragmented automobile retailing industry. In October 1997, Group 1 acquired
four separate dealership groups (the Founding Groups), consisting of 30
dealership franchises and related businesses, in exchange for consideration
consisting of a combination of cash and common stock. Concurrent with the
acquisition of the Founding Groups, Group 1 completed an initial public
offering of 5,520,000 shares of common stock. The Company is primarily engaged
in the retail sale of new and used vehicles and the sale of related finance,
insurance and service contracts thereon. In addition, the Company sells
automotive parts and provides vehicle servicing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
For financial statement presentation purposes, Howard Group, one of the
Founding Groups, has been identified as the accounting acquiror. The
acquisition of the remaining Founding Groups was accounted for using the
purchase method of accounting. The operations of Group 1 Automotive, Inc., the
parent company, and the Founding Groups, excluding the Howard Group, are
included in the results of operations beginning October 31, 1997, the effective
closing date of the acquisitions for accounting purposes. The results of
operations of the Howard Group are included for the full year for all periods
presented. The allocation of purchase price to the assets acquired and
liabilities assumed has been initially assigned and recorded based on
preliminary estimates of fair value and may be revised as additional
information concerning the valuation of such assets and liabilities becomes
available. All significant intercompany balances and transactions have been
eliminated in consolidation.
Revenue Recognition
Revenue from vehicle sales, parts sales and vehicle service is recognized
upon delivery to the customer.
Finance, Insurance and Service Contract Income Recognition
The Company arranges financing for customers through various institutions
and receives financing fees equal to the difference between the loan rates
charged to customers over the predetermined financing rates set by the financing
institution. In addition, the Company receives commissions from the sale of
credit life and disability insurance and extended service contracts to
customers.
The Company may be charged back (chargebacks) for unearned financing fees,
insurance or service contract commissions in the event of early termination of
the contracts by customers. The revenues from financing fees and commissions
are recorded at the time of the sale of the vehicles and a reserve for future
chargebacks is established based on historical operating results and the
termination provisions of the applicable contracts. Finance, insurance and
service contract income, net of estimated chargebacks, are included in other
dealership revenue in the accompanying combined financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments that have an
original maturity of three months or less at the date of purchase and contracts
in transit. Contracts in transit represent contracts on vehicles sold, for
which the proceeds are in transit from financing institutions.
F-7
<PAGE> 44
Inventories
New, used and demonstrator vehicles are stated at the lower of cost or
market, determined on a specific-unit basis. Parts and accessories are stated
at the lower of cost (determined on a first-in, first-out basis) or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the life of the
lease or the estimated useful life of the asset.
Expenditures for major additions or improvements which extend the useful
lives of assets are capitalized. Minor replacements, maintenance and repairs
which do not improve or extend the life of such assets are charged to
operations as incurred. Disposals are removed at cost less accumulated
depreciation, and any resulting gain or loss is reflected in current
operations.
Goodwill
Goodwill represents the excess of the purchase price of dealerships
acquired over the fair value of tangible assets acquired at the date of
acquisition. Goodwill is amortized on a straight-line basis over 40 years.
Amortization expense charged to operations totaled approximately $27,000,
$37,000 and $170,000 for the years ended December 31, 1995, 1996 and 1997,
respectively. Accumulated amortization totaled approximately $129,000 and
$299,000 as of December 31, 1996 and 1997, respectively.
Income Taxes
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109.
Under this method, deferred income taxes are recorded based upon differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets are realized or liabilities are settled. A valuation
allowance reduces deferred tax assets when it is more likely than not that some
or all of the deferred tax assets will not be realized.
Prior to acquisition of the Founding Groups, certain entities of the
Howard Group elected S Corporation status, as defined by the Internal Revenue
Code, whereby the companies were not subject to taxation for federal purposes.
Under S Corporation status, the stockholders report their share of these
companies' taxable earnings or losses in their personal tax returns. All S
Corporation elections were terminated in conjunction with the acquisitions.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of floorplan notes
payable and long-term debt. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or existence of
variable interest rates that approximate market rates.
In January 1998, the Company entered into a three-year interest rate swap
agreement with a bank. The effect of this swap will be to convert the interest
rate on $75 million of debt to a fixed rate of approximately 7.16%.
Advertising
The Company expenses production and other costs of advertising as
incurred. Advertising expense for the years ended December 31, 1995, 1996 and
1997 totaled $3.4, $3.2 and $5.9 million, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in determining the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The
F-8
<PAGE> 45
significant estimates made by management in the accompanying financial
statements relate to reserves for used vehicle valuations, retail loan
guarantees and future chargebacks on finance, insurance and service contract
income. Actual results could differ from those estimates.
Statements of Cash Flows
For purposes of the statements of cash flows, cash and cash equivalents
include contracts in transit which are typically collected within one month.
Additionally, the net change in floorplan financing of inventory, which is a
customary financing technique in the industry, is reflected as an operating
activity in the statements of cash flows.
Earnings Per Share
SFAS No. 128 requires the presentation of basic earnings per share and
diluted earnings per share in financial statements of public enterprises rather
than primary and fully diluted earnings per share as previously required. Under
the provisions of this statement, basic earnings per share is computed based on
weighted average shares outstanding and excludes dilutive securities. Diluted
earnings per share is computed including the impacts of all potentially
dilutive securities. As the Company was not a public enterprise until October
1997, and the companies included in the statements of operations were under
different tax structures (S Corporations and C Corporations), no earnings per
share data has been presented for the historical results of operations for the
years ended December 31, 1995, 1996 and 1997. The following table sets forth
the shares outstanding for the pro forma earnings per share calculations:
<TABLE>
<CAPTION>
Pro Forma
Year Ended
December 31,
1997
-------------
<S> <C>
Common stock outstanding 14,673,051
Less: weighted average treasury shares repurchased.............................. (247)
------------
Shares used in computing basic earnings per share............................. 14,672,804
Dilutive effect of stock options, net of assumed repurchase of treasury
stock........................................................................... 425,790
------------
Shares used in computing diluted earnings per share........................... 15,098,594
============
</TABLE>
Recent Accounting Pronouncements
During June 1997, Statement of Financial Accounting Standards ("SFAS") No.
131, " Disclosures About Segments of an Enterprise and Related Information" was
issued. SFAS No. 131 requires that segment reporting for public reporting
purposes be conformed to the segment reporting used by management for internal
purposes. Additionally, it adds a requirement for the presentation of certain
segment data on a quarterly basis starting in 1999. Management is currently
evaluating the impact of this standard on the Company's future financial
reporting.
Reclassifications
Certain reclassifications have been made to prior year financial
statements to conform them with the current year presentation.
3. ACQUISITION OF FOUNDING GROUPS
The accompanying consolidated balance sheet includes preliminary
allocations of the purchase price of the Founding Groups which are subject to
final adjustment.
The following pro forma financial information consists of income statement
data from continuing operations as presented in the consolidated financial
statements plus (1) the acquisition of the Founding Groups assuming the
acquisitions occurred on January 1, 1996 and 1997, respectively, (2) the
completion of the IPO as of the beginning of the respective periods and (3)
certain pro forma adjustments discussed below.
1996 1997
--------- ----------
(in thousands, except share amounts)
F-9
<PAGE> 46
(unaudited)
Revenues........................ $821,913 $902,295
Gross profit.................... 116,130 127,131
Income from operations.......... 21,822 25,412
Net income...................... 9,447 11,413
Basic earnings per share........ 0.64 0.78
Diluted earnings per share...... $0.63 $0.76
Pro forma adjustments included in the amounts above primarily relate to:
(a) increases in revenues and decreases in cost of sales related to commission
arrangements on certain third-party products sold by the dealerships which
previously benefited the stockholders and such agreements were terminated in
conjunction with the acquisitions and the companies will realize the benefits
thereafter; (b) pro forma goodwill amortization expense over an estimated
useful life of 40 years; (c) reductions in compensation expense and management
fees to the level that certain management employees and owners of the Founding
Groups will contractually receive; (d) incremental corporate overhead costs
related to personnel costs, rents, professional service fees and directors and
officers liability insurance premiums; (e) decreases in interest expense
resulting from the repayment of floorplan obligations with proceeds from the
offering; and (f) incremental provisions for federal and state income taxes
relating to the compensation differential, S Corporation income and other pro
forma adjustments.
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1997
----------- ------------
<S> <C> <C>
Amounts due from manufacturers................ $3,574,953 $3,888,501
Due from finance companies.................... 1,002,153 3,217,205
Parts and service receivables................. 652,222 2,273,045
Other......................................... 777,329 890,403
------------ ------------
Total accounts receivable..................... 6,006,657 10,269,154
Less - Allowance for doubtful accounts........ (107,921) (520,207)
------------ ------------
Accounts receivable, net...................... $5,898,736 $9,748,947
============ ============
</TABLE>
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1997
----------- ------------
<S> <C> <C>
New vehicles................................ $36,973,347 $70,574,596
Used vehicles............................... 8,612,757 25,690,062
Rental vehicles............................. - 2,495,113
Parts, accessories and other................ 2,088,358 6,661,600
------------ ------------
Total inventories........................... $47,674,462 $105,421,371
=========== ============
</TABLE>
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1997
----------- ------------
<S> <C> <C>
Account payable, trade....................... $ 6,135,880 $18,510,907
Reserve for finance, insurance and
service contract chargebacks.............. 5,782,600 10,530,250
Reserve for retail loan guarantees........... - 2,009,638
Other accrued expenses....................... $ 4,822,045 19,617,531
------------ ------------
Total accounts payable and accrued
expenses............................. $16,740,525 $50,668,326
=========== ===========
</TABLE>
F-10
<PAGE> 47
5. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
Estimated December 31,
Useful Lives ------------------------------------
in Years 1996 1997
----------- ------------ --------------
<S> <C> <C> <C>
Land............................... - $- $7,665,229
Buildings.......................... 20 to 35 32,058 5,402,916
Leasehold improvements............. 7 to 15 1,086,129 3,807,625
Machinery and equipment............ 3 to 7 2,460,465 2,995,035
Furniture and fixtures............. 5 to 7 1,387,095 4,590,538
Company vehicles................... 5 2,146,377 528,166
------------ -------------
Total......................... 7,112,124 24,989,509
Less -- Accumulated depreciation... (2,983,244) (3,403,108)
------------ -------------
Property and equipment, net........ $4,128,880 $21,586,401
============ =============
</TABLE>
6. FLOORPLAN NOTES PAYABLE:
Floorplan notes payable reflect amounts payable for the purchase of
specific vehicle inventory and consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1997
----------- ------------
<S> <C> <C>
New vehicles................................ $38,677,985 $42,918,279
Used vehicles............................... 3,865,917 13,173,880
Rental vehicles............................. - 2,395,686
------------ ------------
Total floorplan notes payable.......... $42,543,902 $58,487,845
============ ============
</TABLE>
Floorplan notes payable are due to various floorplan lenders, bearing
interest at rates ranging from prime minus 100 basis points to prime plus 175
basis points. As of December 31, 1996 and 1997 the weighted average interest
rate on floorplan notes payable outstanding was 7.75% and 7.93%. Interest
expense on floorplan notes payable totaled approximately $3.4, $3.1 and $3.9
million for the years ended December 31, 1995, 1996 and 1997, respectively. The
floorplan arrangements permit the Company to borrow up to $150.4 million,
dependent upon new and used vehicle sales and inventory levels. As of December
31, 1997, total available borrowings under floorplan agreements were
approximately $91.9 million. Vehicle payments on the notes are due when the
related vehicles are sold. The notes are collateralized by substantially all of
the inventories of the Company.
F-11
<PAGE> 48
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1996 1997
--------------- --------------
<S> <C> <C>
Note payable to a bank with
monthly principal payments of
$41,892, due through March 2004,
bearing interest at 7.5%
payable monthly.................... $ -- $ 3,138,386
Note payable to a bank, with
monthly principal payments of
$13,740 due through August 2006,
bearing interest at prime rate
(8.50% at December 31, 1997)....... -- 2,082,893
Mortgage loan to a bank, with
monthly principal payments of
$15,000, due through May 2005,
bearing interest at prime plus 25
basis points (8.75% at December
31, 1997), payable monthly......... -- 1,314,290
Revolving line of credit with a
bank, due on demand, bearing
interest at prime plus 100 basis
points (9.5% at December 31, 1997) -- 985,448
Note payable to a bank, with
monthly principal and interest
payments of $5,831 due through
February 2006, bearing interest at
8.20%.............................. -- 568,399
Other notes payable, maturing in
varying amounts through August
2001 with interest ranging from
7.0% to 13.7%...................... 343,464 1,280,483
--------------- --------------
Total long-term debt.................. 343,464 9,369,899
--------------- --------------
Less - Current portion............. (33,685) (2,316,432)
--------------- --------------
Long-term portion.................. $ 309,779 $ 7,053,467
=============== ==============
</TABLE>
The notes payable are secured by the land, buildings or other assets
for which the debt was incurred. On December 31, 1997, Group 1 entered into a
$125 million, three-year revolving Credit Agreement with a bank group (the
"Credit Facility"). There were no amounts drawn on the Credit Facility as of
December 31, 1997. The Credit Facility provides for a floorplan line of credit
of $75 million for the financing of vehicle inventories and an acquisition line
of credit of $50 million, for the financing of acquisitions, general corporate
purposes or capital expenditures. The amount of funds available under the
acquisition line is dependent upon a calculation based on the Company's cash
flow and maintaining certain financial ratios. At Group 1's option the
acquisition line of credit of the Credit Facility may bear interest based on
the London Interbank Offered Rate plus a margin varying from 150 to 275 basis
points, dependent upon certain financial ratios. Additionally, the loan
agreement contains various covenants including financial ratios and other
requirements which must be maintained by the Company. The agreements also limit
the amount the Company may pay as cash dividends.
Total interest expense on long-term debt was approximately $56,000 and
$176,000 for the years ended December 31, 1996 and 1997, respectively.
F-12
<PAGE> 49
The aggregate maturities of long-term debt as of December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998........................ $2,316,432
1999........................ 1,206,616
2000........................ 1,138,898
2001........................ 1,055,680
2002........................ 897,017
Thereafter.................. 2,755,256
-------------
Total long-term debt........ $9,369,899
=============
</TABLE>
8. CAPITAL STOCK AND STOCK OPTIONS:
In 1996, Group 1 adopted the 1996 Stock Incentive Plan (the Plan), which
provides for the granting or awarding of stock options, stock appreciation
rights and restricted stock to officers and other key employees and directors.
The number of shares authorized and reserved for issuance under the Plan is
2,000,000 shares of which 752,550 are available for future issuance. In
general, the terms of the option awards (including vesting schedules) are
established by the Compensation Committee of the Company's Board of Directors.
As of December 31, 1997, the Company has granted options to employees and
directors covering an aggregate of 1,247,450 shares of common stock. All
outstanding options are exercisable over a period not to exceed 10 years and
vest over a five- or six-year period.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which, if fully adopted, requires the Company to record
stock-based compensation at fair value. The Company has adopted the disclosure
requirements of SFAS No. 123 and has elected to record employee compensation
expense in accordance with Accounting Principles Board (APB) Opinion No. 25.
Accordingly, compensation expense is recorded for stock options based on the
excess of the fair market value of the common stock on the date the options
were granted over the aggregate exercise price of the options. As the exercise
price of options granted under the Plan has been equal to or greater than the
market price of the Company's stock on the date of grant, no compensation
expense related to the Plan has been recorded.
Had compensation expense for the Plan been determined based on the
provisions of SFAS No. 123, the impact on the Company's net income would have
been as follows for the year ended December 31, 1997:
<TABLE>
<S> <C>
Net income as reported ........................................ $5,817,716
Pro forma net income under FAS 123 ............................ $5,451,048
</TABLE>
The following table summarizes the Company's outstanding stock options:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------
WEIGHTED
AVERAGE
NUMBER EXERCISE PRICE
-------------- --------------
<S> <C> <C>
Options outstanding, beginning of year........ 205,000 $ 2.90
Grants:
First quarter 1997 (all at $2.90 per share).. 360,000 2.90
Fourth quarter 1997 (all at $12.00 per share) 682,450 12.00
-------------- --------------
Options outstanding, end of year.............. 1,247,450 $ 7.88
============== ==============
</TABLE>
At December 31, 1997, 129,843 options were exercisable at a weighted
average exercise price of $6.56. The weighted average exercise price of options
granted during the year ended December 31, 1997 was $8.86. The weighted average
remaining contractual life of options outstanding is 9.5 years. The weighted
average fair value per share of options granted during the years ended December
31, 1996 and 1997 is $0.45 and $5.94, respectively. The fair value of the
options granted prior to the initial public offering were estimated on the date
of the grant using the minimum value method as the Company was not a public
entity and was not able to use the Black-Scholes model because estimating the
expected
F-13
<PAGE> 50
volatility was not feasible. The fair value of options granted at or subsequent
to the initial public offering is estimated on the date of grant using the
Black-Scholes option pricing model.
The following table summarizes the weighted average information used in
determining the fair value of the options granted during the years ended
December 31, 1996 and 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1997
---- ----
Weighted average risk-free interest rate ........ 5.0% 5.9%
Weighted average expected life of options........ 6 years 10 years
Weighted average expected volatility............. N/A 58.1%
Weighted average expected dividends.............. --- ----
</TABLE>
In September 1997, Group 1 adopted Group 1 Automotive's 1998 Employee Stock
Purchase Plan (the "Purchase Plan"). The Purchase Plan authorizes the issuance
of up to 200,000 shares of Common Stock and provides that no options may be
granted under the Purchase Plan after June 30, 2007. The Purchase Plan is
available to all employees of the Company and its participating subsidiaries. At
the end of each fiscal quarter ("Option Period") during the term of the Purchase
Plan, the employee contributions are used to acquire shares of Common Stock at
85% of the fair market value of the Common Stock on the first or the last day of
the Option Period, whichever is lower.
9. RELATED-PARTY TRANSACTIONS:
The principals of the Founding Groups lease certain of the dealership
facilities to Group 1 under long-term operating leases. Additional information
regarding the terms of these leases is contained in Note 10, "Operating Leases."
In connection with the acquisitions the principal stockholder of the Howard
Group acquired certain non-operating assets (recreational vehicles and
properties) owned by the Howard Group. The purchase price, which approximated
fair market value, was approximately $2.0 million.
10. OPERATING LEASES:
The Company leases various facilities and equipment under long-term
operating lease agreements, including leases with related parties. The
related-party leases expire on December 31, 2027 and are cancelable, at the
Company's option, every five years beginning in 2007. The third-party leases are
non-cancelable and expire on various dates through August 2013.
Future minimum lease payments for operating leases are as follows:
<TABLE>
<CAPTION> Related
Year ended December 31, Parties Third Parties Total
------------------------------ ------------- ------------------ -----------
<S> <C> <C> <C>
1998.......................... $5,022,608 $2,025,394 $7,048,002
1999.......................... 5,076,161 1,730,511 6,806,672
2000.......................... 5,043,672 1,671,049 6,714,721
2001.......................... 5,043,672 988,422 6,032,094
2002.......................... 4,909,232 570,000 5,479,232
Thereafter.................... 24,411,720 5,038,367 29,450,087
----------- ----------- -----------
Total......................... $49,507,065 $12,023,743 $61,530,808
=========== =========== ===========
</TABLE>
Total rent expense under all operating leases, including operating leases
with related parties, was approximately $2.2, $2.3 and $3.3 million for the
years ended December 31, 1995, 1996 and 1997, respectively. Total rental expense
for the year ending December 31, 1998 is not anticipated to be materially
different than the total rental expense incurred by all of the companies for the
year ended December 31, 1997. Rental expense on related-party leases, which is
included in the above amounts, totaled approximately $1.8, $1.9 and $2.6 million
for the years ended December 31, 1995, 1996 and 1997, respectively.
F-14
<PAGE> 51
11. INCOME TAXES:
Federal and state income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1995 1996 1997
-------- --------- ----------
<S> <C> <C> <C>
Federal -
Current............ $476,615 $586,642 $1,290,857
Deferred........... 160,631 (261,857) (761,726)
State -
Current............ 76,914 110,741 297,102
Deferred........... 30,156 (53,774) (252,979)
-------- -------- --------
Provision for
income taxes....... $744,316 $381,752 $573,254
======== ======== ========
</TABLE>
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 34 percent to income
before income taxes as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Provision at the statutory rate...... $1,489,032 $1,900,172 $2,172,930
Increase (decrease) resulting
from --............................. (877,106) (1,584,686) (1,269,151)
Income of S Corporations
State income tax, net of
benefit for federal deduction...... 70,666 37,598 29,121
Deferred tax assets realized on
conversion of S Corporations to
C Corporations..................... - - (402,524)
Other............................... 61,724 28,668 42,878
-------- -------- --------
Provision for income taxes........... $744,316 $381,752 $573,254
======== ======== ========
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for
financial reporting purposes and for tax purposes. The tax effects of these
temporary differences representing deferred tax assets and (liabilities) result
principally from the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997
------------ ------------
<S> <C> <C>
Inventory ................................ $(2,637,029) $(3,166,360)
Reserves and accruals not deductible
until paid ............................ 2,175,732 8,639,072
Depreciation ............................. (58,604) (644,607)
Other .................................... 104,125 165,504
----------- -----------
Net deferred tax asset (liability)........ $ (415,776) $ 4,993,609
=========== ===========
</TABLE>
The net deferred tax assets and (liabilities) are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1997
----------- ------------
<S> <C> <C>
Deferred tax assets -
Current .................. $2,144,789 $ 10,219,562
Deferred tax liabilities -
Current .................. (2,501,961) (1,527,115)
Long-term ................ (58,604) (3,698,838)
---------- ------------
Net deferred tax
asset (liability)......... $ (415,776) $ 4,993,609
========== ============
</TABLE>
F-15
<PAGE> 52
12. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is a defendant in several lawsuits arising from normal
business activities. Management has reviewed pending litigation with legal
counsel and believes that the ultimate liability, if any, resulting from such
actions will not have a material adverse effect on the Companies' financial
position or results of operations.
Insurance
Because of their vehicle inventory and nature of business, automobile
retail dealerships generally require significant levels of insurance covering a
broad variety of risks. The Company's insurance includes an umbrella policy
with a $50 million per occurrence limit as well as insurance on its real
property, comprehensive coverage for its vehicle inventory, general liability
insurance, employee dishonesty coverage and errors and omissions insurance in
connection with its vehicle sales and financing activities.
Loan Guarantees
Two of the Company's dealerships provide financing for certain customers
through a third-party lender. Under the terms of this financing contract,
customers execute installment contracts which are guaranteed with full recourse
to the dealerships. The dealerships transfer the rights to the future economic
benefits related to the receivables; however, in the event that the customer
defaults on the note, the lender may require repayment of the principal amount
of the note plus earned interest through the date of default, with collection
efforts to be performed by the dealership. As of December 31, 1997, total
customer notes outstanding guaranteed by the two dealerships were approximately
$10.1 million. The dealerships have provided reserves for estimated future
loan losses based on historical loss trends and total guarantees outstanding
(see Note 4). This financing arrangement represents approximately 1.3% of the
Company's total financing arranged.
13. RETIREMENT PLANS:
Effective April 1, 1996, one of the Founding Groups established a 401(k)
salary deferral/savings plan for the benefit of all employees. Employees
electing to participate in the plan may contribute up to 15% of annual
compensation, limited to the maximum amount that can be deducted for income tax
purposes each year.
The Founding Group, at its discretion, has the option to match each
employee's contribution up to a maximum of 6% of annual compensation each plan
year. The Founding Group elected to make contributions totaling approximately
$178,000 and $306,000 for the years ended December 31, 1996 and 1997,
respectively.
14. PENDING ACQUISITIONS(UNAUDITED)
The Company has signed definitive purchase agreements related to eight
dealership acquisitions. Three of these acquisitions are new platforms and will
expand the Company's geographic diversity to include Georgia, New Mexico and
South Florida. Certain of the remaining acquisitions are tuck-ins which will
complement the Company's platform operations in Austin and Beaumont, Texas and
in South Florida. These acquisitions will bring the Company's total number of
dealership franchises to 58 and the number of brands represented to 24. The
closing of each of these acquisitions is subject to customary closing
conditions, including manufacturer approval and the completion of due diligence.
The aggregate consideration paid, or to be paid, in completing these
acquisitions, including real estate acquired and excluding the assumption of an
estimated $92.5 million of inventory financing, is $80.2 million in cash and
3,450,358 shares of Group 1 Common Stock. As part of certain of the
acquisitions, the Company may be obligated for additional purchase consideration
dependent upon the Company's future stock price and earnings before taxes of
certain of the dealership operations.
F-16
<PAGE> 53
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To McCall Group:
We have audited the accompanying combined balance sheet of the companies
identified in Note 1 (the Companies) as of December 31, 1996, and the related
combined statements of operations, stockholders' equity (deficit) and cash
flows for the ten month period ended October 31, 1997, and for the years ended
December 31, 1996 and 1995. These financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Companies as of
December 31, 1996, and the results of their operations and their cash flows for
the ten month period ended October 31, 1997 and for the years ended December
31, 1996 and 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 6, 1998
F-17
<PAGE> 54
MCCALL GROUP
COMBINED BALANCE SHEET
<TABLE>
<S> <C>
December 31,
ASSETS 1996
------------
CURRENT ASSETS:
Cash and cash equivalents............................ $14,093,483
Accounts receivable, net............................. 4,407,835
Due from affiliates.................................. 1,397,454
Inventories.......................................... 23,720,965
Notes receivable, net................................ 237,547
Prepaid expenses..................................... 294,044
Deferred income taxes................................ 1,769,529
-----------
Total current assets.............................. 45,920,857
-----------
PROPERTY AND EQUIPMENT, net........................... 3,147,017
LONG-TERM DEFERRED INCOME TAXES....................... 104,882
OTHER ASSETS.......................................... 1,300,432
-----------
Total assets...................................... $50,473,188
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Floorplan notes payable.............................. $32,219,713
Current maturities of long-term debt................. 146,303
Due to affiliates.................................... 798,413
Accounts payable and accrued expenses................ 18,176,922
-----------
Total current liabilities......................... 51,341,351
-----------
LONG-TERM DEBT, net of current maturities............. 410,805
OTHER LONG-TERM LIABILITIES........................... 427,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock......................................... 71,278
Additional paid-in capital........................... 3,222,043
Retained deficit..................................... (4,999,289)
-----------
Total stockholders' deficit....................... (1,705,968)
-----------
Total liabilities and stockholders'
deficit.......................................... $50,473,188
===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-18
<PAGE> 55
MCCALL GROUP
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Ten Month
Year Ended December 31, Period Ended
------------------------------- October 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
New vehicle sales............... $125,809,681 $166,381,686 $138,435,720
Used vehicle sales.............. 68,332,375 90,895,516 77,240,103
Parts and service sales......... 19,431,385 21,244,959 21,004,450
Other dealership revenues, net.. 5,314,141 6,810,908 5,360,216
------------ ------------ ------------
Total revenues............. 218,887,582 285,333,069 242,040,489
COST OF SALES:
New vehicle sales............... 115,413,170 152,054,592 125,123,613
Used vehicle sales.............. 64,157,498 84,806,452 73,522,958
Parts and service sales......... 9,069,093 9,354,112 8,671,416
------------ ------------ ------------
Total cost of sales........ 188,639,761 246,215,156 207,317,987
------------ ------------ ------------
Gross profit............... 30,247,821 39,117,913 34,722,502
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES......... 27,751,831 35,072,460 29,233,094
------------ ------------ ------------
Income from
operations............... 2,495,990 4,045,453 5,489,408
OTHER INCOME AND EXPENSE:
Interest expense, net........... (3,305,891) (2,883,395) (1,720,557)
Other expense, net.............. (43,735) (45,094) (42,020)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES........................... (853,636) 1,116,964 3,726,831
PROVISION FOR INCOME TAXES....... 282,887 177,772 1,045,383
------------ ------------ ------------
NET INCOME (LOSS)................ $(1,136,523) $939,192 $2,681,448
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-19
<PAGE> 56
MCCALL GROUP
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Additional
Common Paid-In Subscription Retained
Stock Capital Receivable (Deficit) Total
--------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994................ 125,800 $2,930,419 $(838,683) $(2,347,263) $(129,727)
Net loss................................. - - - (1,136,523) (1,136,523)
Payments on subscriptions receivable..... - - 270,272 - 270,272
Settlement of subscriptions
receivable.............................. - - 568,411 - 568,411
------- ---------- ---------- ----------- -----------
BALANCE, December 31, 1995................ 125,800 2,930,419 - (3,483,786) (427,567)
Net income............................... - - - 939,192 939,192
Dividend to parent under tax sharing
agreement............................... - - - (323,590) (323,590)
Purchase and retirement of treasury
stock................................... (57,898) - - (2,131,105) (2,189,003)
Stock issued to employees................ 3,376 291,624 - - 295,000
------- ---------- ---------- ----------- -----------
BALANCE, December 31, 1996................ 71,278 3,222,043 - (4,999,289) (1,705,968)
Net income............................... - - - 2,681,448 2,681,448
Dividend to parent under tax sharing
agreement................................ - - - (445,349) (445,349)
------- ---------- ---------- ----------- -----------
BALANCE, October 31, 1997................. $71,278 $3,222,043 $ - $(2,763,190) $530,131
======= ========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-20
<PAGE> 57
MCCALL GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Ten Month
Year Ended December 31, Period Ended
------------------------------ October 31,
1995 1996 1997
------------ ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................. $(1,136,523) $ 939,192 2,681,448
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities -
Depreciation and amortization.................................... 439,402 598,278 485,153
LIFO reserve..................................................... (305,000) 9,000 (99,474)
Deferred income taxes............................................ (514,187) (14,313) 133,250
Provision for doubtful accounts and uncollectible notes.......... 208,972 357,860 240,682
Loss (gain) on sale of assets.................................... (23,259) 32,632 63
Non-cash compensation............................................ - 295,000 -
Tax carryforward benefited....................................... - (323,590) (445,349)
Changes in assets and liabilities -
Accounts receivable............................................. 2,651,367 (1,059,288) (65,337)
Inventories..................................................... (2,780,245) (1,239,076) 7,733,229
Due from affiliates, net........................................ (1,565,588) 132,341 107,566
Prepaid expenses................................................ (25,720) (170,068) 260,068
Other assets.................................................... (9,546) (874,771) 493,050
Floorplan notes payable......................................... (2,058,861) (3,720,448) (15,304,404)
Accounts payable and accrued expenses........................... 7,695,141 (655,658) (2,738,901)
Other long term liabilities..................................... - 277,000 (34,505)
----------- ----------- ----------
Total adjustments.............................................. 3,712,476 (6,355,101) (9,234,909)
----------- ----------- ----------
Net cash provided by (used in) operating activities............ 2,575,953 (5,415,909) (6,553,461)
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable...................................... (909,260) (1,151,783) (1,825,293)
Collections on notes receivable................................... 1,271,071 969,767 1,003,856
Purchases of property and equipment............................... (613,890) (1,285,276) (1,129,274)
----------- ----------- ----------
Net cash used in investing activities.......................... (252,079) (1,467,292) (1,950,711)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt.............................. (54,555) (164,694) (228,994)
Borrowings of long-term debt...................................... 110,168 512,594 127,069
Payments on subscriptions receivable.............................. 270,272 - -
----------- ----------- ----------
Net cash provided by (used in) financing activities............... 325,885 347,900 (101,925)
----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... 2,649,759 (6,535,301) (8,606,097)
CASH AND CASH EQUIVALENTS, beginning of period..................... 17,979,025 20,628,784 14,093,483
----------- ----------- ----------
CASH AND CASH EQUIVALENTS, end of period........................... $20,628,784 $14,093,483 $5,487,386
=========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for -
Interest.......................................................... $3,253,486 $ 2,808,993 $1,725,577
Taxes............................................................. 227,090 818,962 513,262
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Receivables from stockholder forgiven in conjunction
with purchase of treasury stock.................................. - 2,189,003 -
Settlement of subscriptions receivable from
stockholder in lieu of bonus..................................... 568,411 - -
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-21
<PAGE> 58
MCCALL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
McCall Group (the Companies) is primarily engaged in the retail sale of
new and used automobiles and the sale of the related finance, insurance and
service contracts thereon. In addition, the Companies sell automotive parts,
provide vehicle servicing and sell wholesale used vehicles.
The following companies are included within the combined group:
Southwest Toyota, Inc. (d.b.a. Sterling McCall Toyota) (SMT) - SMT is a
Toyota dealership located in Houston, Texas.
SMC Luxury Cars, Inc. (d.b.a. Sterling McCall Lexus) (SML) - SML is a
Lexus dealership located in Houston, Texas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying combined financial statements include the accounts of SMT
and SML. The Companies have been presented on a combined basis due to their
related operations, common ownership and common management control. All
significant intercompany balances and transactions have been eliminated in
combination. SMC Investments, Inc. (SMC) owns 100% of the issued and
outstanding stock of SML and approximately 51% of the stock of SMT. SMC is a
separate holding company which does not operate in the automobile retailing
industry and has not been included in the accompanying combined financial
statements as it will not be acquired by Group 1.
Revenue Recognition
Revenue from vehicle sales, parts sales and vehicle service is recognized
upon delivery to the customer.
Fleet Sales
SMT periodically supplies vehicles to various rental car companies as an
accommodation to the manufacturer and to better utilize dealership capacity.
These transactions generate nominal gross profit, and in management's opinion,
do not represent sales in the normal course of business. Accordingly, sales of
approximately $7.7 million, $10.8 million and $12.6 million and cost of sales of
approximately $7.5 million, $10.7 million and $12.5 million have been excluded
from the accompanying statements of operations for the years ended December 31,
1995 and 1996 and the ten month period ended October 31, 1997, respectively, as
management believes excluding such amounts represents a more appropriate basis
of presentation. The net profit on these wholesale fleet transactions is
recorded as other dealership revenues in the accompanying statements of
operations.
Finance, Insurance and Service Contract Income Recognition
The Companies arrange financing for customers through various institutions
and receive financing fees equal to the difference between the loan rates
charged to customers over the predetermined financing rates set by the financing
institution. In addition, the Companies receive commissions from the sale of
credit life and disability insurance and extended service contracts to
customers.
The Companies may be charged back (chargebacks) for unearned financing
fees, insurance or service contract commissions in the event of early
termination of the contracts by customers. The revenues from financing fees and
commissions are recorded at the time of the sale of the vehicles and a reserve
for future chargebacks is established based on historical operating results and
the termination provisions of the applicable contracts. Finance, insurance and
service contract income, net of estimated chargebacks, are included in other
dealership revenue in the accompanying combined financial statements.
F-22
<PAGE> 59
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments that have an
original maturity of three months or less at the date of purchase and contracts
in transit. Contracts in transit represent contracts on vehicles sold, for
which the proceeds are in transit from financing institutions.
Inventories
New and demonstrator vehicles are stated at cost, determined on the
last-in, first-out (LIFO) basis, which is not in excess of market. Used
vehicles are stated at lower of cost or market, determined on a specific unit
basis. Parts and accessories are stated at the lower of cost (determined on a
first-in, first-out basis) or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the life of the
lease or the estimated life of the asset.
Expenditures for major additions or improvements which extend the useful
lives of assets are capitalized. Minor replacements, maintenance and repairs
which do not improve or extend the life of such assets are charged to
operations as incurred. Disposals are removed at cost less accumulated
depreciation, and any resulting gain or loss is reflected in current
operations.
Income Taxes
The Companies follow the liability method of accounting for income taxes
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109.
Under this method, deferred income taxes are recorded based upon differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets are realized or liabilities are settled.
SML is a member of a consolidated group for tax reporting purposes. In
accordance with SFAS No. 109, SML reports current and deferred tax expense
using the separate return method, resulting in tax expense being recorded as if
SML filed a separate company return for tax purposes. Under this method, SML
does not recognize benefits for net operating losses (NOL's) as such amounts
will not be refunded to SML by the consolidated group. These NOL carryforwards
are offset against the provision for taxes in subsequent profitable years and
treated as dividends to the parent when benefited. SMT is a separate tax
paying entity and is not a member of a consolidated group.
Fair Value of Financial Instruments
The Companies' financial instruments consist primarily of floorplan notes
payable, notes receivable and long-term debt. The carrying amount of these
financial instruments approximates fair value due either to length of maturity
or existence of variable interest rates that approximate market rates.
Advertising
The Company expenses production and other costs of advertising as
incurred. Advertising expense for the years ended December 31, 1995 and 1996
and the ten month period ended October 31, 1997 totaled approximately $2.8,
$4.0 and $2.5 million, respectively.
Concentration of Credit Risk
Financial instruments which potentially subject the Companies to a
concentration of credit risk consist principally of cash, cash equivalents,
contracts in transit and accounts receivable. The Company maintains cash
balances at financial institutions which may at times be in excess of federally
insured levels. The Companies grant credit to local companies in various
businesses. The Companies perform ongoing credit evaluations of their customers
and generally do not require collateral. The Companies maintain an allowance
for doubtful accounts at a level which management believes is sufficient to
cover potential credit losses. The Companies have not incurred significant
losses related to these financial instruments to date.
F-23
<PAGE> 60
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in determining the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The significant estimates made by management in the
accompanying financial statements relate to reserves for used vehicle
valuations, future chargebacks on finance, insurance and service contract
income and reserves for retail loan guarantees (Notes 2 and 11, respectively).
Actual results could differ from those estimates.
Statements of Cash Flows
For purposes of the statements of cash flows, cash and cash equivalents
include contracts in transit which are typically collected within one month or
less. Additionally, the net change in floorplan financing of inventory, which
is a customary financing technique in the industry, is reflected as an
operating activity in the statements of cash flows.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Amounts due from manufacturers.......... $1,192,275
Parts and service receivables........... 870,209
Warranty receivables.................... 259,826
Due from finance companies.............. 1,204,624
Other................................... 1,180,201
----------
Total accounts receivable............... 4,707,135
Less - Allowance for doubtful
accounts................................ (299,300)
----------
Accounts receivable, net................ $4,407,835
==========
</TABLE>
Activity in the Companies' allowance for doubtful accounts consists of the
following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Balance, beginning of year..................................... $159,972
Additions charged to expense................................... 187,278
Deductions for uncollectible receivables
written off................................................... (47,950)
--------
Balance, end of year........................................... $299,300
========
</TABLE>
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
New vehicles......................... $13,918,424
Used vehicles........................ 11,050,657
Parts, accessories and other......... 1,566,156
Rental vehicles...................... 1,674,747
Accumulated LIFO Reserve............. (4,489,019)
-----------
Total inventories, net............... $23,720,965
===========
</TABLE>
If the specific unit method of inventory were used, income before taxes
would have increased (decreased) by approximately $305,000, $(9,000) and
$(99,000) for the years ended December 31, 1995 and 1996 and for the ten month
period ended October 31, 1997, respectively.
Activity in the Companies' allowance for uncollectible notes consists of
the following:
F-24
<PAGE> 61
<TABLE>
<CAPTION>
DECEMBER 31,
1996
---------
<S> <C>
Balance, beginning of year.................................... $240,000
Additions charged to expense.................................. 170,580
Transfers from loan guarantee reserve ........................ -
Deductions for uncollectible notes written off................ (196,580)
--------
Balance, end of year.......................................... $214,000
========
</TABLE>
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-----------
<S> <C>
Accounts payable, trade........................... $ 7,452,034
Reserve for finance, insurance and service
contract chargebacks............................. 3,011,354
Reserve for retail loan guarantees................ 1,965,000
Other accrued expenses............................ 5,748,534
-----------
Total accounts payable and accrued expenses....... $18,176,922
===========
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES DECEMBER 31,
IN YEARS 1996
------------ -----------
<S> <C> <C>
Leasehold improvements.................... 20 $ 2,470,037
Machinery and equipment................... 7 1,136,461
Furniture and fixtures.................... 7 2,622,636
Autos and trucks.......................... 5 380,626
-----------
Total.............................. 6,609,760
Less - Accumulated depreciation........... (3,462,743)
-----------
Property and equipment, net............... $ 3,147,017
===========
</TABLE>
5. FLOORPLAN NOTES PAYABLE:
Floorplan notes payable reflect amounts payable for the purchase of
specific vehicle inventory and consist of the following:
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
New vehicles............................... $24,398,255
Used vehicles.............................. 6,212,001
Rental vehicles............................ 1,609,457
-----------
Total floorplan notes payable........ $32,219,713
===========
</TABLE>
Floorplan notes payable are due to various floorplan lenders, bearing
interest at rates ranging from prime minus 75 basis points to prime minus 100
basis points. As of 1996, the weighted average interest rate on floorplan notes
payable outstanding was 8.99%. Interest expense on floorplan notes payable
totaled approximately $3.1, $2.5 and $1.5 million for the years ended December
31, 1995 and 1996 and the ten month period ended October 31, 1997. The flooring
arrangements permit the Companies to borrow up to $38.3 million dependent upon
new and used vehicle sales and inventory levels. As of December 31, 1996, total
available borrowings under the floorplan agreements were approximately $6.1
million. Payments on the notes are due when the related vehicles are sold and
are collateralized by substantially all new and used vehicles.
6. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Note payable to floorplan institution, principal payable in.
monthly installments of $5,000 through August 2001, interest
</TABLE>
F-25
<PAGE> 62
<TABLE>
<CAPTION>
<S> <C>
payable monthly at lender's available financing rate plus
150 basis points (9.3% at December 31, 1996)
Other notes payable, maturing in varying amounts through.............. $275,000
April 2001, with interest ranging from 5.5% to 9.6% at
December 31, 1996..................................................... 282,108
--------
Total long-term debt.................................................. 557,108
Less - Current portion................................................ (146,303)
--------
Long-term portion..................................................... $410,805
========
</TABLE>
Interest expense on long-term debt totaled approximately $210,000,
$385,000 and $221,000 for the years ended December 31, 1995 and 1996 and for
the ten month period ended October 31, 1997.
The aggregate maturities of long-term debt as of December 31, 1996, are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------------
<S> <C>
1997............. $146,303
1998............. 141,666
1999............. 124,378
2000............. 103,906
2001............. 40,855
--------
$557,108
========
</TABLE>
7. STOCKHOLDERS' EQUITY:
Capital stock consists of the following as of December 31, 1996:
<TABLE>
<CAPTION>
PAR
AUTHORIZED ISSUED OUTSTANDING VALUE
---------- ------ ----------- -----
<S> <C> <C> <C> <C>
Sterling McCall Toyota.. 500,000 70,278 70,278 $1.00
Sterling McCall Lexus... 1,000,000 100,000 100,000 .01
</TABLE>
During 1996, SMT and its principal stockholder entered into a series of
treasury stock transactions in which SMT repurchased 57,898 shares of common
stock from its principal stockholder. In conjunction with these transactions,
SMT forgave approximately $2.2 million of related party receivables due from
various entities owned by the principal stockholder. As part of these
transactions, SMT has agreed to repurchase in certain instances, up to 4,502
additional shares of stock from its principal stockholder in exchange for a
note payable in the amount of $2.0 million. This repurchase provision will be
cancelled concurrently with an initial public offering of stock by the
Companies. The shares repurchased by SMT have been constructively retired for
financial reporting purposes.
During December 1996, the Companies granted 3,376 shares of stock to two
employees as compensation for prior services. The shares were issued as of the
grant date and the Companies recorded compensation expense of $295,000 related
to these shares based on the estimated fair market value of the shares as of
the grant date. The shares issued are subject to various restrictions relating
to transferability and resale, and contain a right of first refusal for
repurchase by the Companies.
8. RELATED-PARTY TRANSACTIONS:
SMT and SML lease land, facilities and equipment from limited partnerships
and other entities controlled by the majority stockholder of the Companies
under long-term operating leases. Additional information regarding the terms of
these leases is contained in Note 9 "Operating Leases".
The principal stockholder of the Companies has provided personal
guarantees relating to the repayment of long term debt and floorplan
obligations incurred by the Companies. As of December 31, 1996, floorplan
obligations guaranteed by the principal stockholder totaled approximately $32.2
million, and long-term debt obligations totaled approximately $300,000. In
addition to the above guarantees, the principal stockholder has also provided a
personal guarantee related to loan guarantees on second chance finance
customers (see Note 11). As of December 31, 1996, customer notes outstanding
which were guaranteed by the Companies and the stockholder totaled
approximately $10.4 million.
The Companies sell credit life and disability insurance policies and
extended service contracts
F-26
<PAGE> 63
which are underwritten by three companies owned by the principal stockholders
of the Companies, as well as similar products provided by third parties. The
Companies also sell various aftermarket products from certain companies owned
by the principal stockholders of the Companies. The principal stockholders
currently have agreements in place with these entities which decrease the fees
and commissions paid to the dealerships for the sale of credit life and
disability insurance policies and extended service contracts, and increase the
cost of aftermarket products. The amounts withheld under these agreements are
paid directly to the principal stockholders. Approximately $1.1, $1.6 and $1.4
million was withheld and paid to the stockholders under the agreements
described above, during the years ended December 31, 1995 and 1996 and the ten
month period ended October 31, 1997, respectively.
The Companies pay management fees plus certain allocated and out of pocket
expenses to an entity owned by the principal stockholder of the Companies for
consultation and direct management assistance with respect to operations and
strategic planning. Management fee expense totaled approximately $1.3 million,
$1.4 million and $807,000 for the years ended December 31, 1995, 1996 and the
ten month period ended October 31, 1997, respectively.
9. OPERATING LEASES:
The Companies lease various facilities and equipment under long-term
operating lease agreements, including leases with related parties. These leases
are non-cancelable and expire on various dates through 2006. The lease
agreements are subject to renewal under essentially the same terms and
conditions as the original leases.
Future minimum lease payments for operating leases are as follows:
<TABLE>
<CAPTION>
Year ending Related Third
December 31, Parties Parties Total
------------ ---------- ---------- ----------
<S> <C> <C> <C>
1997.............. $1,842,000 $411,556 $2,253,556
1998.............. 1,842,000 354,084 2,196,084
1999.............. 1,842,000 234,590 2,076,590
2000.............. 1,842,000 161,908 2,003,908
2001.............. 1,282,000 73,982 1,355,982
Thereafter........ 648,000 - 648,000
---------- ---------- -----------
Total............. $9,298,000 $1,236,120 $10,534,120
========== ========== ===========
</TABLE>
Total rent expense under all operating leases, including operating leases
with related parties, was approximately $1.9, $2.0 and $1.8 million for the
years ended December 31, 1995 and 1996 and the ten month period ended October
31, 1997, respectively. Rental expense on related-party leases, which is
included in the above amounts, totaled $1.5, $1.6 and $1.6 million for the
years ended December 31, 1995 and 1996 and the ten month period ended October
31, 1997, respectively.
10. INCOME TAXES:
The Companies are subject to a Texas franchise tax which is an income
based tax. Federal and state income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------- October 31,
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
Federal -
Current.......... $695,074 $168,053 $1,204,955
Deferred......... (466,528) (12,618) (276,544)
State -
Current.......... 102,000 24,032 152,527
Deferred ......... (47,659) (1,695) (35,555)
-------- -------- ----------
Provision for
income taxes..... $282,887 $177,772 $1,045,383
======== ======== ==========
</TABLE>
F-27
<PAGE> 64
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 34 percent to income
before income taxes as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------- October 31,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Provision (benefit) at
the statutory rate....... $(290,236) $379,768 $1,267,123
Increase (decrease)
resulting from -
State income tax, net of
benefit for federal
deduction.............. 35,865 14,742 77,202
SML NOL (benefited) not
benefited.............. 584,795 (323,590) (445,349)
Other.................... (47,537) 106,852 146,407
-------- -------- ----------
Provision for income....... $282,887 $177,772 $1,045,383
======== ======== ==========
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences representing deferred
tax assets and liabilities result principally from the following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Reserves and accruals not deductible until
paid........................................ $1,779,755
Other.......................................... 94,656
----------
Net deferred tax asset......................... $1,874,411
==========
</TABLE>
The net deferred tax assets and liabilities are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Deferred tax assets -
Current..................................... $1,773,229
Long-term................................... 182,711
----------
Total..................................... 1,955,940
Deferred tax liabilities -
Current..................................... (6,836)
Long-term................................... (74,693)
----------
Total..................................... (81,529)
----------
Net deferred tax asset........... $1,874,411
==========
</TABLE>
As discussed in Note 2, SML is a member of a consolidated group for tax
reporting purposes and reports income taxes under the separate return method.
During 1994 and 1995, SML did not record tax benefits of approximately $184,000
and $585,000 related to net operating losses as such amounts would not be
reimbursed by the consolidated group. During 1996 and 1997, approximately
$323,600 and $445,349 of these benefits were offset against the provision for
taxes and accounted for as a dividend in the accompanying statement of
stockholders' equity.
11. COMMITMENTS AND CONTINGENCIES:
The Companies are defendants in several lawsuits arising from normal
business activities. Management has reviewed pending litigation with legal
counsel and believes that the ultimate liability, if any, resulting from such
action will not have a material adverse effect on the Companies' financial
position or results of operations.
The Companies carry insurance coverage, including general and business
auto liability, commercial property, workers' compensation and excess liability
coverage. The Companies have not incurred significant claims or losses on any
of their insurance policies.
F-28
<PAGE> 65
Loan Guarantees Provided on Second Chance Financing
The Companies provide financing for certain customers through a third party
lender. Under the terms of this financing contract, customers execute
installment contracts which are guaranteed with full recourse by the Companies.
The Companies transfer all rights to the future economic benefits related to the
receivables; however, in the event that the customer defaults on the note, the
lender may require repayment of the principal amount of the note plus earned
interest through the date of default, with collection efforts to be performed by
the dealership. Total customer notes outstanding guaranteed by the dealership at
December 31, 1995 and 1996 and October 31, 1997 were approximately $7.4, $10.4
and $10.2 million, respectively. The principal stockholder of the Companies has
also provided a personal guarantee to the lender related to repayment of these
customer notes. The Companies have provided reserves for estimated future loan
losses based on historical loss trends and total guarantees outstanding.
Activity in the Companies' reserve account consists of the following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Balance, beginning of year...................... $1,471,000
Additions charged to expense.................... 1,033,000
Deductions for loans written off................ (539,000)
----------
Balance, end of year............................ $1,965,000
==========
</TABLE>
12. ACQUISITION BY GROUP 1 AUTOMOTIVE, INC.:
In November 1997, the McCall Group was acquired by Group 1 in exchange for
2,318,826 shares of common stock of Group 1. In conjunction with the acquisition
of the Companies by Group 1, and all existing operating leases with related
parties were restructured under new lease agreements. In addition, all amounts
due to/from affiliates and related parties were settled in connection with the
acquisition.
F-29
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Smith Group:
We have audited the accompanying combined balance sheet of the companies
identified in Note 1 (the Companies) as of December 31, 1996, and the related
combined statements of operations, stockholders' equity and cash flows for the
ten month period ended October 31, 1997 and for the years ended December 31,
1996 and 1995. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Companies as of
December 31, 1996, and the results of their operations and their cash flows for
the ten month period ended October 31, 1997 and for the years ended December
31, 1996 and 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 6, 1998
F-30
<PAGE> 67
SMITH GROUP
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $9,069,829
Accounts receivable, net.............................. 4,467,590
Due from affiliates................................... 14,580
Inventories........................................... 30,637,433
Prepaid expenses...................................... 185,218
Deferred income tax benefit........................... 182,081
-----------
Total current assets............................. 44,556,731
-----------
PROPERTY AND EQUIPMENT, net................................ 9,819,994
GOODWILL, net.............................................. 2,322,307
OTHER ASSETS............................................... 689,453
-----------
Total assets..................................... $57,388,485
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floorplan notes payable............................... $30,676,725
Current maturities of long-term debt.................. 949,565
Accounts payable and accrued expenses................. 8,509,815
-----------
Total current liabilities........................ 40,136,105
-----------
LONG-TERM DEBT, net of current maturities.................. 5,006,474
LONG-TERM DEFERRED INCOME TAXES............................ 217,611
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock.......................................... 3,090
Additional paid-in capital............................ 6,369,228
Retained earnings..................................... 6,051,274
Treasury stock, at cost............................... (395,297)
-----------
Total stockholders' equity....................... 12,028,295
-----------
Total liabilities and stockholders' equity....... $57,388,485
===========
</TABLE>
The accompanying notes are an integral part of these combined
financial statements.
F-31
<PAGE> 68
SMITH GROUP
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Ten Month
Year Ended December 31, Period Ended
------------------------------ October 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
New vehicle sales................... $132,149,669 $124,173,950 $127,870,773
Used vehicle sales.................. 57,363,332 60,579,545 60,486,072
Parts and service sales............. 26,237,774 28,630,577 23,936,260
Other dealership revenues, net...... 5,506,759 4,895,329 5,152,307
------------ ------------ ------------
Total revenues............ 221,257,534 218,279,401 217,445,412
COST OF SALES:
New vehicle sales................... 123,391,332 114,982,383 116,853,172
Used vehicle sales.................. 53,162,956 56,247,629 55,931,779
Parts and service sales............. 15,234,938 16,684,932 13,803,578
------------ ------------ ------------
Total cost of sales....... 191,789,226 187,914,944 186,588,529
------------ ------------ ------------
Gross profit.............. 29,468,308 30,364,457 30,856,883
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................... 22,823,685 23,710,904 23,242,452
------------ ------------ ------------
Income from operations......... 6,644,623 6,653,553 7,614,431
OTHER INCOME AND EXPENSE:
Interest expense, net............... (3,831,372) (2,964,476) (3,011,873)
Other income (expense), net......... 202,134 222,470 (25,389)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES................ 3,015,385 3,911,547 4,577,169
PROVISION FOR INCOME TAXES................ 562,415 677,751 882,088
------------ ------------ ------------
NET INCOME................................ $2,452,970 $3,233,796 $3,695,081
============ ============ ============
S-Corporation pro forma income
taxes (unaudited)................... 598,508 828,195 880,122
------------ ------------ ------------
Pro forma net income (unaudited).......... $1,854,462 $2,405,601 $2,814,959
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-32
<PAGE> 69
SMITH GROUP
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994...... $2,090 $5,890,228 $4,316,871 $(395,297) $9,813,892
Net income................. - - 2,452,970 - 2,452,970
Dividends.................. - - (1,557,239) - (1,557,239)
----------- ----------- ----------- ---------- -----------
BALANCE, December 31, 1995...... 2,090 5,890,228 5,212,602 (395,297) 10,709,623
Net income................. - - 3,233,796 - 3,233,796
Issuance of common stock... 1,000 479,000 - - 480,000
Dividends.................. - - (2,395,124) - (2,395,124)
----------- ----------- ----------- ---------- -----------
BALANCE, December 31, 1996...... 3,090 6,369,228 6,051,274 (395,297) 12,028,295
Net income................. - - 3,695,081 - 3,695,081
Dividends.................. - - (3,955,187) - (3,955,187)
----------- ----------- ----------- ---------- -----------
BALANCE, October 31, 1997....... $3,090 $6,369,228 $5,791,168 $(395,297) $11,768,189
=========== =========== =========== ========== ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-33
<PAGE> 70
SMITH GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Ten Month
Year Ended December 31, Period Ended
---------------------------- October 31,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $2,452,970 $ 3,233,796 $ 3,695,081
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization................ 669,312 719,991 493,999
LIFO reserve................................. 78,061 35,489 (329,943)
Deferred income taxes........................ 29,389 35,839 (10,000)
Provision for doubtful accounts.............. 61,460 49,729 50,197
Loss (gain) on sale of assets................ (74,258) 65,088 -
Changes in assets and liabilities -
Accounts receivable..................... (1,207,158) (31,960) 1,348,321
Inventories............................. (4,323) (2,726,301) (4,294,534)
Due from affiliates, net................ (136,650) 31,427 14,580
Prepaid expenses........................ 264,974 15,367 (53,446)
Other assets............................ (12,073) (493,584) 722,704
Floorplan notes payable................. 2,175,223 3,252,493 1,498,531
Accounts payable and accrued expenses... 678,372 346,332 (825,189)
----------- ----------- -----------
Total adjustments.................. 2,522,329 1,299,910 (1,384,780)
----------- ----------- -----------
Net cash provided by
operating activities.............. 4,975,299 4,533,706 2,310,301
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............... (699,792) (858,245) (517,936)
----------- ----------- -----------
Net cash used in investing activities........ (699,792) (858,245) (517,936)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt.............. (899,623) (961,108) (778,176)
Borrowings of long-term debt...................... 375,071 533,722 -
Issuance of common stock.......................... - 480,000 -
Dividends......................................... (1,557,239) (2,395,124) (1,928,117)
----------- ----------- -----------
Net cash used in financing activities........ (2,081,791) (2,342,510) (2,706,293)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 2,193,716 1,332,951 (913,928)
CASH AND CASH EQUIVALENTS,
beginning of period............................... 5,543,162 7,736,878 9,069,829
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
end of period..................................... $7,736,878 $ 9,069,829 $ 8,155,901
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for -
Interest..................................... $3,743,310 $ 2,818,402 $ 3,021,083
Taxes........................................ 522,565 543,401 574,481
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-34
<PAGE> 71
SMITH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Smith Group (the Companies) is primarily engaged in the retail sale of new
and used automobiles and the sale of the related finance, insurance and service
contracts thereon. In addition, the Companies sell automotive parts, provide
vehicle servicing and sell wholesale used vehicles.
The following companies are included within the combined group:
Mike Smith Autoplaza, Inc. (MSAP)
MSAP consists of several franchises which conduct business at contiguous
locations in Beaumont, Texas. The franchises operated in this location include
Oldsmobile, Lincoln, Mercury, GMC, Mitsubishi, and Honda.
Smith, Liu & Kutz, Inc. (Town North)
Town North consists of three companies operating several franchises which
conduct business at contiguous locations in Austin, Texas. The franchises
operated in this location include Nissan, Mitsubishi and Suzuki.
Courtesy Nissan, Inc. (Courtesy)
Courtesy is a Nissan dealership located in Richardson, Texas.
Smith, Liu & Corbin, Inc. (d.b.a. Acura Southwest) (Acura)
Acura is an Acura dealership located in Houston, Texas.
Round Rock Nissan, Inc. (Round Rock)
Round Rock is a Nissan dealership located in Round Rock, Texas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying combined financial statements include the accounts of the
Companies listed above. The Companies have been presented on a combined basis
due to their related operations, common ownership and common management
control. All significant intercompany balances and transactions have been
eliminated in combination.
Revenue Recognition
Revenue from vehicle sales, parts sales and vehicle service is recognized
upon delivery to the customer. Finance, Insurance and Service Contract Income
Recognition
The Companies arrange financing for customers through various institutions
and receive financing fees equal to the difference between the loan rates
charged to customers over the predetermined financing rates set by the
financing institution. In addition, the Companies receive commissions from the
sale of credit life and disability insurance and extended service contracts to
customers.
The Companies may be charged back (chargebacks) for unearned financing
fees, insurance or service contract commissions in the event of early
termination of the contracts by customers. The revenues from financing fees and
commissions are recorded at the time of the sale of the vehicles and a reserve
for future chargebacks is established based on historical operating results and
the termination provisions of the applicable contracts. Finance, insurance and
service contract income, net of estimated chargebacks, are included in other
dealership revenue in the accompanying combined financial
F-35
<PAGE> 72
statements.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments that have an
original maturity of three months or less at the date of purchase and contracts
in transit. Contracts in transit represent contracts on vehicles sold, for
which the proceeds are in transit from financing institutions.
Inventories
New and demonstrator vehicles are stated at cost, determined on the
last-in, first-out (LIFO) basis, which is not in excess of market. Used
vehicles are stated at the lower of cost or market, determined on a
specific-unit basis. Parts and accessories are stated at the lower of cost
(determined on a first-in, first-out basis) or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized over the lesser of the life of the
lease or the estimated life of the asset.
Expenditures for major additions or improvements which extend the useful
lives of assets are capitalized. Minor replacements, maintenance and repairs
which do not improve or extend the life of such assets are charged to
operations as incurred. Disposals are removed at cost less accumulated
depreciation, and any resulting gain or loss is reflected in current
operations.
Goodwill
Goodwill represents the excess of the purchase price of dealerships
acquired (Town North Nissan, Courtesy Nissan and Mike Smith Auto Plaza) over
the fair value of tangible assets acquired at the date of acquisition. Goodwill
is amortized on a straight-line basis over 40 years and amortization expense
charged to operations totaled approximately $55,000 for the ten month period
ended October 31, 1997 and $67,000 for each of the two years ended December 31,
1996 and 1995. Accumulated amortization totaled approximately $956,000 as of
December 31, 1996.
Income Taxes
The Companies follow the liability method of accounting for income taxes
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109.
Under this method, deferred income taxes are recorded based upon differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets are realized or liabilities are settled.
Certain of the Companies have elected S Corporation status, as defined by
the Internal Revenue Code, whereby the companies are not subject to taxation
for federal purposes. Under S Corporation status, the stockholders report their
share of these companies' taxable earnings or losses in their personal tax
returns.
Fair Value of Financial Instruments
The Companies' financial instruments consist primarily of floorplan notes
payable and long-term debt. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or existence of
variable interest rates that approximate market rates.
Advertising
The Company expenses production and other costs of advertising as
incurred. Advertising expense for the years ended December 31, 1995, 1996 and
the ten month period ended October 31, 1997 totaled approximately $2.1, $1.9
and $2.9 million, respectively.
F-36
<PAGE> 73
Concentration of Credit Risk
Financial instruments which potentially subject the Companies to a
concentration of credit risk consist principally of cash, cash equivalents,
contracts in transit and accounts receivable. The Company maintains cash
balances at financial institutions which may at times be in excess of federally
insured levels. The Companies grant credit to local companies in various
businesses. The Companies perform ongoing credit evaluations of its customers
and generally do not require collateral. The Companies maintain an allowance
for doubtful accounts at a level which management believes is sufficient to
cover potential credit losses. The Companies have not incurred significant
losses related to these financial instruments to date.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in determining the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The significant estimates made by management in the
accompanying financial statements relate to reserves for used vehicle
valuations and future chargebacks on finance, insurance and service contract
income. Actual results could differ from those estimates.
Statements of Cash Flows
For purposes of the statements of cash flows, cash and cash equivalents
include contracts in transit which are typically collected within one month or
less. Additionally, the net change in floorplan financing of inventory, which
is a customary financing technique in the industry, is reflected as an
operating activity in the statements of cash flows.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Vehicle receivables..................... $1,082,909
Amounts due from manufacturers.......... 1,670,776
Parts and service receivables........... 949,874
Warranty receivables.................... 314,391
Due from finance companies.............. 392,192
Other................................... 138,948
----------
Total accounts receivable............... 4,549,090
Less - Allowance for doubtful accounts.. (81,500)
----------
Accounts receivable, net................ $4,467,590
==========
</TABLE>
Activity in the Companies' allowance for doubtful accounts consists of the
following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
Balance, beginning of year..................... $131,500
Additions charged to expense................... 49,729
Deductions for uncollectible receivables
written off.................................. (99,729)
-------
Balance, end of year........................... $81,500
=======
</TABLE>
F-37
<PAGE> 74
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
New vehicles............................ $24,302,689
Used vehicles........................... 6,936,348
Parts, accessories and other............ 3,102,812
Accumulated LIFO reserve................ (3,704,416)
-----------
Inventories, net........................ $30,637,433
===========
</TABLE>
If the specific-unit method of inventory were used, income before taxes
would have increased (decreased) by approximately $78,000, $35,000 and
($261,000), for the years ended December 31, 1995 and 1996 and the ten month
period ended October 31, 1997, respectively.
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
1996
-----------
<S> <C>
Accounts payable, trade ............................... $3,696,293
Reserve for finance, insurance and service
contract chargebacks................................. 1,374,780
Other accrued expenses................................. 3,438,742
----------
Total accounts payable and accrued expenses............ $8,509,815
==========
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives December 31,
in Years 1996
------------ ------------
<S> <C> <C>
Land................................ - $4,789,177
Buildings........................... 35 4,858,250
Leasehold improvements.............. 15 1,367,199
Machinery and equipment............. 7 1,720,940
Furniture and fixtures.............. 7 2,535,075
Autos and trucks.................... 5 321,316
Rental vehicles..................... - 124,023
----------
Total.................... 15,715,980
Less - Accumulated depreciation.... (5,895,986)
----------
Property and equipment, net.... $9,819,994
==========
</TABLE>
5. FLOORPLAN NOTES PAYABLE:
Floorplan notes payable reflect amounts payable for the purchase of
specific vehicle inventory and consist of the following:
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
New vehicles.............................. $27,712,804
Used vehicles............................. 2,963,921
-----------
Total floorplan notes payable............. $30,676,725
===========
</TABLE>
Floorplan notes payable are due to various floorplan lenders, bearing
interest at rates ranging from prime (adjusted for volume with lender (8.0% at
December 31, 1996)) to prime plus 175 basis points. As of December 31, 1996,
the weighted average interest rate on floorplan notes payable outstanding was
8.66%, respectively. Interest expense on floorplan notes payable totaled
approximately $3.2, $2.5 and $2.6 million for the years ended December 31, 1995
and 1996 and for the ten month period ended October 31, 1997, respectively. The
flooring arrangements permit the Companies to borrow up to $37.0 million
dependent upon new and used vehicle sales and inventory levels. As of December
31, 1996, total
F-38
<PAGE> 75
available borrowings under floorplan agreements were approximately $6.5
million. Payments on the notes are due when the related vehicles are sold and
are collateralized by substantially all new and used vehicles.
6. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Note payable to a bank, with monthly principal payments of
$41,892, due through March 2004, bearing interest at
7.5%, payable monthly.......................................... $3,641,136
Mortgage loan to a bank, with monthly principal payments of
$15,000, due through May 2005, bearing interest at prime
plus 25 basis points (8.50% at December 31, 1996),
payable monthly................................................ 1,494,291
Note payable to a finance company, with monthly principal
payments of $7,500, due through January 2002, bearing
interest at prime plus 175 basis points (10.0% at
December 31, 1996), payable monthly............................ 450,000
Other notes payable, maturing in varying amounts through
November 2000 with interest ranging from prime plus 25
basis points to prime plus 150 basis points.................... 370,612
----------
Total long-term debt............................................. 5,956,039
Less - current portion........................................... (949,565)
----------
Long-term portions............................................... $5,006,474
==========
</TABLE>
The Note payable due March 2004 is secured by a first priority lien on the
land and buildings of Town North. The note payable due May 2005 is secured by
substantially all property, improvements and equipment of Acura.
Interest expense on long-term debt totaled approximately $626,000,
$490,000 and $451,000 for the years ended December 31, 1995 and 1996 and for
the ten month period ended October 31, 1997.
The aggregate maturities of long-term debt as of December 31, 1996, are as
follows:
YEAR ENDING
DECEMBER 31,
--------------------
1997........... $949,565
1998........... 839,644
1999........... 846,513
2000........... 807,428
2001........... 771,704
Thereafter ....... 1,741,185
----------
Total.......... $5,956,039
7. STOCKHOLDERS' EQUITY:
Capital stock consists of the following:
<TABLE>
<CAPTION>
AUTHORIZED ISSUED OUTSTANDING PAR VALUE
---------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Common stock -
MSAP......................... 10,000 1,000 800 $1.00
Town North Nissan............ 1,000 1,000 1,000 .01
Town North Suzuki............ 1,000 1,000 1,000 .01
Town North Mitsubishi........ 1,000 1,000 1,000 1.00
Courtesy..................... 1,000 1,000 1,000 .05
Acura........................ 2,000 2,000 2,000 .01
Round Rock................... 1,000 1,000 1,000 1.00
</TABLE>
Treasury stock consists of 200 shares of the common stock of MSAP at a
cost of approximately
F-39
<PAGE> 76
$395,000 at December 31, 1995 and 1996.
8. RELATED-PARTY TRANSACTIONS:
MSAP and Round Rock lease land and facilities from entities owned by
various stockholders of the Companies. Additional information regarding the
terms of these leases is contained in Note 9 "Operating Leases".
9. OPERATING LEASES:
The Companies lease various facilities and equipment under long-term
operating lease agreements, including leases with related parties. These leases
are noncancelable and expire on various dates through August 2013. The lease
agreements are subject to renewal under essentially the same terms and
conditions as the original leases.
Future minimum lease payments for operating leases are as follows:
<TABLE>
<CAPTION>
Year Ending Related Third
December 31, Parties Parties Total
----------- ---------- ----------- -----------
<S> <C> <C> <C>
1997................ $918,000 $ 500,681 $1,418,681
1998................ 918,000 479,876 1,397,876
1999................ 918,000 472,655 1,390,655
2000................ 499,500 453,149 952,649
2001................ 360,000 433,387 793,387
Thereafter............ 4,440,000 4,896,000 9,336,000
---------- ---------- -----------
Total............... $8,053,500 $7,235,748 $15,289,248
========== ========== ===========
</TABLE>
Total rent expense under all operating leases, including operating leases
with related parties, was approximately $1.1, $1.2 and $1.2 million for the
years ended December 31, 1995, 1996 and for the ten months ended October 31,
1997, respectively. Rental expense on related-party leases, which is included
in the above amounts, totaled approximately $558,000, $591,000 and $785,000 for
the years ended December 31, 1995, 1996 and for the ten month period ended
October 31, 1997, respectively.
10. INCOME TAXES:
The S Corporations will terminate S Corporation status concurrent with the
effective date of the offering. The Companies are subject to a Texas franchise
tax which is an income based tax. Federal and state income taxes are as
follows:
<TABLE>
<CAPTION>
December 31,
----------------------- October 31,
1995 1996 1997
-------- -------- -----------
<S> <C> <C> <C>
Federal -
Current......... $382,865 $460,166 $684,916
Deferred........ 36,310 29,304 (8,800)
State -
Current......... 150,161 181,746 207,172
Deferred........ (6,921) 6,535 (1,200)
-------- -------- --------
Provision for
income taxes.... $562,415 $677,751 $882,088
======== ======== ========
</TABLE>
F-40
<PAGE> 77
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 34 percent to income
before income taxes as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- OCTOBER 31,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Provision at the statutory rate............ $1,025,231 $1,329,926 $1,556,237
Increase (decrease) resulting from -
Income of S Corporations.............. (619,972) (888,533) (979,979)
State income tax, net of benefit
for federal deduction............... 123,800 165,900 180,041
Other................................. 33,356 70,458 125,789
--------- -------- ---------
Provision for income taxes................. $562,415 $677,751 $882,088
========= ======== =========
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences representing deferred
tax assets and liabilities result principally from the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Reserves and accruals not deductible until
paid.......................................... $191,862
Depreciation.................................... (217,611)
Other........................................... (9,781)
--------
Net deferred tax liability...................... $(35,530)
========
</TABLE>
The net deferred tax assets and liabilities are comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Deferred tax assets -
Current.................................................. $191,862
Long-term ............................................... -
--------
Total............................................... 191,862
--------
Deferred tax liabilities -
Current ................................................. 9,781
Long-term................................................ 217,611
--------
Total............................................... 227,392
--------
Net deferred income tax assets (liabilities)....... $(35,530)
========
</TABLE>
11. COMMITMENTS AND CONTINGENCIES:
The Companies are defendants in several lawsuits arising from normal
business activities. Management has reviewed pending litigation with legal
counsel and believes that the ultimate liability, if any, resulting from such
actions will not have a material adverse effect on the Companies' financial
position or results of operations.
The Companies carry insurance coverage, including general and business
auto liability, commercial property, workers' compensation and excess liability
coverage. The Companies have not incurred significant claims or losses on any
of their insurance policies.
12. ACQUISITION BY GROUP 1 AUTOMOTIVE, INC.:
In November 1997, the Smith Group was acquired by Group 1 in exchange for
2,725,933 shares of common stock of Group 1. In conjunction with the
acquisition of the Companies by Group 1, all existing operating leases with
related parties were restructured under new lease agreements.
F-41
<PAGE> 78
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 __ Restated Certificate of Incorporation of the Company (Incorporated by reference to
Exhibit 3.1 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
3.2 __ Certificate of Designation of Series A Junior Participating Preferred Stock (Incorporated
by reference to Exhibit 3.2 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
3.3 __ Bylaws of the Company (Incorporated by reference to Exhibit 3.3 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
4.1 __ Specimen Common Stock certificate (Incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.1 __ Employment Agreement between the Company and B.B. Hollingsworth, Jr. dated November 3, 1997.
10.2 __ Employment Agreement between the Company and Robert E. Howard II dated November 3, 1997.
10.3 __ Employment Agreement between the Company and Sterling B. McCall, Jr. dated November 3, 1997.
10.4 __ Employment Agreement between the Company and Charles M. Smith dated November 3, 1997.
10.5 __ Employment Agreement between the Company and John T. Turner dated November 3, 1997.
10.6 __ Employment Agreement between the Company and Scott L. Thompson dated November 3, 1997.
10.7 __ Employment Agreement between the Company and Kevin H. Whalen dated November 3, 1997.
10.8 __ Employment Agreement between the Company and James S. Carroll dated March 16, 1998.
10.9 __ 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 10.7 of the Company's
Registration Statement on Form S-1 Registration No. 333-29893)
10.10 __ First Amendment to 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8
of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.11 __ Lease Agreement between Round Rock Nissan and SKLR Round Rock, L.C. (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.12 __ Lease Agreement between SMC Luxury Cars and SBM-L F.L.P.(Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.13 __ Lease Agreement between Southwest Toyota and SBM-T F.L.P. (Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.14 __ Lease Agreement between Southwest Toyota and SBM-T I&E F.L.P. (Incorporated by reference
to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.15 __ Lease Agreement between SMC Luxury Cars and SBM-L I&E F.L.P. (Incorporated by reference
to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.16 __ Lease Agreement between SMC Luxury Cars and SBM-L F.L.P. (Incorporated by reference to
Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.17 __ Lease Agreement between Southwest Toyota and SMC Investment, Inc. (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
</TABLE>
<PAGE> 79
INDEX TO EXHIBITS
<TABLE>
<S> <C>
10.18 __ Lease Agreement between Southwest Toyota and Dodge Financial F.L.P. (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.19 __ Lease Agreement between Howard Pontiac GMC and Robert E. Howard II (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration
No. 333-29893)
10.20 __ Lease Agreement between Bob Howard Motors and Robert E. Howard II (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.21 __ Lease Agreement between Bob Howard Chevrolet and Robert E. Howard II (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.22 __ Lease Agreement between Bob Howard Automotive-H and North Broadway Real Estate,
(Incorporated by reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.23 __ Lease Agreement between Mike Smith Autoplaza and Olds-Honda Realty (Incorporated by
reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.24 __ Rights Agreement between Group 1 Automotive, Inc. and ChaseMellon
Shareholder Services, L.L.C., as rights agent dated October 3, 1997 (Incorporated by reference to
Exhibit 10.10 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.25 __ 1998 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.26 __ Form of Agreement between Toyota Motor Sales, U.S.A., and Group 1 Automotive, Inc.
(Incorporated by reference to Exhibit 10.12 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.27 __ Form of Supplemental Agreement to General Motors Corporation Dealer Sales and Service
Agreement (Incorporated by reference to Exhibit 10.13 of the Company's Registration Statement
on Form S-1 Registration No. 333-29893)
10.28 __ Approval Letter dated December 11, 1996 from Nissan Motor Corporation U.S.A.
(Incorporated by reference to Exhibit 10.14 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.29 __ Amendment to Approval Letter from Nissan Motor Corporation U.S.A. dated September 29,
1997 (Incorporated by reference to Exhibit 10.15 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.30 __ Supplemental Terms and Conditions between Ford Motor Company and Group 1 Automotive, Inc.
dated September 4, 1997 (Incorporated by reference to Exhibit 10.16 of the Company's Registration
Statement on Form S-1 Registration No. 333-29893)
10.31 __ Toyota Dealer Agreement between Gulf States Toyota, Inc. and Southwest Toyota, Inc. dated
April 5, 1993 (Incorporated by reference to Exhibit 10.17 of the Company's Registration Statement
on Form S-1 Registration No. 333-29893)
10.32 __ Lexus Dealer Agreement between Toyota Motor Sales, U.S.A., Inc. and SMC Luxury Cars, Inc.
dated August 21, 1995 (Incorporated by reference to Exhibit 10.18 of the Company's Registration
Statement on Form S-1 Registration No. 333-29893)
10.33 __ Letter Agreement between Mitsubishi Motor Sales of America, Inc. and Group 1 Automotive,
Inc. dated June 20, 1997 (Incorporated by reference to Exhibit 10.20 of the Company's Registration
Statement on Form S-1 Registration No. 333-29893)
</TABLE>
<PAGE> 80
INDEX TO EXHIBITS
<TABLE>
<S> <C>
10.34 __ Supplemental Agreement to Dealer Sales and Service Agreement (Public Traded Company)
among Foyt Motors, Inc., Group 1 Automotive, Inc. and American Isuzu Motors Inc. (Incorporated by
reference to Exhibit 10.21 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.35 __ Stock Purchase Agreement Among Howard Pontiac-GMC, Inc., Bob Howard Automotive-East, Inc.
and the Stockholder of Bob Howard Automotive-East, Inc. dated as of September 12, 1997
(Incorporated by reference to Exhibit 10.22 of the Company's Registration Statement on Form S-1
Registration No. 333-29893)
10.36 __ Agreement between American Honda Motor Co., Inc. and the Dealership Parties dated October
23, 1997 (Incorporated by reference to Exhibit 10.24 of the Company's Registration Statement
on Form S-1 Registration No. 333-29893)
10.37 __ Form of General Motors Corporation U.S.A. Sales and Service Agreement (Incorporated by
reference to Exhibit 10.25 of the Company's Registration Statement on Form S-1 Registration No.
333-29893)
10.38 __ Form of Nissan Motor Corporation Sales and Service Agreement (Incorporated by reference
to Exhibit 10.26 of the Company's Registration Statement on Form S-1 Registration No. 333-29893)
10.39 -- Agreement and Plan of Reorganization by and among Group 1 Automotive, Inc., Koons Merger, Inc., Koons
Ford, Inc. and the stockholders of Koons Ford, Inc. dated December 17, 1997.
10.40 -- Agreement and Plan of Reorganization by and among Group 1 Automotive, Inc., PF Merger, Inc., Perimeter
Ford, Inc. and the stockholders of Perimeter Ford, Inc. dated December 17, 1997.
10.41 -- Agreement and Plan of Reorganization by and among Group 1 Automotive, Inc., Courtesy Merger, Inc.,
Courtesy Ford, Inc. and the stockholders of Courtesy Ford, Inc. dated December 17, 1997.
10.42 -- Lease Agreement between World Partner Enterprises Ltd. and Koons Ford, Inc. dated March 16, 1998.
10.43 -- Operations/Lease Agreement between KC Partnership and Perimeter Ford, Inc. dated March 16, 1998.
10.44 -- Lease Agreement between K.C. Partnership and Courtesy Ford, Inc. dated March 16, 1998.
10.45 -- Amended and Restated Sublease Agreement between Koons Development Co. and Koons Ford, Inc. dated
March 16, 1998.
10.46 -- Multi-Party Agreement by and among KC Partnership, Ford Leasing Development Company, Perimeter Ford,
Inc., PF Merger, Inc. and Comerica Bank dated March 16, 1998.
10.47 -- Purchase Agreement by and among Group 1 Automotive, Inc., MSAP Merger Corp., the limited partners of
Prestige Chrysler Plymouth South, Ltd. and the stockholders of Prestige Chrysler Plymouth, Inc. dated
December 18, 1997.
10.48 -- Purchase Agreement by and among Group 1 Automotive, Inc., ST Merger Corp., the limited partners of
Maxwell Chrysler Plymouth Dodge Jeep Eagle, Ltd. and the stockholders of Maxwell Chrysler Plymouth
Dodge, Inc. dated December 18, 1997.
10.49 -- Purchase Agreement by and among Group 1 Automotive, Inc., RRN Merger Corp., the limited partners of
Prestige Chrysler Plymouth Northwest, Ltd. and the stockholders of MMK Interests, Inc. dated December
18, 1997.
10.50 -- Asset Purchase Agreement by and among Group 1 Automotive, Inc., Casa Chevrolet Inc., United
Management, Inc. and the stockholders of United Management, Inc. dated February 25, 1998.
10.51 -- Asset Purchase Agreement by and among Group 1 Automotive, Inc., Casa Chrysler Plymouth Jeep Inc.,
United Management, Inc. and the stockholders of United Management, Inc. dated February 25, 1998.
10.52 -- Purchase Agreement between Group 1 Automotive, Inc. and the sole stockholder of Bob Howard Nissan, Inc.
dated as of December 30, 1997.
10.53 -- Revolving Credit Agreement dated December 31, 1997.
10.54 -- Stock Pledge Agreement dated December 19, 1997.
10.55 -- Swap Transaction Letter Agreement dated January 23, 1998.
21.1 -- Group 1 Automotive, Inc. Subsidiary List.
23.1 __ Consent of Arthur Andersen LLP
27.1 __ Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas
77024 ("Employer"), and B. B. Hollingsworth, Jr., an individual currently
residing at 5763 Indian Circle, Houston, Texas 77057 ("Employee"), to be
effective as of November 3, 1997.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning November 3, 1997 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as "Chairman, President and Chief
Executive Officer" of Employer. Employee agrees to serve in the assigned
position and to perform diligently and to the best of Employee's abilities the
duties and services appertaining to such position as determined by Employer, as
well as such additional or different duties and services appropriate to such
position which Employee from time to time may be reasonably directed to perform
by Employer. Employee shall at all times comply with and be subject to such
policies and procedures as Employer may establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer or any of its subsidiaries or affiliates, or requires any
significant portion of Employee's business time; provided, however, that
Employee may engage in passive personal investments that do not conflict with
the business and affairs of the Employer or any of its subsidiaries or
affiliates or interfere with Employee's performance of his or her duties
hereunder.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to Employer's business and shall not appropriate for Employee's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
<PAGE> 2
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its affiliates, involves a possible conflict of interest.
In keeping with Employee's fiduciary duties to Employer, Employee agrees that
Employee shall not knowingly become involved in a conflict of interest with
Employer, or its affiliates, or upon discovery thereof, allow such a conflict
to continue. Moreover, Employee agrees that Employee shall disclose to
Employer's General Counsel (who shall be Employer's outside General Counsel
unless Employer has employed an inside General Counsel) any facts which might
involve such a conflict of interest that has not been approved by Employer's
President. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest". Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its subsidiaries or affiliates to protect its interests. In others, if no
improper motivation appears to exist and the interests of Employer or its
subsidiaries or affiliates have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for Employer to
terminate the employment relationship. Employee agrees that Employer's
determination as to whether a conflict of interest exists shall be conclusive.
Employer reserves the right to take such action as, in its judgment, will end
the conflict.
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$360,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Employer subject to the terms and
conditions of Employer's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
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2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
November 3, 1997 through November 2, 2002. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, but Employee shall not be
entitled to any bonus with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated. Upon termination of employment,
Employee shall repay to Employer all advances received by Employee from
Employer or any of its subsidiaries or affiliates, including all advances drawn
against any bonus.
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Employer's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony; or (c) Employee's material breach of
any material provision of this Agreement or corporate code or
policy. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to Employer's
Board of Directors for
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determination. Employee, if he so requests, after reasonable
notice of such Board of Directors meeting, shall be entitled
to be heard before the Board of Directors. If Employee
disagrees with the decision reached by Employer's Board of
Directors, the dispute will be limited to whether Employer's
Board of Directors reached its decision in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Employer's Board of
Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement, which remains uncorrected for 30 days
following written notice of such breach by Employee to
Employer's Board of Directors;
(ii) the dissolution of Employer; or
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
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3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the
date of termination. Employee shall be entitled to pro rata salary through the
date of such termination, but Employee shall not be entitled to any bonuses
with respect to the operations of the Employer and its subsidiaries and
affiliates during the calendar year in which Employee's employment with
Employer is terminated.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to
recover from Employee all sums expended by Employer, and its subsidiaries and
affiliates (including costs and attorneys' fees) in connection with such suit,
claim, demand or cause of action. Employer and its subsidiaries and affiliates
shall not be entitled to offset any of the amounts specified in the immediately
preceding sentence against amounts otherwise owing by Employer and its
subsidiaries and affiliates to Employee prior to a final determination under
the terms of the arbitration provisions of this Agreement that Employee has
breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
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subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans (excluding any pension, retirement
and profit sharing plans of Employer that may be in effect from time to time)
or policies of Employer or its subsidiaries or affiliates or any successor to
all or a portion of the business or assets of Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendre or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries having civil or
criminal liability or responsibility under the FCPA or other applicable United
States law, such action or finding shall constitute "cause" for termination
under this Agreement unless Employer's Board of Directors determines that the
actions found to be in violation of the FCPA or other applicable United States
law were taken in good faith and in compliance with all applicable policies of
Employer. Moreover, to the extent that Employer or any of its subsidiaries is
found or held responsible for any civil or criminal fines or sanctions of any
type under the FCPA or other applicable United States law or suffers other
damages as a result of Employee's actions, Employee shall be responsible for,
and shall reimburse and pay to such Employer an amount of money equal to, such
civil or criminal fines, sanctions or damages. The rights afforded Employer
under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer owns certain confidential and proprietary information
and trade secrets to which Employee will be given access for the purpose of
carrying out his or her employment responsibilities hereunder. Furthermore,
Employer agrees to provide Employee with confidential
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and proprietary information and trade secrets regarding the Employer and its
subsidiaries and affiliates, in order to assist Employee in satisfying his or
her obligations hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's or
any of its subsidiaries' or affiliates' businesses, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects,
or marketing and merchandising techniques, prospective names, and marks) shall
be disclosed to Employer and are and shall be the sole and exclusive property
of Employer. Upon termination of Employee's employment, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, or any of its
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's or any of its
subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
or her employment; or, if the work is not prepared by Employee within the scope
of his or her employment but is specially ordered by Employer or any of its
subsidiaries or affiliates as a contribution to a collective work, as a part of
a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the
work shall be considered to be work made for hire and Employer or any of its
subsidiaries or affiliates shall be the author of the work. If such work is
neither prepared by Employee within the scope of his or her employment nor a
work specially ordered that is deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to Employer all of
Employee's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
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5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its subsidiaries or affiliated companies are
conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment.
The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in
subsection (iii) of this Section 6.1 with respect to employees shall apply
during Employee's employment and for a period of five (5) years after
termination of employment If Employer or any of its subsidiaries or affiliates
abandons a particular aspect of its business, that is,
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ceases such aspect of its business with the intention to permanently refrain
from such aspect of its business, then this post-employment non-competition
covenant shall not apply to such former aspect of that business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term upon Involuntary
Termination and access to certain confidential and proprietary information and
trade secrets) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach
of this Article 6 by Employee, and Employer or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach, without any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer or any of its
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonable and necessary to
protect the confidential and proprietary information and trade secrets of
Employer and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer or any of its subsidiaries' or
affiliates' directors, officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Employer or any of its subsidiaries' or affiliates' business
affairs, officers, employees, agents, or representatives; or that constitute an
intrusion into the seclusion or private lives of Employer or any of its
subsidiaries' or affiliates' directors, officers, employees, agents, or
representatives; or that give rise to unreasonable publicity about the private
lives of Employer or any of its subsidiaries' or affiliates' officers,
employees, agents, or representatives; or that place Employer or its
subsidiaries' or affiliates' or its
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officers, employees, agents, or representatives in a false light before the
public; or that constitute a misappropriation of the name or likeness Employer
or any of its subsidiaries' or affiliates' or its officers, employees, agents,
or representatives. A violation or threatened violation of this prohibition
may be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association,
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or entity or circumstances other than those to which they have been held
invalid or unenforceable, shall remain in full force and effect.
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Employee or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Employee, the Employer and its subsidiaries and
affiliates. The arbitration proceeding shall be conducted in Houston, Texas.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by
Employee without the prior written consent of Employer.
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7.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer or any of its subsidiaries or
affiliates and Employee is hereby canceled and Employee hereby irrevocably
waives and renounces all of Employee's rights and claims under any such
agreement or arrangement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-------------------------------------
B. B. Hollingsworth, Jr.
Chairman, President and Chief
Executive Officer
/s/ B. B. HOLLINGSWORTH, JR.
-----------------------------------------
Employee
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas
77024 ("Employer"), and Robert E. Howard II, an individual currently residing
at 1825 N. Coltrane, Edmond, Oklahoma 73034 ("Employee"), to be effective as of
November 3, 1997.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning November 3, 1997 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as "President -- Howard Group" of
Employer. Employee agrees to serve in the assigned position and to perform
diligently and to the best of Employee's abilities the duties and services
appertaining to such position as determined by Employer, as well as such
additional or different duties and services appropriate to such position which
Employee from time to time may be reasonably directed to perform by Employer.
Employee shall at all times comply with and be subject to such policies and
procedures as Employer may establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer or any of its subsidiaries or affiliates, or requires any
significant portion of Employee's business time; provided, however, that
Employee may engage in passive personal investments that do not conflict with
the business and affairs of the Employer or any of its subsidiaries or
affiliates or interfere with Employee's performance of his or her duties
hereunder.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to Employer's business and shall not appropriate for Employee's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
<PAGE> 2
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its affiliates, involves a possible conflict of interest.
In keeping with Employee's fiduciary duties to Employer, Employee agrees that
Employee shall not knowingly become involved in a conflict of interest with
Employer, or its affiliates, or upon discovery thereof, allow such a conflict
to continue. Moreover, Employee agrees that Employee shall disclose to
Employer's General Counsel (who shall be Employer's outside General Counsel
unless Employer has employed an inside General Counsel) any facts which might
involve such a conflict of interest that has not been approved by Employer's
President. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest". Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its subsidiaries or affiliates to protect its interests. In others, if no
improper motivation appears to exist and the interests of Employer or its
subsidiaries or affiliates have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for Employer to
terminate the employment relationship. Employee agrees that Employer's
determination as to whether a conflict of interest exists shall be conclusive.
Employer reserves the right to take such action as, in its judgment, will end
the conflict.
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$300,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Employer subject to the terms and
conditions of Employer's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs
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<PAGE> 3
than provided to similarly situated employees pursuant to the terms and
conditions of such benefit plans and programs.
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
November 3, 1997 through November 2, 2002. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, but Employee shall not be
entitled to any bonus with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated. Upon termination of employment,
Employee shall repay to Employer all advances received by Employee from
Employer or any of its subsidiaries or affiliates, including all advances drawn
against any bonus.
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Employer's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services
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<PAGE> 4
required of Employee pursuant to this Agreement; (b) Employee
has been convicted of a felony; or (c) Employee's material
breach of any material provision of this Agreement or
corporate code or policy. It is expressly acknowledged and
agreed that the decision as to whether "cause" exists for
termination of the employment relationship by Employer is
delegated to Employer's Board of Directors for determination.
Employee, if he so requests, after reasonable notice of such
Board of Directors meeting, shall be entitled to be heard
before the Board of Directors. If Employee disagrees with the
decision reached by Employer's Board of Directors, the dispute
will be limited to whether Employer's Board of Directors
reached its decision in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Employer's Board of
Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement, which remains uncorrected for 30 days
following written notice of such breach by Employee to
Employer's Board of Directors;
(ii) the dissolution of Employer; or
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<PAGE> 5
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the
date of termination. Employee shall be entitled to pro rata salary through the
date of such termination, but Employee shall not be entitled to any bonuses
with respect to the operations of the Employer and its subsidiaries and
affiliates during the calendar year in which Employee's employment with
Employer is terminated.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to
recover from Employee all sums expended by Employer, and its subsidiaries and
affiliates (including costs and attorneys' fees) in connection with such suit,
claim, demand or cause of action. Employer and its subsidiaries and affiliates
shall not be entitled to offset any of the amounts specified in the immediately
preceding sentence against amounts otherwise owing by Employer and its
subsidiaries and affiliates to Employee prior to a final determination under
the
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<PAGE> 6
terms of the arbitration provisions of this Agreement that Employee has
breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans (excluding any pension, retirement
and profit sharing plans of Employer that may be in effect from time to time)
or policies of Employer or its subsidiaries or affiliates or any successor to
all or a portion of the business or assets of Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendre or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries having civil or
criminal liability or responsibility under the FCPA or other applicable United
States law, such action or finding shall constitute "cause" for termination
under this Agreement unless Employer's Board of Directors determines that the
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<PAGE> 7
actions found to be in violation of the FCPA or other applicable United States
law were taken in good faith and in compliance with all applicable policies of
Employer. Moreover, to the extent that Employer or any of its subsidiaries is
found or held responsible for any civil or criminal fines or sanctions of any
type under the FCPA or other applicable United States law or suffers other
damages as a result of Employee's actions, Employee shall be responsible for,
and shall reimburse and pay to such Employer an amount of money equal to, such
civil or criminal fines, sanctions or damages. The rights afforded Employer
under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer owns certain confidential and proprietary information
and trade secrets to which Employee will be given access for the purpose of
carrying out his or her employment responsibilities hereunder. Furthermore,
Employer agrees to provide Employee with confidential and proprietary
information and trade secrets regarding the Employer and its subsidiaries and
affiliates, in order to assist Employee in satisfying his or her obligations
hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's or
any of its subsidiaries' or affiliates' businesses, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects,
or marketing and merchandising techniques, prospective names, and marks) shall
be disclosed to Employer and are and shall be the sole and exclusive property
of Employer. Upon termination of Employee's employment, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright
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(such as videotapes, written presentations on acquisitions, computer programs,
E-mail, voice mail, electronic databases, drawings, maps, architectural
renditions, models, manuals, brochures, or the like) relating to Employer's, or
any of its subsidiaries' or affiliates' businesses, products, or services,
whether such work is created solely by Employee or jointly with others (whether
during business hours or otherwise and whether on Employer's or any of its
subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
or her employment; or, if the work is not prepared by Employee within the scope
of his or her employment but is specially ordered by Employer or any of its
subsidiaries or affiliates as a contribution to a collective work, as a part of
a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the
work shall be considered to be work made for hire and Employer or any of its
subsidiaries or affiliates shall be the author of the work. If such work is
neither prepared by Employee within the scope of his or her employment nor a
work specially ordered that is deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to Employer all of
Employee's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its subsidiaries or affiliated companies are
conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
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<PAGE> 9
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment.
The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in
subsection (iii) of this Section 6.1 with respect to employees shall apply
during Employee's employment and for a period of five (5) years after
termination of employment If Employer or any of its subsidiaries or affiliates
abandons a particular aspect of its business, that is, ceases such aspect of
its business with the intention to permanently refrain from such aspect of its
business, then this post-employment non-competition covenant shall not apply to
such former aspect of that business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term upon Involuntary
Termination and access to certain confidential and proprietary information and
trade secrets) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach
of this Article 6 by Employee, and Employer or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach, without any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer or any of its
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonable and necessary to
protect the confidential and proprietary information and trade secrets of
Employer and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
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unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
7. CONCERNING THE TULSA CHEVROLET DEALERSHIP:
If the shares of common stock of Employer placed in escrow in
accordance with the Stock Purchase Agreement (the "Stock Purchase Agreement")
by and among Employer, Howard Pontiac-GMC, Inc. and the stockholders of Howard
Pontiac-GMC, Inc. are released and distributed according to the formula
described in Section 5.19 of the Stock Purchase Agreement, Employer shall
release Employee from his obligations under Section 1 and Section 6 of this
Agreement to the extent necessary to permit Employee to:
(i) Own and operate the Chevrolet dealership in Tulsa, Oklahoma
("Tulsa Chevrolet");
(ii) Own and operate the Honda and Saturn dealerships adjoining
Tulsa Chevrolet;
(iii) Expand the existing Tulsa Chevrolet facility ("Existing
Facility") or construct a replacement facility ("Replacement
Facility") on property within five miles of the Existing
Facility;
(iv) Acquire any other automobile franchise provided that such
acquired automobile franchise is moved into, or adjacent to,
the Existing Facility or the Replacement Facility; and
(v) Temporarily operate any acquired automobile franchise pending
the relocation of such acquired automobile franchise into, or
adjacent to, the Existing Facility or the Replacement
Facility.
8. MISCELLANEOUS:
8.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
8.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer or any of its subsidiaries' or
affiliates' directors, officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Employer or any of its subsidiaries' or affiliates' business
affairs, officers, employees, agents, or representatives; or that constitute an
intrusion into the seclusion or private lives of Employer or any of its
subsidiaries' or affiliates' directors, officers, employees, agents, or
representatives; or that give
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rise to unreasonable publicity about the private lives of Employer or any of
its subsidiaries' or affiliates' officers, employees, agents, or
representatives; or that place Employer or its subsidiaries' or affiliates' or
its officers, employees, agents, or representatives in a false light before the
public; or that constitute a misappropriation of the name or likeness Employer
or any of its subsidiaries' or affiliates' or its officers, employees, agents,
or representatives. A violation or threatened violation of this prohibition
may be enjoined.
8.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
with a copy to:
Randall K. Calvert
6520 N. Western, Suite 100
Oklahoma City, Oklahoma 73116
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
8.4. This Agreement shall be governed in all respects by the laws
of the State of Oklahoma, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
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8.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
8.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
8.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Western District of Oklahoma, upon
application of the Employee or the Employer, shall appoint an arbitrator to
fill such space with the same force and effect as though such arbitrator had
been appointed in accordance with the immediately preceding sentence of this
Section 7.7. The decision of a majority of the arbitrators shall be binding on
the Employee, the Employer and its subsidiaries and affiliates. The
arbitration proceeding shall be conducted in Oklahoma City, Oklahoma. Judgment
upon any award rendered in any such arbitration proceeding may be entered by
any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules
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governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Oklahoma; provided, however, that
the Arbitrators shall have no authority to award treble, exemplary or punitive
type damages under any circumstances regardless of whether such damages may be
available under Oklahoma law, the parties hereby waiving their right, if any,
to recover treble, exemplary or punitive type damages in connection with any
such Claims.
8.8. This Agreement shall be binding upon and inure to the benefit
of Employer its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by
Employee without the prior written consent of Employer.
8.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer or any of its subsidiaries or
affiliates and Employee is hereby canceled and Employee hereby irrevocably
waives and renounces all of Employee's rights and claims under any such
agreement or arrangement.
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IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement in
multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
--------------------------------------
B. B. Hollingsworth, Jr.
Chief Executive Officer
/s/ ROBERT E. HOWARD II
-----------------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas
77024 ("Employer"), and Sterling B. McCall, Jr., an individual currently
residing at 37 Saddlebrook, Houston, Texas 77024 ("Employee"), to be effective
as of November 3, 1997.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning November 3, 1997 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as "President -- McCall Group" of
Employer. Employee agrees to serve in the assigned position and to perform
diligently and to the best of Employee's abilities the duties and services
appertaining to such position as determined by Employer, as well as such
additional or different duties and services appropriate to such position which
Employee from time to time may be reasonably directed to perform by Employer.
Employee shall at all times comply with and be subject to such policies and
procedures as Employer may establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer or any of its subsidiaries or affiliates, or requires any
significant portion of Employee's business time; provided, however, that
Employee may engage in passive personal investments that do not conflict with
the business and affairs of the Employer or any of its subsidiaries or
affiliates or interfere with Employee's performance of his or her duties
hereunder.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to Employer's business and shall not appropriate for Employee's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its affiliates, involves a possible conflict of interest.
In keeping with Employee's fiduciary duties to Employer, Employee agrees that
Employee shall not knowingly become involved in a conflict of interest with
Employer, or its affiliates, or upon discovery thereof, allow such a conflict
to continue. Moreover, Employee agrees that Employee shall disclose to
Employer's General Counsel
<PAGE> 2
(who shall be Employer's outside General Counsel unless Employer has employed
an inside General Counsel) any facts which might involve such a conflict of
interest that has not been approved by Employer's President. Employer and
Employee recognize that it is impossible to provide an exhaustive list of
actions or interests which constitute a "conflict of interest". Moreover,
Employer and Employee recognize there are many borderline situations. In some
instances, full disclosure of facts by Employee to Employer's General Counsel
may be all that is necessary to enable Employer or its subsidiaries or
affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of Employer or its subsidiaries or
affiliates have not suffered, prompt elimination of the outside interest will
suffice. In still others, it may be necessary for Employer to terminate the
employment relationship. Employee agrees that Employer's determination as to
whether a conflict of interest exists shall be conclusive. Employer reserves
the right to take such action as, in its judgment, will end the conflict.
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$300,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Employer subject to the terms and
conditions of Employer's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be
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<PAGE> 3
secured or funded in any way, and each shall instead constitute an unfunded and
unsecured promise to pay money in the future exclusively from the general
assets of Employer and its subsidiaries and affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
November 3, 1997 through November 2, 2002. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, but Employee shall not be
entitled to any bonus with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated. Upon termination of employment,
Employee shall repay to Employer all advances received by Employee from
Employer or any of its subsidiaries or affiliates, including all advances drawn
against any bonus.
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Employer's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony; or (c) Employee's material breach of
any material provision of this Agreement or corporate code or
policy. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to Employer's
Board of Directors for determination. Employee, if he so
requests, after reasonable notice of such Board of Directors
meeting, shall be entitled to be heard before the Board of
Directors. If Employee disagrees with the decision reached by
Employer's Board of Directors, the dispute will be limited
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<PAGE> 4
to whether Employer's Board of Directors reached its decision
in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Employer's Board of
Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement, which remains uncorrected for 30 days
following written notice of such breach by Employee to
Employer's Board of Directors;
(ii) the dissolution of Employer; or
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the
date of termination. Employee shall be entitled to pro rata salary through the
date of such termination, but Employee shall not be entitled to any bonuses
with respect to the operations of the
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<PAGE> 5
Employer and its subsidiaries and affiliates during the calendar year in which
Employee's employment with Employer is terminated.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to
recover from Employee all sums expended by Employer, and its subsidiaries and
affiliates (including costs and attorneys' fees) in connection with such suit,
claim, demand or cause of action. Employer and its subsidiaries and affiliates
shall not be entitled to offset any of the amounts specified in the immediately
preceding sentence against amounts otherwise owing by Employer and its
subsidiaries and affiliates to Employee prior to a final determination under
the terms of the arbitration provisions of this Agreement that Employee has
breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which
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<PAGE> 6
Employee may otherwise be entitled under any and all severance plans (excluding
any pension, retirement and profit sharing plans of Employer that may be in
effect from time to time) or policies of Employer or its subsidiaries or
affiliates or any successor to all or a portion of the business or assets of
Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendre or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries having civil or
criminal liability or responsibility under the FCPA or other applicable United
States law, such action or finding shall constitute "cause" for termination
under this Agreement unless Employer's Board of Directors determines that the
actions found to be in violation of the FCPA or other applicable United States
law were taken in good faith and in compliance with all applicable policies of
Employer. Moreover, to the extent that Employer or any of its subsidiaries is
found or held responsible for any civil or criminal fines or sanctions of any
type under the FCPA or other applicable United States law or suffers other
damages as a result of Employee's actions, Employee shall be responsible for,
and shall reimburse and pay to such Employer an amount of money equal to, such
civil or criminal fines, sanctions or damages. The rights afforded Employer
under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer owns certain confidential and proprietary information
and trade secrets to which Employee will be given access for the purpose of
carrying out his or her employment responsibilities hereunder. Furthermore,
Employer agrees to provide Employee with confidential and proprietary
information and trade secrets regarding the Employer and its subsidiaries and
affiliates, in order to assist Employee in satisfying his or her obligations
hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in
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conjunction with others, during Employee's employment by Employer (whether
during business hours or otherwise and whether on Employer's premises or
otherwise) which relate to Employer's or any of its subsidiaries' or
affiliates' businesses, products or services (including, without limitation,
all such information relating to corporate opportunities, research, financial
and sales data, pricing and trading terms, evaluations, opinions,
interpretations, acquisition prospects, the identity of customers or their
requirements, the identity of key contacts within the customer's organizations
or within the organization of acquisition prospects, or marketing and
merchandising techniques, prospective names, and marks) shall be disclosed to
Employer and are and shall be the sole and exclusive property of Employer.
Upon termination of Employee's employment, for any reason, Employee promptly
shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, or any of its
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's or any of its
subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
or her employment; or, if the work is not prepared by Employee within the scope
of his or her employment but is specially ordered by Employer or any of its
subsidiaries or affiliates as a contribution to a collective work, as a part of
a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the
work shall be considered to be work made for hire and Employer or any of its
subsidiaries or affiliates shall be the author of the work. If such work is
neither prepared by Employee within the scope of his or her employment nor a
work specially ordered that is deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to Employer all of
Employee's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents
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<PAGE> 8
requested by Employer or any of its subsidiaries or affiliates or their
nominees and the execution of all lawful oaths and applications for
applications for patents and registration of copyright in the United States and
foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its subsidiaries or affiliated companies are
conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment.
The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in
subsection (iii) of this Section 6.1 with respect to employees shall apply
during Employee's employment and for a period of five (5) years after
termination of employment If Employer or any of its subsidiaries or affiliates
abandons a particular aspect of its business, that is, ceases such aspect of
its business with the intention to permanently refrain from such aspect of its
business, then this post-employment non-competition covenant shall not apply to
such former aspect of that business.
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<PAGE> 9
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term upon Involuntary
Termination and access to certain confidential and proprietary information and
trade secrets) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach
of this Article 6 by Employee, and Employer or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach, without any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer or any of its
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonable and necessary to
protect the confidential and proprietary information and trade secrets of
Employer and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer or any of its subsidiaries' or
affiliates' directors, officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Employer or any of its subsidiaries' or affiliates' business
affairs, officers, employees, agents, or representatives; or that constitute an
intrusion into the seclusion or private lives of Employer or any of its
subsidiaries' or affiliates' directors, officers, employees, agents, or
representatives; or that give rise to unreasonable publicity about the private
lives of Employer or any of its subsidiaries' or affiliates' officers,
employees, agents, or representatives; or that place Employer or its
subsidiaries' or affiliates' or its officers, employees, agents, or
representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness Employer or any of its subsidiaries'
or affiliates' or its officers, employees, agents, or representatives. A
violation or threatened violation of this prohibition may be enjoined.
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7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
with a copy to:
Robert D. Remy
Two Memorial City Plaza
820 Gessner, Suite 1360
Houston, Texas 77024
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable
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in whole or in part, then such term, provision, covenant, or remedy shall be
construed in a manner so as to permit its enforceability under the applicable
law to the fullest extent permitted by law. In any case, the remaining
provisions of this Agreement or the application thereof to any person,
association, or entity or circumstances other than those to which they have
been held invalid or unenforceable, shall remain in full force and effect.
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Employee or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Employee, the Employer and its subsidiaries and
affiliates. The arbitration proceeding shall be conducted in Houston, Texas.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under
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this Agreement are personal and such rights, benefits, and obligations of
Employee shall not be voluntarily or involuntarily assigned, alienated, or
transferred, whether by operation of law or otherwise, by Employee without the
prior written consent of Employer.
7.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer or any of its subsidiaries or
affiliates and Employee is hereby canceled and Employee hereby irrevocably
waives and renounces all of Employee's rights and claims under any such
agreement or arrangement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-------------------------------------
B. B. Hollingsworth, Jr.
Chief Executive Officer
/s/ STERLING B. McCALL, JR.
-----------------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas
77024 ("Employer"), and Charles M. Smith, an individual currently residing at
11145 N. Country Squire, Houston, Texas 77024 ("Employee"), to be effective as
of November 3, 1997.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning November 3, 1997 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as "President -- Smith Group" of
Employer. Employee agrees to serve in the assigned position and to perform
diligently and to the best of Employee's abilities the duties and services
appertaining to such position as determined by Employer, as well as such
additional or different duties and services appropriate to such position which
Employee from time to time may be reasonably directed to perform by Employer.
Employee shall at all times comply with and be subject to such policies and
procedures as Employer may establish from time to time.
1.3. Except for Employee's performance of his duties relating to
the ownership and operation of Russell & Smith Ford, Inc. (also d/b/a Russell &
Smith Honda) and W. C. & M. Enterprises Incorporated (d/b/a Streater-Smith)
consistent with Employee's past conduct in performing such duties:
(i) Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and
best efforts to the business and affairs of Employer; and
(ii) Employee may not engage, directly or indirectly, in any other
business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is
contrary to the interests of Employer or any of its
subsidiaries or affiliates, or requires any significant
portion of Employee's business time (provided, however, that
Employee may engage in passive personal investments that do
not conflict with the business and affairs of the Employer or
any of its subsidiaries or affiliates or interfere with
Employee's performance of his duties hereunder).
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to Employer's business and shall not appropriate for
<PAGE> 2
Employee's own benefit business opportunities concerning the subject matter of
the fiduciary relationship.
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its affiliates, involves a possible conflict of interest.
In keeping with Employee's fiduciary duties to Employer, Employee agrees that
Employee shall not knowingly become involved in a conflict of interest with
Employer, or its affiliates, or upon discovery thereof, allow such a conflict
to continue. Moreover, Employee agrees that Employee shall disclose to
Employer's General Counsel (who shall be Employer's outside General Counsel
unless Employer has employed an inside General Counsel) any facts which might
involve such a conflict of interest that has not been approved by Employer's
President. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest". Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its subsidiaries or affiliates to protect its interests. In others, if no
improper motivation appears to exist and the interests of Employer or its
subsidiaries or affiliates have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for Employer to
terminate the employment relationship. Employee agrees that Employer's
determination as to whether a conflict of interest exists shall be conclusive.
Employer reserves the right to take such action as, in its judgment, will end
the conflict. For the purposes of this Agreement, Employee's performance of
his duties relating to the ownership and operation of Russell & Smith Ford,
Inc. (also d/b/a Russell & Smith Honda) and W. C. & M. Enterprises Incorporated
(d/b/a Streater-Smith) consistent with Employee's past conduct in discharging
such duties shall not constitute a "conflict of interest."
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$300,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Employer subject to the terms and
conditions of Employer's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans,
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<PAGE> 3
and programs may include, without limitation, medical, health, and dental care,
life insurance, disability protection, and pension plans. Nothing in this
Agreement is to be construed or interpreted to provide greater rights,
participation, coverage, or benefits under such benefit plans or programs than
provided to similarly situated employees pursuant to the terms and conditions
of such benefit plans and programs.
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
November 3, 1997 through November 2, 2002. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, but Employee shall not be
entitled to any bonus with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated. Upon termination of employment,
Employee shall repay to Employer all advances received by Employee from
Employer or any of its subsidiaries or affiliates, including all advances drawn
against any bonus.
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Employer's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
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<PAGE> 4
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony; or (c) Employee's material breach of
any material provision of this Agreement or corporate code or
policy. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to Employer's
Board of Directors for determination. Employee, if he so
requests, after reasonable notice of such Board of Directors
meeting, shall be entitled to be heard before the Board of
Directors. If Employee disagrees with the decision reached by
Employer's Board of Directors, the dispute will be limited to
whether Employer's Board of Directors reached its decision in
good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Employer's Board of
Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement, which remains uncorrected for 30 days
following written notice of such breach by Employee to
Employer's Board of Directors;
(ii) the dissolution of Employer; or
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
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<PAGE> 5
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the
date of termination. Employee shall be entitled to pro rata salary through the
date of such termination, but Employee shall not be entitled to any bonuses
with respect to the operations of the Employer and its subsidiaries and
affiliates during the calendar year in which Employee's employment with
Employer is terminated.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to
recover from Employee all sums expended by Employer, and its subsidiaries and
affiliates (including costs and attorneys' fees) in connection with such suit,
claim, demand or cause of action. Employer and its subsidiaries and affiliates
shall not be entitled to offset any of the amounts specified in the immediately
preceding sentence against amounts otherwise owing by Employer and its
subsidiaries and affiliates to Employee prior to a final determination under
the terms of the arbitration provisions of this Agreement that Employee has
breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to
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<PAGE> 6
any individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans (excluding any pension, retirement
and profit sharing plans of Employer that may be in effect from time to time)
or policies of Employer or its subsidiaries or affiliates or any successor to
all or a portion of the business or assets of Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendere or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries having civil or
criminal liability or responsibility under the FCPA or other applicable United
States law, such action or finding shall constitute "cause" for termination
under this Agreement unless Employer's Board of Directors determines that the
actions found to be in violation of the FCPA or other applicable United States
law were taken in good faith and in compliance with all applicable policies of
Employer. Moreover, to the extent that Employer or any of its subsidiaries is
found or held responsible for any civil or criminal fines or sanctions of any
type under the FCPA or other applicable United States law or suffers other
damages as a result of Employee's actions, Employee shall be responsible for,
and shall reimburse and pay to such Employer an amount of money equal to, such
civil or criminal fines, sanctions or damages. The rights afforded Employer
under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.
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<PAGE> 7
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer owns certain confidential and proprietary information
and trade secrets to which Employee will be given access for the purpose of
carrying out his employment responsibilities hereunder. Furthermore, Employer
agrees to provide Employee with confidential and proprietary information and
trade secrets regarding the Employer and its subsidiaries and affiliates, in
order to assist Employee in satisfying his obligations hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's or
any of its subsidiaries' or affiliates' businesses, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects,
or marketing and merchandising techniques, prospective names, and marks) shall
be disclosed to Employer and are and shall be the sole and exclusive property
of Employer. Upon termination of Employee's employment, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, or any of its
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's or any of its
subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
employment; or, if the work is not prepared by Employee within the scope of his
employment but is specially ordered by Employer or any of its subsidiaries or
affiliates as a contribution to a collective work, as a part of a motion
picture or other audiovisual work, as a translation, as a supplementary work,
as a compilation, or as an instructional text, then the work shall be
considered to be work made for hire and Employer or any of its subsidiaries or
affiliates shall be the author of the work. If such
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<PAGE> 8
work is neither prepared by Employee within the scope of his employment nor a
work specially ordered that is deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to Employer all of
Employee's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its subsidiaries or affiliated companies are
conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment.
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<PAGE> 9
The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in
subsection (iii) of this Section 6.1 with respect to employees shall apply
during Employee's employment and for a period of five (5) years after
termination of employment If Employer or any of its subsidiaries or affiliates
abandons a particular aspect of its business, that is, ceases such aspect of
its business with the intention to permanently refrain from such aspect of its
business, then this post-employment non-competition covenant shall not apply to
such former aspect of that business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term upon Involuntary
Termination and access to certain confidential and proprietary information and
trade secrets) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach
of this Article 6 by Employee, and Employer or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach, without any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer or any of its
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonable and necessary to
protect the confidential and proprietary information and trade secrets of
Employer and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
6.4. Nothing in this Section 6 shall prohibit Employee from
performing his duties relating to the ownership and operation of Russell &
Smith Ford, Inc. (also d/b/a Russell & Smith Honda) and W. C. & M. Enterprises
Incorporated (d/b/a Streater-Smith) in a manner consistent with Employee's past
conduct in performing such duties.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
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7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer or any of its subsidiaries' or
affiliates' directors, officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Employer or any of its subsidiaries' or affiliates' business
affairs, officers, employees, agents, or representatives; or that constitute an
intrusion into the seclusion or private lives of Employer or any of its
subsidiaries' or affiliates' directors, officers, employees, agents, or
representatives; or that give rise to unreasonable publicity about the private
lives of Employer or any of its subsidiaries' or affiliates' officers,
employees, agents, or representatives; or that place Employer or its
subsidiaries' or affiliates' or its officers, employees, agents, or
representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness Employer or any of its subsidiaries'
or affiliates' or its officers, employees, agents, or representatives. A
violation or threatened violation of this prohibition may be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed
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a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Employee or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Employee, the Employer and its subsidiaries and
affiliates. The arbitration proceeding shall be conducted in Houston, Texas.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may
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be available under Texas law, the parties hereby waiving their right, if any,
to recover treble, exemplary or punitive type damages in connection with any
such Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by
Employee without the prior written consent of Employer.
7.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer or any of its subsidiaries or
affiliates and Employee is hereby canceled and Employee hereby irrevocably
waives and renounces all of Employee's rights and claims under any such
agreement or arrangement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-------------------------------------
B. B. Hollingsworth, Jr.
Chief Executive Officer
/s/ CHARLES M. SMITH
-----------------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas
77024 ("Employer"), and John T. Turner, an individual currently residing at
5405 Maryanna Drive, Austin, Texas 78746 ("Employee"), to be effective as of
November 3, 1997.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning November 3, 1997 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as "Senior Vice President -- Corporate
Development" of Employer. Employee agrees to serve in the assigned position
and to perform diligently and to the best of Employee's abilities the duties
and services appertaining to such position as determined by Employer, as well
as such additional or different duties and services appropriate to such
position which Employee from time to time may be reasonably directed to perform
by Employer. Employee shall at all times comply with and be subject to such
policies and procedures as Employer may establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer or any of its subsidiaries or affiliates, or requires any
significant portion of Employee's business time; provided, however, that
Employee may engage in passive personal investments that do not conflict with
the business and affairs of the Employer or any of its subsidiaries or
affiliates or interfere with Employee's performance of his or her duties
hereunder.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to Employer's business and shall not appropriate for Employee's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
<PAGE> 2
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its affiliates, involves a possible conflict of interest.
In keeping with Employee's fiduciary duties to Employer, Employee agrees that
Employee shall not knowingly become involved in a conflict of interest with
Employer, or its affiliates, or upon discovery thereof, allow such a conflict
to continue. Moreover, Employee agrees that Employee shall disclose to
Employer's General Counsel (who shall be Employer's outside General Counsel
unless Employer has employed an inside General Counsel) any facts which might
involve such a conflict of interest that has not been approved by Employer's
President. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest". Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its subsidiaries or affiliates to protect its interests. In others, if no
improper motivation appears to exist and the interests of Employer or its
subsidiaries or affiliates have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for Employer to
terminate the employment relationship. Employee agrees that Employer's
determination as to whether a conflict of interest exists shall be conclusive.
Employer reserves the right to take such action as, in its judgment, will end
the conflict.
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$250,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Employer subject to the terms and
conditions of Employer's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
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<PAGE> 3
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
November 3, 1997 through November 2, 2002. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, but Employee shall not be
entitled to any bonus with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated. Upon termination of employment,
Employee shall repay to Employer all advances received by Employee from
Employer or any of its subsidiaries or affiliates, including all advances drawn
against any bonus.
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Employer's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony; or (c) Employee's material breach of
any material provision of this Agreement or corporate code or
policy. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to Employer's
Board of Directors for
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<PAGE> 4
determination. Employee, if he so requests, after reasonable
notice of such Board of Directors meeting, shall be entitled
to be heard before the Board of Directors. If Employee
disagrees with the decision reached by Employer's Board of
Directors, the dispute will be limited to whether Employer's
Board of Directors reached its decision in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Employer's Board of
Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement, which remains uncorrected for 30 days
following written notice of such breach by Employee to
Employer's Board of Directors;
(ii) the dissolution of Employer; or
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
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<PAGE> 5
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the
date of termination. Employee shall be entitled to pro rata salary through the
date of such termination, but Employee shall not be entitled to any bonuses
with respect to the operations of the Employer and its subsidiaries and
affiliates during the calendar year in which Employee's employment with
Employer is terminated.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to
recover from Employee all sums expended by Employer, and its subsidiaries and
affiliates (including costs and attorneys' fees) in connection with such suit,
claim, demand or cause of action. Employer and its subsidiaries and affiliates
shall not be entitled to offset any of the amounts specified in the immediately
preceding sentence against amounts otherwise owing by Employer and its
subsidiaries and affiliates to Employee prior to a final determination under
the terms of the arbitration provisions of this Agreement that Employee has
breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
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<PAGE> 6
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans (excluding any pension, retirement
and profit sharing plans of Employer that may be in effect from time to time)
or policies of Employer or its subsidiaries or affiliates or any successor to
all or a portion of the business or assets of Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendre or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries having civil or
criminal liability or responsibility under the FCPA or other applicable United
States law, such action or finding shall constitute "cause" for termination
under this Agreement unless Employer's Board of Directors determines that the
actions found to be in violation of the FCPA or other applicable United States
law were taken in good faith and in compliance with all applicable policies of
Employer. Moreover, to the extent that Employer or any of its subsidiaries is
found or held responsible for any civil or criminal fines or sanctions of any
type under the FCPA or other applicable United States law or suffers other
damages as a result of Employee's actions, Employee shall be responsible for,
and shall reimburse and pay to such Employer an amount of money equal to, such
civil or criminal fines, sanctions or damages. The rights afforded Employer
under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer owns certain confidential and proprietary information
and trade secrets to which Employee will be given access for the purpose of
carrying out his or her employment responsibilities hereunder. Furthermore,
Employer agrees to provide Employee with confidential and
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<PAGE> 7
proprietary information and trade secrets regarding the Employer and its
subsidiaries and affiliates, in order to assist Employee in satisfying his or
her obligations hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's or
any of its subsidiaries' or affiliates' businesses, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects,
or marketing and merchandising techniques, prospective names, and marks) shall
be disclosed to Employer and are and shall be the sole and exclusive property
of Employer. Upon termination of Employee's employment, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, or any of its
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's or any of its
subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
or her employment; or, if the work is not prepared by Employee within the scope
of his or her employment but is specially ordered by Employer or any of its
subsidiaries or affiliates as a contribution to a collective work, as a part of
a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the
work shall be considered to be work made for hire and Employer or any of its
subsidiaries or affiliates shall be the author of the work. If such work is
neither prepared by Employee within the scope of his or her employment nor a
work specially ordered that is deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to Employer all of
Employee's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
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<PAGE> 8
5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its subsidiaries or affiliated companies are
conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment.
The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in
subsection (iii) of this Section 6.1 with respect to employees shall apply
during Employee's employment and for a period of five (5) years after
termination of employment If Employer or any of its subsidiaries or affiliates
abandons a particular aspect of its business, that is,
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<PAGE> 9
ceases such aspect of its business with the intention to permanently refrain
from such aspect of its business, then this post-employment non-competition
covenant shall not apply to such former aspect of that business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term upon Involuntary
Termination and access to certain confidential and proprietary information and
trade secrets) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach
of this Article 6 by Employee, and Employer or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach, without any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer or any of its
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonable and necessary to
protect the confidential and proprietary information and trade secrets of
Employer and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer or any of its subsidiaries' or
affiliates' directors, officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Employer or any of its subsidiaries' or affiliates' business
affairs, officers, employees, agents, or representatives; or that constitute an
intrusion into the seclusion or private lives of Employer or any of its
subsidiaries' or affiliates' directors, officers, employees, agents, or
representatives; or that give rise to unreasonable publicity about the private
lives of Employer or any of its subsidiaries' or affiliates' officers,
employees, agents, or representatives; or that place Employer or its
subsidiaries' or affiliates' or its officers, employees, agents, or
representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness Employer or any of its subsidiaries'
or affiliates' or its
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officers, employees, agents, or representatives. A violation or threatened
violation of this prohibition may be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association,
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<PAGE> 11
or entity or circumstances other than those to which they have been held
invalid or unenforceable, shall remain in full force and effect.
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Employee or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Employee, the Employer and its subsidiaries and
affiliates. The arbitration proceeding shall be conducted in Houston, Texas.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by
Employee without the prior written consent of Employer.
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<PAGE> 12
7.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer or any of its subsidiaries or
affiliates and Employee is hereby canceled and Employee hereby irrevocably
waives and renounces all of Employee's rights and claims under any such
agreement or arrangement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-------------------------------------
B. B. Hollingsworth, Jr.
Chairman, President and Chief
Executive Officer
/s/ JOHN T. TURNER
-----------------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas
77024 ("Employer"), and Scott L. Thompson, an individual currently residing at
8610 Hawaii Lane, Jersey Village, Texas 77040 ("Employee"), to be effective as
of November 3, 1997.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning November 3, 1997 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as "Senior Vice President -- Chief
Financial Officer" and "Treasurer" of Employer. Employee agrees to serve in
the assigned position and to perform diligently and to the best of Employee's
abilities the duties and services appertaining to such position as determined
by Employer, as well as such additional or different duties and services
appropriate to such position which Employee from time to time may be reasonably
directed to perform by Employer. Employee shall at all times comply with and
be subject to such policies and procedures as Employer may establish from time
to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer or any of its subsidiaries or affiliates, or requires any
significant portion of Employee's business time; provided, however, that
Employee may engage in passive personal investments that do not conflict with
the business and affairs of the Employer or any of its subsidiaries or
affiliates or interfere with Employee's performance of his or her duties
hereunder.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to Employer's business and shall not appropriate for Employee's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
<PAGE> 2
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its affiliates, involves a possible conflict of interest.
In keeping with Employee's fiduciary duties to Employer, Employee agrees that
Employee shall not knowingly become involved in a conflict of interest with
Employer, or its affiliates, or upon discovery thereof, allow such a conflict
to continue. Moreover, Employee agrees that Employee shall disclose to
Employer's General Counsel (who shall be Employer's outside General Counsel
unless Employer has employed an inside General Counsel) any facts which might
involve such a conflict of interest that has not been approved by Employer's
President. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest". Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its subsidiaries or affiliates to protect its interests. In others, if no
improper motivation appears to exist and the interests of Employer or its
subsidiaries or affiliates have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for Employer to
terminate the employment relationship. Employee agrees that Employer's
determination as to whether a conflict of interest exists shall be conclusive.
Employer reserves the right to take such action as, in its judgment, will end
the conflict.
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$180,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Employer subject to the terms and
conditions of Employer's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
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<PAGE> 3
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
November 3, 1997 through November 2, 2002. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, but Employee shall not be
entitled to any bonus with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated. Upon termination of employment,
Employee shall repay to Employer all advances received by Employee from
Employer or any of its subsidiaries or affiliates, including all advances drawn
against any bonus.
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Employer's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony; or (c) Employee's material breach of
any material provision of this Agreement or corporate code or
policy. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to Employer's
Board of Directors for
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<PAGE> 4
determination. Employee, if he so requests, after reasonable
notice of such Board of Directors meeting, shall been titled
to be heard before the Board of Directors. If Employee
disagrees with the decision reached by Employer's Board of
Directors, the dispute will be limited to whether Employer's
Board of Directors reached its decision in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Employer's Board of
Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement, which remains uncorrected for 30 days
following written notice of such breach by Employee to
Employer's Board of Directors;
(ii) the dissolution of Employer; or
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
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<PAGE> 5
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the
date of termination. Employee shall be entitled to pro rata salary through the
date of such termination, but Employee shall not be entitled to any bonuses
with respect to the operations of the Employer and its subsidiaries and
affiliates during the calendar year in which Employee's employment with
Employer is terminated.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to
recover from Employee all sums expended by Employer, and its subsidiaries and
affiliates (including costs and attorneys' fees) in connection with such suit,
claim, demand or cause of action. Employer and its subsidiaries and affiliates
shall not be entitled to offset any of the amounts specified in the immediately
preceding sentence against amounts otherwise owing by Employer and its
subsidiaries and affiliates to Employee prior to a final determination under
the terms of the arbitration provisions of this Agreement that Employee has
breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
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<PAGE> 6
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans (excluding any pension, retirement
and profit sharing plans of Employer that may be in effect from time to time)
or policies of Employer or its subsidiaries or affiliates or any successor to
all or a portion of the business or assets of Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendre or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries having civil or
criminal liability or responsibility under the FCPA or other applicable United
States law, such action or finding shall constitute "cause" for termination
under this Agreement unless Employer's Board of Directors determines that the
actions found to be in violation of the FCPA or other applicable United States
law were taken in good faith and in compliance with all applicable policies of
Employer. Moreover, to the extent that Employer or any of its subsidiaries is
found or held responsible for any civil or criminal fines or sanctions of any
type under the FCPA or other applicable United States law or suffers other
damages as a result of Employee's actions, Employee shall be responsible for,
and shall reimburse and pay to such Employer an amount of money equal to, such
civil or criminal fines, sanctions or damages. The rights afforded Employer
under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer owns certain confidential and proprietary information
and trade secrets to which Employee will be given access for the purpose of
carrying out his or her employment responsibilities hereunder. Furthermore,
Employer agrees to provide Employee with confidential and
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<PAGE> 7
proprietary information and trade secrets regarding the Employer and its
subsidiaries and affiliates, in order to assist Employee in satisfying his or
her obligations hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's or
any of its subsidiaries' or affiliates' businesses, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects,
or marketing and merchandising techniques, prospective names, and marks) shall
be disclosed to Employer and are and shall be the sole and exclusive property
of Employer. Upon termination of Employee's employment, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, or any of its
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's or any of its
subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
or her employment; or, if the work is not prepared by Employee within the scope
of his or her employment but is specially ordered by Employer or any of its
subsidiaries or affiliates as a contribution to a collective work, as a part of
a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the
work shall be considered to be work made for hire and Employer or any of its
subsidiaries or affiliates shall be the author of the work. If such work is
neither prepared by Employee within the scope of his or her employment nor a
work specially ordered that is deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to Employer all of
Employee's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
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<PAGE> 8
5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its subsidiaries or affiliated companies are
conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment.
The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in
subsection (iii) of this Section 6.1 with respect to employees shall apply
during Employee's employment and for a period of five (5) years after
termination of employment If Employer or any of its subsidiaries or affiliates
abandons a particular aspect of its business, that is,
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<PAGE> 9
ceases such aspect of its business with the intention to permanently refrain
from such aspect of its business, then this post-employment non-competition
covenant shall not apply to such former aspect of that business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term upon Involuntary
Termination and access to certain confidential and proprietary information and
trade secrets) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach
of this Article 6 by Employee, and Employer or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach, without any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer or any of its
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonable and necessary to
protect the confidential and proprietary information and trade secrets of
Employer and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer or any of its subsidiaries' or
affiliates' directors, officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Employer or any of its subsidiaries' or affiliates' business
affairs, officers, employees, agents, or representatives; or that constitute an
intrusion into the seclusion or private lives of Employer or any of its
subsidiaries' or affiliates' directors, officers, employees, agents, or
representatives; or that give rise to unreasonable publicity about the private
lives of Employer or any of its subsidiaries' or affiliates' officers,
employees, agents, or representatives; or that place Employer or its
subsidiaries' or affiliates' or its officers, employees, agents, or
representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness Employer or any of its subsidiaries'
or affiliates' or its
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<PAGE> 10
officers, employees, agents, or representatives. A violation or threatened
violation of this prohibition may be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association,
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<PAGE> 11
or entity or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant, or
remedy shall be construed in a manner so as to permit its enforceability under
the applicable law to the fullest extent permitted by law. In any case, the
remaining provisions of this Agreement or the application thereof to any
person, association, or entity or circumstances other than those to which they
have been held invalid or unenforceable, shall remain in full force and effect.
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Employee or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Employee, the Employer and its subsidiaries and
affiliates. The arbitration proceeding shall be conducted in Houston, Texas.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by
Employee without the prior written consent of Employer.
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<PAGE> 12
7.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer or any of its subsidiaries or
affiliates and Employee is hereby canceled and Employee hereby irrevocably
waives and renounces all of Employee's rights and claims under any such
agreement or arrangement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-----------------------------------------------
B. B. Hollingsworth, Jr.
Chairman, President and Chief Executive Officer
/s/ SCOTT L. THOMPSON
----------------------------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc. having offices at 950 Echo Lane, Suite 350, Houston, Texas
77024 ("Employer"), and Kevin H. Whalen, an individual currently residing at
3423 Oakland Drive, Sugar Land, Texas 77479 ("Employee"), to be effective as of
November 3, 1997.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning November 3, 1997 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as "Chief Operating Officer -- McCall
Group" of Employer. Employee agrees to serve in the assigned position and to
perform diligently and to the best of Employee's abilities the duties and
services appertaining to such position as determined by Employer, as well as
such additional or different duties and services appropriate to such position
which Employee from time to time may be reasonably directed to perform by
Employer. Employee shall at all times comply with and be subject to such
policies and procedures as Employer may establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer or any of its subsidiaries or affiliates, or requires any
significant portion of Employee's business time; provided, however, that
Employee may engage in passive personal investments that do not conflict with
the business and affairs of the Employer or any of its subsidiaries or
affiliates or interfere with Employee's performance of his or her duties
hereunder.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to Employer's business and shall not appropriate for Employee's own benefit
business opportunities concerning the subject matter of the fiduciary
relationship.
<PAGE> 2
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its affiliates, involves a possible conflict of interest.
In keeping with Employee's fiduciary duties to Employer, Employee agrees that
Employee shall not knowingly become involved in a conflict of interest with
Employer, or its affiliates, or upon discovery thereof, allow such a conflict
to continue. Moreover, Employee agrees that Employee shall disclose to
Employer's General Counsel (who shall be Employer's outside General Counsel
unless Employer has employed an inside General Counsel) any facts which might
involve such a conflict of interest that has not been approved by Employer's
President. Employer and Employee recognize that it is impossible to provide an
exhaustive list of actions or interests which constitute a "conflict of
interest". Moreover, Employer and Employee recognize there are many borderline
situations. In some instances, full disclosure of facts by Employee to
Employer's General Counsel may be all that is necessary to enable Employer or
its subsidiaries or affiliates to protect its interests. In others, if no
improper motivation appears to exist and the interests of Employer or its
subsidiaries or affiliates have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for Employer to
terminate the employment relationship. Employee agrees that Employer's
determination as to whether a conflict of interest exists shall be conclusive.
Employer reserves the right to take such action as, in its judgment, will end
the conflict.
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$300,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Employer subject to the terms and
conditions of Employer's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
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<PAGE> 3
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
November 3, 1997 through November 2, 2002. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, but Employee shall not be
entitled to any bonus with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated. Upon termination of employment,
Employee shall repay to Employer all advances received by Employee from
Employer or any of its subsidiaries or affiliates, including all advances drawn
against any bonus.
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Employer's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony; or (c) Employee's material breach of
any material provision of this Agreement or corporate code or
policy. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to Employer's
Board of Directors for
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<PAGE> 4
determination. Employee, if he so requests, after reasonable
notice of such Board of Directors meeting, shall be entitled
to be heard before the Board of Directors. If Employee
disagrees with the decision reached by Employer's Board of
Directors, the dispute will be limited to whether Employer's
Board of Directors reached its decision in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Employer's Board of
Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement, which remains uncorrected for 30 days
following written notice of such breach by Employee to
Employer's Board of Directors;
(ii) the dissolution of Employer; or
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
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<PAGE> 5
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer, all future compensation to which Employee is entitled and all future
benefits for which Employee is eligible shall cease and terminate as of the
date of termination. Employee shall be entitled to pro rata salary through the
date of such termination, but Employee shall not be entitled to any bonuses
with respect to the operations of the Employer and its subsidiaries and
affiliates during the calendar year in which Employee's employment with
Employer is terminated.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, and its subsidiaries' and affiliates' shall be entitled to
recover from Employee all sums expended by Employer, and its subsidiaries and
affiliates (including costs and attorneys' fees) in connection with such suit,
claim, demand or cause of action. Employer and its subsidiaries and affiliates
shall not be entitled to offset any of the amounts specified in the immediately
preceding sentence against amounts otherwise owing by Employer and its
subsidiaries and affiliates to Employee prior to a final determination under
the terms of the arbitration provisions of this Agreement that Employee has
breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses with respect to the operations of the Employer and its
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<PAGE> 6
subsidiaries and affiliates during the calendar year in which Employee's
employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans (excluding any pension, retirement
and profit sharing plans of Employer that may be in effect from time to time)
or policies of Employer or its subsidiaries or affiliates or any successor to
all or a portion of the business or assets of Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendre or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries having civil or
criminal liability or responsibility under the FCPA or other applicable United
States law, such action or finding shall constitute "cause" for termination
under this Agreement unless Employer's Board of Directors determines that the
actions found to be in violation of the FCPA or other applicable United States
law were taken in good faith and in compliance with all applicable policies of
Employer. Moreover, to the extent that Employer or any of its subsidiaries is
found or held responsible for any civil or criminal fines or sanctions of any
type under the FCPA or other applicable United States law or suffers other
damages as a result of Employee's actions, Employee shall be responsible for,
and shall reimburse and pay to such Employer an amount of money equal to, such
civil or criminal fines, sanctions or damages. The rights afforded Employer
under this provision are in addition to any and all rights and remedies
otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer owns certain confidential and proprietary information
and trade secrets to which Employee will be given access for the purpose of
carrying out his or her employment responsibilities hereunder. Furthermore,
Employer agrees to provide Employee with confidential
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<PAGE> 7
and proprietary information and trade secrets regarding the Employer and its
subsidiaries and affiliates, in order to assist Employee in satisfying his or
her obligations hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's or
any of its subsidiaries' or affiliates' businesses, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects,
or marketing and merchandising techniques, prospective names, and marks) shall
be disclosed to Employer and are and shall be the sole and exclusive property
of Employer. Upon termination of Employee's employment, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, or any of its
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's or any of its
subsidiaries' or affiliates' premises or otherwise), Employer shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
or her employment; or, if the work is not prepared by Employee within the scope
of his or her employment but is specially ordered by Employer or any of its
subsidiaries or affiliates as a contribution to a collective work, as a part of
a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, or as an instructional text, then the
work shall be considered to be work made for hire and Employer or any of its
subsidiaries or affiliates shall be the author of the work. If such work is
neither prepared by Employee within the scope of his or her employment nor a
work specially ordered that is deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to Employer all of
Employee's worldwide right, title, and interest in and to such work and all
rights of copyright therein.
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<PAGE> 8
5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer or any of its subsidiaries or affiliated companies are
conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment.
The non-competition obligations set forth in subsections (i) and (ii) of this
Section 6.1 shall apply during Employee's employment and for a period of three
(3) years after termination of employment. The obligations set forth in
subsection (iii) of this Section 6.1 with respect to employees shall apply
during Employee's employment and for a period of five (5) years after
termination of employment If Employer or any of its subsidiaries or affiliates
abandons a particular aspect of its business, that is,
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<PAGE> 9
ceases such aspect of its business with the intention to permanently refrain
from such aspect of its business, then this post-employment non-competition
covenant shall not apply to such former aspect of that business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term upon Involuntary
Termination and access to certain confidential and proprietary information and
trade secrets) under this Agreement to justify such restriction. Employee
acknowledges that money damages would not be sufficient remedy for any breach
of this Article 6 by Employee, and Employer or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Article 6 by
terminating any payments then owing to Employee under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach or any
threatened breach, without any requirement for the securing or posting of any
bond in connection with such remedies. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer or any of its
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonable and necessary to
protect the confidential and proprietary information and trade secrets of
Employer and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer.
7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer or any of its subsidiaries' or
affiliates' directors, officers, employees, agents or representatives that are
slanderous, libelous, or defamatory; or that disclose private or confidential
information about Employer or any of its subsidiaries' or affiliates' business
affairs, officers, employees, agents, or representatives; or that constitute an
intrusion into the seclusion or private lives of Employer or any of its
subsidiaries' or affiliates' directors, officers, employees, agents, or
representatives; or that give rise to unreasonable publicity about the private
lives of Employer or any of its subsidiaries' or affiliates' officers,
employees, agents, or representatives; or that place Employer or its
subsidiaries' or affiliates' or its officers, employees, agents, or
representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness Employer or any of its subsidiaries'
or affiliates' or its
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<PAGE> 10
officers, employees, agents, or representatives. A violation or threatened
violation of this prohibition may be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
with a copy to:
Robert D. Remy
Two Memorial City Plaza
820 Gessner, Suite 1360
Houston, Texas 77024
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
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<PAGE> 11
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Employee shall select one
arbitrator, the Employer shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Employee and the
Employer fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Employee or the Employer, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence of this Section 7.7. The decision of a majority of the arbitrators
shall be binding on the Employee, the Employer and its subsidiaries and
affiliates. The arbitration proceeding shall be conducted in Houston, Texas.
Judgment upon any award rendered in any such arbitration proceeding may be
entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
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<PAGE> 12
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by
Employee without the prior written consent of Employer.
7.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests as officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer or any of its subsidiaries or
affiliates and Employee is hereby canceled and Employee hereby irrevocably
waives and renounces all of Employee's rights and claims under any such
agreement or arrangement.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-------------------------------------
B. B. Hollingsworth, Jr.
Chief Executive Officer
/s/ KEVIN H. WHALEN
-----------------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between Group
1 Automotive, Inc., a Delaware corporation having offices at 950 Echo Lane,
Suite 350, Houston, Texas 77024 ("Group 1"), Koons Ford, Inc., a Florida
corporation and a wholly owned subsidiary of Group 1 ("Employer"), and James S.
Carroll, an individual currently residing at 13880 Stirling Road, Fort
Lauderdale, Florida 33330 ("Employee"), to be effective as of March 16, 1998.
For and in consideration of the mutual promises, covenants, and
obligations contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning March 16, 1998 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement. In addition, Employee shall perform management services (as
determined in accordance with Section 1.2 hereof) for Courtesy Ford, Inc.
("Courtesy"), Perimeter Ford, Inc. ("Perimeter") and such other dealerships of
Group 1 as may be mutually agreed upon between Employee and Group 1 (Employer,
Courtesy, Perimeter and such other dealerships are collectively refereed to
herein as the "Dealerships Under Management").
1.2. Employee shall serve as President of Employer, Courtesy, as
Chairman of Perimeter, and shall serve in such offices of the other Dealerships
Under Management as may be mutually agreed by Employee and Group 1. Employee
agrees to serve in the assigned positions and to perform diligently and to the
best of Employee's abilities the duties and services appertaining to such
positions as determined by Group 1, as well as such additional or different
duties and services appropriate to such positions which Employee from time to
time may be reasonably directed to perform by Group 1. Employee shall at all
times comply with and be subject to such policies and procedures as Group 1 and
the Dealerships Under Management may establish from time to time.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of the Dealerships Under Management. Employee may not
engage, directly or indirectly, in any other business, investment, or activity
that interferes with Employee's performance of Employee's duties hereunder, is
contrary to the interests of Employer or any of its subsidiaries or affiliates,
or requires any significant portion of Employee's business time; provided,
however, that Employee may engage in passive personal investments that do not
conflict with the business and affairs of the Employer or any of its
subsidiaries or affiliates or interfere with Employee's performance of his
duties hereunder. It is specifically acknowledged that Employee's investments
in Koons Development Co., K.C. Partnership, World Partner Enterprises, Ltd.
(each owners of the real property of the dealership facilities leased to
subsidiaries of Group 1 under agreements of even date herewith), Shamrock Life
Insurance Company, Shamrock Reinsurance Company, Ltd., VPC Holding Corp.,
Vehicle Protection Corp. (credit life and supplemental warranty entities not
sold to Group 1 under the Agreement and Plan of Reorganization by and among
Group 1, Koons Merger, Inc., Koons Ford, Inc. and the stockholders of Koons
Ford, Inc. dated as of December 17, 1997 (the "Plan of Reorganization"), which
continuing activity will be the "runoff" of business pre- existing this
Agreement) and J. Carroll Enterprises, Inc. (the management company which will
manage Employee's investments in the preceding entities) will not constitute a
violation of this Section 1.3
<PAGE> 2
provided that the management of such investments do not require a significant
portion of Employee's business time or interfere with Employee's performance of
his duties hereunder.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer or any of its subsidiaries or affiliates and to do
no act which would injure the business, interests, or reputation of Employer or
any of its subsidiaries or affiliates. In keeping with these duties, Employee
shall make full disclosure to Employer of all business opportunities pertaining
to the business of Employer or any of its subsidiaries or affiliates and shall
not appropriate for Employee's own benefit business opportunities concerning
the subject matter of the fiduciary relationship. Exercise of the right
granted under Section 10.1(a) of the Plan of Reorganization will not constitute
a violation of this Section 1.4.
1.5. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect
Employer, or any of its subsidiaries or affiliates, involves a possible
conflict of interest. In keeping with Employee's fiduciary duties to Employer
and its subsidiaries and affiliates, Employee agrees that Employee shall not
knowingly become involved in a conflict of interest with Employer, or any of
its subsidiaries or affiliates, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that Employee shall disclose
to Group 1's General Counsel (who shall be Group 1's outside General Counsel
unless Group 1 has employed an inside General Counsel) any facts which might
involve such a conflict of interest that has not been approved by Group 1's
President. Employer, Group 1 and Employee recognize that it is impossible to
provide an exhaustive list of actions or interests which constitute a "conflict
of interest". Moreover, Employer, Group 1 and Employee recognize there are
many borderline situations. In some instances, full disclosure of facts by
Employee to Group 1's General Counsel may be all that is necessary to enable
Employer or its subsidiaries or affiliates to protect their interests. In
others, if no improper motivation appears to exist and the interests of
Employer or its subsidiaries or affiliates have not suffered, prompt
elimination of the outside interest will suffice. In still others, it may be
necessary for Employer or Group 1 to terminate the employment relationship.
Employee agrees that Group 1's determination as to whether a conflict of
interest exists shall be conclusive. Employer and Group 1 reserve the right to
take such action as, in their judgment, will end the conflict. It is
acknowledged that the outside activities described in Sections 1.3 and 1.4 do
not constitute a violation of this Section 1.5.
2. COMPENSATION AND BENEFITS:
2.1. (i) Employee's initial base salary under this Agreement shall
be $300,000.00 per annum and shall be paid in semi-monthly installments in
accordance with Employer's standard payroll practice. Employee's base salary
may be increased from time to time by Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
(ii) In addition to the compensation of Sections 2.1(i) and
2.2, employee will be entitled to $260,000.00 per annum, paid in semi-monthly
installments, for each of the five years subsequent to the date of this
Agreement.
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<PAGE> 3
2.2 Employee's participation in bonus plans shall be governed by
the bonus and incentive plans adopted by the Board of Directors of Employer in
which Employee is a participant.
2.3. If Employee is granted stock options, Employee will enter into
a separate written stock option agreement pursuant to which Employee shall be
granted the option to acquire common stock of Group 1 subject to the terms and
conditions of Group 1's 1996 Stock Incentive Plan and the stock option
agreement entered into thereunder. The number of shares, exercise price per
share and other terms of the options shall be as specified in such other
written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of Employer, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for five (5) years from
March 16, 1998 through March 15, 2003. Should Employee remain employed by
Employer beyond the expiration of the Term, such employment shall convert to a
month-to-month relationship terminable at any time by either Employer or
Employee for any reason whatsoever, with or without cause, upon thirty days
notice. Upon such termination of the continued at-will employment relationship
by either Employer or Employee for any reason whatsoever, all future
compensation to which Employee is entitled and all future benefits for which
Employee is eligible shall cease and terminate. Employee shall be entitled to
pro rata salary through the date of such termination, and any quarterly
incentive compensation previously payable with respect to full quarters
completed prior to the date of termination, but Employee shall not be entitled
to any incentive compensation with respect to full quarters not completed prior
to the date of termination. Upon termination of employment, Employee shall
repay to Employer all advances received by Employee from Employer or any of its
subsidiaries or affiliates, including all advances drawn against any bonus.
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<PAGE> 4
3.2. Notwithstanding any other provisions of this Agreement,
Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
(i) For "cause" upon the determination by Group 1's Board of
Directors that "cause" exists for the termination of the
employment relationship. As used in this Section 3.2(i), the
term "cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony; or (c) Employee's material breach of
any material provision of this Agreement or corporate code or
policy, which breach remains uncorrected for 30 days following
Employer's delivery of written notice of such breach to
Employee. It is expressly acknowledged and agreed that the
decision as to whether "cause" exists for termination of the
employment relationship by Employer is delegated to Group 1's
Board of Directors for determination. Employee, if he so
requests, after reasonable notice of such Board of Directors
meeting, shall be entitled to be heard before the Board of
Directors;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of Group 1's Board of Directors;
(iii) upon Employee's death; or
(iv) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by Employer's Board of Directors
renders him mentally or physically incapable of performing the
duties and services required of Employee, and which will
continue in the reasonable opinion of such doctor for a period
of not less than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The effect of the
employment relationship being terminated pursuant to Section 3.2(iii) as a
result of Employee's death is specified in Section 3.7. The effect of the
employment relationship being terminated pursuant to Section 3.2(iv) as a
result of the Employee becoming incapacitated is specified in Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer of any material provision of
this Agreement or a material breach by Group 1 of any material
provision of the Plan of Reorganization, in each case which
remains uncorrected for 30 days following
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<PAGE> 5
written notice of such breach by Employee to Employer's or
Group 1's Board of Directors, as appropriate;
(ii) the dissolution of Employer; or
(iii) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i) or 3.3(ii); the
effect of such termination is specified in Section 3.5. The termination of
Employee's employment by Employee shall constitute a "Voluntary Termination" if
made pursuant to Sections 3.3(iii); the effect of such termination is specified
in Section 3.4.
3.4. Subject to the provisions of Section 3.12, upon a "Voluntary
Termination" of the employment relationship by Employee or a termination of the
employment relationship for "Cause" by Employer, all future compensation to
which Employee is entitled and all future benefits for which Employee is
eligible shall cease and terminate as of the date of termination. Employee
shall be entitled to pro rata salary through the date of such termination, and
any quarterly incentive compensation previously payable with respect to full
quarters completed prior to the date of termination, but Employee shall not be
entitled to any incentive compensation with respect to full quarters not
completed prior to the date of termination.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii) or 3.3(i), Employee
shall be entitled, in consideration of Employee's continuing obligations
hereunder after such termination (including, without limitation, Employee's
non-competition obligations), to receive the compensation specified in Section
2.1, payable bi-weekly, as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term of this
Agreement. Upon an Involuntary Termination of the employment relationship by
Employee pursuant to Sections 3.3(ii), Employee shall be entitled, in
consideration of Employee's continuing obligations hereunder after such
termination (including, without limitation, Employee's non- competition
obligations), to receive in a lump sum payment the compensation specified in
Section 2.1 as if Employee's employment (which shall cease on the date of such
Involuntary Termination) had continued for the full Term of this Agreement.
Employee shall not be under any duty or obligation to seek or accept other
employment following Involuntary Termination and the amounts due Employee
hereunder shall not be reduced or suspended if Employee accepts subsequent
employment. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Employer or its subsidiaries or affiliates, and
Employer's and its subsidiaries' and affiliates' sole and exclusive liability
to Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship.
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer or any of its subsidiaries or affiliates based
on Involuntary Termination for any monies other than those specified in Section
3.5. If Employee breaches this covenant, Employer and its subsidiaries and
affiliates shall be entitled to recover from Employee all sums expended by
Employer and its subsidiaries and affiliates (including costs and attorneys'
fees) in connection with such suit, claim, demand or cause of action. Employer
and its subsidiaries and affiliates shall not be entitled to offset any of the
amounts specified in the immediately preceding sentence against amounts
otherwise owing by
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<PAGE> 6
Employer and its subsidiaries and affiliates to Employee prior to a final
determination under the terms of the arbitration provisions of this Agreement
that Employee has breached the covenant contained in this Section 3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination
which has not been paid, but Employee's heirs, administrators, or legatees
shall not be entitled to any individual incentive compensation with respect to
the operations of the Employer and its subsidiaries and affiliates during the
calendar year in which Employee's employment with Employer is terminated.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination which has not been paid, but Employee
shall not be entitled to any individual incentive compensation with respect to
the operations of the Employer and its subsidiaries and affiliates during the
calendar year in which Employee's employment with Employer is terminated.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans (excluding any pension, retirement
and profit sharing plans of Employer that may be in effect from time to time)
or policies of Employer or its subsidiaries or affiliates or any successor to
all or a portion of the business or assets of Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer or any of its
subsidiaries or affiliates during the employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment.
3.12. Notwithstanding anything to the contrary in this Section 3,
any compensation payable to Employee under Section 2.1.(ii) of this Agreement
will remain payable according to the terms thereof and will not be affected by
any termination of employment under this Agreement.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of Employer and its subsidiaries and
affiliates, including specifically, without limitation, the United States
Foreign Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as the
FCPA may hereafter be amended, and/or its successor statutes. If Employee
pleads guilty to or nolo contendre or admits civil or criminal liability under
the FCPA or other applicable United States law, or if a court finds that
Employee has personal civil or criminal liability under the FCPA or other
applicable United States law, or if a court finds that Employee committed an
action resulting in Employer or any of its subsidiaries or affiliates having
civil or criminal liability or responsibility under the FCPA or other
-6-
<PAGE> 7
applicable United States law, such action or finding shall constitute "cause"
for termination under this Agreement unless Employer's Board of Directors
determines that the actions found to be in violation of the FCPA or other
applicable United States law were taken in good faith and in compliance with
all applicable policies of Employer. Moreover, to the extent that Employer or
any of its subsidiaries or affiliates is found or held responsible for any
civil or criminal fines or sanctions of any type under the FCPA or other
applicable United States law or suffers other damages as a result of Employee's
actions, Employee shall be responsible for, and shall reimburse and pay to such
Employer an amount of money equal to, such civil or criminal fines, sanctions
or damages. The rights afforded Employer under this provision are in addition
to any and all rights and remedies otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. Employer and its subsidiaries and affiliates own certain
confidential and proprietary information and trade secrets to which Employee
will be given access for the purpose of carrying out his or her employment
responsibilities hereunder. Furthermore, Employer agrees to provide Employee
with confidential and proprietary information and trade secrets regarding the
Employer and its subsidiaries and affiliates, in order to assist Employee in
satisfying his or her obligations hereunder.
5.2 All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to Employer's or
any of its subsidiaries' or affiliates' businesses, products or services
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects,
or marketing and merchandising techniques, prospective names, and marks) shall
be disclosed to Employer and are and shall be the sole and exclusive property
of Employer. Upon termination of Employee's employment, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Employer.
5.3. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer or its subsidiaries or affiliates, or
make any use thereof, except in the carrying out of his employment
responsibilities hereunder. As a result of Employee's employment by Employer,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of Employer and
its subsidiaries and affiliates. Employee also agrees to preserve and protect
the confidentiality of such third party confidential information and trade
secrets to the same extent, and on the same basis, as Employer's or any of its
subsidiaries' or affiliates' confidential business information and trade
secrets. Information which is common knowledge within the automotive retailing
industry is not included under the provisions of this Section 5.3.
5.4. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic
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<PAGE> 8
databases, drawings, maps, architectural renditions, models, manuals,
brochures, or the like) relating to Employer's or any of its subsidiaries' or
affiliates' businesses, products, or services, whether such work is created
solely by Employee or jointly with others (whether during business hours or
otherwise and whether on Employer's or any of its subsidiaries' or affiliates'
premises or otherwise), Employer shall be deemed the author of such work if the
work is prepared by Employee in the scope of his or her employment; or, if the
work is not prepared by Employee within the scope of his or her employment but
is specially ordered by Employer or any of its subsidiaries or affiliates as a
contribution to a collective work, as a part of a motion picture or other
audiovisual work, as a translation, as a supplementary work, as a compilation,
or as an instructional text, then the work shall be considered to be work made
for hire and Employer or any of its subsidiaries or affiliates shall be the
author of the work. If such work is neither prepared by Employee within the
scope of his or her employment nor a work specially ordered that is deemed to
be a work made for hire, then Employee hereby agrees to assign, and by these
presents does assign, to Employer all of Employee's worldwide right, title, and
interest in and to such work and all rights of copyright therein.
5.5. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, or any of its subsidiaries or
affiliates and their nominees, at any time, in the protection of Employer's or
any of its subsidiaries' or affiliates' worldwide right, title, and interest in
and to information, ideas, concepts, improvements, discoveries, and inventions,
and its copyrighted works, including without limitation, the execution of all
formal assignment documents requested by Employer or any of its subsidiaries or
affiliates or their nominees and the execution of all lawful oaths and
applications for applications for patents and registration of copyright in the
United States and foreign countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid and extended to Employee hereunder, and as an additional incentive
for Employer to enter into this Agreement, Employer and Employee agree to the
non-competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, within twelve (12) miles of
or in the county of any Dealership Under Management as of the date of
termination of the employment relationship or any of Employee's Dealerships
Under Management during the previous twelve months:
(i) engage in any business competitive with any line of business
conducted by Employer or any of its subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer or any of its subsidiaries or
affiliates;
(iii) encourage or induce any current or former employee of Employer
or any of its subsidiaries or affiliates to leave the
employment of Employer or any of its subsidiaries or
affiliates or proselytize, offer employment, retain, hire or
assist in the hiring of any such employee by any person,
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<PAGE> 9
association, or entity not affiliated with Employer or any of
its subsidiaries or affiliates; provided, however, that
nothing in this subsection (iii) shall prohibit Employee from
offering employment to any prior employee of Employer or any
of its subsidiaries or affiliates who was not employed by
Employer or any of its subsidiaries or affiliates at any time
in the twelve (12) months prior to the termination of
Employee's employment (i.e., this subsection (iii) shall not
apply to any prior employee who was not employed by Employer
during the twelve (12) months preceding the termination of
Employee).
6.2. The non-competition obligations set forth in subsections (i),
(ii) and (iii) of this Section 6.1 shall apply during Employee's employment and
for a period of three (3) years after termination of employment. If Employer
and its subsidiaries and affiliates abandon a particular aspect of their
business, that is, ceases such aspect of their business with the intention to
permanently refrain from such aspect of their business, then this
post-employment non- competition covenant shall not apply to such former aspect
of that business.
Further, Employee will not engage in these restricted activities or
assist in the industry consolidation efforts on behalf of any publicly held
entity in the automotive retailing industry (nor any entity with the ultimate
intention of becoming a publicly held entity or being acquired in any manner by
a publicly held entity), regardless of geographic area or market; provided,
however, that this paragraph shall not prohibit Employee from selling, to a
publicly held entity, any dealership acquired by him in full compliance with
his post-employment non-competition obligations hereunder and held by him for
at least one year.
6.3. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses during the period provided for
above, but acknowledges that Employee will receive sufficiently high
remuneration and other benefits (e.g., the right to receive compensation under
Section 3.5 for the remainder of the Term upon Involuntary Termination and
access to certain confidential and proprietary information and trade secrets)
under this Agreement to justify such restriction. Employee acknowledges that
money damages would not be a sufficient remedy for any breach of this Article 6
by Employee, and Employer or any of its subsidiaries or affiliates shall be
entitled to enforce the provisions of this Article 6 by terminating any
payments then owing to Employee under this Agreement (except for payments
payable to Employee under Section 2.1(ii)) and/or to specific performance and
injunctive relief as remedies for such breach or any threatened breach, without
any requirement for the securing or posting of any bond in connection with such
remedies. Such remedies shall not be deemed the exclusive remedies for a
breach of this Article 6, but shall be in addition to all remedies available at
law or in equity to Employer or any of its subsidiaries or affiliates,
including, without limitation, the recovery of damages from Employee and his
agents involved in such breach.
6.4. It is expressly understood that the restrictions contained in
this Article 6 are related to and result from the agreements of Employer and
Employee in Article 5 and agreed that Employer and Employee consider the
restrictions contained in this Article 6 to be reasonably necessary to protect
the legitimate business interests of Employer and its subsidiaries and
affiliates, including the confidential and proprietary information and trade
secrets of Employer and its subsidiaries and affiliates. Nevertheless, if any
of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly
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<PAGE> 10
broad as to geographic area or time, or otherwise unenforceable, the parties
intend for the restrictions therein set forth to be modified by such courts so
as to be reasonable and enforceable and, as so modified by the court, to be
fully enforced.
6.5. Notwithstanding the foregoing, the non-competition obligations
of this Article 6 shall not apply to (x) the leasing of property or facilities
owned by the Employee or his affiliates to a competitor of Group 1 if such
property or facilities were previously leased to Group 1 under a lease
agreement which Group 1 materially breached, failed to renew or terminated (for
reasons other than lessor's breach), or (y) the operation and management of any
dealership purchased pursuant to Section 10.1(b) of the Plan of Reorganization.
6.6. The parties hereto expressly acknowledge that Group 1's and
Employer's rights under this Article 6 are assignable and that such rights
shall be fully enforceable by any of Group 1's or Employer's assignees or
successors in interest.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Employer. For purposes of this Agreement the term "control" (including the
terms "controlled," "controlled by" and "under common control with") means the
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management or policies of an individual or
entity, whether through the ownership of stock or as a trustee or executor, by
contract or credit arrangement or otherwise.
7.2. Employer, Group 1 and Employee shall refrain, both during the
employment relationship and after the employment relationship terminates, from
making any negative or critical statements about each other or any of their
respective affiliates or such entities' directors, officers, employees, agents
or representatives or disclosing any conflicts with same, or from publishing
any oral or written statements about each other or any of their respective
subsidiaries' or affiliates' directors, officers, employees, agents or
representatives that are slanderous, libelous, or defamatory; or that disclose
private or confidential information about each other or any of their respective
subsidiaries' or affiliates' business affairs or about their respective
directors, officers, employees, agents, or representatives; or that constitute
an intrusion into the seclusion or private lives of each other or any of their
respective affiliates, directors, officers, employees, agents, or
representatives; or that give rise to unreasonable publicity about the private
lives of each other or any of their respective subsidiaries, affiliates,
officers, employees, agents, or representatives; or that place each other or
any of their respective affiliates, officers, employees, agents, or
representatives in a false light before the public; or that constitute a
misappropriation of the name or likeness of each other or any of their
respective subsidiaries, affiliates, officers, employees, agents, or
representatives. A violation or threatened violation of this prohibition may
be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
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<PAGE> 11
If to Employer to:
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, TX 77024
Attn: Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
Either Employer or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Florida, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
7.7. Any and all claims, demands, causes of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving Employer, its
subsidiaries and affiliates and Employee (all of which are referred to herein
as "Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and
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<PAGE> 12
decided by binding arbitration pursuant to the Federal Arbitration Act in
accordance with the Commercial Arbitration Rules then in effect with the
American Arbitration Association. In the arbitration proceeding the Employee
shall select one arbitrator, the Employer shall select one arbitrator and the
two arbitrators so selected shall select a third arbitrator. Should one party
fail to select an arbitrator within five days after notice of the appointment
of an arbitrator by the other party or should the two arbitrators selected by
the Employee and the Employer fail to select an arbitrator within ten days
after the date of the appointment of the last of such two arbitrators, any
person sitting as a Judge of the United States District Court of the Southern
District of Florida, upon application of the Employee or the Employer, shall
appoint an arbitrator to fill such space with the same force and effect as
though such arbitrator had been appointed in accordance with the immediately
preceding sentence of this Section 7.7. The decision of a majority of the
arbitrators shall be binding on the Employee, the Employer and its subsidiaries
and affiliates. The arbitration proceeding shall be conducted in Broward
County, Florida. Judgment upon any award rendered in any such arbitration
proceeding may be entered by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Florida; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Florida law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer, its subsidiaries and affiliates and any other person, association,
or entity which may hereafter acquire or succeed to all or a portion of the
business or assets of Employer by any means, whether direct or indirect, by
purchase, merger, consolidation, or otherwise. Employee's rights and
obligations under this Agreement are personal and such rights, benefits, and
obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, by
Employee without the prior written consent of Employer.
7.9. Except as provided in (1) written company policies promulgated
by Employer dealing with issues such as securities trading, business ethics,
governmental affairs and political contributions, consulting fees, commissions
and other payments, compliance with law, investments and outside business
interests of officers and employees, reporting responsibilities, administrative
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer
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<PAGE> 13
or any of its subsidiaries or affiliates and Employee is hereby canceled and
Employee hereby irrevocably waives and renounces all of Employee's rights and
claims under any such agreement or arrangement.
7.10. The reasonable costs of resolution of any dispute arising
under this Agreement shall be borne by the party losing such dispute.
7.11. The parties hereto expressly acknowledge that Group 1's and
Employer's rights under this Agreement are assignable and that such rights
shall be fully enforceable by any of Group 1's or Employer's assignees or
successors in interest.
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<PAGE> 14
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ JOHN T. TURNER
--------------------------
Name: John T. Turner
Title: Senior Vice President
KOONS FORD, INC.
By: /s/ WILLIAM C. CARROLL
-------------------------------------
Name: William C. Carroll
Title: Vice President
/s/ JAMES S. CARROLL
---------------------------------
Employee
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<PAGE> 1
EXHIBIT 10.39
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
GROUP 1 AUTOMOTIVE, INC.,
KOONS MERGER, INC.,
A WHOLLY OWNED SUBSIDIARY OF GROUP 1 AUTOMOTIVE, INC.,
KOONS FORD, INC.
AND THE STOCKHOLDERS OF KOONS FORD, INC.
DATED AS OF
DECEMBER 17, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE MERGER
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.15 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.17 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.18 Leased Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.20 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.24 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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3.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
4.1 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 No Knowledge of Misrepresentations or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Conduct of Business by the Company Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.14 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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6.15 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.16 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.17 Section 338(h)(10) Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.18 Phase I Environmental Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Delivery of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.6 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . 27
8.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 27
8.3 Additional Conditions Precedent to Obligations of the Stockholders. . . . . . . . . . . . . . . . 29
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Agreement by Group 1 to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Section 338(h)(10) Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.2 Certain Post-Closing Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.3 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.4 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.6 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.8 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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10.9 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.10 Legal Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.11 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.18 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated as
of the 17th day of December, 1997, is among Group 1 Automotive, Inc., a
Delaware corporation ("Group 1"), Koons Merger, Inc., a Florida corporation and
a wholly owned subsidiary of Group 1 (Merger Sub"), Koons Ford, Inc., a Florida
corporation ("the Company") and the persons listed on the signature pages
hereof under the caption "Stockholders" (collectively, the "Stockholders," and
each of those persons, individually, a "Stockholder").
RECITALS:
WHEREAS, the parties to this Agreement have determined it is in their
best long-term interests to effect a business combination pursuant to which:
(A) Merger Sub will merge with and into the Company on
the terms and subject to the conditions set forth herein (the
"Merger");
(B) Group 1 will acquire by merger (the "Other Mergers")
Courtesy Ford, Inc., a Florida corporation and Perimeter Ford, Inc., a
Delaware corporation (each an "Other Company" and, collectively with
the Company, the "Companies") pursuant to agreements entered into
among those entities and their equity owners, Group 1 and subsidiaries
of Group 1 (collectively, the "Other Agreements"); and
WHEREAS, the respective Boards of Directors of Group 1, Merger Sub and
the Company have approved this Agreement and the Merger pursuant to the terms
and conditions herein set forth.
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (c) "or" is not exclusive; (d) "including" means
"including, without limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one
gender shall be construed to apply to each gender; (h) the terms "hereof,"
"herein," "hereby," "hereto" and derivative or similar words refer to
<PAGE> 7
this entire Agreement; (i) the terms "Article" or "Section" shall refer to the
specified Article or Section of this Agreement; and (j) section and paragraph
headings in this Agreement are for convenience only and shall not affect the
construction of this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and pursuant to the Agreement and Plan of Merger
between Merger Sub and the Company, a form of which is attached hereto as
Exhibit A (the "Plan of Merger"), at the Effective Time (as hereinafter
defined) Merger Sub shall be merged with and into the Company, the separate
existence of the Merger Company shall cease, and the Company shall (i) continue
as the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Koons Ford, Inc.", (ii) be governed by
the laws of Florida, (iii) maintain a registered office in the State of Florida
at 3101 N. State Road 7, Hollywood, Florida 33021 and (iv) succeed to and
assume all of the rights, properties and obligations of Merger Sub and the
Company in accordance with the Florida Business and Corporation Act. Subject
to the terms and conditions of this Agreement and the Plan of Merger, Group 1
agrees, at or prior to the Closing, to cause Merger Sub to execute and deliver,
the Plan of Merger in form and substance substantially similar to the form
attached hereto as Exhibit A. Subject to the terms and conditions of this
Agreement and the Plan of Merger, the Stockholders agree, at or prior to the
Closing, to cause the Company to execute and deliver the Plan of Merger in form
and substance substantially similar to the form attached hereto as Exhibit A.
2.2 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, Houston, Texas 77002 on the last day of
the month in which all conditions set forth in Article VIII hereof are
satisfied or waived or at such other time and place and on such other date as
Group 1 and the Company shall agree; provided, that the conditions set forth in
Article VIII shall have been satisfied or waived at or prior to such time. The
date on which the Closing occurs is herein referred to as the "Closing Date."
2.3 Effective Time. As soon as practicable after all conditions
set forth in Article VIII hereof are satisfied or waived, the parties hereto
will file with the Secretary of State of the State of Florida, articles of
merger in such form as required by, and executed in accordance with, the
relevant provisions of the Florida Business Corporation Act, with instructions
that such articles of merger are to be issued and effective as of the Closing
Date (the effective time of the issuance of a certificate of merger by the
Secretary of State of the State of Florida being the "Effective Time").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
The Stockholders hereby represent and warrant to Group 1 and Merger
Sub as follows:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with all requisite corporate power and
authority to own or lease its properties and conduct its business as now owned,
leased or conducted and to execute, deliver and perform this Agreement and each
instrument, document or agreement required hereby to be executed and delivered
by it at, or prior to, the Closing. True and complete copies of the articles
of incorporation and bylaws (or other organizational documents) of the Company
are included in Schedule 3.1. The minute books of the Company previously made
available to Group 1 are complete and accurately reflect all action taken prior
to the date of this Agreement by their respective boards of directors and
stockholders in their capacities as such.
3.2 Qualification. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of the business as now conducted or the character of the property
owned or leased by it makes such qualification necessary. Schedule 3.2 sets
forth a list of the jurisdictions in which the Company is qualified to do
business, if any.
3.3 Authorization. The execution and delivery by the Company, the
performance of its obligations pursuant to this Agreement and the execution,
delivery and performance of each instrument, document or agreement required
hereby to be executed and delivered by the Company at, or prior to, the Closing
have been duly and validly authorized by all requisite corporate action on the
part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or any other instrument,
document or agreement required hereby to be executed by the Company at, or
prior to, the Closing. The Board of Directors of the Company has voted to
recommend approval of the Merger to the stockholders of the Company and such
determination remains in effect. THE EXECUTION OF THIS AGREEMENT BY THE
STOCKHOLDERS CONSTITUTES UNANIMOUS STOCKHOLDER CONSENT TO THE MERGER, THE TERMS
AND PROVISIONS OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY
WITHIN IN ACCORDANCE WITH SECTION 607.0704 FLORIDA STATUTES, AND THIS EXECUTED
AGREEMENT SHALL BE FILED IN THE MINUTE BOOKS OF THE COMPANY AS EVIDENCE OF SUCH
SHAREHOLDER ACTION. This Agreement has been, and each instrument, document or
agreement required hereby to be executed and delivered by the Company at, or
prior to, the Closing will then be, duly executed and delivered by it, and this
Agreement constitutes, and, to the extent it purports to obligate the Company,
each such instrument, document or agreement will constitute (assuming due
authorization, execution and delivery by each other party thereto), the legal,
valid and binding obligation of the Company enforceable against it in
accordance with its terms.
3.4 Approvals. Except for the applicable filings with the
Secretary of State of the State of Florida relating to the Merger and except
for applicable requirements, if any, of the HSR Act, and
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<PAGE> 9
except to the extent set forth in Schedule 3.4, no filing or registration with,
and no consent, approval, authorization, permit, certificate or order of any
Court or Governmental Authority is required by any applicable Law or by any
applicable Order or any applicable rule or regulation of any Court or
Governmental Authority to permit the Company to execute, deliver or perform
this Agreement or any instrument required hereby to be executed and delivered
by it at the Closing.
3.5 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.5, neither the execution and delivery by the Company of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by the Company of its obligations under this Agreement or any such instrument,
document or agreement will (assuming receipt of all consents, approvals,
authorizations, permits, certificates and orders disclosed as requisite in
Schedule 3.4) (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) any applicable permits
received from any Governmental Authority (iv) the articles of incorporation or
bylaws or other organizational documents of the Company or (v) any contract or
agreement to which the Company is a party or by which it, or any of its
properties, is bound, or (b) result in the creation or imposition of any Lien
on any of the properties or assets of the Company, or (c) result in the
cancellation, forfeiture, revocation, suspension or adverse modification of any
existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority, or (d) with the passage of time
or the giving of notice or the taking of any action of any third party have any
of the effects set forth in clause (a), (b) or (c) of this Section.
3.6 Subsidiaries; Equity Investments. The Company has not
controlled directly or indirectly, or had any direct or indirect equity
participation in any corporation during the five-year period preceding the date
hereof.
3.7 Capitalization.
(a) The authorized capital stock of the Company consists
of 5,000 shares of common stock, par value $.10 per share, of which
1,000 shares are issued and outstanding (no shares being held in
treasury) (the "Company Common Stock"). Each outstanding share of the
Company Common Stock has been duly authorized, is validly issued,
fully paid and nonassessable and was not issued in violation of any
preemptive rights of any stockholder. Set forth in Schedule 3.7(a)
are the names, social security or I.R.S. identification numbers and
addresses (as reflected in the corporate records of the Company) of
each record holder of the Company Common Stock, together with the
number of shares held by each such person.
(b) There is not outstanding any capital stock or other
security, including without limitation any option, warrant or right,
entitling the holder thereof to purchase or otherwise acquire any
shares of capital stock of the Company. Except as disclosed in
Schedule 3.7(b), there are no contracts, agreements, commitments or
arrangements obligating the Company (i) to issue, sell, pledge,
dispose of or encumber any shares of, or any options, warrants or
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<PAGE> 10
rights of any kind to acquire, or any securities that are convertible
into or exercisable or exchangeable for, any shares of, any class of
capital stock of the Company or (ii) to redeem, purchase or acquire or
offer to acquire any shares of, or any outstanding option, warrant or
right to acquire, or any securities that are convertible into or
exercisable or exchangeable for, any shares of, any class of capital
stock of the Company.
3.8 Financial Statements. Included in Schedule 3.8 are copies of
the financial statements of the Company consisting of (i) an unaudited balance
sheet of the Company as of October 31, 1997 (the "Interim Balance Sheet") and
the related unaudited statement of income for the ten month period then ended
(collectively with the Interim Balance Sheet, the "Company Interim Financial
Statements") and (ii) an audited balance sheet of the Company as of December
31, 1996 (the "Company 1996 Balance Sheet") and the related audited statements
of income, changes in stockholders' equity and cash flows for the year then
ended (including the notes thereto) (collectively with the Company 1996 Balance
Sheet, the "Company 1996 Financial Statements") and (collectively with the
Company Interim Financial Statements, the "Company Financial Statements"). The
Company Interim Financial Statements are true and complete in all material
respects. The Company 1996 Financial Statements are true and complete in all
respects. The Company Financial Statements present fairly the financial
position of the Company and the results of its operations and changes in
financial position as of the dates and for the periods indicated therein in
conformity with GAAP. The Company Financial Statements do not omit to state
any liabilities, absolute or contingent, required to be stated therein in
accordance with GAAP. All accounts receivable of the Company reflected in the
Company Financial Statements and as incurred since October 31, 1997 represent
sales made in the ordinary course of business, are collectible (net of any
reserves for doubtful accounts shown in the Company Interim Financial
Statements) in the ordinary course of business and, except as set forth in
Schedule 3.8, are not in dispute or subject to counterclaim, set-off or
renegotiation. Schedule 3.8 contains an aged schedule of accounts receivable
included in the Interim Balance Sheet. References regarding GAAP compliance in
this Section 3.8 shall be qualified by the exceptions set forth in Section 3.9
below.
3.9 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet, or
relating to the items listed below in this Section 3.9, or as set forth in
Schedule 3.9, the Company does not have any material liabilities or obligations
of any nature whether absolute, accrued, contingent or otherwise, and whether
due or to become due. The reserves reflected in the Interim Balance Sheet are
adequate, appropriate and reasonable in accordance with GAAP, except for
possible adjustments to current year's depreciation provisions, LIFO
adjustments, management company fees, profit sharing provisions, general
manager year-end bonuses and the month-end payroll tax accrual.
3.10 Certain Agreements. Except as set forth in Schedule 3.10,
neither the Company, nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a noncompetition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
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3.11 Contracts and Commitments. Schedule 3.11 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of its officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.12 Absence of Changes. Except as set forth in Schedule 3.12,
there has not been, since October 31, 1997, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.12, since
October 31, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, the
Company makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since October 31,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
3.13 Tax Matters.
(a) Except as set forth in Schedule 3.13(a) (and except
for filings and payments of assessments the failure of which to file
or pay will not materially adversely affect the Company), (i) all Tax
Returns which are required to be filed on or before the Closing Date
by or with respect to the Company have been or will be duly and timely
filed, (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) all Taxes which have
become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, (iv) all
withholding Tax requirements imposed on or with respect to the Company
have been or will be satisfied in full, and (v) no penalty, interest
or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) All Tax Returns of, or with respect to, the Company
have been audited by the applicable governmental authority, or the
applicable statute of limitations has expired, for all periods up to
and including December 31, 1996 except as included on Schedule
3.13(b).
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or
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with respect to the Company, other than those disclosed (and to which
are attached true and complete copies of all audit or similar reports)
in Schedule 3.13(c).
(d) Except as set forth in Schedule 3.13(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company, or any
waiver or agreement for any extension of time for the assessment or
payment of any Tax of or with respect to the Company.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes (except for payroll tax accrual for
October 31, 1997), whether or not assessed or disputed, which are, or
are hereafter found to be, or to have been, due by or with respect to
the Company up to and through the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company shall be terminated prior to the Closing Date and no
payments shall be due or will become due by the Company on or after
the Closing Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 3.13(g), the Company
will not be required to include any amount in income for any taxable
period as a result of a change in accounting method for any taxable
period pursuant to any agreement with any Tax authority with respect
to any such taxable period.
(h) The Company has not consented to have the provisions
of section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(i) The Company has been a validly electing S corporation
within the meaning of sections 1361 and 1362 of the Code at all times
since January 1, 1985 and the Company will be an S corporation up to
and including the Closing Date. From the end of its most recent tax
year through the Closing Date, each Stockholder has been an individual
resident of the United States or an estate or trust described in
section 1361(c)(2) of the Code that is permitted to hold the stock of
an S corporation. The Company will not be liable for any tax under
section 1374 of the Code in connection with the deemed sale of the
Company's assets caused by the Section 338(h)(10) Elections. In the
past 10 years, the Company has not (a) acquired assets from another
corporation in a transaction in which the Company's federal income tax
basis in the acquired assets was determined, in whole or in part, by
reference to the federal income tax basis of the acquired assets (or
any other property) in the hands of the transferor or (b) acquired the
stock of any corporation which is a qualified subchapter S subsidiary,
as defined in section 1361(b)(3)(B) of the Code.
3.14 Litigation.
(a) Except as set forth in Schedule 3.14(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Company,
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threatened against or specifically affecting the Company before or by
any Court or Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.14(b), the Company has performed
all obligations required to be performed by it to date and is not in
default under, and, to the knowledge of the Company, no event has
occurred which, with the lapse of time or action by a third party
could result in a default under any contract or other agreement to
which any of the Company is a party or by which it or any of its
properties is bound or under any applicable Order of any Court or
Governmental Authority.
3.15 Compliance with Law. Except as set forth in Schedule 3.15,
the Company is in compliance with all applicable statutes and other applicable
laws and all applicable rules and regulations of all federal, state, foreign
and local governmental agencies and authorities.
3.16 Permits. Except as set forth in Schedule 3.16, the Company
owns or holds all franchises, licenses, permits, consents, approvals and
authorizations of all Governmental Authorities necessary for the conduct of its
business. A listing of all such items, with their expiration dates, is
included in Schedule 3.16. Each franchise, license, permit, consent, approval
and authorization so owned or held is in full force and effect, and the Company
is in compliance with all of its obligations with respect thereto, and no event
has occurred which allows, or upon the giving of notice or the lapse of time or
otherwise would allow, revocation or termination of any franchise, license,
permit, consent, approval or authorization so owned or held.
3.17 Employee Benefit Plans and Policies.
(a) Schedule 3.17(a) provides a description of each of
the following which is sponsored, maintained or contributed to by any
of the Company for the benefit of its employees, or has been so
sponsored, maintained or contributed to within six years prior to the
Closing Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not described in Section 3.17(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
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(b) The Company does not contribute to or have an
obligation to contribute to, and has not at any time contributed to or
had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in Schedule 3.17(c),
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would adversely affect such qualified status;
(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan or Benefit Program
or Agreement than it otherwise would or (B) create or give
rise to any additional vested rights or service credits under
any Plan or Benefit Program or Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
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<PAGE> 15
(e) Termination of employment of any employee of any of
the Company after consummation of the transactions contemplated by
this Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) Schedule 3.17(g) sets forth by name and job
description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.18 Leased Properties.
(a) On the Closing Date, the Company will not own any
real property or any interest therein. Schedule 3.18(a) sets forth
the location and size of, principal improvements and buildings on, and
Liens on all parcels of real estate leased by the Company
(individually a "Leased Property" and collectively the "Leased
Properties"). True and correct copies of all Liens are attached to
Schedule 3.18(a). Except as set forth in Schedule 3.18(a), with
respect to each Leased Property:
(i) the Company has good and valid leasehold
interests in each parcel of its Leased Property, free and
clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
the Company or the Stockholders, threatened condemnation
proceedings, suits or administrative actions relating to the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) except as set forth in Schedule 3.18(a)(iii),
the legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
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<PAGE> 16
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(v);
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Leased Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.18(a)(vii)
who are in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used; and
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(xi).
(b) Except as set forth in Schedule 3.18(b), the Company
has good and marketable title to all of its Assets, free and clear of
any Liens or restrictions on use. The Fixed Assets currently in use
for the business and operations of the Company are in good operating
condition, normal wear and tear excepted and have been maintained in
accordance with sound industry practices.
3.19 Insurance. Schedule 3.19 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.19, no
insurer has denied
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coverage of any such claims or actions or reserved its rights in respect of or
rejected any of such claims. The Company has not received any notice or other
communication from any such insurer canceling or materially amending any of
such insurance policies, and no such cancellation is pending or threatened.
The execution of this Agreement and the consummation of the transactions
contemplated hereby will not cause such insurance policies to lapse, terminate
or be canceled and will not result in any party thereto having the right to
terminate or cancel such insurance policies.
3.20 Affiliate Interests. Except as set forth in Schedule 3.20, no
employee, officer or director, or former employee, officer or director, of the
Company has any interest in any property, tangible or intangible, including
without limitation, patents, trade secrets, other confidential business
information, trademarks, service marks or trade names, used in or pertaining to
the business of the Company, except for the normal rights of employees and
stockholders.
3.21 Environmental Matters. Except as set forth in Schedule 3.21,
to the best of the knowledge of the Stockholders:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. The Company is
not currently liable for any penalties, fines or forfeitures for
failure to comply with any Environmental Laws. The Company is in
compliance with all required notice, record keeping and reporting
requirements of all Environmental Laws, and has complied with all
informational requests or demands arising under the Environmental
Laws.
(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of their business as presently conducted, including, without
limitation, all air emission, water discharge, water use and solid
waste, hazardous waste and other Waste generation, transportation,
transfer, storage, treatment or disposal Licenses (a listing of such
items being included in Schedule 3.21(b)), and the Company is in
compliance with all the terms, conditions and requirements of such
Licenses, and copies of such Licenses have been made available to
Group 1. There are no administrative or judicial investigations,
notices, claims or other proceedings pending or threatened by any
Governmental Authority or third parties against the Company or its
business, operations, properties, or assets, which question the
validity or entitlement of the Company to any License required by the
Environmental Laws for the ownership of each of the respective
properties and assets of the Company and the operation of its
business.
(c) The Company has not received and is not aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental
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<PAGE> 18
Authority or third party with respect to any Environmental Laws in
connection with the ownership of its properties or assets or the
operation of its business, which has not been resolved to the
satisfaction of the issuing Governmental Authority or third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leased Properties.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle, treat,
spill, leak, dump, discharge, release or dispose of, any material
quantities of Hazardous Substances or other waste upon property
currently or previously owned or leased by it, except in compliance
with Environmental Laws.
(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the Leased Properties or to any
properties adjacent thereto except in compliance with the
Environmental laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge,
of any Hazardous Substance on, into or beneath the surface of the
Owned Properties or the Leased Properties or to any properties
adjacent thereto.
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor have they allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Stockholders have received notice or have knowledge of
any facts which could give rise to any notice, that the Company is a
potentially responsible party
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<PAGE> 19
for a federal or state environmental cleanup site or for corrective
action under CERCLA, RCRA or any other applicable Environmental Laws.
The Company has not submitted and has not been required to submit any
notice pursuant to Section 103(c) of CERCLA with respect to any
properties owned by, or used in the business of, the Company. The
Company has not received any written or, to the knowledge of the
Stockholders, oral request for information in connection with any
federal or state environmental cleanup site, or in connection with any
of the real property or premises where the Company has transported,
transferred or disposed of other Wastes. The Company has not been
required to and has not undertaken any response or remedial actions or
clean-up actions at the request of any Governmental Authorities or at
the request of any other third party. The Company has no liability
under any Environmental Laws for personal injury, property damage,
natural resource damage, or clean up obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.21(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which the Company is
aware undertaken by the Company or its agents, or by the Stockholders,
or by any Governmental Authority, or by any third party, relating to
the Company, or any of the Owned Properties or the Leased Properties;
(ii) the results of which the Company is aware of any ground, water,
soil, air or asbestos monitoring undertaken by the Company or their
agents, or by the Stockholders, or by any Governmental Authority, or
by any third party, relating to the Company or any of the Owned
Properties or the Leased Properties; (iii) all written communications
between the Company and any Governmental Authority arising under or
related to Environmental Laws; and (iv) all citations issued under
OSHA, or similar state or local statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, relating to or
affecting the Company or any of the Owned Properties or the Leased
Properties.
(j) Schedule 3.21(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.21(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule
3.21(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, or threatened against or directly affecting the
Company or any of its assets or operations relating to the use,
handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
(k) Any references in this Section 3.21 to the "Leased
Properties" are deemed to also refer to any properties previously
leased by the Company.
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3.22 Intellectual Property. Except as set forth in Schedule 3.22,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that are necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Stockholders, (a) the use of the Intellectual Property by the Company does not
infringe on the rights of any Person, and (b) no Person is infringing on any
right of the Company with respect to any Intellectual Property. No claims are
pending or, to the knowledge of the Stockholders, threatened that the Company
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the knowledge of the Stockholders, no
Person is infringing the rights of the Company with respect to any
Intellectual Property. All of the Intellectual Property that is owned by the
Company is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by the Company is licensed pursuant to valid and existing license
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss of any Intellectual Property.
3.23 Bank Accounts. Schedule 3.23 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.24 Brokers. Except as disclosed in Schedule 3.24, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.25 Disclosure. The Stockholders have disclosed in writing, or
pursuant to this Agreement and the Schedules attached hereto, all facts
material to the business, assets, prospects and condition (financial or
otherwise) of the Company. No representation or warranty to Group 1 by the
Stockholders contained in this Agreement, and no statement contained in the
Schedules attached hereto, any certificate, list or other writing furnished to
Group 1 by the Stockholders pursuant to the provisions hereof or in connection
with the transactions contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any certificate, list, document
or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed a representation and warranty
of the Stockholders for all purposes of this Agreement.
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<PAGE> 21
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby, severally and not jointly, represents and
warrants to Group 1 and Merger Sub that:
4.1 Capital Stock. Such Stockholder is the beneficial and record
owner of the number of shares of Company Common Stock as set forth in Schedule
3.7(a). On the Closing Date all such shares will be owned free and clear of
any lien, claim, pledge, encumbrance or other adverse claim. Except for such
shares of Company Common Stock set forth in Schedule 3.7(a) hereto, such
Stockholder does not own, beneficially or of record, any capital stock or other
security, including without limitation any option, warrant or right entitling
the holder thereof to purchase or otherwise acquire any shares of capital stock
of the Company.
4.2 Authorization of Agreement.
(a) Such Stockholder has full legal right, power,
capacity and authority to execute, deliver and perform its obligations
pursuant to this Agreement and to execute, deliver and perform its
obligations under each instrument, document or agreement required
hereby to be executed and delivered by such Stockholder at, or prior
to, the Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
such Stockholder at, or prior to, the Closing will then be, duly
executed and delivered by such Stockholder, and this Agreement
constitutes and, to the extent it purports to obligate such
Stockholder, each such instrument, document or agreement will
constitute (assuming due authorization, execution and delivery by each
other party thereto), the legal, valid and binding obligation of such
Stockholder enforceable against it in accordance with its terms.
4.3 Approvals. Except for filings with the Secretary of State of
Florida relating to the Merger, and except for applicable requirements, if any,
of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Governmental
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
such Stockholder to execute, deliver or perform this Agreement or any
instrument required hereby to be executed and delivered by it at the Closing.
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by such Stockholder of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by such Stockholder of its obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) the
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<PAGE> 22
organizational documents of such Stockholder or (iv) any contract or agreement
to which such Stockholder is a party or by which it, or any of its properties,
is bound, or (b) result in the creation or imposition of any Lien on any of the
properties or assets of such Stockholder, or (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit, certificate or order of any
Court or Governmental Authority, or (d) with the passage of time or the giving
of notice or the taking of any action of any third party have any of the
effects set forth in clause (a), (b) or (c) of this Section.
4.5 Investment Intent. Each Stockholder makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Stockholder will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Merger to such Stockholder solely for such Stockholder's
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution; (ii) such Stockholder is not a party to any agreement or
other arrangement for the disposition of any shares of Group 1 Common Stock;
(iii) such Stockholder is an "accredited investor" as defined in Securities Act
Rule 501(a); (iv) such Stockholder (A) is able to bear the economic risk of an
investment in the Group 1 Common Stock acquired pursuant to this Agreement, (B)
can afford to sustain a total loss of that investment, (C) has such knowledge
and experience in financial and business matters, and such past participation
in investments, that he or she is capable of evaluating the merits and risks of
the proposed investment in the Group 1 Common Stock, (D) has received and
reviewed the SEC Documents, (E) has had an adequate opportunity to ask
questions and receive answers from the officers of Group 1 concerning any and
all matters relating to the transactions contemplated hereby, including the
background and experience of the current officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of Group 1 and any plans of Group 1 for additional
mergers or acquisitions of automotive dealerships, and (F) has asked all
questions of the nature described in the preceding clause (E), and all those
questions have been answered to his or her satisfaction; (v) such Stockholder
acknowledges that the shares of Group 1 Common Stock to be delivered to such
Stockholder pursuant to the Merger have not been and will not be registered
under the Securities Act or qualified under applicable blue sky laws and
therefore may not be resold by such Stockholder without compliance with Rule
144 of the Securities Act; (vi) such Stockholder acknowledges that he or she
has agreed, pursuant to Section 10.8 herein, not to sell the shares of Group 1
Common Stock to be delivered to such Stockholder pursuant to the Merger for a
period of one year (or two years with respect to James S. Carroll) from the
Closing Date; (vii) such Stockholder, if a corporation, partnership, trust or
other entity, acknowledges that it was not formed for the specific purpose of
acquiring the Group 1 Common Stock; and (viii) without limiting any of the
foregoing, such Stockholder agrees not to dispose of any portion of Group 1
Common Stock unless either (1) a registration statement under the Securities
Act is in effect as to the applicable shares and the disposition is made in
accordance with that registration statement, or (2) the disposition is made in
full compliance with SEC Rule 144 and any other requirements of the Securities
Act. Additionally, for the three-year period following the Closing Date a
disposition pursuant to (viii)(2) above may be made only if the Stockholder has
notified Group 1 of the proposed disposition and the disposition is made
through a national brokerage firm selected by Group 1 and the Stockholder to
offer disposition services for Group 1 Common Stock (in the absence of
agreement between Group 1 and
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the Stockholder seeking to make a disposition, Goldman, Sachs & Co., Inc. will
be the firm to handle such disposition).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
Group 1 and Merger Sub hereby represent and warrant, jointly and
severally, to the Company and the Stockholders that:
5.1 Corporate Organization. Group 1 is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority to execute, deliver
and perform this Agreement and each instrument required hereby to be executed
and delivered by it at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Merger Sub of this Agreement, the performance by Group 1 and Merger Sub of
their respective obligations pursuant to this Agreement, and the execution,
delivery and performance of each instrument required hereby to be executed and
delivered by Group 1 or Merger Sub at the Closing have been duly and validly
authorized by all requisite corporate action on the part of Group 1 or Merger
Sub, as the case may be. This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by Group 1
or Merger Sub at, or prior to, the Closing will then be, duly executed and
delivered by Group 1 or Merger Sub, as the case may be. This Agreement
constitutes, and, to the extent it purports to obligate Group 1 or Merger Sub,
each such instrument, document or agreement will constitute (assuming due
authorization, execution and delivery by each other party thereto), the legal,
valid and binding obligation of Group 1 or Merger Sub, as the case may be,
enforceable against them in accordance with its terms.
5.3 Approvals. Except for filings with the Secretary of State of
Florida relating to the Merger, and except for applicable requirements, if any,
of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Group 1 or Merger Sub, as the case may be, to execute, deliver or consummate
the transactions contemplated by this Agreement or any instrument required
hereby to be executed and delivered by either of them at or prior to the
Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 or Merger Sub, as the case may be, of this Agreement or any instrument
required hereby to be executed by it at or prior to the Closing nor the
performance by Group 1 or Merger Sub, as the case may be, of its obligations
under this Agreement or any such instrument will (a) violate or breach the
terms of or cause a default under (i) any applicable Law, (ii) any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority, (iii) the organizational documents of Group 1 or Merger Sub or (iv)
any contract or agreement to which Group 1 or Merger Sub is a party or by which
it or any of its property is bound, or (b) result in the creation or imposition
of any Liens on
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any of the properties or assets of Group 1 or Merger Sub (other than any Lien
created by the Company ), or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit certificate or order of any Court or
Governmental Authority or (d) with the passage of time or the giving of notice
or the taking of any action by any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section, except, with respect to
clauses (a), (b), (c) or (d) of this Section, where such matter would not have
a material adverse effect on the business, assets, prospects or condition
(financial or otherwise) of Group 1 and its subsidiaries, taken as a whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Merger are duly authorized and will, when
issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations of the Commission promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Group 1 included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with GAAP during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Group 1 and its consolidated
subsidiaries as of the dates thereto and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information, for normal year-end adjustments).
5.7 Merger Sub. Merger Sub is a corporation recently and duly
incorporated under the laws of the State of Florida, is validly existing and in
good standing under such laws and is a wholly-owned subsidiary of Group 1.
Merger Sub has no assets, liabilities or obligations and has engaged in no
business except as contemplated by this Agreement.
5.8 No Knowledge of Misrepresentations or Omissions. Neither
Group 1, Merger Sub nor any of their agents or representatives has any actual
knowledge that the representations of the Stockholders made in this Agreement
are not true and correct in all material respects, and none of such persons has
any actual knowledge of any material errors in, or material omissions from, the
Schedules to this Agreement.
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ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals. Prior to the Closing Date, neither the
Company, any of its officers, directors, employees or agents nor any
Stockholder shall agree to, solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, business combination
or purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, the Company, other than the transactions with Group 1
contemplated by this Agreement. The Company and Stockholders will notify Group
1 promptly of any unsolicited offer.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Company or the Stockholders pursuant to this Agreement.
6.3 Conduct of Business by the Company Pending the Merger. The
Stockholders covenant and agree that, from the date of this Agreement until the
Closing Date, unless Group 1 shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement:
(a) The business of the Company shall be conducted only
in, and the Company shall not take any action except in, the ordinary
course of business and consistent with past practice. In connection
therewith, the parties agree that the Company may dealer trade
vehicles for similar models, but the Company shall not liquidate or
otherwise dispose of any of their new vehicles other than in the
ordinary course of business to retail buyers. The Company agrees to
maintain their advertising expenditures and activities commensurate
with prior business practices. The Company shall not advertise a
"Going Out of Business" sale;
(b) The Company shall not directly or indirectly do any
of the following: (i) issue, sell, pledge, dispose of or encumber, (A)
any capital stock (or securities convertible into capital stock) of
the Company or (B) other than in the ordinary course of business and
consistent with past practice and not relating to the borrowing of
money, any assets of the Company, (ii) amend or propose to amend the
articles of incorporation or bylaws (or other organizational
documents) of the Company, (iii) split, combine or reclassify any
outstanding capital stock of the Company, or declare, set aside or pay
any dividend payable in cash, stock, property or otherwise with
respect to its capital stock whether now or hereafter outstanding
(except as provided in Section 6.3(j) below), (iv) redeem, purchase or
acquire or offer to acquire any of its capital stock, (v) create,
incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money (other than floor plan
indebtedness incurred in the ordinary course of business), or (vi)
except in the ordinary course of business and consistent with past
practice, enter into any contract,
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agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than consistent with past business
practices of the Company; and shall not grant, to any individual,
severance or termination pay that exceeds the lesser of (i) such
individual's compensation for the calendar month immediately preceding
such individual's grant of severance or termination pay, or (ii)
$50,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Merger set forth in Article
VIII not being satisfied;
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement,
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program, practice or understanding (other than the Plans and the
Benefit Programs or Agreements);
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement;
(j) Notwithstanding anything in this Agreement to the
contrary, dividends or other form of distribution to the Stockholders
may be made after the date of the Interim Balance Sheet so long as
such distributions do not cause the Company to be in violation of any
manufacturer working capital or equity guidelines or requirements; and
(k) The Stockholders will not revoke the Company's
election to be taxed as an S corporation within the meaning of
sections 1361 and 1362 of the Code.
6.4 Confidentiality. The Company shall, and the Company's
officers, directors, employees, representatives and consultants shall, hold in
confidence, and not disclose to others for any reason whatsoever, any
non-public information received by them or their representatives in connection
with the transactions contemplated hereby, including but not limited to all
terms, conditions and agreements related to this transaction, except (i) as
required by law; (ii) for disclosure to officers, directors, employees and
representatives of the Company as necessary in connection with the transactions
contemplated hereby; and (iii) for information which becomes publicly available
other than through the actions of the Company or a Stockholder. In the event
the Merger is not consummated, the Company and the Stockholders will return all
non-public documents and other material obtained from Group 1 or its
representatives in connection with the transactions contemplated hereby or
certify to Group 1 that all such information has been destroyed.
6.5 Notification of Certain Matters. The Company shall give
prompt notice to Group 1, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date hereof to the Effective Time, (ii) any
failure of the Company, or any officer, director, employee or agent thereof, or
any Stockholder to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder, or (iii) any litigation, or
any claim or controversy or contingent liability of which the Company has
knowledge of that might reasonably be expected to become the subject of
litigation, against the Company or affecting any of its assets, in each case in
an amount in controversy in excess of $50,000, or that is seeking to prohibit
or restrict the transactions contemplated hereby.
6.6 Consents. Subject to the terms and conditions of this
Agreement, the Company shall (i) obtain all consents, waivers, approvals
(including all applicable automobile manufacturers approvals, and such
approvals shall not contain any unreasonably burdensome restrictions on the
Company, Group 1 or Merger Sub), authorizations and orders required in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger; and (ii) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary
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or proper to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, the
Company and the Stockholders shall cooperate and use reasonable efforts to
defend against and respond thereto. Costs of this defense and response will be
borne by Group 1.
6.8 Stockholders' Agreements Not to Sell. Each of the
Stockholders hereby covenants and agrees not to sell, pledge, transfer or
dispose of or encumber any shares of Company Common Stock currently owned,
either beneficially or of record, by such Stockholder, except as contemplated
by this Agreement and the Plan of Merger.
6.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
6.10 Removal of Related Party Guarantees. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
terminate, waive or release all guarantees by the Company (such guarantees
shall be referred to herein as "Related Guarantees", as described in Schedule
6.10 pursuant to Section 3.11 of this Agreement) of indebtedness or other
obligations of any of the Company's officers, directors, shareholders,
employees or affiliates of any such Persons.
6.11 Termination of Related Party Agreements. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to terminate
the Related Party Agreements except those Related Party Agreements that are
disclosed in Schedule 6.11 as agreements that shall not be subject to this
Section 6.11.
6.12 Related Party Agreements. The Company agrees, and the
Stockholders agree to cause the Company, not to enter into any Related Party
Agreements or engage in any transactions with the Stockholders or their
affiliates; except for those Related Party Agreements or transactions with
affiliates that are disclosed in Schedule 6.12 as agreements or transactions
that shall not be subject to this Section 6.12.
6.13 Release.
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(a) AS OF THE CLOSING, EACH OF THE STOCKHOLDERS DOES HEREBY FOR
HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES
REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY OF AND FROM ANY AND
ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN
OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT, WHICH EACH OF SUCH
STOCKHOLDERS NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR
HELD AGAINST THE COMPANY INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED
AS A RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF THE COMPANY
AND ITS EMPLOYEES AND AGENTS, EXISTING AS OF THE CLOSING OR RELATING TO ANY
MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING; PROVIDED, HOWEVER, THAT ANY
CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION
WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR
OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS
OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS SHALL
NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT; AND PROVIDED FURTHER
ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS OR AGREEMENTS LISTED ON THE
SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS THAT HE HAS
NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO
ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS,
LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS
RELEASED HEREIN. EACH OF THE STOCKHOLDERS COVENANTS AND AGREES THAT HE WILL
NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF
THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
OR OBLIGATIONS TO BE RELEASED HEREIN. EACH OF THE STOCKHOLDERS REPRESENTS AND
WARRANTS THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION
6.13 AND THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN
CONNECTION WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Leases. Stockholders hereby agree to cause certain of their
affiliates to enter into lease agreements with the Company on the basic terms,
and covering the real properties and improvements, described on Exhibit B.
6.15 Employment Agreements. The Stockholders agree to enter into
employment agreements with Group 1 and the Company in form and substance
substantially similar to Exhibit C attached hereto.
6.16 Certain Tax Matters
(a) The Stockholders shall use the amounts reflected in
Section 1.6(b)(i) of the Plan of Merger for purposes of preparation of
their Tax Returns. With respect to the shares of Group 1 Common Stock
received by the Stockholders, $14.00 per share shall be used for
purposes of determining the value of the stock portion of the purchase
price.
(b) The Stockholders shall (i) file all required 1998
federal income tax returns of the Company by September 30, 1998; (ii)
use an interim closing of the books of the
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Company effective as of the Closing Date for the purposes of preparing
such returns; and (iii) deliver such returns to Group 1 for its review
at least five (5) days prior to the filing of such returns.
6.17 Section 338(h)(10) Elections.
(a) The Stockholders and Group 1 shall join in making a
timely, irrevocable and effective election under section 338(h)(10) of
the Code and a similar election under any applicable state income tax
law (collectively the "Section 338(h)(10) Elections") with respect to
Group 1's purchase of the Company Common Stock. To facilitate such
election, at the Closing the Stockholders shall deliver to Group 1 an
Internal Revenue Service Form 8023 and any similar forms under
applicable state income tax law (the "Forms") with respect to Group
1's purchase of the Company Common Stock, which Forms shall have been
duly executed by an authorized person for the Stockholders. Group 1
shall cause the Forms to be duly executed by an authorized person for
Group 1, shall complete the schedules required to be attached thereto,
shall provide a copy of the executed Form and schedules to the
Stockholders, and shall duly and timely file the Forms as prescribed
by Treasury Regulation 1.338(h)(10)-1 or the corresponding provisions
of applicable state income Tax law. None of the Stockholders or Group
1 shall take any action to rescind, revoke or modify the Section
338(h)(10) Election without the prior written approval of the other
party.
(b) The Stockholders and Group 1 shall jointly determine the
liabilities of the Company and allocate the purchase price, such liabilities,
and other relevant items in accordance with the Code and the Treasury
Regulations promulgated thereunder. The Stockholders and Group 1 shall jointly
prepare all schedules required to be attached to the Forms. Such schedules
shall be attached to this Agreement as Schedule 6.15(b). The Stockholders and
Group 1 shall prepare all relevant federal income tax returns in a manner
consistent with the schedules. With respect to any items included in the
schedules as to which Group 1 and the Stockholders are unable to jointly agree,
the allocation proposed by Group 1 shall be reflected on the schedules. The
parties have previously reviewed and examined the tangible personal property
and other assets of the Company, and agree that the fair market value of such
assets at the Closing Date will be equal to each such asset's adjusted tax
basis, net of depreciation for the Company's tax period ending on the Closing
Date, except that the fair market value of the Company's inventory will be
determined on a first-in, first-out basis. The balance of the purchase price,
the stock portion of which will be reported by the parties hereto based on $14
per share, will be allocated to goodwill of the Company.
6.18 Phase I Environmental Assessments. The Stockholders have
delivered all Phase I Environmental Surveys requested by Group 1. Prior to
Closing the Stockholders will complete at their cost all cure and remediation
efforts recommended in such surveys, and, to the best of Stockholders'
knowledge, the Company will have no residual liability with regard to any
matter revealed in such surveys.
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ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Merger is not consummated, Group 1 will return all non-public
documents and other material obtained from the Company or its representatives
in connection with the transactions contemplated hereby or certify to the
Company that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Merger.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger;
and (ii) take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, Group 1
agrees to cooperate and use reasonable efforts to defend against and respond
thereto. Costs of this defense and response will be borne by Group 1.
7.5 Delivery of Certificates. On the Closing Date, Group 1 will
deliver to each holder of certificates which represented Company Common Stock
prior to the Effective Time a letter of transmittal and other information
advising such holder of the consummation of the Merger and to enable such
holder to effect the exchange of stock certificates as contemplated by Article
II of this Agreement.
7.6 Certain Tax Matters
(a) Group 1 shall use the amounts reflected in Section
1.6(b)(i) of the Plan of Merger for purposes of preparation of its Tax
Returns. With respect to the shares of Group
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1 Common Stock received by the Stockholders, $14.00 per share shall be
used for purposes of determining the value of the stock portion of the
purchase price.
(b) Group 1 shall act as reasonably necessary to assist
the Stockholders in preparing their federal income tax returns in
accordance with Section 6.16(b) hereof.
(c) Group 1 shall cause the Company, as soon as
practicable, to calculate and distribute pro rata to the Stockholders
a cash amount equal to the net assets of the Company as of the Closing
Date less the applicable manufacturer's minimum working capital
requirement as of the Closing Date.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the Merger;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Merger;
(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated; and
(d) Receipt of Ford Motor Company's approval of the
Merger and the transactions contemplated thereby.
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Merger is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Company and
the Stockholders contained in Article III and Article IV,
respectively, shall be true and correct in all respects as of the date
when made and as of the Closing Date as though such representations
and warranties had been made at and as of the Closing Date; all of the
terms, covenants and conditions of this Agreement to be complied with
and performed by the Company and the Stockholders on or before the
Closing Date shall have been duly complied with and performed in all
respects, a certificate to the foregoing effect dated the Closing Date
and signed by the chief executive officer of the Company and each of
the Stockholders shall have
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been delivered to Group 1, and a copy of the resolutions of each
Company's Board of Directors, certified by the Secretary of the
Company as of the Closing Date, approving the terms of this Agreement
and all transactions contemplated hereby shall have been delivered to
Group 1;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Merger and the transactions contemplated
thereby will be in compliance with applicable laws;
(c) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements and the simultaneous
closing of each of the Other Mergers;
(d) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.10 and 6.11 hereto;
(e) Group 1 shall have received executed representations
from each Stockholder stating that such Stockholder (with respect to
shares owned beneficially or of record by him or her) has no current
plan or intention to sell or otherwise dispose of the Group 1 Common
Stock to be received by him or her in the Merger;
(f) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have occurred, and the
Company shall not have suffered any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting
the properties or business of the Company and Group 1 shall have
received a certificate signed by the chief executive officer of the
Company dated the Closing Date to such effect;
(g) Receipt by Group 1, at Stockholders' expense, of a
Policy of Title Insurance, issued by a title company, approved by
Group 1, subject only to the exceptions described in Schedule 8.2(g)
("Permitted Title Exceptions");
(h) Receipt by Group 1, at Stockholders' expense, of a
current survey of the Leased Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1;
(i) Closing of the purchase by Group 1 of the Premier
Auto Finance, L.P., limited partnership interest from J. Carroll
Enterprises, Inc.;
(j) Execution of employment agreements pursuant to
Section 6.15; and
(k) Execution of the lease agreements pursuant to Section
6.14.
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8.3 Additional Conditions Precedent to Obligations of the
Stockholders. The obligation of the Stockholders to effect the Merger is also
subject to the fulfillment at or prior to the Closing Date of the following
condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date, all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects, a certificate to the foregoing effect dated the Closing Date
and signed by the chief executive officer of Group 1 shall have been
delivered to the Company, and a copy of the resolutions of the Board
of Directors of Group 1, certified by the Secretary of Group 1 as of
the Closing Date, approving the terms of this Agreement and all
transactions contemplated hereby shall have been delivered to the
Company; and
(b) Receipt of an opinion from Crowe Chisek & Company,
dated as of the Closing Date, to the effect that the Merger will
constitute a non-taxable reorganization as defined in Section 368(a)
of the Code.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify. Each of the
Stockholders agrees to severally indemnify, defend and hold Group 1 harmless
(subject to the limitations set forth in Section 9.1(e) below) from and against
the aggregate of all Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all actual
expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by Group 1, on a pre-tax consolidated basis to
the extent (i) resulting from any breach of a representation or
warranty made by the Company or such Stockholder in or pursuant to
this Agreement, (ii) resulting from any breach of the covenants or
agreements made by the Company or such Stockholder pursuant to this
Agreement, or (iii) resulting from any inaccuracy in any certificate
delivered by the Company or any of the Stockholders pursuant to this
Agreement; provided, however, that "Indemnifiable Damages" shall not
include any damages arising from the employment agreements executed
pursuant to Section 6.15, the lease agreements executed pursuant to
Section 6.14 and the non- competition provisions of Section 10.4.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Group 1
shall have the right to be put in the same pre-tax consolidated
financial position as Group 1 would have been in had each of the
representations and warranties of the Company and such Stockholder
hereunder been true
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and correct and had the covenants and agreements of the Company and
such Stockholder hereunder been performed in full.
(c) Each of the representations and warranties made by
the Company and the Stockholders in this Agreement or pursuant hereto
shall survive for a period of three years after the Closing Date,
except that the representations and warranties of the Stockholders
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 4.1, 4.2, 4.3 and
4.4 shall not expire, but shall continue indefinitely. No claim for
the recovery of Indemnifiable Damages may be asserted by Group 1
against the Stockholders after such representations and warranties
shall expire, provided, however, that claims for Indemnifiable Damages
first asserted within the applicable period shall not thereafter be
barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the
right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Group 1 believes it is entitled to a claim for any
Indemnifiable Damages hereunder, Group 1 shall promptly give written
notice to the Stockholders of such claim and the amount or the
estimated amount of such claim, and the basis for such claim. If the
Stockholders do not pay the amount of the claim for Indemnifiable
Damages to Group 1 within 10 days, then Group 1 may exercise its
respective rights under Section 9.3 and/or take any action or exercise
any remedy available to it by appropriate legal proceedings to collect
the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, the Stockholders' liability for Indemnifiable
Damages shall be limited as follows:
(1) Group 1 shall have no claim for Indemnifiable
Damages unless and until all Indemnifiable
Damages incurred by Group 1 exceed an
aggregate of $350,000.00 with respect to this
Agreement and the Other Agreements (the
"Basket Amount"), in which event the
Stockholders shall be liable for only such
Indemnifiable Damages in excess of the Basket
Amount; and
(2) The total amount of Indemnifiable Damages for
which each Stockholder shall be liable to
Group 1 shall not exceed the total value of
the Initial Stock Consideration and the
Initial Cash Consideration received by such
Stockholder in the Merger and the Other
Mergers. For the purposes of this Section
9.1(e)(2), all Initial Stock Consideration
shall be assigned a per share value of
$14.00.
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THE STOCKHOLDERS ACKNOWLEDGE AND AGREE THAT FOR
PURPOSES OF THE BASKET AMOUNT, INDEMNIFIABLE DAMAGES UNDER THE
OTHER AGREEMENTS WILL AFFECT THEIR OBLIGATION TO INDEMNIFY
GROUP 1 UNDER THIS AGREEMENT, EVEN THOUGH THE STOCKHOLDERS MAY
OWN DIFFERING PERCENTAGES OF THE DEALERSHIPS BEING ACQUIRED BY
GROUP 1 PURSUANT TO THE OTHER AGREEMENTS. FOR EXAMPLE, IF
CLAIMS FOR INDEMNIFIABLE DAMAGES UNDER ONE OF THE OTHER
AGREEMENTS EQUAL OR EXCEED $350,000, THEN THE STOCKHOLDERS
UNDER THIS AGREEMENT WILL BE OBLIGATED TO INDEMNIFY GROUP 1
FOR CLAIMS FOR ALL AMOUNTS WITHOUT THE BENEFIT OF ANY BASKET
AMOUNT.
9.2 Agreement by Group 1 to Indemnify. Group 1 agrees to
indemnify, defend and hold the Stockholders harmless from and against the
aggregate of all Stockholders Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Stockholders
Indemnifiable Damages" means, without duplication, the aggregate of
all expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by the Stockholders, on a pre-tax consolidated
basis, to the extent (i) resulting from any breach of a representation
or warranty made by Group 1 in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by Group
1 in or pursuant to this Agreement, or (iii) resulting from any
inaccuracy in any certificate delivered by Group 1 pursuant to this
Agreement; provided, however, that "Stockholders Indemnifiable
Damages" shall not include any damages arising from the employment
agreements executed pursuant to Section 6.15, the lease agreements
executed pursuant to Section 6.14 and the non-competition provisions
of Section 10.4.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Stockholders Indemnifiable Damages,
the Stockholders have the right to be put in the same pre-tax
consolidated financial position as he, she or it would have been in
had each of the representations and warranties of Group 1 hereunder
been true and correct and had the covenants and agreements of Group 1
hereunder been performed in full.
(c) Each of the representations and warranties made by
Group 1 in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date, except that the
representations and warranties of Group 1 contained in Sections 5.1,
5.2, 5.3, 5.4 and 5.5 shall not expire, but shall continue
indefinitely. No claim for the recovery of Stockholders Indemnifiable
Damages may be asserted by the Stockholders against Group 1 after such
representations and warranties shall thus expire, provided, however,
that claims for Stockholders Indemnifiable Damages first asserted
within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
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(d) In the event that the Stockholders believe they are
entitled to a claim for any Stockholders Indemnifiable Damages
hereunder, the Stockholders shall promptly give written notice to
Group 1 of such claim and the amount or the estimated amount of such
claim, and the basis for such claim. If Group 1 does not pay the
amount of the claim for Indemnifiable Damages to the Stockholders
within 10 days, then the Stockholders may exercise their respective
rights under Section 9.3 and/or take any action or exercise any remedy
available to them by appropriate legal proceedings to collect the
Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.2, the Stockholders shall have no claim for
Stockholders Indemnifiable Damages unless and until the aggregate
Stockholders Indemnifiable Damages incurred by the Stockholders under
this Agreement and the Other Agreements shall exceed an aggregate of
$350,000, in which event Group 1 shall be liable for only such
Stockholders Indemnifiable Damages in excess of $350,000.
9.3 Conditions of Indemnification. The obligations and
liabilities of the Stockholders and Group 1 hereunder with respect to their
respective indemnities pursuant to this Article IX resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such Indemnifying Party is
harmed by the failure of the Indemnified Party to provide timely
notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Group 1 or Merger Sub, then Group 1 shall have the right to
control the defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel
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to protect its own interests and participate in the defense,
compromise or settlement of the Claim, (B) the Indemnifying Party
shall not, without the Indemnified Party's written consent, settle or
compromise any Claim or consent to entry of any judgement which does
not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from
all liability in respect of such Claim, and (C) the Indemnified Party,
by counsel or other representatives of its own choosing and at its
sole cost and expense, shall have the right to consult with the
Indemnifying Party and its counsel or other representatives concerning
such Claim, and the Indemnifying Party and the Indemnified Party and
their respective counsel shall cooperate with respect to such Claim.
9.4 Section 338(h)(10) Elections. Group 1 agrees to indemnify the
Stockholders for any federal income tax, interest and penalties divided by a
factor of .8 or the reciprocal of the applicable capital gains rate in effect
at that time if different, in the event of a federal income tax adjustment
resulting from an IRS readjustment of the purchase price allocation completed
by the parties hereto in accordance with Section 6.17(b) and shall also
indemnify the Stockholders for any accounting and legal expenses incurred in
connection with any federal income tax audit of said allocation. Any payment
required under this Section 9.4 shall be made no later than ten (10) days after
notice of any final adjustment to Group 1. The Basket Amount shall not apply
to any amounts payable to the Stockholders under this Section 9.4. The
provisions of this Section 9.4 shall survive the Closing and be independent of
any other provisions of this Section 9.
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights.
(a) In connection with Group 1's future dealership
acquisitions in which the seller of such dealership seeks to sell the
real estate and facilities component thereof (and Group 1 elects not
to purchase such real estate and facilities), Group 1 agrees to
introduce and recommend World Partner Associates, Ltd. as a suitable
buyer of such real estate and facilities, with the understanding that
World Partner Associates, Ltd. will lease such real estate and
facilities to Group 1 under terms and conditions substantially similar
to the lease agreement between Courtesy Ford, Inc. and K.C.
Partnership entered into as of the Closing Date (and providing for an
annual rental of 10% of the purchase price for such real estate),
provided, however, that if Group 1 has a business arrangement with an
affiliated real estate company or with a Group 1 lender providing for
economic benefit to Group 1 as a result of the real estate company's
acquisition of the real estate and facilities component of an acquired
dealership, such business arrangement will supersede Group 1's
obligations to World Associates, Ltd. hereunder. The rights and
obligations created hereunder shall expire on the tenth anniversary of
the Closing Date.
(b) Group 1 agrees that if a third party makes an offer
to purchase one or more of the Companies in a transaction not
involving (i) a substantial portion of the other
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operations of Group 1 (other than the Companies) or (ii) a substantial
portion of the Group 1 operations under the management of James S.
Carroll in Florida and Georgia (other than the Companies), James S.
Carroll has the right of first refusal to purchase the Company or
Companies subject to the third party offer on the same terms as such
offer, provided, however, that as a condition of closing such offer,
all Designated Persons (as defined herein) who will own, operate or
manage the repurchased Company or Companies shall resign from
employment with Group 1. The right granted hereunder shall expire on
the tenth anniversary of the Closing Date and is personal to James S.
Carroll and is non-assignable and non-transferrable.
10.2 Certain Post-Closing Payments.
(a) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 10.2(a). Beginning
with the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section
10.2(a) will be paid in cash and Group 1 Common Stock, in the same
proportions as the aggregate consideration received by each
Stockholder in the Merger and the Other Mergers. For the purposes of
determining the number of shares of Group 1 Common Stock payable to
the Stockholders hereunder, such shares shall be assigned a per share
value of the average closing price of the Group 1 Common Stock on the
New York Stock Exchange for the five trading days preceding the date
on which such shares are issued.
The aggregate consideration paid by Group 1 pursuant to this
Section 10.2(a) and Section 10.2(a) of the Other Agreements (the
"Contingent Consideration") shall not exceed $7.5 million, $2.5
million of which (the "Guaranteed Payments") will be paid regardless
of the results of the above computation, as follows: $900,000 on the
first anniversary of the Closing Date, $900,000 on the second
anniversary of the Closing Date, and $700,000 on the third anniversary
of the Closing Date. The aggregate Guaranteed Payments actually paid
to the Stockholders shall carry forward and be applied against any
additional Contingent Consideration payable to the Stockholders
hereunder. The Guaranteed Payments shall be reduced by the difference
between the aggregate Contingent Consideration previously paid to the
Stockholders and $2.5 million.
The Contingent Consideration payable under this Section
10.2(a) is additional consideration for the Stockholders' interests in
the Company, and the parties hereto agree to report such amounts on
such basis for income tax purposes.
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(b) In addition to the compensation payable to the
Stockholders pursuant to the Plan of Merger, Group 1 will pay to the
Stockholders, on April 10, 1999, an aggregate cash amount computed as
follows: (a) 20% of the Company's December 31, 1997 LIFO inventory
reserve, (b) which product is then divided by 80%. The payment by
Group 1 hereunder shall be allocated among the Stockholders pro rata
based on the Initial Cash Consideration paid to such Stockholders
pursuant to the Plan of Merger.
10.3 Schedules to this Agreement. The Schedules to this Agreement
contain all disclosure required to be made by the Company under the various
terms and provisions of this Agreement.
10.4 Non-Competition Obligations.
(a) As part of the consideration for the Merger, and as
an additional incentive for Group 1 to enter into this Agreement,
James S. Carroll, William C. Carroll, Janet L. Giles and Ralph S. Kerr
(each a "Designated Person" and collectively, the "Designated
Persons") and Group 1 agree to the non-competition provisions of this
Section 10.4. Each Designated Person agrees that during the period of
such Designated Person's non-competition obligations hereunder, such
Designated Person will not, directly or indirectly for such Designated
Person or for others, within twelve miles of or in the county of any
operations sold to Group 1 under this Agreement or operations
subsequently managed by such Designated Person as of the date in
question or during the previous twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates engaged in automotive retailing;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates engaged in automotive
retailing; or
(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or affiliates, or hire
or assist in the hiring of any such employee by person,
association, or entity not affiliated with Group 1 or any of
its subsidiaries or affiliates.
For the purposes of this Section 10.4, "operations
subsequently managed" shall mean (i) in the case of James S. Carroll,
all Florida and Georgia operations of Group 1 and its affiliates under
the executive management authority of James S. Carroll and (ii) in the
case of the other Designated Persons, all operations of Group 1 and
its affiliates under the day-to-day general management authority of
such Designated Persons.
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These non-competition obligations shall apply until the later
of (i) three years after the Closing or (ii) the period specified in
any employment agreement entered into by such Designated Person with
Group 1 or its Subsidiaries.
If Group 1 or any of its subsidiaries or affiliates abandons a
particular aspect of its business, that is, ceases such aspect of its
business with the intention to permanently refrain from such aspect of
its business, then this non-competition covenant shall not apply to
such former aspect of that business.
Notwithstanding the foregoing, the non-competition obligations
of this Section 10.4 shall not apply to (x) the leasing of property or
facilities owned by the Designated Persons or their affiliates to a
competitor of Group 1 if such property or facilities were previously
leased to Group 1 under a lease agreement which Group 1 materially
breached, failed to renew or terminated (for reasons other than
lessor's breach), or (y) any Designated Person's operation and
management of any dealership purchased in accordance with Section
10.1(b) hereof.
(b) During this non-competition period James S. Carroll
will not engage in these restricted activities or assist in the
industry consolidation efforts on behalf of any publicly held entity
in the automotive retailing industry (nor any entity with the ultimate
intention of becoming a publicly held entity or being acquired in any
manner by a publicly held entity), regardless of geographic area or
market; provided, however, that this paragraph (b) shall not prohibit
James S. Carroll from selling, to a publicly held entity, any
dealership acquired by him in full compliance with his post-employment
non-competition obligations hereunder and held by him for at least one
year.
(c) The Designated Persons understand that the foregoing
restrictions may limit their ability to engage in certain businesses
during the period provided for above, but acknowledge that the
Designated Persons will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction. Each
of the Designated Persons acknowledges that money damages would not be
sufficient remedy for any breach of this Section 10.4 by such
Designated Person, and such remedies shall not be deemed the
exclusive remedies for a breach of this Section 10.4, but shall be in
addition to all remedies available at law or in equity to Group 1 or
any of its subsidiaries or affiliates, including, without limitation,
the recovery of damages from Group 1 and such Designated Person's
agents involved in such breach.
(d) It is expressly understood and agreed that Group 1
and the Designated Persons consider the restrictions contained in this
Section 10.4 to be reasonably necessary to protect the legitimate
business interests of Group 1 and its affiliates, including the
confidential and proprietary information and trade secrets of Group 1
and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions
therein set forth to be modified by
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such courts so as to be reasonable and enforceable and, as so modified
by the court, to be fully enforced.
(e) The parties hereto expressly acknowledge that Group
1's rights under this Section 10.4 are assignable and that such rights
shall be fully enforceable by any of Group 1's assignees or successors
in interest.
10.5 Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated herein may be abandoned at any time
prior to the Closing:
b (a) by mutual consent of Group 1 and the Stockholders;
(b) by either Group 1 or the Stockholders if the Merger
has not been effected on or before March 31, 1998;
(c) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate under
this Section 10.5(c) shall expire at midnight on January 31, 1998;
(d) by either Group 1 or the Stockholders if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Merger or the other transactions contemplated hereby shall have been
entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations,
financial condition or prospects of the Company; (ii) there has been a
material breach of any representation, warranty, covenant or other
agreement set forth in this Agreement by the Company or the
Stockholders (except for any representation, warranty or covenant
qualified by materiality or knowledge according to its terms, in which
case any breach thereof will give rise to Group 1's right to terminate
hereunder) which breach has not been cured within ten business days
following receipt by the Company of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice) or (iii) there is a material adverse change in the aggregate
projected 1998 pre-tax income of $6.8 million expected for the Company
and the Other Companies, on which the consideration paid to the
Stockholders in connection with the Merger was based; or
(f) by the Stockholders if there has been a material
breach of any representation or warranty set forth in this Agreement
by Group 1 which breach has not been cured within ten business days
following receipt by Group 1 of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice).
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10.6 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.5, the parties hereto shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.7 survive any such termination.
10.7 Expenses. Regardless of whether the Merger is consummated,
all costs and expenses in connection with this Agreement and the transactions
contemplated hereby incurred by Group 1 shall be paid by Group 1 and all such
costs and expenses incurred by the Stockholders shall be paid by the Company
and the Stockholders; provided, that all expenses borne by the Company will be
paid prior to the completion of the distributions contemplated by Sections
6.3(j) and 7.6(c) hereof, and that such expenses will be deducted from the
Company's working capital for the purpose of calculating such distributions.
The Stockholder and Group 1 each represent and warrant to each other that there
is no broker or finder involved in the transactions contemplated hereby.
10.8 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period") (two-year period with respect to James S. Carroll), no
Stockholder voluntarily will: (i) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (A) any shares of Group 1
Common Stock received by any Stockholder in the Merger or (B) any interest in
(including any option to buy or sell) any of those shares of Group 1 Common
Stock, in whole or in part, and Group 1 will have no obligation to, and shall
not, treat any such attempted transfer as effective for any purpose; or (ii)
engage in any transaction, whether or not with respect to any shares of Group 1
Common Stock or any interest therein, the intent or effect of which is to
reduce the risk of owning the shares of Group 1 Common Stock acquired pursuant
to the Plan of Merger (including for example engaging in put, call, short-sale,
straddle or similar market transactions). Notwithstanding the foregoing, each
Stockholder may (i) pledge shares of Group 1 Common Stock, provided that the
pledgee of such shares shall agree not to sell or otherwise dispose of any such
shares for the Restricted Period; (ii) transfer shares to immediate family
members or the estate of any such individual (including, without limitation,
any transfer by such Stockholder to or among any trust, custodial or other
similar accounts or funds that are for the benefit of his or her immediate
family members), provided that such person or entity shall agree not to sell or
otherwise dispose of any such shares for the Restricted Period; and (iii)
transfer shares by will or the laws of descent and distribution or otherwise by
reason of such Stockholder's death. The certificates evidencing the Group 1
Common Stock delivered to each Stockholder pursuant to the Plan of Merger will
bear a legend substantially in the form set forth below and containing such
other information as Group 1 may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER
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DISPOSITION OF ANY OF THOSE SHARES, DURING THE [ONE-YEAR] [TWO-YEAR]
PERIOD ENDING ON ______________ [DATE THAT IS THE [FIRST] [SECOND]
ANNIVERSARY OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of Group 1 Common Stock to be
delivered to that Stockholder pursuant to the Plan of Merger have not been and,
if applicable, will not be registered under the Securities Act and therefore
may not be resold by that Stockholder without compliance with the Securities
Act and (ii) covenants that none of the shares of Group 1 Common Stock issued
to that Stockholder pursuant to the Plan of Merger will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all the applicable provisions of the Securities Act
and the rules and regulations of the Commission and applicable state securities
laws and regulations. All certificates evidencing shares of Group 1 Common
Stock issued pursuant to the Plan of Merger will bear the following legend in
addition to the legend prescribed by Section 10.8(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Plan of Merger to each Stockholder will bear any legend
required by the securities or blue sky laws of the state in which that
Stockholder resides.
10.9 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto. The waiver by any
party hereto of any condition or of a breach of another provision of this
Agreement shall not operate or be construed as a waiver of any other condition
or subsequent breach. The waiver by any party hereto of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement other than with respect to the
condition so waived.
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10.10 Legal Fees. Except as otherwise provided herein, the losing
party shall pay all reasonable legal fees and expenses and costs of litigation
through appeal incurred by the prevailing party in any dispute arising from
this Agreement.
10.11 Public Statements. The Stockholders and Group 1 agree to
consult with each other prior to issuing any press release or otherwise making
any public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
10.12 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
10.13 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to the Company: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
if to the Stockholders: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
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if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and
Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.13. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor. Delivery to the Stockholders' representative, if any, of any
notice to Stockholders hereunder shall constitute delivery to all Stockholders
and any notice given by such Stockholders' representative shall be deemed to be
notice given by all Stockholders.
10.14 Governing Law. Except as otherwise specified herein, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, excluding any choice of law rules that may direct the
application of the laws of another jurisdiction.
10.15 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.16 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.17 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.18 Entire Agreement; Third Party Beneficiaries. This Agreement,
including the Exhibits and the Schedules hereto, constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
oral and written, among the parties or any of them, with respect to the subject
matter hereof (except as contemplated otherwise by this Agreement) and neither
this nor any
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document delivered in connection with this Agreement, confers upon any Person
not a party hereto any rights or remedies hereunder.
[signature page follows]
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<PAGE> 48
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-----------------------------------
Name: B.B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
KOONS MERGER, INC.
By: /s/ JOHN T. TURNER
-----------------------------------
Name: John T. Turner
Title: President
KOONS FORD, INC.
By: /s/ JAMES S. CARROLL
-----------------------------------
Name: James S. Carroll
Title: President
STOCKHOLDERS
J. CARROLL ENTERPRISES TRUST
/s/ JAMES S. CARROLL
---------------------------------------
By: James S. Carroll, Trustee
/s/ RALPH S. KERR
---------------------------------------
Ralph S. Kerr
<PAGE> 49
JANET L. GILES REVOCABLE LIVING TRUST
/s/ JANET L. GILES
---------------------------------------
By: Janet L. Giles, Trustee
WILLIAM C. CARROLL REVOCABLE LIVING
TRUST
/s/ WILLIAM C. CARROLL
---------------------------------------
By: William C. Carroll, Trustee
<PAGE> 50
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Agreement and Plan of Reorganization made
and entered into as of December ____, 1997 by and among Group 1, Merger Sub,
the Company and the Stockholders thereof, including any amendments thereto and
each Annex (including this Annex A), Exhibit and schedule thereto (including
the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Leased Properties, whether personal or mixed, tangible
or intangible, wherever located.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.17.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Carroll Group" shall mean all dealerships under the executive
management responsibility of James S. Carroll in Florida and Georgia (including
the Companies and any other dealerships acquired by Group 1 after the Closing
Date) and additional dealerships acquired by Group 1 as a result of the efforts
of James S. Carroll (whether or not such dealerships are under the executive
management control of James S. Carroll).
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Koons Ford, Inc., a Florida corporation, all
predecessor entities of the Company and its successors from time to time.
"Company Common Stock" shall mean the issued and outstanding common
stock of the Company, as set forth in Section 3.7.
"Company's 1996 Balance Sheet" shall have the meaning set forth in
Section 3.8 herein.
"Company's 1996 Financial Statements" shall have the meaning set forth
in Section 3.8 herein.
"Contingent Consideration" shall have the meaning set forth in Section
10.2(a) herein.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Designated Person" and "Designated Persons" shall have the meanings
set forth in Section 10.4 herein.
"Effective Time" shall mean the effective time of the issuance of a
certificate of merger by the Secretary of State of the State of Florida
recognizing the Merger.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the 1996 Balance Sheet or acquired by the Company since the
date of the 1996 Balance Sheet.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Group 1" shall mean Group 1 Automotive, Inc., a Delaware corporation.
"Group 1 Common Stock" shall mean the common stock, par value $.01 per
share of Group 1.
"Guaranteed Payments" shall have the meaning set forth in Section
10.2(a) herein.
"Guarantees" shall have the meaning set forth in Section 3.11 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has
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been or shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Incremental Return" shall mean return on Group 1's investment in the
operations of the Carroll Group that were not a part of the Companies on the
date of this Agreement (total income after income taxes divided by total
investment). " Income" and "investment" used for these purposes will be before
any Group 1 management fees, allocations of indirect costs, cost of capital
(including interest, loan origination fees, points and any other expenses
incurred in obtaining or maintaining a loan) or amortization of goodwill.
"Total investment" in these operations will include any loan proceeds, cash or
stock invested by Group 1 to acquire the operations added to the Carroll Group
after the date of this Agreement (including all investments made by Group 1 as
a condition to manufacturer approval of such acquisitions).
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" shall have the meaning set
forth in Section 3.18 herein.
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
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"Material Contract" has the meaning set forth in Section 3.11 herein.
"Material Leases" shall have the meaning set forth in Section 3.11
herein.
"Merger" shall mean the merger of Merger Sub with and into the
Company.
"Merger Sub" shall mean Koons Merger, Inc., a Florida corporation and
a wholly owned subsidiary of Group 1.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Other Agreements" shall have the meaning set forth in the Recitals
hereto.
"Other Company" and "Other Companies" shall have the meanings set
forth in the Recitals hereto.
"Owned Properties" shall mean any real estate previously owned by the
Company.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
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(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Phase I Environmental Surveys" shall mean the environmental reports
of S.E. Environmental Consultants, Inc. dated September, 1997.
"Plan" shall have the meaning set forth in Section 3.17.
"Plan of Merger" shall mean the Agreement and Plan of Merger made and
entered into as of __________, 1998 by and between Merger Sub and the Company.
"Related Party Agreements" shall have the meaning set forth in Section
3.11 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person with any Governmental Authority.
"Restricted Period" shall have the meaning set forth in Section 10.8
herein.
"Schedules" shall mean all schedules required to be provided by the
Company or the Stockholders under this Agreement, including any amendments or
supplements thereto.
"SEC Documents" shall mean the Group 1 Automotive, Inc. Prospectus
dated October 29, 1997 and the Form 10-Q for the third quarter ended September
30, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Stockholders Indemnifiable Damages" shall have the meaning set forth
in Section 9.2 herein.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
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"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person within six
years prior to the date of the Agreement but which have been terminated prior
to the date of the Agreement.
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
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EXHIBIT A
______________, 1998
AGREEMENT AND PLAN OF MERGER
Merging KOONS MERGER, INC. into KOONS FORD, INC.
THIS AGREEMENT AND PLAN OF MERGER, dated as of _________, 1998 (this
"Plan of Merger"), is by and between Koons Merger, Inc., a Florida corporation
("Merger Sub") and a wholly owned subsidiary of Group 1 Automotive, Inc., a
Delaware corporation ("Group 1") and Koons Ford, Inc., a Florida corporation
(the "Company"). Merger Sub and the Company are hereinafter sometimes referred
to as the "Constituent Corporations."
PRELIMINARY STATEMENT
Group 1, Merger Sub and the Company desire that Merger Sub merge with
and into the Company.
This Plan of Merger is being entered into pursuant to an Agreement and
Plan of Reorganization dated as of December 17, 1997 (the "Agreement") among
Group 1, Merger Sub, the Company and the stockholders of the Company.
Group 1 will acquire by merger (the "Other Mergers") Courtesy Ford,
Inc., a Florida corporation and Perimeter Ford, Inc., a Delaware corporation
(collectively, the "Other Companies") pursuant to plans of merger entered into
among the Other Companies and subsidiaries of Group 1 (collectively, the "Other
Plans of Merger").
The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $.01 per share ("Merger Sub Common Stock"), of which
1,000 shares are outstanding, all of which are owned by Group 1. The
authorized capital stock of the Company consists of 5,000 shares of common
stock, par value $.10 per share ("Company Common Stock"), of which 1,000 shares
are outstanding and no shares are held in the Company's treasury.
The Boards of Directors of each of the Constituent Corporations,
respectively, have approved the Agreement and the Plan of Merger.
Accordingly, in consideration of the premises, and the mutual
covenants and agreements herein contained, the parties hereto hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
<PAGE> 58
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.3), Merger Sub shall be merged with and into the Company, the separate
existence of Merger Sub shall cease, and the Company (i) shall continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Koons Ford, Inc.", (ii) shall be
governed by the laws of Florida (iii) shall maintain a registered office in the
State of Florida at 3101 N. State Road 7, Hollywood, Florida 33021, and shall
(iv) succeed to and assume all of the rights, properties and obligations of
Merger Sub and the Company in accordance with the applicable provisions of the
Florida Business Corporation Act (the "Code").
1.2 Effect of the Merger. The Merger shall have the effects set
forth in Section ______________ of the Code.
1.3 Consummation of the Merger. As soon as practicable after all
conditions set forth in Article VIII of the Agreement have been satisfied or
waived, the parties hereto will file with the Secretary of State of the State
of Florida articles of merger in such form as required by, and executed in
accordance with, the relevant provisions of the Code, with instructions that
such articles of merger are to be issued and effective as of the last day of
the month in which such articles are filed (the effective time of the issuance
of a certificate of merger by the Secretary of State of the State of Florida
being the "Effective Time").
1.4 Certificate of Incorporation; Bylaws. The certificate of
incorporation and bylaws of the Company, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation and bylaws of the
Surviving Corporation and thereafter shall continue to be its certificate of
incorporation and bylaws until amended as provided therein and under the Code.
1.5 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation. The initial officers
of the Surviving Corporation shall be as follows: (i) James S.
Carroll--President, (ii) William C. Carroll--Vice President, (iii) Janet L.
Giles--Chief Financial Officer and Treasurer, and (iv) Frank R.
Todaro--Secretary, in each case until their respective successors are duly
elected or appointed and qualified.
1.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the Company, Merger Sub or
their respective stockholders:
(a) The shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (the "Shares")
shall be converted, subject to the provisions of this Section 1.6,
into (i) the rights to receive, immediately following the Effective
Date,
2
<PAGE> 59
an amount in cash (the "Initial Cash Consideration") as set forth in
Section 1.6(b) below, and (ii) the rights to receive, periodically
upon satisfaction of the conditions set forth in Section 1.6(c) below,
additional shares of Group 1 Common Stock (the "Contingent Stock
Consideration") and amounts in cash (the "Contingent Cash
Consideration," and together with the Contingent Stock Consideration,
the "Contingent Consideration") as set forth in Section 1.6(c) hereof;
provided, however, that no fractional shares of Group 1 Common Stock
shall be issued, and, in lieu thereof, a cash payment shall be made
pursuant to Sections 1.6(h) and 1.6(i) hereof.
(b)(i) The Shares owned by J. Carroll Enterprises Trust shall
be converted into the right to receive Initial Cash Consideration of
$10,210,200 and the rights to receive a portion of any Contingent
Consideration periodically payable to it in accordance with Section
1.6(c) hereof; (ii) the Shares owned by Janet L. Giles Revocable
Living Trust shall be converted into the right to receive Initial Cash
Consideration of $729,300 and the rights to receive a portion of any
Contingent Consideration periodically payable to it in accordance with
Section 1.6(c) hereof; (iii) the Shares owned by Ralph S. Kerr shall
be converted into the right to receive Initial Cash Consideration of
$729,300 and the rights to receive a portion of any Contingent
Consideration periodically payable to him in accordance with Section
1.6(c) hereof; and (iv) the Shares owned by the William C. Carroll
Revocable Living Trust shall be converted into the right to receive
Initial Cash Consideration of $2,917,200 and the rights to receive a
portion of any Contingent Consideration periodically payable to it in
accordance with Section 1.6(c) hereof.
(c) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 1.6(c). Beginning with
the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section 1.6(c)
will be paid in cash and Group 1 Common Stock, in the same proportions
as the aggregate consideration received by each Stockholder in the
Merger and the Other Mergers. For the purposes of determining the
number of shares of Group 1 Common Stock payable to the Stockholders
hereunder, such shares shall be assigned a per share value of the
average closing price of the Group 1 Common Stock on the New York
Stock Exchange for the five trading days preceding the date on which
such shares are issued.
The Contingent Consideration paid by Group 1 pursuant to this
Section 1.6(c) and Section 1.6(c) of the Other Plans of Merger shall
not exceed $7.5 million, $2.5 million of which (the "Guaranteed
Payments") will be paid regardless of the results of the above
computation, as follows: $900,000 on the first anniversary of the
Closing Date, $900,000 on
3
<PAGE> 60
the second anniversary of the Closing Date, and $700,000 on the third
anniversary of the Closing Date. The aggregate Guaranteed Payments
actually paid to the Stockholders shall carry forward and be applied
against any additional Contingent Consideration payable to the
Stockholders hereunder. The Guaranteed Payments shall be reduced by
the difference between the aggregate Contingent Consideration
previously paid to the Stockholders and $2.5 million.
The Contingent Consideration payable under this Section 1.6(c)
is additional consideration for the Stockholders' interests in the
Company, and the parties hereto agree to report such amounts on such
basis for income tax purposes.
(d) Each share of Company Common Stock that immediately
prior to the Effective Time was held in the treasury of the Company
shall be canceled and retired as a result of the Merger and no
securities or cash shall be issued or paid with respect thereto. Any
shares of preferred stock of the Company and any options, warrants or
other rights to purchase Company Common Stock or any other securities
of the Company which remain outstanding at the Effective Time shall
automatically be canceled and retired as a result of the Merger
without consideration therefor, and each holder thereof shall cease to
have any rights with respect thereto.
(e) At or after the Effective Time, each holder of an
outstanding certificate that prior thereto represented Shares shall be
entitled, upon surrender thereof to Group 1, to receive immediately in
exchange therefor (i) a certificate or certificates representing the
number of whole shares of Initial Stock Consideration in such
denominations and registered in such names as such holder may request
and (ii) cash in the amount equal to the Initial Cash Consideration,
into which the Shares so surrendered shall have been converted as
described above. Each holder of Shares who would otherwise be
entitled to a fraction of a share of Group 1 Common Stock shall, upon
surrender of the certificates that, prior to the Effective Time,
represented Shares held by such holder, to Group 1, be paid an amount
in cash in accordance with the provisions of Sections 1.6(i) and
1.6(j). Until so surrendered, each outstanding certificate that,
prior to the Effective Time, represented Shares shall be deemed from
and after the Effective Time, for all corporate purposes, other than
the payment of earlier dividends and distributions, to evidence the
ownership of the number of full shares of Initial Stock Consideration
and Initial Cash Consideration into which such Shares shall have been
converted pursuant to this Section 1.6. Unless and until any such
outstanding certificates shall be surrendered, no dividends or other
distributions payable to the holders of Group 1 Common Stock, as of
any time on or after the Effective Time, shall be paid to the holders
of such outstanding certificates which prior to the Effective Time
represented Shares; provided, however, that, upon surrender and
exchange of such outstanding certificates, there shall be paid to the
record holders of the certificates issued and exchanged therefor, the
amount, without interest thereon, of dividends and other
distributions, if any, that theretofore were declared and became
payable since the Effective Time with respect to the number of full
shares of Group 1 Common Stock issued to such holders.
4
<PAGE> 61
(f) All shares of Group 1 Common Stock into which the
Shares shall have been converted pursuant to this Section 1.6 shall be
issued and paid in full satisfaction of all rights pertaining to such
converted shares.
(g) If any certificate for shares of Group 1 Common Stock
is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall have paid to Group
1 any transfer or other taxes required by reason of the issuance of a
certificate for shares of Group 1 Common Stock in any name other than
that of the registered holder of the certificate surrendered, or
established to the satisfaction of Group 1 that such tax has been paid
or is not payable.
(h) In lieu of any fraction of a share of Initial Common
Stock, each holder of Shares who would otherwise be entitled to a
fraction of a share of Group 1 Common Stock shall, upon surrender of
the Shares held by such holder to Group 1, be paid an amount in cash
equal to the value of such fraction of a share based upon a per share
price $14.00. No interest shall be paid on such amount.
(i) In lieu of any fraction of a share of Contingent
Common Stock, each person who would otherwise be entitled to a
fraction of a share of Contingent Common Stock shall, upon
satisfaction of the conditions precedent to such persons receipt of
Contingent Common Stock, be paid an amount in cash equal to the value
of such fraction of a share based upon the average closing price of
Group 1 Common Stock on the New York Stock Exchange for the five
trading days preceding each respective issuance of Contingent Common
Stock. No interest shall be paid on such amount.
(j) None of Group 1, Merger Sub, the Company or the
Surviving Corporation shall be liable to a holder of the Shares for
any amount properly paid to a public official pursuant to applicable
property, escheat or similar law.
1.8 Taking of Necessary Action; Further Action. Merger Sub and
the Company shall take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company or Merger
Sub, such corporations shall direct their respective officers and directors to
take all such lawful and necessary action.
5
<PAGE> 62
ARTICLE II
MISCELLANEOUS
2.1 Counterparts. This Plan of Merger may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to each of the other parties.
2.2 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the laws of the State of Florida.
2.3 Waiver and Amendment. Any provision of this Plan of Merger
may be waived at any time by the party that is, or whose stockholders are,
entitled to the benefits thereof. This Plan of Merger may not be amended or
supplemented at any time, except by an instrument in writing signed on behalf
of each party hereto, only as may be permitted by applicable provisions of the
Code. The waiver by any party hereto of any condition or of a breach of
another provision of this Plan of Merger shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this Plan of
Merger shall not preclude it from seeking redress for breach of this Plan of
Merger other than with respect to the condition so waived.
2.4 Certain Definitions.
(a) "Carroll Group" shall mean all dealerships under the
executive management responsibility of James S. Carroll in Florida and
Georgia (including the Companies and any other dealerships acquired by
Group 1 after the Closing Date) and additional dealerships acquired by
Group 1 as a result of the efforts of James S. Carroll (whether or
not such dealerships are under the executive management control of
James S. Carroll).
(b) "Incremental Return" shall mean return on Group 1's
investment in the operations of the Carroll Group that were not a part
of the Companies on the date of this Agreement (total income after
income taxes divided by total investment). " Income" and "investment"
used for these purposes will be before any Group 1 management fees,
allocations of indirect costs, cost of capital (including interest,
loan origination fees, points and any other expenses incurred in
obtaining or maintaining a loan) or amortization of goodwill. "Total
investment" in these operations will include any loan proceeds, cash
or stock invested by Group 1 to acquire the operations added to the
Carroll Group after the date of this Agreement (including all
investments made by Group 1 as a condition to manufacturer approval of
such acquisitions).
[signature page follows]
6
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
to be duly executed as of the date first above written.
KOONS MERGER, INC.
By:
---------------------------------------
Name: James S. Carroll
Title: President
KOONS FORD, INC.
By:
---------------------------------------
Name: James S. Carroll
Title: President
7
<PAGE> 1
EXHIBIT 10.40
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
GROUP 1 AUTOMOTIVE, INC.,
PF MERGER, INC.,
A WHOLLY OWNED SUBSIDIARY OF GROUP 1 AUTOMOTIVE, INC.,
PERIMETER FORD, INC.
AND THE STOCKHOLDERS OF PERIMETER FORD, INC.
DATED AS OF
DECEMBER 17, 1997
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE MERGER
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Escrowed Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.17 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.18 Leased Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.20 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.24 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
4.1 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 No Knowledge of Misrepresentations or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Conduct of Business by the Company Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.14 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.15 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.16 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.17 Phase I Environmental Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Delivery of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . 26
8.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 26
8.3 Additional Conditions Precedent to Obligations of the Stockholders. . . . . . . . . . . . . . . . 28
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Agreement by Group 1 to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Certain Post-Closing Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.3 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.4 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.6 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.8 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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10.9 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.10 Legal Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.11 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.18 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated as
of the 17th day of December, 1997, is among Group 1 Automotive, Inc., a
Delaware corporation ("Group 1"), PF Merger, Inc., a Delaware corporation and a
wholly owned subsidiary of Group 1 (Merger Sub"), Perimeter Ford, Inc., a
Delaware corporation ("the Company") and the persons listed on the signature
pages hereof under the caption "Stockholders" (collectively, the
"Stockholders," and each of those persons, individually, a "Stockholder").
RECITALS:
WHEREAS, the parties to this Agreement have determined it is in their
best long-term interests to effect a business combination pursuant to which:
(A) The Company will merge with and into Merger Sub on
the terms and subject to the conditions set forth herein (the
"Merger");
(B) Group 1 will acquire by merger (the "Other Mergers")
Koons Ford, Inc., a Florida corporation and Courtesy Ford, Inc., a
Florida corporation (each an "Other Company" and, collectively with
the Company, the "Companies") pursuant to agreements entered into
among those entities and their equity owners, Group 1 and subsidiaries
of Group 1 (collectively, the "Other Agreements"); and
WHEREAS, the respective Boards of Directors of Group 1, Merger Sub and
the Company have approved this Agreement and the Merger pursuant to the terms
and conditions herein set forth.
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined
<PAGE> 7
has the meaning ascribed to it in accordance with GAAP; (c) "or" is not
exclusive; (d) "including" means "including, without limitation;" (e) words in
the singular include the plural; (f) words in the plural include the singular;
(g) words applicable to one gender shall be construed to apply to each gender;
(h) the terms "hereof," "herein," "hereby," "hereto" and derivative or similar
words refer to this entire Agreement; (i) the terms "Article" or "Section"
shall refer to the specified Article or Section of this Agreement; and (j)
section and paragraph headings in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and pursuant to the Agreement and Plan of Merger
between Merger Sub and the Company, a form of which is attached hereto as
Exhibit A (the "Plan of Merger"), at the Effective Time (as hereinafter
defined) the Company shall be merged with and into Merger Sub, the separate
existence of the Company shall cease, and Merger Sub shall (i) continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Perimeter Ford, Inc.", (ii) be governed
by the laws of Delaware, (iii) maintain a registered office in the State of
Delaware at c/o The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware, and (iv) succeed to and assume all of the rights, properties and
obligations of Merger Sub and the Company in accordance with the Delaware
General Corporation Law. Subject to the terms and conditions of this Agreement
and the Plan of Merger, Group 1 agrees, at or prior to the Closing, to cause
Merger Sub to execute and deliver, the Plan of Merger in form and substance
substantially similar to the form attached hereto as Exhibit A. Subject to the
terms and conditions of this Agreement and the Plan of Merger, the Stockholders
agree, at or prior to the Closing, to cause the Company to execute and deliver
the Plan of Merger in form and substance substantially similar to the form
attached hereto as Exhibit A.
2.2 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, Houston, Texas 77002 on the last day of
the month in which all conditions set forth in Article VIII hereof are
satisfied or waived or at such other time and place and on such other date as
Group 1 and the Company shall agree; provided, that the conditions set forth in
Article VIII shall have been satisfied or waived at or prior to such time. The
date on which the Closing occurs is herein referred to as the "Closing Date."
2.3 Effective Time. As soon as practicable after all conditions
set forth in Article VIII hereof are satisfied or waived, the parties hereto
will file with the Secretary of State of the State of Delaware, articles of
merger in such form as required by, and executed in accordance with, the
relevant provisions of the Delaware General Corporation Law, with instructions
that such articles of merger are to be issued and effective as of the Closing
Date (the effective time of the issuance of a certificate of merger by the
Secretary of State of the State of Delaware being the "Effective Time").
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2.4 Escrowed Shares. In the event that James S. Carroll has not
been approved by American Honda Motor Co., Inc. ("Honda") as a 5% stockholder
of Group 1 before Closing, 105,000 shares of Group 1 Common Stock due James S.
Carroll under this Agreement will be placed in Escrow at Closing pending
release as provided in this Section 2.4. These shares will remain in Escrow
until the first of the following to occur: (1) the second anniversary of the
Closing Date, (2) Honda's approval of James S. Carroll as a 5% stockholder of
Group 1, or (3) such time as Group 1 is no longer required to obtain Honda's
approval of each 5% stockholder of Group 1. In the event these shares become
issuable from Escrow as a result of (1) above, Group 1 may, at its option,
elect to pay cash to James S. Carroll in lieu of the escrowed shares in an
amount equal to 105,000 times the greater of (i) the average closing price of
Group 1 Common Stock on the New York Stock Exchange for the five trading days
immediately preceding the date on which the escrowed shares become issuable or
(ii) $14.00. In the event these shares become issuable from Escrow as a result
of (2) or (3) above, the shares will be issued from escrow to James S. Carroll
as soon as reasonably practicable after receipt of such approval.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
The Stockholders hereby represent and warrant to Group 1 and Merger
Sub as follows:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with all requisite corporate power and
authority to own or lease its properties and conduct its business as now owned,
leased or conducted and to execute, deliver and perform this Agreement and each
instrument, document or agreement required hereby to be executed and delivered
by it at, or prior to, the Closing. True and complete copies of the articles
of incorporation and bylaws (or other organizational documents) of the Company
are included in Schedule 3.1. The minute books of the Company previously made
available to Group 1 are complete and accurately reflect all action taken prior
to the date of this Agreement by their respective boards of directors and
stockholders in their capacities as such.
3.2 Qualification. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of the business as now conducted or the character of the property
owned or leased by it makes such qualification necessary. Schedule 3.2 sets
forth a list of the jurisdictions in which the Company is qualified to do
business, if any.
3.3 Authorization. The execution and delivery by the Company, the
performance of its obligations pursuant to this Agreement and the execution,
delivery and performance of each instrument, document or agreement required
hereby to be executed and delivered by the Company at, or prior to, the Closing
have been duly and validly authorized by all requisite corporate action on the
part of the Company and no other corporate proceedings on the part of the
Company are
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<PAGE> 9
necessary to authorize this Agreement or any other instrument, document or
agreement required hereby to be executed by the Company at, or prior to, the
Closing. The Board of Directors of the Company has voted to recommend approval
of the Merger to the stockholders of the Company and such determination remains
in effect. THE EXECUTION OF THIS AGREEMENT BY THE STOCKHOLDERS CONSTITUTES
UNANIMOUS STOCKHOLDER CONSENT TO THE MERGER, THE TERMS AND PROVISIONS OF THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY WITHIN IN ACCORDANCE WITH
SECTION 228(a) OF THE DELAWARE GENERAL CORPORATION LAW. THIS EXECUTED
AGREEMENT SHALL ALSO CONSTITUTE THE STOCKHOLDERS' WRITTEN WAIVER OF ALL
APPLICABLE NOTICE REQUIREMENTS. THIS EXECUTED AGREEMENT SHALL BE FILED IN THE
MINUTE BOOKS OF THE COMPANY AS EVIDENCE OF SUCH STOCKHOLDER ACTION. This
Agreement has been, and each instrument, document or agreement required hereby
to be executed and delivered by the Company at, or prior to, the Closing will
then be, duly executed and delivered by it, and this Agreement constitutes,
and, to the extent it purports to obligate the Company, each such instrument,
document or agreement will constitute (assuming due authorization, execution
and delivery by each other party thereto), the legal, valid and binding
obligation of the Company enforceable against it in accordance with its terms.
3.4 Approvals. Except for the applicable filings with the
Secretary of State of the State of Delaware relating to the Merger and except
for applicable requirements, if any, of the HSR Act, and except to the extent
set forth in Schedule 3.4, no filing or registration with, and no consent,
approval, authorization, permit, certificate or order of any Court or
Governmental Authority is required by any applicable Law or by any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority to permit the Company to execute, deliver or perform this Agreement
or any instrument required hereby to be executed and delivered by it at the
Closing.
3.5 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.5, neither the execution and delivery by the Company of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by the Company of its obligations under this Agreement or any such instrument,
document or agreement will (assuming receipt of all consents, approvals,
authorizations, permits, certificates and orders disclosed as requisite in
Schedule 3.4) (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) any applicable permits
received from any Governmental Authority (iv) the articles of incorporation or
bylaws or other organizational documents of the Company or (v) any contract or
agreement to which the Company is a party or by which it, or any of its
properties, is bound, or (b) result in the creation or imposition of any Lien
on any of the properties or assets of the Company, or (c) result in the
cancellation, forfeiture, revocation, suspension or adverse modification of any
existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority, or (d) with the passage of time
or the giving of notice or the taking of any action of any third party have any
of the effects set forth in clause (a), (b) or (c) of this Section.
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3.6 Subsidiaries; Equity Investments. The Company has not
controlled directly or indirectly, or had any direct or indirect equity
participation in any corporation during the five-year period preceding the date
hereof.
3.7 Capitalization.
(a) The authorized capital stock of the Company consists
of 5,000 shares of common stock, par value $100.00 per share, of which
1,579 shares are issued and outstanding (no shares being held in
treasury) (the "Company Common Stock"). Each outstanding share of the
Company Common Stock has been duly authorized, is validly issued,
fully paid and nonassessable and was not issued in violation of any
preemptive rights of any stockholder. Set forth in Schedule 3.7(a)
are the names, social security or I.R.S. identification numbers and
addresses (as reflected in the corporate records of the Company) of
each record holder of the Company Common Stock, together with the
number of shares held by each such person.
(b) There is not outstanding any capital stock or other
security, including without limitation any option, warrant or right,
entitling the holder thereof to purchase or otherwise acquire any
shares of capital stock of the Company. Except as disclosed in
Schedule 3.7(b), there are no contracts, agreements, commitments or
arrangements obligating the Company (i) to issue, sell, pledge,
dispose of or encumber any shares of, or any options, warrants or
rights of any kind to acquire, or any securities that are convertible
into or exercisable or exchangeable for, any shares of, any class of
capital stock of the Company or (ii) to redeem, purchase or acquire or
offer to acquire any shares of, or any outstanding option, warrant or
right to acquire, or any securities that are convertible into or
exercisable or exchangeable for, any shares of, any class of capital
stock of the Company.
3.8 Financial Statements. Included in Schedule 3.8 are copies of
the financial statements of the Company consisting of (i) an unaudited balance
sheet of the Company as of October 31, 1997 (the "Interim Balance Sheet") and
the related unaudited statement of income for the ten month period then ended
(collectively with the Interim Balance Sheet, the "Company Interim Financial
Statements") and (ii) an audited balance sheet of the Company as of December
31, 1996 (the "Company 1996 Balance Sheet") and the related audited statements
of income, changes in stockholders' equity and cash flows for the year then
ended (including the notes thereto) (collectively with the Company 1996 Balance
Sheet, the "Company 1996 Financial Statements") and (collectively with the
Company Interim Financial Statements, the "Company Financial Statements"). The
Company Financial Statements are true and complete in all material respects.
The Company 1996 Financial Statements are true and complete in all respects.
The Company Financial Statements present fairly the financial position of the
Company and the results of its operations and changes in financial position as
of the dates and for the periods indicated therein in conformity with GAAP.
The Company Financial Statements do not omit to state any liabilities, absolute
or contingent, required to be stated therein in accordance with GAAP. All
accounts receivable of the Company reflected in the Company Financial
Statements and as incurred since October 31, 1997 represent sales made in the
ordinary course of business, are collectible (net of any reserves for doubtful
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<PAGE> 11
accounts shown in the Company Interim Financial Statements) in the ordinary
course of business and, except as set forth in Schedule 3.8, are not in dispute
or subject to counterclaim, set-off or renegotiation. Schedule 3.8 contains an
aged schedule of accounts receivable included in the Interim Balance Sheet.
References regarding GAAP compliance in this Section 3.8 shall be qualified by
the exceptions set forth in Section 3.9 below.
3.9 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet, or
relating to the items listed below in this Section 3.9, or as set forth in
Schedule 3.9, the Company does not have any material liabilities or obligations
of any nature whether absolute, accrued, contingent or otherwise, and whether
due or to become due. The reserves reflected in the Interim Balance Sheet are
adequate, appropriate and reasonable in accordance with GAAP, except for
possible adjustments to current year's depreciation provisions, LIFO
adjustments, management company fees, profit sharing provisions, general
manager year-end bonuses and the month-end payroll tax accrual.
3.10 Certain Agreements. Except as set forth in Schedule 3.10,
neither the Company, nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a noncompetition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
3.11 Contracts and Commitments. Schedule 3.11 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of its officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.12 Absence of Changes. Except as set forth in Schedule 3.12,
there has not been, since October 31, 1997, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.12, since
October 31, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, the
Company makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since October 31,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
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3.13 Tax Matters.
(a) Except as set forth in Schedule 3.13(a) (and except
for filings and payments of assessments the failure of which to file
or pay will not materially adversely affect the Company), (i) all Tax
Returns which are required to be filed on or before the Closing Date
by or with respect to the Company have been or will be duly and timely
filed, (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) all Taxes which have
become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, (iv) all
withholding Tax requirements imposed on or with respect to the Company
have been or will be satisfied in full, and (v) no penalty, interest
or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) All Tax Returns of, or with respect to, the Company
have been audited by the applicable governmental authority, or the
applicable statute of limitations has expired, for all periods up to
and including December 31, 1996 except as included on Schedule
3.13(b).
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to the
Company, other than those disclosed (and to which are attached true
and complete copies of all audit or similar reports) in Schedule
3.13(c).
(d) Except as set forth in Schedule 3.13(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company, or any
waiver or agreement for any extension of time for the assessment or
payment of any Tax of or with respect to the Company.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes (except for payroll tax accrual for
October 31, 1997), whether or not assessed or disputed, which are, or
are hereafter found to be, or to have been, due by or with respect to
the Company up to and through the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company shall be terminated prior to the Closing Date and no
payments shall be due or will become due by the Company on or after
the Closing Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 3.13(g), the Company
will not be required to include any amount in income for any taxable
period as a result of a change in accounting method for any taxable
period pursuant to any agreement with any Tax authority with respect
to any such taxable period.
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(h) The Company has not consented to have the provisions
of section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(i) Since the date of the Company's S Corp election on
December 31, 1986, the Company (a) continuously has been and will be
an S Corporation within the meaning of section 1361 of the Code, and
(b) each holder of common stock of the Company has been an individual
resident of the United States or an estate or trust described in
section 1361(c)(2) that is permitted to hold the stock of an S
Corporation.
3.14 Litigation.
(a) Except as set forth in Schedule 3.14(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Company, threatened against or
specifically affecting the Company before or by any Court or
Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.14(b), the Company has performed
all obligations required to be performed by it to date and is not in
default under, and, to the knowledge of the Company, no event has
occurred which, with the lapse of time or action by a third party
could result in a default under any contract or other agreement to
which any of the Company is a party or by which it or any of its
properties is bound or under any applicable Order of any Court or
Governmental Authority.
3.15 Compliance with Law. Except as set forth in Schedule 3.15,
the Company is in compliance with all applicable statutes and other applicable
laws and all applicable rules and regulations of all federal, state, foreign
and local governmental agencies and authorities.
3.16 Permits. Except as set forth in Schedule 3.16, the Company
owns or holds all franchises, licenses, permits, consents, approvals and
authorizations of all Governmental Authorities necessary for the conduct of its
business. A listing of all such items, with their expiration dates, is
included in Schedule 3.16. Each franchise, license, permit, consent, approval
and authorization so owned or held is in full force and effect, and the Company
is in compliance with all of its obligations with respect thereto, and no event
has occurred which allows, or upon the giving of notice or the lapse of time or
otherwise would allow, revocation or termination of any franchise, license,
permit, consent, approval or authorization so owned or held.
3.17 Employee Benefit Plans and Policies.
(a) Schedule 3.17(a) provides a description of each of
the following which is sponsored, maintained or contributed to by any
of the Company for the benefit of its employees, or has been so
sponsored, maintained or contributed to within six years prior to the
Closing Date:
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(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not described in Section 3.17(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) The Company does not contribute to or have an
obligation to contribute to, and has not at any time contributed to or
had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in Schedule 3.17(c),
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would adversely affect such qualified status;
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(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan or Benefit Program
or Agreement than it otherwise would or (B) create or give
rise to any additional vested rights or service credits under
any Plan or Benefit Program or Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
(e) Termination of employment of any employee of any of
the Company after consummation of the transactions contemplated by
this Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) Schedule 3.17(g) sets forth by name and job
description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.18 Leased Properties.
(a) On the Closing Date, the Company will not own any
real property or any interest therein. Schedule 3.18(a) sets forth
the location and size of, principal improvements and buildings on, and
Liens on all parcels of real estate leased by the Company
(individually a "Leased Property" and collectively the "Leased
Properties"). True and correct copies of all Liens are attached to
Schedule 3.18(a). Except as set forth in Schedule 3.18(a), with
respect to each Leased Property:
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(i) the Company has good and valid leasehold
interests in each parcel of its Leased Property, free and
clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
the Company or the Stockholders, threatened condemnation
proceedings, suits or administrative actions relating to the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) except as set forth in Schedule 3.18(a)(iii),
the legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(v);
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Leased Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.18(a)(vii)
who are in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used; and
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(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(xi).
(b) Except as set forth in Schedule 3.18(b), the Company
has good and marketable title to all of its Assets, free and clear of
any Liens or restrictions on use. The Fixed Assets currently in use
for the business and operations of the Company are in good operating
condition, normal wear and tear excepted and have been maintained in
accordance with sound industry practices.
3.19 Insurance. Schedule 3.19 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.19, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. The Company has not
received any notice or other communication from any such insurer canceling or
materially amending any of such insurance policies, and no such cancellation is
pending or threatened. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.20 Affiliate Interests. Except as set forth in Schedule 3.20, no
employee, officer or director, or former employee, officer or director, of the
Company has any interest in any property, tangible or intangible, including
without limitation, patents, trade secrets, other confidential business
information, trademarks, service marks or trade names, used in or pertaining to
the business of the Company, except for the normal rights of employees and
stockholders.
3.21 Environmental Matters. Except as set forth in Schedule 3.21,
to the best of the knowledge of the Stockholders:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. The Company is
not currently liable for any penalties, fines or forfeitures for
failure to comply with any Environmental Laws. The Company is in
compliance with all required notice, record keeping and reporting
requirements of all Environmental Laws, and has complied with all
informational requests or demands arising under the Environmental
Laws.
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(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of their business as presently conducted, including, without
limitation, all air emission, water discharge, water use and solid
waste, hazardous waste and other Waste generation, transportation,
transfer, storage, treatment or disposal Licenses (a listing of such
items being included in Schedule 3.21(b)), and the Company is in
compliance with all the terms, conditions and requirements of such
Licenses, and copies of such Licenses have been made available to
Group 1. There are no administrative or judicial investigations,
notices, claims or other proceedings pending or threatened by any
Governmental Authority or third parties against the Company or its
business, operations, properties, or assets, which question the
validity or entitlement of the Company to any License required by the
Environmental Laws for the ownership of each of the respective
properties and assets of the Company and the operation of its
business.
(c) The Company has not received and is not aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of its business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leased Properties.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle, treat,
spill, leak, dump, discharge, release or dispose of, any material
quantities of Hazardous Substances or other waste upon property
currently or previously owned or leased by it, except in compliance
with Environmental Laws.
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<PAGE> 19
(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the Leased Properties or to any
properties adjacent thereto except in compliance with the
Environmental laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge,
of any Hazardous Substance on, into or beneath the surface of the
Owned Properties or the Leased Properties or to any properties
adjacent thereto.
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor have they allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Stockholders have received notice or have knowledge of
any facts which could give rise to any notice, that the Company is a
potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA, RCRA or any other
applicable Environmental Laws. The Company has not submitted and has
not been required to submit any notice pursuant to Section 103(c) of
CERCLA with respect to any properties owned by, or used in the
business of, the Company. The Company has not received any written
or, to the knowledge of the Stockholders, oral request for information
in connection with any federal or state environmental cleanup site, or
in connection with any of the real property or premises where the
Company has transported, transferred or disposed of other Wastes. The
Company has not been required to and has not undertaken any response
or remedial actions or clean-up actions at the request of any
Governmental Authorities or at the request of any other third party.
The Company has no liability under any Environmental Laws for personal
injury, property damage, natural resource damage, or clean up
obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.21(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which the Company is
aware undertaken by the Company or its agents, or by the Stockholders,
or by any Governmental Authority, or by any third party, relating to
the Company, or any of the Owned Properties or the Leased Properties;
(ii) the results of which the Company is aware of any ground, water,
soil, air or asbestos monitoring undertaken by the Company or their
agents, or by the Stockholders, or by any Governmental Authority, or
by any third party, relating to the Company or any of the Owned
Properties or the Leased Properties; (iii) all written communications
between the Company and any Governmental Authority arising under or
related to Environmental Laws; and (iv) all citations issued under
OSHA, or similar
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state or local statutes, laws, ordinances, codes, rules, regulations,
orders, rulings, or decrees, relating to or affecting the Company or
any of the Owned Properties or the Leased Properties.
(j) Schedule 3.21(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.21(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule
3.21(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, or threatened against or directly affecting the
Company or any of its assets or operations relating to the use,
handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
(k) Any references in this Section 3.21 to the "Leased
Properties" are deemed to also refer to any properties previously
leased by the Company.
3.22 Intellectual Property. Except as set forth in Schedule 3.22,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that are necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Stockholders, (a) the use of the Intellectual Property by the Company does not
infringe on the rights of any Person, and (b) no Person is infringing on any
right of the Company with respect to any Intellectual Property. No claims are
pending or, to the knowledge of the Stockholders, threatened that the Company
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the knowledge of the Stockholders, no
Person is infringing the rights of the Company with respect to any
Intellectual Property. All of the Intellectual Property that is owned by the
Company is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by the Company is licensed pursuant to valid and existing license
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss of any Intellectual Property.
3.23 Bank Accounts. Schedule 3.23 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.24 Brokers. Except as disclosed in Schedule 3.24, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.25 Disclosure. The Stockholders have disclosed in writing, or
pursuant to this Agreement and the Schedules attached hereto, all facts
material to the business, assets, prospects and condition (financial or
otherwise) of the Company. No representation or warranty to Group 1 by the
Stockholders contained in this Agreement, and no statement contained in the
Schedules attached
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<PAGE> 21
hereto, any certificate, list or other writing furnished to Group 1 by the
Stockholders pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any certificate, list, document
or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed a representation and warranty
of the Stockholders for all purposes of this Agreement.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby, severally and not jointly, represents and
warrants to Group 1 and Merger Sub that:
4.1 Capital Stock. Such Stockholder is the beneficial and record
owner of the number of shares of Company Common Stock as set forth in Schedule
3.7(a). On the Closing Date all such shares will be owned free and clear of
any lien, claim, pledge, encumbrance or other adverse claim. Except for such
shares of Company Common Stock set forth in Schedule 3.7(a) hereto, such
Stockholder does not own, beneficially or of record, any capital stock or other
security, including without limitation any option, warrant or right entitling
the holder thereof to purchase or otherwise acquire any shares of capital stock
of the Company.
4.2 Authorization of Agreement.
(a) Such Stockholder has full legal right, power,
capacity and authority to execute, deliver and perform its obligations
pursuant to this Agreement and to execute, deliver and perform its
obligations under each instrument, document or agreement required
hereby to be executed and delivered by such Stockholder at, or prior
to, the Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
such Stockholder at, or prior to, the Closing will then be, duly
executed and delivered by such Stockholder, and this Agreement
constitutes and, to the extent it purports to obligate such
Stockholder, each such instrument, document or agreement will
constitute (assuming due authorization, execution and delivery by each
other party thereto), the legal, valid and binding obligation of such
Stockholder enforceable against it in accordance with its terms.
4.3 Approvals. Except for filings with the Secretary of State of
Delaware relating to the Merger, and except for applicable requirements, if
any, of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Governmental
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
such Stockholder to execute, deliver
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<PAGE> 22
or perform this Agreement or any instrument required hereby to be executed and
delivered by it at the Closing.
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by such Stockholder of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by such Stockholder of its obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) the organizational
documents of such Stockholder or (iv) any contract or agreement to which such
Stockholder is a party or by which it, or any of its properties, is bound, or
(b) result in the creation or imposition of any Lien on any of the properties
or assets of such Stockholder, or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit, certificate or order of any Court or
Governmental Authority, or (d) with the passage of time or the giving of notice
or the taking of any action of any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section.
4.5 Investment Intent. Each Stockholder makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Stockholder will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Merger to such Stockholder solely for such Stockholder's
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution; (ii) such Stockholder is not a party to any agreement or
other arrangement for the disposition of any shares of Group 1 Common Stock;
(iii) such Stockholder is an "accredited investor" as defined in Securities Act
Rule 501(a); (iv) such Stockholder (A) is able to bear the economic risk of an
investment in the Group 1 Common Stock acquired pursuant to this Agreement, (B)
can afford to sustain a total loss of that investment, (C) has such knowledge
and experience in financial and business matters, and such past participation
in investments, that he or she is capable of evaluating the merits and risks of
the proposed investment in the Group 1 Common Stock, (D) has received and
reviewed the SEC Documents, (E) has had an adequate opportunity to ask
questions and receive answers from the officers of Group 1 concerning any and
all matters relating to the transactions contemplated hereby, including the
background and experience of the current officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of Group 1 and any plans of Group 1 for additional
mergers or acquisitions of automotive dealerships, and (F) has asked all
questions of the nature described in the preceding clause (E), and all those
questions have been answered to his or her satisfaction; (v) such Stockholder
acknowledges that the shares of Group 1 Common Stock to be delivered to such
Stockholder pursuant to the Merger have not been and will not be registered
under the Securities Act or qualified under applicable blue sky laws and
therefore may not be resold by such Stockholder without compliance with Rule
144 of the Securities Act; (vi) such Stockholder acknowledges that he or she
has agreed, pursuant to Section 10.8 herein, not to sell the shares of Group 1
Common Stock to be delivered to such Stockholder pursuant to the Merger for a
period of one year (or two years with respect to James S. Carroll) from the
Closing Date; (vii) such Stockholder, if a corporation, partnership, trust or
other entity, acknowledges that it was not formed for the specific
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<PAGE> 23
purpose of acquiring the Group 1 Common Stock; and (viii) without limiting any
of the foregoing, such Stockholder agrees not to dispose of any portion of
Group 1 Common Stock unless either (1) a registration statement under the
Securities Act is in effect as to the applicable shares and the disposition is
made in accordance with that registration statement, or (2) the disposition is
made in full compliance with SEC Rule 144 and any other requirements of the
Securities Act. Additionally, for the three-year period following the Closing
Date a disposition pursuant to (viii)(2) above may be made only if the
Stockholder has notified Group 1 of the proposed disposition and the
disposition is made through a national brokerage firm selected by Group 1 and
the Stockholder to offer disposition services for Group 1 Common Stock (in the
absence of agreement between Group 1 and the Stockholder seeking to make a
disposition, Goldman, Sachs & Co., Inc. will be the firm to handle such
disposition).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
Group 1 and Merger Sub hereby represent and warrant, jointly and
severally, to the Company and the Stockholders that:
5.1 Corporate Organization. Group 1 is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority to execute, deliver
and perform this Agreement and each instrument required hereby to be executed
and delivered by it at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Merger Sub of this Agreement, the performance by Group 1 and Merger Sub of
their respective obligations pursuant to this Agreement, and the execution,
delivery and performance of each instrument required hereby to be executed and
delivered by Group 1 or Merger Sub at the Closing have been duly and validly
authorized by all requisite corporate action on the part of Group 1 or Merger
Sub, as the case may be. This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by Group 1
or Merger Sub at, or prior to, the Closing will then be, duly executed and
delivered by Group 1 or Merger Sub, as the case may be. This Agreement
constitutes, and, to the extent it purports to obligate Group 1 or Merger Sub,
each such instrument, document or agreement will constitute (assuming due
authorization, execution and delivery by each other party thereto), the legal,
valid and binding obligation of Group 1 or Merger Sub, as the case may be,
enforceable against them in accordance with its terms.
5.3 Approvals. Except for filings with the Secretary of State of
Delaware relating to the Merger, and except for applicable requirements, if
any, of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Group 1 or Merger Sub, as the case may be, to execute, deliver or consummate
the transactions contemplated by this Agreement or any instrument required
hereby to be executed and delivered by either of them at or prior to the
Closing.
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5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 or Merger Sub, as the case may be, of this Agreement or any instrument
required hereby to be executed by it at or prior to the Closing nor the
performance by Group 1 or Merger Sub, as the case may be, of its obligations
under this Agreement or any such instrument will (a) violate or breach the
terms of or cause a default under (i) any applicable Law, (ii) any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority, (iii) the organizational documents of Group 1 or Merger Sub or (iv)
any contract or agreement to which Group 1 or Merger Sub is a party or by which
it or any of its property is bound, or (b) result in the creation or imposition
of any Liens on any of the properties or assets of Group 1 or Merger Sub (other
than any Lien created by the Company ), or (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit certificate or order of any
Court or Governmental Authority or (d) with the passage of time or the giving
of notice or the taking of any action by any third party have any of the
effects set forth in clause (a), (b) or (c) of this Section, except, with
respect to clauses (a), (b), (c) or (d) of this Section, where such matter
would not have a material adverse effect on the business, assets, prospects or
condition (financial or otherwise) of Group 1 and its subsidiaries, taken as a
whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Merger are duly authorized and will, when
issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations of the Commission promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Group 1 included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with GAAP during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Group 1 and its consolidated
subsidiaries as of the dates thereto and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information, for normal year-end adjustments).
5.7 Merger Sub. Merger Sub is a corporation recently and duly
incorporated under the laws of the State of Delaware, is validly existing and
in good standing under such laws and is a wholly-owned subsidiary of Group 1.
Merger Sub has no assets, liabilities or obligations and has engaged in no
business except as contemplated by this Agreement.
5.8 No Knowledge of Misrepresentations or Omissions. Neither
Group 1, Merger Sub nor any of their agents or representatives has any actual
knowledge that the representations of the Stockholders made in this Agreement
are not true and correct in all material respects, and none of
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such persons has any actual knowledge of any material errors in, or material
omissions from, the Schedules to this Agreement.
ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals. Prior to the Closing Date, neither the
Company, any of its officers, directors, employees or agents nor any
Stockholder shall agree to, solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, business combination
or purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, the Company, other than the transactions with Group 1
contemplated by this Agreement. The Company and Stockholders will notify Group
1 promptly of any unsolicited offer.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Company or the Stockholders pursuant to this Agreement.
6.3 Conduct of Business by the Company Pending the Merger. The
Stockholders covenant and agree that, from the date of this Agreement until the
Closing Date, unless Group 1 shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement:
(a) The business of the Company shall be conducted only
in, and the Company shall not take any action except in, the ordinary
course of business and consistent with past practice. In connection
therewith, the parties agree that the Company may dealer trade
vehicles for similar models, but the Company shall not liquidate or
otherwise dispose of any of their new vehicles other than in the
ordinary course of business to retail buyers. The Company agrees to
maintain their advertising expenditures and activities commensurate
with prior business practices. The Company shall not advertise a
"Going Out of Business" sale;
(b) The Company shall not directly or indirectly do any
of the following: (i) issue, sell, pledge, dispose of or encumber, (A)
any capital stock (or securities convertible into capital stock) of
the Company or (B) other than in the ordinary course of business and
consistent with past practice and not relating to the borrowing of
money, any assets of the Company, (ii) amend or propose to amend the
articles of incorporation or bylaws (or other organizational
documents) of the Company, (iii) split, combine or reclassify any
outstanding capital stock of the Company, or declare, set aside or pay
any dividend payable in cash, stock, property or otherwise with
respect to its capital stock whether now or hereafter outstanding
(except as provided in Section 6.3(j) below), (iv) redeem, purchase or
acquire or offer to acquire any of its capital stock, (v) create,
incur, assume, guarantee or otherwise
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become liable or obligated with respect to any indebtedness for
borrowed money (other than floor plan indebtedness incurred in the
ordinary course of business), or (vi) except in the ordinary course of
business and consistent with past practice, enter into any contract,
agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than consistent with past business
practices of the Company; and shall not grant, to any individual,
severance or termination pay that exceeds the lesser of (i) such
individual's compensation for the calendar month immediately preceding
such individual's grant of severance or termination pay, or (ii)
$50,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Merger set forth in Article
VIII not being satisfied;
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
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executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement, program, practice or understanding (other than
the Plans and the Benefit Programs or Agreements);
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement; and
(j) Notwithstanding anything in this Agreement to the
contrary, dividends or other form of distribution to the Stockholders
may be made after the date of the Interim Balance Sheet so long as
such distributions do not cause the Company to be in violation of any
manufacturer working capital or equity guidelines or requirements. In
computing the Company's manufacturer working capital requirements, the
effect of the approximately $1,000,000 misclassification relating to
the renovation of the Perimeter facility shall be excluded.
6.4 Confidentiality. The Company shall, and the Company's
officers, directors, employees, representatives and consultants shall, hold in
confidence, and not disclose to others for any reason whatsoever, any
non-public information received by them or their representatives in connection
with the transactions contemplated hereby, including but not limited to all
terms, conditions and agreements related to this transaction, except (i) as
required by law; (ii) for disclosure to officers, directors, employees and
representatives of the Company as necessary in connection with the transactions
contemplated hereby; and (iii) for information which becomes publicly available
other than through the actions of the Company or a Stockholder. In the event
the Merger is not consummated, the Company and the Stockholders will return all
non-public documents and other material obtained from Group 1 or its
representatives in connection with the transactions contemplated hereby or
certify to Group 1 that all such information has been destroyed.
6.5 Notification of Certain Matters. The Company shall give
prompt notice to Group 1, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date hereof to the Effective Time, (ii) any
failure of the Company, or any officer, director, employee or agent thereof, or
any Stockholder to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder, or (iii) any litigation, or
any claim or controversy or contingent liability of which the Company has
knowledge of that might reasonably be expected to become the subject of
litigation, against the Company or affecting any of its assets, in each case in
an amount in controversy in excess of $50,000, or that is seeking to prohibit
or restrict the transactions contemplated hereby.
6.6 Consents. Subject to the terms and conditions of this
Agreement, the Company shall (i) obtain all consents, waivers, approvals
(including all applicable automobile manufacturers approvals, and such
approvals shall not contain any unreasonably burdensome restrictions on the
Company, Group 1 or Merger Sub), authorizations and orders required in
connection with the
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authorization, execution and delivery of this Agreement and the consummation of
the Merger; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary or proper to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, the
Company and the Stockholders shall cooperate and use reasonable efforts to
defend against and respond thereto. Costs of this defense and response will be
borne by Group 1.
6.8 Stockholders' Agreements Not to Sell. Each of the
Stockholders hereby covenants and agrees not to sell, pledge, transfer or
dispose of or encumber any shares of Company Common Stock currently owned,
either beneficially or of record, by such Stockholder, except as contemplated
by this Agreement and the Plan of Merger.
6.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
6.10 Removal of Related Party Guarantees. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
terminate, waive or release all guarantees by the Company (such guarantees
shall be referred to herein as "Related Guarantees", as described in Schedule
6.10 pursuant to Section 3.11 of this Agreement) of indebtedness or other
obligations of any of the Company's officers, directors, shareholders,
employees or affiliates of any such Persons.
6.11 Termination of Related Party Agreements. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to terminate
the Related Party Agreements except those Related Party Agreements that are
disclosed in Schedule 6.11 as agreements that shall not be subject to this
Section 6.11.
6.12 Related Party Agreements. The Company agrees, and the
Stockholders agree to cause the Company, not to enter into any Related Party
Agreements or engage in any transactions with the Stockholders or their
affiliates; except for those Related Party Agreements or transactions with
affiliates that are disclosed in Schedule 6.12 as agreements or transactions
that shall not be subject to this Section 6.12.
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6.13 Release.
(a) AS OF THE CLOSING, EACH OF THE STOCKHOLDERS DOES HEREBY FOR
HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES
REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY OF AND FROM ANY AND
ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN
OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT, WHICH EACH OF SUCH
STOCKHOLDERS NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR
HELD AGAINST THE COMPANY INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED
AS A RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF THE COMPANY
AND ITS EMPLOYEES AND AGENTS, EXISTING AS OF THE CLOSING OR RELATING TO ANY
MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING; PROVIDED, HOWEVER, THAT ANY
CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION
WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR
OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS
OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS SHALL
NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT; AND PROVIDED FURTHER
ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS OR AGREEMENTS LISTED ON THE
SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS THAT HE HAS
NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO
ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS,
LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS
RELEASED HEREIN. EACH OF THE STOCKHOLDERS COVENANTS AND AGREES THAT HE WILL
NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF
THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
OR OBLIGATIONS TO BE RELEASED HEREIN. EACH OF THE STOCKHOLDERS REPRESENTS AND
WARRANTS THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION
6.13 AND THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN
CONNECTION WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Leases. Stockholders hereby agree to cause certain of their
affiliates to enter into a lease agreement with the Company on the basic terms,
and covering the real property and improvements, described on Exhibit B.
6.15 Employment Agreements. The Stockholders agree to enter into
employment agreements with Group 1 and the Company in form and substance
substantially similar to Exhibit C attached hereto.
6.16 Certain Tax Matters
(a) The Stockholders shall use the amounts reflected in
Section 1.6(b)(i) of the Plan of Merger for purposes of preparation of
their Tax Returns. With respect to the shares of Group 1 Common Stock
received by the Stockholders, $14.00 per share shall be used for
purposes of determining the value of the stock portion of the purchase
price.
(b) The Stockholders shall (i) file all required 1998
federal income tax returns of the Company by September 30, 1998; (ii)
use an interim closing of the books of the
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Company effective as of the Closing Date for the purposes of preparing
such returns; and (iii) deliver such returns to Group 1 for its review
at least five (5) days prior to the filing of such returns.
6.17 Phase I Environmental Assessments. The Stockholders have
delivered all Phase I Environmental Surveys requested by Group 1. Prior to
Closing the Stockholders will complete at their cost all cure and remediation
efforts recommended in such surveys, and, to the best of Stockholders'
knowledge, the Company will have no residual liability with regard to any
matter revealed in such surveys.
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Merger is not consummated, Group 1 will return all non-public
documents and other material obtained from the Company or its representatives
in connection with the transactions contemplated hereby or certify to the
Company that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Merger.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger;
and (ii) take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, Group 1
agrees to cooperate and use reasonable efforts to defend against and respond
thereto. Costs of this defense and response will be borne by Group 1.
7.5 Delivery of Certificates. On the Closing Date, Group 1 will
deliver to each holder of certificates which represented Company Common Stock
prior to the Effective Time a letter of
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transmittal and other information advising such holder of the consummation of
the Merger and to enable such holder to effect the exchange of stock
certificates as contemplated by Article II of this Agreement.
7.6 Certain Tax Matters
(a) Group 1 shall use the amounts reflected in Section
1.6(b)(i) of the Plan of Merger for purposes of preparation of its Tax
Returns. With respect to the shares of Group 1 Common Stock received
by the Stockholders, $14.00 per share shall be used for purposes of
determining the value of the stock portion of the purchase price.
(b) Group 1 shall act as reasonably necessary to assist
the Stockholders in preparing their federal income tax returns in
accordance with Section 6.16(b) hereof.
(c) Group 1 shall cause the Company, as soon as
practicable, to calculate and distribute pro rata to the Stockholders
a cash amount equal to the net assets of the Company as of the Closing
Date less the applicable manufacturer's minimum working capital
requirement as of the Closing Date.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the Merger;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Merger;
(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated; and
(d) Receipt of Ford Motor Company's approval of the
Merger and the transactions contemplated thereby.
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Merger is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
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(a) The representations and warranties of the Company and
the Stockholders contained in Article III and Article IV,
respectively, shall be true and correct in all respects as of the date
when made and as of the Closing Date as though such representations
and warranties had been made at and as of the Closing Date; all of the
terms, covenants and conditions of this Agreement to be complied with
and performed by the Company and the Stockholders on or before the
Closing Date shall have been duly complied with and performed in all
respects, a certificate to the foregoing effect dated the Closing Date
and signed by the chief executive officer of the Company and each of
the Stockholders shall have been delivered to Group 1, and a copy of
the resolutions of each Company's Board of Directors, certified by the
Secretary of the Company as of the Closing Date, approving the terms
of this Agreement and all transactions contemplated hereby shall have
been delivered to Group 1;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Merger and the transactions contemplated
thereby will be in compliance with applicable laws;
(c) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements and the simultaneous
closing of each of the Other Mergers;
(d) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.10 and 6.11 hereto;
(e) Group 1 shall have received executed representations
from each Stockholder stating that such Stockholder (with respect to
shares owned beneficially or of record by him or her) has no current
plan or intention to sell or otherwise dispose of the Group 1 Common
Stock to be received by him or her in the Merger;
(f) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have occurred, and the
Company shall not have suffered any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting
the properties or business of the Company and Group 1 shall have
received a certificate signed by the chief executive officer of the
Company dated the Closing Date to such effect;
(g) Receipt by Group 1, at Stockholders' expense, of a
Policy of Title Insurance, issued by a title company, approved by
Group 1, subject only to the exceptions described in Schedule 8.2(g)
("Permitted Title Exceptions");
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(h) Receipt by Group 1, at Stockholders' expense, of a
current survey of the Leased Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1;
(i) Closing of the purchase by Group 1 of the Premier
Auto Finance, L.P., limited partnership interest from J. Carroll
Enterprises, Inc.;
(j) Execution of employment agreements pursuant to Section
6.15; and
(k) Execution of the lease agreement pursuant to Section
6.14.
8.3 Additional Conditions Precedent to Obligations of the
Stockholders. The obligation of the Stockholders to effect the Merger is also
subject to the fulfillment at or prior to the Closing Date of the following
condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date, all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects, a certificate to the foregoing effect dated the Closing Date
and signed by the chief executive officer of Group 1 shall have been
delivered to the Company, and a copy of the resolutions of the Board
of Directors of Group 1, certified by the Secretary of Group 1 as of
the Closing Date, approving the terms of this Agreement and all
transactions contemplated hereby shall have been delivered to the
Company; and
(b) Receipt of an opinion from Crowe Chisek & Company,
dated as of the Closing Date, to the effect that the Merger will
constitute a non-taxable reorganization as defined in Section 368(a)
of the Code.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify. Each of the
Stockholders agrees to severally indemnify, defend and hold Group 1 harmless
(subject to the limitations set forth in Section 9.1(e) below) from and against
the aggregate of all Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all actual
expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by Group 1, on a pre-tax consolidated basis to
the extent (i) resulting from any breach of a representation or
warranty made by the Company or such Stockholder in or pursuant to
this Agreement, (ii) resulting from any breach of the covenants or
agreements
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made by the Company or such Stockholder pursuant to this Agreement, or
(iii) resulting from any inaccuracy in any certificate delivered by
the Company or any of the Stockholders pursuant to this Agreement;
provided, however, that "Indemnifiable Damages" shall not include any
damages arising from the employment agreements executed pursuant to
Section 6.15, the lease agreements executed pursuant to Section 6.14
and the non- competition provisions of Section 10.4.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Group 1
shall have the right to be put in the same pre-tax consolidated
financial position as Group 1 would have been in had each of the
representations and warranties of the Company and such Stockholder
hereunder been true and correct and had the covenants and agreements
of the Company and such Stockholder hereunder been performed in full.
(c) Each of the representations and warranties made by
the Company and the Stockholders in this Agreement or pursuant hereto
shall survive for a period of three years after the Closing Date,
except that the representations and warranties of the Stockholders
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 4.1, 4.2, 4.3 and
4.4 shall not expire, but shall continue indefinitely. No claim for
the recovery of Indemnifiable Damages may be asserted by Group 1
against the Stockholders after such representations and warranties
shall expire, provided, however, that claims for Indemnifiable Damages
first asserted within the applicable period shall not thereafter be
barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the
right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Group 1 believes it is entitled to a claim for any
Indemnifiable Damages hereunder, Group 1 shall promptly give written
notice to the Stockholders of such claim and the amount or the
estimated amount of such claim, and the basis for such claim. If the
Stockholders do not pay the amount of the claim for Indemnifiable
Damages to Group 1 within 10 days, then Group 1 may exercise its
respective rights under Section 9.3 and/or take any action or exercise
any remedy available to it by appropriate legal proceedings to collect
the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, the Stockholders' liability for Indemnifiable
Damages shall be limited as follows:
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(1) Group 1 shall have no claim for Indemnifiable
Damages unless and until all Indemnifiable
Damages incurred by Group 1 exceed an
aggregate of $350,000.00 with respect to this
Agreement and the Other Agreements (the
"Basket Amount"), in which event the
Stockholders shall be liable for only such
Indemnifiable Damages in excess of the Basket
Amount; and
(2) The total amount of Indemnifiable Damages for
which each Stockholder shall be liable to
Group 1 shall not exceed the total value of
the Initial Stock Consideration and the
Initial Cash Consideration received by such
Stockholder in the Merger and the Other
Mergers. For the purposes of this Section
9.1(e)(2), all Initial Stock Consideration
shall be assigned a per share value of
$14.00.
THE STOCKHOLDERS ACKNOWLEDGE AND AGREE THAT FOR PURPOSES OF
THE BASKET AMOUNT, INDEMNIFIABLE DAMAGES UNDER THE OTHER AGREEMENTS
WILL AFFECT THEIR OBLIGATION TO INDEMNIFY GROUP 1 UNDER THIS
AGREEMENT, EVEN THOUGH THE STOCKHOLDERS MAY OWN DIFFERING PERCENTAGES
OF THE DEALERSHIPS BEING ACQUIRED BY GROUP 1 PURSUANT TO THE OTHER
AGREEMENTS. FOR EXAMPLE, IF CLAIMS FOR INDEMNIFIABLE DAMAGES UNDER
ONE OF THE OTHER AGREEMENTS EQUAL OR EXCEED $350,000, THEN THE
STOCKHOLDERS UNDER THIS AGREEMENT WILL BE OBLIGATED TO INDEMNIFY GROUP
1 FOR CLAIMS FOR ALL AMOUNTS WITHOUT THE BENEFIT OF ANY BASKET AMOUNT.
9.2 Agreement by Group 1 to Indemnify. Group 1 agrees to
indemnify, defend and hold the Stockholders harmless from and against the
aggregate of all Stockholders Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Stockholders
Indemnifiable Damages" means, without duplication, the aggregate of
all expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by the Stockholders, on a pre-tax consolidated
basis, to the extent (i) resulting from any breach of a representation
or warranty made by Group 1 in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by Group
1 in or pursuant to this Agreement, or (iii) resulting from any
inaccuracy in any certificate delivered by Group 1 pursuant to this
Agreement; provided, however, that "Stockholders Indemnifiable
Damages" shall not include any damages arising from the employment
agreements executed pursuant to Section 6.15, the lease agreements
executed pursuant to Section 6.14 and the non-competition provisions
of Section 10.4.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Stockholders Indemnifiable Damages,
the Stockholders have the right to be put in the same pre-tax
consolidated financial position as he, she or it would have been in
had
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each of the representations and warranties of Group 1 hereunder been
true and correct and had the covenants and agreements of Group 1
hereunder been performed in full.
(c) Each of the representations and warranties made by
Group 1 in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date, except that the
representations and warranties of Group 1 contained in Sections 5.1,
5.2, 5.3, 5.4 and 5.5 shall not expire, but shall continue
indefinitely. No claim for the recovery of Stockholders Indemnifiable
Damages may be asserted by the Stockholders against Group 1 after such
representations and warranties shall thus expire, provided, however,
that claims for Stockholders Indemnifiable Damages first asserted
within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) In the event that the Stockholders believe they are
entitled to a claim for any Stockholders Indemnifiable Damages
hereunder, the Stockholders shall promptly give written notice to
Group 1 of such claim and the amount or the estimated amount of such
claim, and the basis for such claim. If Group 1 does not pay the
amount of the claim for Indemnifiable Damages to the Stockholders
within 10 days, then the Stockholders may exercise their respective
rights under Section 9.3 and/or take any action or exercise any remedy
available to them by appropriate legal proceedings to collect the
Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.2, the Stockholders shall have no claim for
Stockholders Indemnifiable Damages unless and until the aggregate
Stockholders Indemnifiable Damages incurred by the Stockholders under
this Agreement and the Other Agreements shall exceed an aggregate of
$350,000, in which event Group 1 shall be liable for only such
Stockholders Indemnifiable Damages in excess of $350,000.
9.3 Conditions of Indemnification. The obligations and
liabilities of the Stockholders and Group 1 hereunder with respect to their
respective indemnities pursuant to this Article IX resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such
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Indemnifying Party is harmed by the failure of the Indemnified Party
to provide timely notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Group 1 or Merger Sub, then Group 1 shall have the right to
control the defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights.
(a) In connection with Group 1's future dealership
acquisitions in which the seller of such dealership seeks to sell the
real estate and facilities component thereof (and Group 1 elects not
to purchase such real estate and facilities), Group 1 agrees to
introduce and recommend World Partner Associates, Ltd. as a suitable
buyer of such real estate and facilities, with the understanding that
World Partner Associates, Ltd. will lease such real estate and
facilities to Group 1 under terms and conditions substantially similar
to the lease agreement between Courtesy Ford, Inc. and K.C.
Partnership entered into as of the Closing Date (and providing for an
annual rental of 10% of the purchase price for such real estate),
provided, however, that if Group 1 has a business arrangement with an
affiliated real estate company or with a Group 1 lender providing for
economic benefit to Group 1 as a result of the real estate company's
acquisition of the real estate and facilities component of an
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acquired dealership, such business arrangement will supersede Group
1's obligations to World Associates, Ltd. hereunder. The rights and
obligations created hereunder shall expire on the tenth anniversary of
the Closing Date.
(b) Group 1 agrees that if a third party makes an offer
to purchase one or more of the Companies in a transaction not
involving (i) a substantial portion of the other operations of Group 1
(other than the Companies) or (ii) a substantial portion of the Group
1 operations under the management of James S. Carroll in Florida and
Georgia (other than the Companies), James S. Carroll has the right of
first refusal to purchase the Company or Companies subject to the
third party offer on the same terms as such offer, provided, however,
that as a condition of closing such offer, all Designated Persons (as
defined herein) who will own, operate or manage the repurchased
Company or Companies shall resign from employment with Group 1. The
right granted hereunder shall expire on the tenth anniversary of the
Closing Date and is personal to James S. Carroll and is non-assignable
and non-transferrable.
10.2 Certain Post-Closing Payments.
(a) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 10.2(a). Beginning
with the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section
10.2(a) will be paid in cash and Group 1 Common Stock, in the same
proportions as the aggregate consideration received by each
Stockholder in the Merger and the Other Mergers. For the purposes of
determining the number of shares of Group 1 Common Stock payable to
the Stockholders hereunder, such shares shall be assigned a per share
value of the average closing price of the Group 1 Common Stock on the
New York Stock Exchange for the five trading days preceding the date
on which such shares are issued.
The aggregate consideration paid by Group 1 pursuant to this
Section 10.2(a) and Section 10.2(a) of the Other Agreements (the
"Contingent Consideration") shall not exceed $7.5 million, $2.5
million of which (the "Guaranteed Payments") will be paid regardless
of the results of the above computation, as follows: $900,000 on the
first anniversary of the Closing Date, $900,000 on the second
anniversary of the Closing Date, and $700,000 on the third anniversary
of the Closing Date. The aggregate Guaranteed Payments actually paid
to the Stockholders shall carry forward and be applied against any
additional Contingent Consideration payable to the Stockholders
hereunder. The Guaranteed Payments shall be
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reduced by the difference between the aggregate Contingent
Consideration previously paid to the Stockholders and $2.5 million.
The Contingent Consideration payable under this Section
10.2(a) is additional consideration for the Stockholders' interests in
the Company, and the parties hereto agree to report such amounts on
such basis for income tax purposes.
(b) If a Stockholder sells any of the Initial Stock
Consideration received by such Stockholder pursuant to the Plan of
Merger for a per share price of less than fourteen dollars ($14.00),
Group 1 shall pay the difference between the price per share at which
such shares were sold and $14.00 per share; provided, that this
Section 10.2(b) shall only apply to sales (i) occurring after the
expiration of the applicable Stockholder's Restricted Period and (ii)
made in the public market; and provided, further that this Section
10.2(b) shall terminate five (5) years following the termination of
the applicable Stockholder's Restricted Period. A Stockholder shall
promptly notify Group 1 in writing of any sale of Group 1 Common Stock
pursuant to this Section 10.2(b), and Group 1 shall make any payments
due to such Stockholder hereunder within ten (10) business days of
receipt of notice.
10.3 Schedules to this Agreement. The Schedules to this Agreement
contain all disclosure required to be made by the Company under the various
terms and provisions of this Agreement.
10.4 Non-Competition Obligations.
(a) As part of the consideration for the Merger, and as
an additional incentive for Group 1 to enter into this Agreement,
James S. Carroll, Janet L. Giles and Ralph S. Kerr (each a "Designated
Person" and collectively, the "Designated Persons") and Group 1 agree
to the non-competition provisions of this Section 10.4. Each
Designated Person agrees that during the period of such Designated
Person's non-competition obligations hereunder, such Designated Person
will not, directly or indirectly for such Designated Person or for
others, within twelve miles of or in the county of any operations sold
to Group 1 under this Agreement or operations subsequently managed by
such Designated Person as of the date in question or during the
previous twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates engaged in automotive retailing;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates engaged in automotive
retailing; or
(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or
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affiliates, or hire or assist in the hiring of any such
employee by person, association, or entity not affiliated with
Group 1 or any of its subsidiaries or affiliates.
For the purposes of this Section 10.4, "operations
subsequently managed" shall mean (i) in the case of James S. Carroll,
all Florida and Georgia operations of Group 1 and its affiliates under
the executive management authority of James S. Carroll and (ii) in the
case of the other Designated Persons, all operations of Group 1 and
its affiliates under the day-to-day general management authority of
such Designated Persons.
These non-competition obligations shall apply until the later
of (i) three years after the Closing or (ii) the period specified in
any employment agreement entered into by such Designated Person with
Group 1 or its Subsidiaries.
If Group 1 or any of its subsidiaries or affiliates abandons a
particular aspect of its business, that is, ceases such aspect of its
business with the intention to permanently refrain from such aspect of
its business, then this non-competition covenant shall not apply to
such former aspect of that business.
Notwithstanding the foregoing, the non-competition obligations
of this Section 10.4 shall not apply to (x) the leasing of property or
facilities owned by the Designated Persons or their affiliates to a
competitor of Group 1 if such property or facilities were previously
leased to Group 1 under a lease agreement which Group 1 materially
breached, failed to renew or terminated (for reasons other than
lessor's breach), or (y) any Designated Person's operation and
management of any dealership purchased in accordance with Section
10.1(b) hereof.
(b) During this non-competition period James S. Carroll
will not engage in these restricted activities or assist in the
industry consolidation efforts on behalf of any publicly held entity
in the automotive retailing industry (nor any entity with the ultimate
intention of becoming a publicly held entity or being acquired in any
manner by a publicly held entity), regardless of geographic area or
market; provided, however, that this paragraph (b) shall not prohibit
James S. Carroll from selling, to a publicly held entity, any
dealership acquired by him in full compliance with his post-employment
non-competition obligations hereunder and held by him for at least one
year.
(c) The Designated Persons understand that the foregoing
restrictions may limit their ability to engage in certain businesses
during the period provided for above, but acknowledge that the
Designated Persons will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction. Each
of the Designated Persons acknowledges that money damages would not be
sufficient remedy for any breach of this Section 10.4 by such
Designated Person, and such remedies shall not be deemed the
exclusive remedies for a breach of this Section 10.4, but shall be in
addition to all remedies available at law or in equity to Group 1 or
any of its subsidiaries or affiliates, including,
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without limitation, the recovery of damages from Group 1 and such
Designated Person's agents involved in such breach.
(d) It is expressly understood and agreed that Group 1
and the Designated Persons consider the restrictions contained in this
Section 10.4 to be reasonably necessary to protect the legitimate
business interests of Group 1 and its affiliates, including the
confidential and proprietary information and trade secrets of Group 1
and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions
therein set forth to be modified by such courts so as to be reasonable
and enforceable and, as so modified by the court, to be fully
enforced.
(e) The parties hereto expressly acknowledge that Group
1's rights under this Section 10.4 are assignable and that such rights
shall be fully enforceable by any of Group 1's assignees or successors
in interest.
10.5 Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated herein may be abandoned at any time
prior to the Closing:
(a) by mutual consent of Group 1 and the Stockholders;
(b) by either Group 1 or the Stockholders if the Merger
has not been effected on or before March 31, 1998;
(c) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate under
this Section 10.5(c) shall expire at midnight on January 31, 1998;
(d) by either Group 1 or the Stockholders if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Merger or the other transactions contemplated hereby shall have been
entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations,
financial condition or prospects of the Company; (ii) there has been a
material breach of any representation, warranty, covenant or other
agreement set forth in this Agreement by the Company or the
Stockholders (except for any representation, warranty or covenant
qualified by materiality or knowledge according to its terms, in which
case any breach thereof will give rise to Group 1's right to terminate
hereunder) which breach has not been cured within ten business days
following receipt by the Company of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice) or (iii) there is a material adverse change in the aggregate
projected 1998
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pre-tax income of $6.8 million expected for the Company and the Other
Companies, on which the consideration paid to the Stockholders in
connection with the Merger was based; or
(f) by the Stockholders if there has been a material
breach of any representation or warranty set forth in this Agreement
by Group 1 which breach has not been cured within ten business days
following receipt by Group 1 of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice).
10.6 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.5, the parties hereto shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.7 survive any such termination.
10.7 Expenses. Regardless of whether the Merger is consummated,
all costs and expenses in connection with this Agreement and the transactions
contemplated hereby incurred by Group 1 shall be paid by Group 1 and all such
costs and expenses incurred by the Stockholders shall be paid by the Company
and the Stockholders; provided, that all expenses borne by the Company will be
paid prior to the completion of the distributions contemplated by Sections
6.3(j) and 7.6(c) hereof, and that such expenses will be deducted from the
Company's working capital for the purpose of calculating such distributions.
The Stockholder and Group 1 each represent and warrant to each other that there
is no broker or finder involved in the transactions contemplated hereby.
10.8 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period") (two-year period with respect to James S. Carroll), no
Stockholder voluntarily will: (i) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (A) any shares of Group 1
Common Stock received by any Stockholder in the Merger or (B) any interest in
(including any option to buy or sell) any of those shares of Group 1 Common
Stock, in whole or in part, and Group 1 will have no obligation to, and shall
not, treat any such attempted transfer as effective for any purpose; or (ii)
engage in any transaction, whether or not with respect to any shares of Group 1
Common Stock or any interest therein, the intent or effect of which is to
reduce the risk of owning the shares of Group 1 Common Stock acquired pursuant
to the Plan of Merger (including for example engaging in put, call, short-sale,
straddle or similar market transactions). Notwithstanding the foregoing, each
Stockholder may (i) pledge shares of Group 1 Common Stock, provided that the
pledgee of such shares shall agree not to sell or otherwise dispose of any such
shares for the Restricted Period; (ii) transfer shares to immediate family
members or the estate of any such individual (including, without limitation,
any transfer by such Stockholder to or among any trust, custodial or other
similar accounts or funds that are for the benefit of his or her immediate
family members), provided that such person or entity shall agree not to sell or
otherwise dispose of any such shares for the Restricted Period; and (iii)
transfer shares by will or the laws of descent and distribution or otherwise by
reason of such Stockholder's death. The certificates evidencing the Group 1
Common Stock delivered to each Stockholder pursuant to the Plan of Merger will
bear a legend substantially in the form set forth below and containing such
other information as Group 1 may deem necessary or appropriate:
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<PAGE> 43
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE [ONE-YEAR] [TWO-YEAR] PERIOD ENDING ON ______________ [DATE
THAT IS THE [FIRST] [SECOND] ANNIVERSARY OF THE CLOSING DATE] (THE
"RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE
SPECIFIED ABOVE.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of Group 1 Common Stock to be
delivered to that Stockholder pursuant to the Plan of Merger have not been and,
if applicable, will not be registered under the Securities Act and therefore
may not be resold by that Stockholder without compliance with the Securities
Act and (ii) covenants that none of the shares of Group 1 Common Stock issued
to that Stockholder pursuant to the Plan of Merger will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all the applicable provisions of the Securities Act
and the rules and regulations of the Commission and applicable state securities
laws and regulations. All certificates evidencing shares of Group 1 Common
Stock issued pursuant to the Plan of Merger will bear the following legend in
addition to the legend prescribed by Section 10.8(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Plan of Merger to each Stockholder will bear any legend
required by the securities or blue sky laws of the state in which that
Stockholder resides.
10.9 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party entitled to the benefits thereof. This
Agreement may not be amended or supplemented
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at any time, except by an instrument in writing signed on behalf of each party
hereto. The waiver by any party hereto of any condition or of a breach of
another provision of this Agreement shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
10.10 Legal Fees. Except as otherwise provided herein, the losing
party shall pay all reasonable legal fees and expenses and costs of litigation
through appeal incurred by the prevailing party in any dispute arising from
this Agreement.
10.11 Public Statements. The Stockholders and Group 1 agree to
consult with each other prior to issuing any press release or otherwise making
any public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
10.12 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
10.13 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
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<PAGE> 45
if to the Company: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
if to the Stockholders: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.13. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor. Delivery to the Stockholders' representative, if any, of any
notice to Stockholders hereunder shall constitute delivery to all
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<PAGE> 46
Stockholders and any notice given by such Stockholders' representative shall be
deemed to be notice given by all Stockholders.
10.14 Governing Law. Except as otherwise specified herein, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, excluding any choice of law rules that may direct the
application of the laws of another jurisdiction.
10.15 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.16 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.17 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.18 Entire Agreement; Third Party Beneficiaries. This Agreement,
including the Exhibits and the Schedules hereto, constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
oral and written, among the parties or any of them, with respect to the subject
matter hereof (except as contemplated otherwise by this Agreement) and neither
this nor any document delivered in connection with this Agreement, confers upon
any Person not a party hereto any rights or remedies hereunder.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
-------------------------------------
Name: B.B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
PF MERGER, INC.
By: /s/ JOHN T. TURNER
-------------------------------------
Name: John T. Turner
Title: President
PERIMETER FORD, INC.
By: /s/ RALPH S. KERR
-------------------------------------
Name: Ralph S. Kerr
Title: President
STOCKHOLDERS
J. CARROLL ENTERPRISES TRUST
/s/ JAMES S. CARROLL
-----------------------------------------
By: James S. Carroll, Trustee
/s/ RALPH S. KERR
-----------------------------------------
Ralph S. Kerr
JANET L. GILES REVOCABLE LIVING TRUST
/s/ JANET L. GILES
-----------------------------------------
By: Janet L. Giles, Trustee
<PAGE> 48
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Agreement and Plan of Reorganization made
and entered into as of December ____, 1997 by and among Group 1, Merger Sub,
the Company and the Stockholders thereof, including any amendments thereto and
each Annex (including this Annex A), Exhibit and schedule thereto (including
the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Leased Properties, whether personal or mixed, tangible
or intangible, wherever located.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.17.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Carroll Group" shall mean all dealerships under the executive
management responsibility of James S. Carroll in Florida and Georgia (including
the Companies and any other dealerships acquired by Group 1 after the Closing
Date) and additional dealerships acquired by Group 1 as a result of the efforts
of James S. Carroll (whether or not such dealerships are under the executive
management control of James S. Carroll).
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
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<PAGE> 49
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Perimeter Ford, Inc., a Delaware corporation, all
predecessor entities of the Company and its successors from time to time.
"Company Common Stock" shall mean the issued and outstanding common
stock of the Company, as set forth in Section 3.7.
"Company's 1996 Balance Sheet" shall have the meaning set forth in
Section 3.8 herein.
"Company's 1996 Financial Statements" shall have the meaning set forth
in Section 3.8 herein.
"Contingent Consideration" shall have the meaning set forth in Section
10.2(a) herein.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Designated Person" and "Designated Persons" shall have the meanings
set forth in Section 10.4 herein.
"Effective Time" shall mean the effective time of the issuance of a
certificate of merger by the Secretary of State of the State of Delaware
recognizing the Merger.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the 1996 Balance Sheet or acquired by the Company since the
date of the 1996 Balance Sheet.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Group 1" shall mean Group 1 Automotive, Inc., a Delaware corporation.
"Group 1 Common Stock" shall mean the common stock, par value $.01 per
share of Group 1.
"Guaranteed Payments" shall have the meaning set forth in Section
10.2(a) herein.
"Guarantees" shall have the meaning set forth in Section 3.11 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has
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<PAGE> 51
been or shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Incremental Return" shall mean return on Group 1's investment in the
operations of the Carroll Group that were not a part of the Companies on the
date of this Agreement (total income after income taxes divided by total
investment). " Income" and "investment" used for these purposes will be before
any Group 1 management fees, allocations of indirect costs, cost of capital
(including interest, loan origination fees, points and any other expenses
incurred in obtaining or maintaining a loan) or amortization of goodwill.
"Total investment" in these operations will include any loan proceeds, cash or
stock invested by Group 1 to acquire the operations added to the Carroll Group
after the date of this Agreement (including all investments made by Group 1 as
a condition to manufacturer approval of such acquisitions).
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" shall have the meaning set
forth in Section 3.18 herein.
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
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<PAGE> 52
"Material Contract" has the meaning set forth in Section 3.11 herein.
"Material Leases" shall have the meaning set forth in Section 3.11
herein.
"Merger" shall mean the merger of Merger Sub with and into the
Company.
"Merger Sub" shall mean PF Merger, Inc., a Delaware corporation and a
wholly owned subsidiary of Group 1.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Other Agreements" shall have the meaning set forth in the Recitals
hereto.
"Other Company" and "Other Companies" shall have the meanings set
forth in the Recitals hereto.
"Owned Properties" shall mean any real estate previously owned by the
Company.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
-5-
<PAGE> 53
(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Phase I Environmental Surveys" shall mean the environmental reports
of S.E. Environmental Consultants, Inc. dated September, 1997.
"Plan" shall have the meaning set forth in Section 3.17.
"Plan of Merger" shall mean the Agreement and Plan of Merger made and
entered into as of __________, 1998 by and between Merger Sub and the Company.
"Related Party Agreements" shall have the meaning set forth in Section
3.11 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person with any Governmental Authority.
"Restricted Period" shall have the meaning set forth in Section 10.8
herein.
"Schedules" shall mean all schedules required to be provided by the
Company or the Stockholders under this Agreement, including any amendments or
supplements thereto.
"SEC Documents" shall mean the Group 1 Automotive, Inc. Prospectus
dated October 29, 1997 and the Form 10-Q for the third quarter ended September
30, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Stockholders Indemnifiable Damages" shall have the meaning set forth
in Section 9.2 herein.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
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<PAGE> 54
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person within six
years prior to the date of the Agreement but which have been terminated prior
to the date of the Agreement.
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
-7-
<PAGE> 55
EXHIBIT A
______________, 1998
AGREEMENT AND PLAN OF MERGER
Merging PERIMETER FORD, INC. into PF MERGER, INC.
THIS AGREEMENT AND PLAN OF MERGER, dated as of _________, 1998 (this
"Plan of Merger"), is by and between PF Merger, Inc., a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of Group 1 Automotive, Inc., a
Delaware corporation ("Group 1") and Perimeter Ford, Inc., a Delaware
corporation (the "Company"). Merger Sub and the Company are hereinafter
sometimes referred to as the "Constituent Corporations."
PRELIMINARY STATEMENT
Group 1, Merger Sub and the Company desire that the Company merge with
and into Merger Sub.
This Plan of Merger is being entered into pursuant to an Agreement and
Plan of Reorganization dated as of December 17, 1997 (the "Agreement") among
Group 1, Merger Sub, the Company and the stockholders of the Company.
Group 1 will acquire by merger (the "Other Mergers") Koons Ford, Inc.,
a Florida corporation and Courtesy Ford, Inc., a Florida corporation
(collectively, the "Other Companies") pursuant to plans of merger entered into
among the Other Companies and subsidiaries of Group 1 (collectively, the "Other
Plans of Merger").
The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $.01 per share ("Merger Sub Common Stock"), of which
1,000 shares are outstanding, all of which are owned by Group 1. The
authorized capital stock of the Company consists of 5,000 shares of common
stock, par value $100.00 per share ("Company Common Stock"), of which 1,579
shares are outstanding and no shares are held in the Company's treasury.
The Boards of Directors of each of the Constituent Corporations,
respectively, have approved the Agreement and the Plan of Merger.
Accordingly, in consideration of the premises, and the mutual
covenants and agreements herein contained, the parties hereto hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
<PAGE> 56
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.3), the Company shall be merged with and into the Merger Sub, the separate
existence of the Company shall cease, and the Merger Sub (i) shall continue as
the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Perimeter Ford, Inc.", (ii) shall be
governed by the laws of Delaware (iii) shall maintain a registered office in
the State of Delaware at c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware, and shall (iv) succeed to and assume all of the rights,
properties and obligations of Merger Sub and the Company in accordance with the
applicable provisions of the Delaware General Corporation Law (the "Code").
1.2 Effect of the Merger. The Merger shall have the effects set
forth in Section 251 of the Code.
1.3 Consummation of the Merger. As soon as practicable after all
conditions set forth in Article VIII of the Agreement have been satisfied or
waived, the parties hereto will file with the Secretary of State of the State
of Delaware articles of merger in such form as required by, and executed in
accordance with, the relevant provisions of the Code, with instructions that
such articles of merger are to be issued and effective as of the last day of
the month in which such articles are filed (the effective time of the issuance
of a certificate of merger by the Secretary of State of the State of Delaware
being the "Effective Time").
1.4 Certificate of Incorporation; Bylaws. The certificate of
incorporation and bylaws of the Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation and bylaws of the
Surviving Corporation and thereafter shall continue to be its certificate of
incorporation and bylaws until amended as provided therein and under the Code.
1.5 Directors and Officers. The directors of the Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation. The initial officers
of the Surviving Corporation shall be as follows: (i) Ralph S.
Kerr--President, (ii) James S. Carroll--Vice President, (iii) Janet L.
Giles--Treasurer, and (iv) Frank R. Todaro--Secretary, in each case until their
respective successors are duly elected or appointed and qualified.
1.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the Company, Merger Sub or
their respective stockholders:
(a) The shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (the "Shares")
shall be converted, subject to the provisions of this Section 1.6,
into (i) the rights to receive, immediately following the Effective
Date,
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<PAGE> 57
a number of shares of Group 1 Common Stock (the "Initial Stock
Consideration") and an amount in cash (the "Initial Cash
Consideration," and together with the Initial Stock Consideration, the
"Initial Consideration") as set forth in Section 1.6(b) below, and
(ii) the rights to receive, periodically upon satisfaction of the
conditions set forth in Section 1.6(c) below, additional shares of
Group 1 Common Stock (the "Contingent Stock Consideration") and
amounts in cash (the "Contingent Cash Consideration," and together
with the Contingent Stock Consideration, the "Contingent
Consideration") as set forth in Section 1.6(c) hereof; provided,
however, that no fractional shares of Group 1 Common Stock shall be
issued, and, in lieu thereof, a cash payment shall be made pursuant to
Sections 1.6(h) and 1.6(i) hereof.
(b)(i) The Shares owned by J. Carroll Enterprises Trust shall
be converted into the right to receive Initial Stock Consideration of
311,383 shares and the rights to receive a portion of any Contingent
Consideration periodically payable to it in accordance with Section
1.6(c) hereof; (ii) the Shares owned by Janet L. Giles Revocable
Living Trust shall be converted into the right to receive Initial
Stock Consideration of 26,760 shares, Initial Cash Consideration of
$7,766 and the rights to receive a portion of any Contingent
Consideration periodically payable to it in accordance with Section
1.6(c) hereof; and (iii) the Shares owned by Ralph S. Kerr shall be
converted into the right to receive Initial Stock Consideration of
203,373 shares, Initial Cash Consideration of $59,025 and the rights
to receive a portion of any Contingent Consideration periodically
payable to him in accordance with Section 1.6(c) hereof.
(c) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 1.6(c). Beginning with
the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section 1.6(c)
will be paid in cash and Group 1 Common Stock, in the same proportions
as the aggregate consideration received by each Stockholder in the
Merger and the Other Mergers. For the purposes of determining the
number of shares of Group 1 Common Stock payable to the Stockholders
hereunder, such shares shall be assigned a per share value of the
average closing price of the Group 1 Common Stock on the New York
Stock Exchange for the five trading days preceding the date on which
such shares are issued.
The Contingent Consideration paid by Group 1 pursuant to this
Section 1.6(c) and Section 1.6(c) of the Other Plans of Merger shall
not exceed $7.5 million, $2.5 million of which (the "Guaranteed
Payments") will be paid regardless of the results of the above
computation, as follows: $900,000 on the first anniversary of the
Closing Date, $900,000 on
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<PAGE> 58
the second anniversary of the Closing Date, and $700,000 on the third
anniversary of the Closing Date. The aggregate Guaranteed Payments
actually paid to the Stockholders shall carry forward and be applied
against any additional Contingent Consideration payable to the
Stockholders hereunder. The Guaranteed Payments shall be reduced by
the difference between the aggregate Contingent Consideration
previously paid to the Stockholders and $2.5 million.
The Contingent Consideration payable under this Section 1.6(c)
is additional consideration for the Stockholders' interests in the
Company, and the parties hereto agree to report such amounts on such
basis for income tax purposes.
(d) Each share of Company Common Stock that immediately
prior to the Effective Time was held in the treasury of the Company
shall be canceled and retired as a result of the Merger and no
securities or cash shall be issued or paid with respect thereto. Any
shares of preferred stock of the Company and any options, warrants or
other rights to purchase Company Common Stock or any other securities
of the Company which remain outstanding at the Effective Time shall
automatically be canceled and retired as a result of the Merger
without consideration therefor, and each holder thereof shall cease to
have any rights with respect thereto.
(e) At or after the Effective Time, each holder of an
outstanding certificate that prior thereto represented Shares shall be
entitled, upon surrender thereof to Group 1, to receive immediately in
exchange therefor (i) a certificate or certificates representing the
number of whole shares of Initial Stock Consideration in such
denominations and registered in such names as such holder may request
and (ii) cash in the amount equal to the Initial Cash Consideration,
into which the Shares so surrendered shall have been converted as
described above. Each holder of Shares who would otherwise be
entitled to a fraction of a share of Group 1 Common Stock shall, upon
surrender of the certificates that, prior to the Effective Time,
represented Shares held by such holder, to Group 1, be paid an amount
in cash in accordance with the provisions of Sections 1.6(i) and
1.6(j). Until so surrendered, each outstanding certificate that,
prior to the Effective Time, represented Shares shall be deemed from
and after the Effective Time, for all corporate purposes, other than
the payment of earlier dividends and distributions, to evidence the
ownership of the number of full shares of Initial Stock Consideration
and Initial Cash Consideration into which such Shares shall have been
converted pursuant to this Section 1.6. Unless and until any such
outstanding certificates shall be surrendered, no dividends or other
distributions payable to the holders of Group 1 Common Stock, as of
any time on or after the Effective Time, shall be paid to the holders
of such outstanding certificates which prior to the Effective Time
represented Shares; provided, however, that, upon surrender and
exchange of such outstanding certificates, there shall be paid to the
record holders of the certificates issued and exchanged therefor, the
amount, without interest thereon, of dividends and other
distributions, if any, that theretofore were declared and became
payable since the Effective Time with respect to the number of full
shares of Group 1 Common Stock issued to such holders.
4
<PAGE> 59
(f) All shares of Group 1 Common Stock into which the
Shares shall have been converted pursuant to this Section 1.6 shall be
issued and paid in full satisfaction of all rights pertaining to such
converted shares.
(g) If any certificate for shares of Group 1 Common Stock
is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall have paid to Group
1 any transfer or other taxes required by reason of the issuance of a
certificate for shares of Group 1 Common Stock in any name other than
that of the registered holder of the certificate surrendered, or
established to the satisfaction of Group 1 that such tax has been paid
or is not payable.
(h) In lieu of any fraction of a share of Initial Common
Stock, each holder of Shares who would otherwise be entitled to a
fraction of a share of Group 1 Common Stock shall, upon surrender of
the Shares held by such holder to Group 1, be paid an amount in cash
equal to the value of such fraction of a share based upon a per share
price $14.00. No interest shall be paid on such amount.
(i) In lieu of any fraction of a share of Contingent
Common Stock, each person who would otherwise be entitled to a
fraction of a share of Contingent Common Stock shall, upon
satisfaction of the conditions precedent to such persons receipt of
Contingent Common Stock, be paid an amount in cash equal to the value
of such fraction of a share based upon the average closing price of
Group 1 Common Stock on the New York Stock Exchange for the five
trading days preceding each respective issuance of Contingent Common
Stock. No interest shall be paid on such amount.
(j) None of Group 1, Merger Sub, the Company or the
Surviving Corporation shall be liable to a holder of the Shares for
any amount properly paid to a public official pursuant to applicable
property, escheat or similar law.
1.8 Taking of Necessary Action; Further Action. Merger Sub and
the Company shall take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company or Merger
Sub, such corporations shall direct their respective officers and directors to
take all such lawful and necessary action.
5
<PAGE> 60
ARTICLE II
MISCELLANEOUS
2.1 Counterparts. This Plan of Merger may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to each of the other parties.
2.2 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the laws of the State of Delaware.
2.3 Waiver and Amendment. Any provision of this Plan of Merger
may be waived at any time by the party that is, or whose stockholders are,
entitled to the benefits thereof. This Plan of Merger may not be amended or
supplemented at any time, except by an instrument in writing signed on behalf
of each party hereto, only as may be permitted by applicable provisions of the
Code. The waiver by any party hereto of any condition or of a breach of
another provision of this Plan of Merger shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this Plan of
Merger shall not preclude it from seeking redress for breach of this Plan of
Merger other than with respect to the condition so waived.
2.4 Certain Definitions.
(a) "Carroll Group" shall mean all dealerships under the
executive management responsibility of James S. Carroll in Florida and
Georgia (including the Companies and any other dealerships acquired by
Group 1 after the Closing Date) and additional dealerships acquired by
Group 1 as a result of the efforts of James S. Carroll (whether or
not such dealerships are under the executive management control of
James S. Carroll).
(b) "Incremental Return" shall mean return on Group 1's
investment in the operations of the Carroll Group that were not a part
of the Companies on the date of this Agreement (total income after
income taxes divided by total investment). " Income" and "investment"
used for these purposes will be before any Group 1 management fees,
allocations of indirect costs, cost of capital (including interest,
loan origination fees, points and any other expenses incurred in
obtaining or maintaining a loan) or amortization of goodwill. "Total
investment" in these operations will include any loan proceeds, cash
or stock invested by Group 1 to acquire the operations added to the
Carroll Group after the date of this Agreement (including all
investments made by Group 1 as a condition to manufacturer approval of
such acquisitions).
[signature page follows]
6
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
to be duly executed as of the date first above written.
PF MERGER, INC.
By:
-------------------------------------
Name: Ralph S. Kerr
Title: President
PERIMETER FORD, INC.
By:
-------------------------------------
Name: Ralph S. Kerr
Title: President
7
<PAGE> 1
EXHIBIT 10.41
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
GROUP 1 AUTOMOTIVE, INC.,
COURTESY MERGER, INC.,
A WHOLLY OWNED SUBSIDIARY OF GROUP 1 AUTOMOTIVE, INC.,
COURTESY FORD, INC.
AND THE STOCKHOLDERS OF COURTESY FORD, INC.
DATED AS OF
DECEMBER 17, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE MERGER
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Escrowed Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.17 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.18 Leased Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.20 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.24 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
4.1 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 No Knowledge of Misrepresentations or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Conduct of Business by the Company Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.14 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.15 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.16 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.17 Phase I Environmental Assessments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Delivery of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . 26
8.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 26
8.3 Additional Conditions Precedent to Obligations of the Stockholders. . . . . . . . . . . . . . . . 28
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Agreement by Group 1 to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Certain Post-Closing Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.3 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.4 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.6 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.8 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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10.9 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.10 Legal Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.11 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.18 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated as
of the 17th day of December, 1997, is among Group 1 Automotive, Inc., a
Delaware corporation ("Group 1"), Courtesy Merger, Inc., a Florida corporation
and a wholly owned subsidiary of Group 1 (Merger Sub"), Courtesy Ford, Inc., a
Florida corporation ("the Company") and the persons listed on the signature
pages hereof under the caption "Stockholders" (collectively, the
"Stockholders," and each of those persons, individually, a "Stockholder").
RECITALS:
WHEREAS, the parties to this Agreement have determined it is in their
best long-term interests to effect a business combination pursuant to which:
(A) The Company will merge with and into Merger Sub on
the terms and subject to the conditions set forth herein (the
"Merger");
(B) Group 1 will acquire by merger (the "Other Mergers")
Koons Ford, Inc., a Florida corporation and Perimeter Ford, Inc., a
Delaware corporation (each an "Other Company" and, collectively with
the Company, the "Companies") pursuant to agreements entered into
among those entities and their equity owners, Group 1 and subsidiaries
of Group 1 (collectively, the "Other Agreements"); and
WHEREAS, the respective Boards of Directors of Group 1, Merger Sub and
the Company have approved this Agreement and the Merger pursuant to the terms
and conditions herein set forth.
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined
<PAGE> 7
has the meaning ascribed to it in accordance with GAAP; (c) "or" is not
exclusive; (d) "including" means "including, without limitation;" (e) words in
the singular include the plural; (f) words in the plural include the singular;
(g) words applicable to one gender shall be construed to apply to each gender;
(h) the terms "hereof," "herein," "hereby," "hereto" and derivative or similar
words refer to this entire Agreement; (i) the terms "Article" or "Section"
shall refer to the specified Article or Section of this Agreement; and (j)
section and paragraph headings in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and pursuant to the Agreement and Plan of Merger
between Merger Sub and the Company, a form of which is attached hereto as
Exhibit A (the "Plan of Merger"), at the Effective Time (as hereinafter
defined) the Company shall be merged with and into Merger Sub, the separate
existence of the Company shall cease, and Merger Sub shall (i) continue as the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Courtesy Ford, Inc.", (ii) be governed
by the laws of Florida, (iii) maintain a registered office in the State of
Florida at 15551 South Dixie Highway, Miami, Florida 33157, and (iv) succeed to
and assume all of the rights, properties and obligations of Merger Sub and the
Company in accordance with the Florida Business Corporation Act. Subject to
the terms and conditions of this Agreement and the Plan of Merger, Group 1
agrees, at or prior to the Closing, to cause Merger Sub to execute and deliver,
the Plan of Merger in form and substance substantially similar to the form
attached hereto as Exhibit A. Subject to the terms and conditions of this
Agreement and the Plan of Merger, the Stockholders agree, at or prior to the
Closing, to cause the Company to execute and deliver the Plan of Merger in form
and substance substantially similar to the form attached hereto as Exhibit A.
2.2 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, Houston, Texas 77002 on the last day of
the month in which all conditions set forth in Article VIII hereof are
satisfied or waived or at such other time and place and on such other date as
Group 1 and the Company shall agree; provided, that the conditions set forth in
Article VIII shall have been satisfied or waived at or prior to such time. The
date on which the Closing occurs is herein referred to as the "Closing Date."
2.3 Effective Time. As soon as practicable after all conditions
set forth in Article VIII hereof are satisfied or waived, the parties hereto
will file with the Secretary of State of the State of Florida, articles of
merger in such form as required by, and executed in accordance with, the
relevant provisions of the Florida Business Corporation Act, with instructions
that such articles of merger are to be issued and effective as of the Closing
Date (the effective time of the issuance of a certificate of merger by the
Secretary of State of the State of Florida being the "Effective Time").
2.4 Escrowed Shares. In the event that James S. Carroll has not
been approved by American Honda Motor Co., Inc. ("Honda") as a 5% stockholder
of Group 1 before Closing, 175,000
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shares of Group 1 Common Stock due James S. Carroll under this Agreement will
be placed in Escrow at Closing pending release as provided in this Section 2.4.
These shares will remain in Escrow until the first of the following to occur:
(1) the second anniversary of the Closing Date, (2) Honda's approval of James
S. Carroll as a 5% stockholder of Group 1, or (3) such time as Group 1 is no
longer required to obtain Honda's approval of each 5% stockholder of Group 1.
In the event these shares become issuable from Escrow as a result of (1) above,
Group 1 may, at its option, elect to pay cash to James S. Carroll in lieu of
the escrowed shares in an amount equal to 175,000 times the greater of (i) the
average closing price of Group 1 Common Stock on the New York Stock Exchange
for the five trading days immediately preceding the date on which the escrowed
shares become issuable or (ii) $14.00. In the event these shares become
issuable from Escrow as a result of (2) or (3) above, the shares will be issued
from escrow to James S. Carroll as soon as reasonably practicable after receipt
of such approval.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
The Stockholders hereby represent and warrant to Group 1 and Merger
Sub as follows:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with all requisite corporate power and
authority to own or lease its properties and conduct its business as now owned,
leased or conducted and to execute, deliver and perform this Agreement and each
instrument, document or agreement required hereby to be executed and delivered
by it at, or prior to, the Closing. True and complete copies of the articles
of incorporation and bylaws (or other organizational documents) of the Company
are included in Schedule 3.1. The minute books of the Company previously made
available to Group 1 are complete and accurately reflect all action taken prior
to the date of this Agreement by their respective boards of directors and
stockholders in their capacities as such.
3.2 Qualification. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of the business as now conducted or the character of the property
owned or leased by it makes such qualification necessary. Schedule 3.2 sets
forth a list of the jurisdictions in which the Company is qualified to do
business, if any.
3.3 Authorization. The execution and delivery by the Company, the
performance of its obligations pursuant to this Agreement and the execution,
delivery and performance of each instrument, document or agreement required
hereby to be executed and delivered by the Company at, or prior to, the Closing
have been duly and validly authorized by all requisite corporate action on the
part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or any other instrument,
document or agreement required hereby to be executed by the Company at, or
prior to, the Closing. The Board of Directors of the
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<PAGE> 9
Company has voted to recommend approval of the Merger to the stockholders of
the Company and such determination remains in effect. THE EXECUTION OF THIS
AGREEMENT BY THE STOCKHOLDERS CONSTITUTES UNANIMOUS STOCKHOLDER CONSENT TO THE
MERGER, THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY WITHIN IN ACCORDANCE WITH SECTION 607.0704 FLORIDA
STATUTES, AND THIS EXECUTED AGREEMENT SHALL BE FILED IN THE MINUTE BOOKS OF THE
COMPANY AS EVIDENCE OF SUCH SHAREHOLDER ACTION. This Agreement has been, and
each instrument, document or agreement required hereby to be executed and
delivered by the Company at, or prior to, the Closing will then be, duly
executed and delivered by it, and this Agreement constitutes, and, to the
extent it purports to obligate the Company, each such instrument, document or
agreement will constitute (assuming due authorization, execution and delivery
by each other party thereto), the legal, valid and binding obligation of the
Company enforceable against it in accordance with its terms.
3.4 Approvals. Except for the applicable filings with the
Secretary of State of the State of Florida relating to the Merger and except
for applicable requirements, if any, of the HSR Act, and except to the extent
set forth in Schedule 3.4, no filing or registration with, and no consent,
approval, authorization, permit, certificate or order of any Court or
Governmental Authority is required by any applicable Law or by any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority to permit the Company to execute, deliver or perform this Agreement
or any instrument required hereby to be executed and delivered by it at the
Closing.
3.5 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.5, neither the execution and delivery by the Company of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by the Company of its obligations under this Agreement or any such instrument,
document or agreement will (assuming receipt of all consents, approvals,
authorizations, permits, certificates and orders disclosed as requisite in
Schedule 3.4) (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) any applicable permits
received from any Governmental Authority (iv) the articles of incorporation or
bylaws or other organizational documents of the Company or (v) any contract or
agreement to which the Company is a party or by which it, or any of its
properties, is bound, or (b) result in the creation or imposition of any Lien
on any of the properties or assets of the Company, or (c) result in the
cancellation, forfeiture, revocation, suspension or adverse modification of any
existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority, or (d) with the passage of time
or the giving of notice or the taking of any action of any third party have any
of the effects set forth in clause (a), (b) or (c) of this Section.
3.6 Subsidiaries; Equity Investments. The Company has not
controlled directly or indirectly, or had any direct or indirect equity
participation in any corporation during the five-year period preceding the date
hereof.
3.7 Capitalization.
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<PAGE> 10
(a) The authorized capital stock of the Company consists
of 1,000 shares of common stock, par value $1.00 per share, of which
750 shares are issued and outstanding (no shares being held in
treasury) (the "Company Common Stock"). Each outstanding share of the
Company Common Stock has been duly authorized, is validly issued,
fully paid and nonassessable and was not issued in violation of any
preemptive rights of any stockholder. Set forth in Schedule 3.7(a)
are the names, social security or I.R.S. identification numbers and
addresses (as reflected in the corporate records of the Company) of
each record holder of the Company Common Stock, together with the
number of shares held by each such person.
(b) There is not outstanding any capital stock or other
security, including without limitation any option, warrant or right,
entitling the holder thereof to purchase or otherwise acquire any
shares of capital stock of the Company. Except as disclosed in
Schedule 3.7(b), there are no contracts, agreements, commitments or
arrangements obligating the Company (i) to issue, sell, pledge,
dispose of or encumber any shares of, or any options, warrants or
rights of any kind to acquire, or any securities that are convertible
into or exercisable or exchangeable for, any shares of, any class of
capital stock of the Company or (ii) to redeem, purchase or acquire or
offer to acquire any shares of, or any outstanding option, warrant or
right to acquire, or any securities that are convertible into or
exercisable or exchangeable for, any shares of, any class of capital
stock of the Company.
3.8 Financial Statements. Included in Schedule 3.8 are copies of
the financial statements of the Company consisting of (i) an unaudited balance
sheet of the Company as of October 31, 1997 (the "Interim Balance Sheet") and
the related unaudited statement of income for the ten month period then ended
(collectively with the Interim Balance Sheet, the "Company Interim Financial
Statements") and (ii) an audited balance sheet of the Company as of December
31, 1996 (the "Company 1996 Balance Sheet") and the related audited statements
of income, changes in stockholders' equity and cash flows for the year then
ended (including the notes thereto) (collectively with the Company 1996 Balance
Sheet, the "Company 1996 Financial Statements") and (collectively with the
Company Interim Financial Statements, the "Company Financial Statements"). The
Company Interim Financial Statements are true and complete in all material
respects. The Company 1996 Financial Statements are true and complete in all
respects. The Company Financial Statements present fairly the financial
position of the Company and the results of its operations and changes in
financial position as of the dates and for the periods indicated therein in
conformity with GAAP. The Company Financial Statements do not omit to state
any liabilities, absolute or contingent, required to be stated therein in
accordance with GAAP. All accounts receivable of the Company reflected in the
Company Financial Statements and as incurred since October 31, 1997 represent
sales made in the ordinary course of business, are collectible (net of any
reserves for doubtful accounts shown in the Company Interim Financial
Statements) in the ordinary course of business and, except as set forth in
Schedule 3.8, are not in dispute or subject to counterclaim, set-off or
renegotiation. Schedule 3.8 contains an aged schedule of accounts receivable
included in the Interim Balance Sheet. References regarding GAAP compliance in
this Section 3.8 shall be qualified by the exceptions set forth in Section 3.9
below.
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<PAGE> 11
3.9 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet, or
relating to the items listed below in this Section 3.9, or as set forth in
Schedule 3.9, the Company does not have any material liabilities or obligations
of any nature whether absolute, accrued, contingent or otherwise, and whether
due or to become due. The reserves reflected in the Interim Balance Sheet are
adequate, appropriate and reasonable in accordance with GAAP, except for
possible adjustments to current year's depreciation provisions, LIFO
adjustments, management company fees, profit sharing provisions, general
manager year-end bonuses and the month-end payroll tax accrual.
3.10 Certain Agreements. Except as set forth in Schedule 3.10,
neither the Company, nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a noncompetition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
3.11 Contracts and Commitments. Schedule 3.11 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of its officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.12 Absence of Changes. Except as set forth in Schedule 3.12,
there has not been, since October 31, 1997, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.12, since
October 31, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, the
Company makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since October 31,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
3.13 Tax Matters.
(a) Except as set forth in Schedule 3.13(a) (and except
for filings and payments of assessments the failure of which to file
or pay will not materially adversely affect the Company), (i) all Tax
Returns which are required to be filed on or before the Closing Date
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<PAGE> 12
by or with respect to the Company have been or will be duly and timely
filed, (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) all Taxes which have
become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, (iv) all
withholding Tax requirements imposed on or with respect to the Company
have been or will be satisfied in full, and (v) no penalty, interest
or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) All Tax Returns of, or with respect to, the Company
have been audited by the applicable governmental authority, or the
applicable statute of limitations has expired, for all periods up to
and including December 31, 1996 except as included on Schedule
3.13(b).
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to the
Company, other than those disclosed (and to which are attached true
and complete copies of all audit or similar reports) in Schedule
3.13(c).
(d) Except as set forth in Schedule 3.13(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company, or any
waiver or agreement for any extension of time for the assessment or
payment of any Tax of or with respect to the Company.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes (except for payroll tax accrual for
October 31, 1997), whether or not assessed or disputed, which are, or
are hereafter found to be, or to have been, due by or with respect to
the Company up to and through the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company shall be terminated prior to the Closing Date and no
payments shall be due or will become due by the Company on or after
the Closing Date pursuant to any such agreement or arrangement.
(g) Except as set forth in Schedule 3.13(g), the Company
will not be required to include any amount in income for any taxable
period as a result of a change in accounting method for any taxable
period pursuant to any agreement with any Tax authority with respect
to any such taxable period.
(h) The Company has not consented to have the provisions
of section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(i) Since the date of the Company's S Corp election on
December 31, 1986, the Company (a) continuously has been and will be
an S Corporation within the meaning of
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section 1361 of the Code, and (b) each holder of common stock of the
Company has been an individual resident of the United States or an
estate or trust described in section 1361(c)(2) that is permitted to
hold the stock of an S Corporation.
3.14 Litigation.
(a) Except as set forth in Schedule 3.14(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Company, threatened against or
specifically affecting the Company before or by any Court or
Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.14(b), the Company has performed
all obligations required to be performed by it to date and is not in
default under, and, to the knowledge of the Company, no event has
occurred which, with the lapse of time or action by a third party
could result in a default under any contract or other agreement to
which any of the Company is a party or by which it or any of its
properties is bound or under any applicable Order of any Court or
Governmental Authority.
3.15 Compliance with Law. Except as set forth in Schedule 3.15,
the Company is in compliance with all applicable statutes and other applicable
laws and all applicable rules and regulations of all federal, state, foreign
and local governmental agencies and authorities.
3.16 Permits. Except as set forth in Schedule 3.16, the Company
owns or holds all franchises, licenses, permits, consents, approvals and
authorizations of all Governmental Authorities necessary for the conduct of its
business. A listing of all such items, with their expiration dates, is
included in Schedule 3.16. Each franchise, license, permit, consent, approval
and authorization so owned or held is in full force and effect, and the Company
is in compliance with all of its obligations with respect thereto, and no event
has occurred which allows, or upon the giving of notice or the lapse of time or
otherwise would allow, revocation or termination of any franchise, license,
permit, consent, approval or authorization so owned or held.
3.17 Employee Benefit Plans and Policies.
(a) Schedule 3.17(a) provides a description of each of
the following which is sponsored, maintained or contributed to by any
of the Company for the benefit of its employees, or has been so
sponsored, maintained or contributed to within six years prior to the
Closing Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement,
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vacation policy, severance pay plan, policy or agreement,
deferred compensation agreement or arrangement, executive
compensation or supplemental income arrangement, consulting
agreement, employment agreement and each other employee
benefit plan, agreement, arrangement, program, practice or
understanding that is not described in Section 3.17(a)(i)
("Benefit Program or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) The Company does not contribute to or have an
obligation to contribute to, and has not at any time contributed to or
had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in Schedule 3.17(c),
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would adversely affect such qualified status;
(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make
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a larger contribution to, or pay greater benefits under, any
Plan or Benefit Program or Agreement than it otherwise would
or (B) create or give rise to any additional vested rights or
service credits under any Plan or Benefit Program or
Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
(e) Termination of employment of any employee of any of
the Company after consummation of the transactions contemplated by
this Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) Schedule 3.17(g) sets forth by name and job
description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.18 Leased Properties.
(a) On the Closing Date, the Company will not own any
real property or any interest therein. Schedule 3.18(a) sets forth
the location and size of, principal improvements and buildings on, and
Liens on all parcels of real estate leased by the Company
(individually a "Leased Property" and collectively the "Leased
Properties"). True and correct copies of all Liens are attached to
Schedule 3.18(a). Except as set forth in Schedule 3.18(a), with
respect to each Leased Property:
(i) the Company has good and valid leasehold
interests in each parcel of its Leased Property, free and
clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
the Company or the Stockholders, threatened condemnation
proceedings, suits or administrative actions relating to the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
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<PAGE> 16
(iii) except as set forth in Schedule 3.18(a)(iii),
the legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(v);
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Leased Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.18(a)(vii)
who are in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used; and
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.18(a)(xi).
(b) Except as set forth in Schedule 3.18(b), the Company
has good and marketable title to all of its Assets, free and clear of
any Liens or restrictions on use. The Fixed Assets currently in use
for the business and operations of the Company are in good
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<PAGE> 17
operating condition, normal wear and tear excepted and have been
maintained in accordance with sound industry practices.
3.19 Insurance. Schedule 3.19 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.19, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. The Company has not
received any notice or other communication from any such insurer canceling or
materially amending any of such insurance policies, and no such cancellation is
pending or threatened. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.20 Affiliate Interests. Except as set forth in Schedule 3.20, no
employee, officer or director, or former employee, officer or director, of the
Company has any interest in any property, tangible or intangible, including
without limitation, patents, trade secrets, other confidential business
information, trademarks, service marks or trade names, used in or pertaining to
the business of the Company, except for the normal rights of employees and
stockholders.
3.21 Environmental Matters. Except as set forth in Schedule 3.21,
to the best of the knowledge of the Stockholders:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. The Company is
not currently liable for any penalties, fines or forfeitures for
failure to comply with any Environmental Laws. The Company is in
compliance with all required notice, record keeping and reporting
requirements of all Environmental Laws, and has complied with all
informational requests or demands arising under the Environmental
Laws.
(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of their business as presently conducted, including, without
limitation, all air emission, water discharge, water use and solid
waste, hazardous waste and other Waste generation, transportation,
transfer, storage, treatment or disposal Licenses (a listing of such
items being included in Schedule 3.21(b)), and the Company is in
compliance with all the terms, conditions and requirements of such
Licenses, and copies of
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<PAGE> 18
such Licenses have been made available to Group 1. There are no
administrative or judicial investigations, notices, claims or other
proceedings pending or threatened by any Governmental Authority or
third parties against the Company or its business, operations,
properties, or assets, which question the validity or entitlement of
the Company to any License required by the Environmental Laws for the
ownership of each of the respective properties and assets of the
Company and the operation of its business.
(c) The Company has not received and is not aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of its business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leased Properties.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle, treat,
spill, leak, dump, discharge, release or dispose of, any material
quantities of Hazardous Substances or other waste upon property
currently or previously owned or leased by it, except in compliance
with Environmental Laws.
(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the Leased Properties or to any
properties adjacent thereto except in compliance with the
Environmental laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge,
of any Hazardous Substance on, into or beneath the surface of the
Owned Properties or the Leased Properties or to any properties
adjacent thereto.
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<PAGE> 19
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor have they allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Stockholders have received notice or have knowledge of
any facts which could give rise to any notice, that the Company is a
potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA, RCRA or any other
applicable Environmental Laws. The Company has not submitted and has
not been required to submit any notice pursuant to Section 103(c) of
CERCLA with respect to any properties owned by, or used in the
business of, the Company. The Company has not received any written
or, to the knowledge of the Stockholders, oral request for information
in connection with any federal or state environmental cleanup site, or
in connection with any of the real property or premises where the
Company has transported, transferred or disposed of other Wastes. The
Company has not been required to and has not undertaken any response
or remedial actions or clean-up actions at the request of any
Governmental Authorities or at the request of any other third party.
The Company has no liability under any Environmental Laws for personal
injury, property damage, natural resource damage, or clean up
obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.21(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which the Company is
aware undertaken by the Company or its agents, or by the Stockholders,
or by any Governmental Authority, or by any third party, relating to
the Company, or any of the Owned Properties or the Leased Properties;
(ii) the results of which the Company is aware of any ground, water,
soil, air or asbestos monitoring undertaken by the Company or their
agents, or by the Stockholders, or by any Governmental Authority, or
by any third party, relating to the Company or any of the Owned
Properties or the Leased Properties; (iii) all written communications
between the Company and any Governmental Authority arising under or
related to Environmental Laws; and (iv) all citations issued under
OSHA, or similar state or local statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, relating to or
affecting the Company or any of the Owned Properties or the Leased
Properties.
(j) Schedule 3.21(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.21(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set
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forth in Schedule 3.21(j), there are no claims, actions, suits,
governmental investigations or proceedings before any Governmental
Authority or third party pending, or threatened against or directly
affecting the Company or any of its assets or operations relating to
the use, handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
(k) Any references in this Section 3.21 to the "Leased
Properties" are deemed to also refer to any properties previously
leased by the Company.
3.22 Intellectual Property. Except as set forth in Schedule 3.22,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that are necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Stockholders, (a) the use of the Intellectual Property by the Company does not
infringe on the rights of any Person, and (b) no Person is infringing on any
right of the Company with respect to any Intellectual Property. No claims are
pending or, to the knowledge of the Stockholders, threatened that the Company
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the knowledge of the Stockholders, no
Person is infringing the rights of the Company with respect to any
Intellectual Property. All of the Intellectual Property that is owned by the
Company is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by the Company is licensed pursuant to valid and existing license
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss of any Intellectual Property.
3.23 Bank Accounts. Schedule 3.23 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.24 Brokers. Except as disclosed in Schedule 3.24, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.25 Disclosure. The Stockholders have disclosed in writing, or
pursuant to this Agreement and the Schedules attached hereto, all facts
material to the business, assets, prospects and condition (financial or
otherwise) of the Company. No representation or warranty to Group 1 by the
Stockholders contained in this Agreement, and no statement contained in the
Schedules attached hereto, any certificate, list or other writing furnished to
Group 1 by the Stockholders pursuant to the provisions hereof or in connection
with the transactions contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any certificate, list, document
or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed a representation and warranty
of the Stockholders for all purposes of this Agreement.
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<PAGE> 21
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby, severally and not jointly, represents and
warrants to Group 1 and Merger Sub that:
4.1 Capital Stock. Such Stockholder is the beneficial and record
owner of the number of shares of Company Common Stock as set forth in Schedule
3.7(a). On the Closing Date all such shares will be owned free and clear of
any lien, claim, pledge, encumbrance or other adverse claim. Except for such
shares of Company Common Stock set forth in Schedule 3.7(a) hereto, such
Stockholder does not own, beneficially or of record, any capital stock or other
security, including without limitation any option, warrant or right entitling
the holder thereof to purchase or otherwise acquire any shares of capital stock
of the Company.
4.2 Authorization of Agreement.
(a) Such Stockholder has full legal right, power,
capacity and authority to execute, deliver and perform its obligations
pursuant to this Agreement and to execute, deliver and perform its
obligations under each instrument, document or agreement required
hereby to be executed and delivered by such Stockholder at, or prior
to, the Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
such Stockholder at, or prior to, the Closing will then be, duly
executed and delivered by such Stockholder, and this Agreement
constitutes and, to the extent it purports to obligate such
Stockholder, each such instrument, document or agreement will
constitute (assuming due authorization, execution and delivery by each
other party thereto), the legal, valid and binding obligation of such
Stockholder enforceable against it in accordance with its terms.
4.3 Approvals. Except for filings with the Secretary of State of
Florida relating to the Merger, and except for applicable requirements, if any,
of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Governmental
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
such Stockholder to execute, deliver or perform this Agreement or any
instrument required hereby to be executed and delivered by it at the Closing.
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by such Stockholder of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by such Stockholder of its obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) the
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<PAGE> 22
organizational documents of such Stockholder or (iv) any contract or agreement
to which such Stockholder is a party or by which it, or any of its properties,
is bound, or (b) result in the creation or imposition of any Lien on any of the
properties or assets of such Stockholder, or (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit, certificate or order of any
Court or Governmental Authority, or (d) with the passage of time or the giving
of notice or the taking of any action of any third party have any of the
effects set forth in clause (a), (b) or (c) of this Section.
4.5 Investment Intent. Each Stockholder makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Stockholder will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Merger to such Stockholder solely for such Stockholder's
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution; (ii) such Stockholder is not a party to any agreement or
other arrangement for the disposition of any shares of Group 1 Common Stock;
(iii) such Stockholder is an "accredited investor" as defined in Securities Act
Rule 501(a); (iv) such Stockholder (A) is able to bear the economic risk of an
investment in the Group 1 Common Stock acquired pursuant to this Agreement, (B)
can afford to sustain a total loss of that investment, (C) has such knowledge
and experience in financial and business matters, and such past participation
in investments, that he or she is capable of evaluating the merits and risks of
the proposed investment in the Group 1 Common Stock, (D) has received and
reviewed the SEC Documents, (E) has had an adequate opportunity to ask
questions and receive answers from the officers of Group 1 concerning any and
all matters relating to the transactions contemplated hereby, including the
background and experience of the current officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of Group 1 and any plans of Group 1 for additional
mergers or acquisitions of automotive dealerships, and (F) has asked all
questions of the nature described in the preceding clause (E), and all those
questions have been answered to his or her satisfaction; (v) such Stockholder
acknowledges that the shares of Group 1 Common Stock to be delivered to such
Stockholder pursuant to the Merger have not been and will not be registered
under the Securities Act or qualified under applicable blue sky laws and
therefore may not be resold by such Stockholder without compliance with Rule
144 of the Securities Act; (vi) such Stockholder acknowledges that he or she
has agreed, pursuant to Section 10.8 herein, not to sell the shares of Group 1
Common Stock to be delivered to such Stockholder pursuant to the Merger for a
period of one year (or two years with respect to James S. Carroll) from the
Closing Date; (vii) such Stockholder, if a corporation, partnership, trust or
other entity, acknowledges that it was not formed for the specific purpose of
acquiring the Group 1 Common Stock; and (viii) without limiting any of the
foregoing, such Stockholder agrees not to dispose of any portion of Group 1
Common Stock unless either (1) a registration statement under the Securities
Act is in effect as to the applicable shares and the disposition is made in
accordance with that registration statement, or (2) the disposition is made in
full compliance with SEC Rule 144 and any other requirements of the Securities
Act. Additionally, for the three-year period following the Closing Date a
disposition pursuant to (viii)(2) above may be made only if the Stockholder has
notified Group 1 of the proposed disposition and the disposition is made
through a national brokerage firm selected by Group 1 and the Stockholder to
offer disposition services for Group 1 Common Stock (in the absence of
agreement between Group 1 and
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<PAGE> 23
the Stockholder seeking to make a disposition, Goldman, Sachs & Co., Inc. will
be the firm to handle such disposition).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1 AND MERGER SUB
Group 1 and Merger Sub hereby represent and warrant, jointly and
severally, to the Company and the Stockholders that:
5.1 Corporate Organization. Group 1 is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with all requisite corporate power and authority to execute, deliver
and perform this Agreement and each instrument required hereby to be executed
and delivered by it at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Merger Sub of this Agreement, the performance by Group 1 and Merger Sub of
their respective obligations pursuant to this Agreement, and the execution,
delivery and performance of each instrument required hereby to be executed and
delivered by Group 1 or Merger Sub at the Closing have been duly and validly
authorized by all requisite corporate action on the part of Group 1 or Merger
Sub, as the case may be. This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by Group 1
or Merger Sub at, or prior to, the Closing will then be, duly executed and
delivered by Group 1 or Merger Sub, as the case may be. This Agreement
constitutes, and, to the extent it purports to obligate Group 1 or Merger Sub,
each such instrument, document or agreement will constitute (assuming due
authorization, execution and delivery by each other party thereto), the legal,
valid and binding obligation of Group 1 or Merger Sub, as the case may be,
enforceable against them in accordance with its terms.
5.3 Approvals. Except for filings with the Secretary of State of
Florida relating to the Merger, and except for applicable requirements, if any,
of the HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Group 1 or Merger Sub, as the case may be, to execute, deliver or consummate
the transactions contemplated by this Agreement or any instrument required
hereby to be executed and delivered by either of them at or prior to the
Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 or Merger Sub, as the case may be, of this Agreement or any instrument
required hereby to be executed by it at or prior to the Closing nor the
performance by Group 1 or Merger Sub, as the case may be, of its obligations
under this Agreement or any such instrument will (a) violate or breach the
terms of or cause a default under (i) any applicable Law, (ii) any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority, (iii) the organizational documents of Group 1 or Merger Sub or (iv)
any contract or agreement to which Group 1 or Merger Sub is a party or by which
it or any of its property is bound, or (b) result in the creation or imposition
of any Liens on
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<PAGE> 24
any of the properties or assets of Group 1 or Merger Sub (other than any Lien
created by the Company ), or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit certificate or order of any Court or
Governmental Authority or (d) with the passage of time or the giving of notice
or the taking of any action by any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section, except, with respect to
clauses (a), (b), (c) or (d) of this Section, where such matter would not have
a material adverse effect on the business, assets, prospects or condition
(financial or otherwise) of Group 1 and its subsidiaries, taken as a whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Merger are duly authorized and will, when
issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations of the Commission promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Group 1 included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with GAAP during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Group 1 and its consolidated
subsidiaries as of the dates thereto and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information, for normal year-end adjustments).
5.7 Merger Sub. Merger Sub is a corporation recently and duly
incorporated under the laws of the State of Florida, is validly existing and in
good standing under such laws and is a wholly-owned subsidiary of Group 1.
Merger Sub has no assets, liabilities or obligations and has engaged in no
business except as contemplated by this Agreement.
5.8 No Knowledge of Misrepresentations or Omissions. Neither
Group 1, Merger Sub nor any of their agents or representatives has any actual
knowledge that the representations of the Stockholders made in this Agreement
are not true and correct in all material respects, and none of such persons has
any actual knowledge of any material errors in, or material omissions from, the
Schedules to this Agreement.
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ARTICLE VI
COVENANTS OF THE STOCKHOLDERS
6.1 Merger Proposals. Prior to the Closing Date, neither the
Company, any of its officers, directors, employees or agents nor any
Stockholder shall agree to, solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, business combination
or purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, the Company, other than the transactions with Group 1
contemplated by this Agreement. The Company and Stockholders will notify Group
1 promptly of any unsolicited offer.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Company or the Stockholders pursuant to this Agreement.
6.3 Conduct of Business by the Company Pending the Merger. The
Stockholders covenant and agree that, from the date of this Agreement until the
Closing Date, unless Group 1 shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement:
(a) The business of the Company shall be conducted only
in, and the Company shall not take any action except in, the ordinary
course of business and consistent with past practice. In connection
therewith, the parties agree that the Company may dealer trade
vehicles for similar models, but the Company shall not liquidate or
otherwise dispose of any of their new vehicles other than in the
ordinary course of business to retail buyers. The Company agrees to
maintain their advertising expenditures and activities commensurate
with prior business practices. The Company shall not advertise a
"Going Out of Business" sale;
(b) The Company shall not directly or indirectly do any
of the following: (i) issue, sell, pledge, dispose of or encumber, (A)
any capital stock (or securities convertible into capital stock) of
the Company or (B) other than in the ordinary course of business and
consistent with past practice and not relating to the borrowing of
money, any assets of the Company, (ii) amend or propose to amend the
articles of incorporation or bylaws (or other organizational
documents) of the Company, (iii) split, combine or reclassify any
outstanding capital stock of the Company, or declare, set aside or pay
any dividend payable in cash, stock, property or otherwise with
respect to its capital stock whether now or hereafter outstanding
(except as provided in Section 6.3(j) below), (iv) redeem, purchase or
acquire or offer to acquire any of its capital stock, (v) create,
incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money (other than floor plan
indebtedness incurred in the ordinary course of business), or (vi)
except in the ordinary course of business and consistent with past
practice, enter into any contract,
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agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than consistent with past business
practices of the Company; and shall not grant, to any individual,
severance or termination pay that exceeds the lesser of (i) such
individual's compensation for the calendar month immediately preceding
such individual's grant of severance or termination pay, or (ii)
$50,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Merger set forth in Article
VIII not being satisfied;
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement,
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program, practice or understanding (other than the Plans and the
Benefit Programs or Agreements);
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement; and
(j) Notwithstanding anything in this Agreement to the
contrary, dividends or other form of distribution to the Stockholders
may be made after the date of the Interim Balance Sheet so long as
such distributions do not cause the Company to be in violation of any
manufacturer working capital or equity guidelines or requirements.
6.4 Confidentiality. The Company shall, and the Company's
officers, directors, employees, representatives and consultants shall, hold in
confidence, and not disclose to others for any reason whatsoever, any
non-public information received by them or their representatives in connection
with the transactions contemplated hereby, including but not limited to all
terms, conditions and agreements related to this transaction, except (i) as
required by law; (ii) for disclosure to officers, directors, employees and
representatives of the Company as necessary in connection with the transactions
contemplated hereby; and (iii) for information which becomes publicly available
other than through the actions of the Company or a Stockholder. In the event
the Merger is not consummated, the Company and the Stockholders will return all
non-public documents and other material obtained from Group 1 or its
representatives in connection with the transactions contemplated hereby or
certify to Group 1 that all such information has been destroyed.
6.5 Notification of Certain Matters. The Company shall give
prompt notice to Group 1, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date hereof to the Effective Time, (ii) any
failure of the Company, or any officer, director, employee or agent thereof, or
any Stockholder to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder, or (iii) any litigation, or
any claim or controversy or contingent liability of which the Company has
knowledge of that might reasonably be expected to become the subject of
litigation, against the Company or affecting any of its assets, in each case in
an amount in controversy in excess of $50,000, or that is seeking to prohibit
or restrict the transactions contemplated hereby.
6.6 Consents. Subject to the terms and conditions of this
Agreement, the Company shall (i) obtain all consents, waivers, approvals
(including all applicable automobile manufacturers approvals, and such
approvals shall not contain any unreasonably burdensome restrictions on the
Company, Group 1 or Merger Sub), authorizations and orders required in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger; and (ii) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary or proper
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
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6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, the
Company and the Stockholders shall cooperate and use reasonable efforts to
defend against and respond thereto. Costs of this defense and response will be
borne by Group 1.
6.8 Stockholders' Agreements Not to Sell. Each of the
Stockholders hereby covenants and agrees not to sell, pledge, transfer or
dispose of or encumber any shares of Company Common Stock currently owned,
either beneficially or of record, by such Stockholder, except as contemplated
by this Agreement and the Plan of Merger.
6.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
6.10 Removal of Related Party Guarantees. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
terminate, waive or release all guarantees by the Company (such guarantees
shall be referred to herein as "Related Guarantees", as described in Schedule
6.10 pursuant to Section 3.11 of this Agreement) of indebtedness or other
obligations of any of the Company's officers, directors, shareholders,
employees or affiliates of any such Persons.
6.11 Termination of Related Party Agreements. The Company and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to terminate
the Related Party Agreements except those Related Party Agreements that are
disclosed in Schedule 6.11 as agreements that shall not be subject to this
Section 6.11.
6.12 Related Party Agreements. The Company agrees, and the
Stockholders agree to cause the Company, not to enter into any Related Party
Agreements or engage in any transactions with the Stockholders or their
affiliates; except for those Related Party Agreements or transactions with
affiliates that are disclosed in Schedule 6.12 as agreements or transactions
that shall not be subject to this Section 6.12.
6.13 Release.
(a) AS OF THE CLOSING, EACH OF THE STOCKHOLDERS DOES HEREBY FOR
HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES
REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY OF AND FROM ANY AND
ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR
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UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT,
WHICH EACH OF SUCH STOCKHOLDERS NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME
PREVIOUSLY HAD, OWNED OR HELD AGAINST THE COMPANY INCLUDING WITHOUT LIMITATION
ALL LIABILITIES CREATED AS A RESULT OF THE NEGLIGENCE, GROSS NEGLIGENCE AND
WILLFUL ACTS OF THE COMPANY AND ITS EMPLOYEES AND AGENTS, EXISTING AS OF THE
CLOSING OR RELATING TO ANY MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING;
PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT
MAY ARISE IN CONNECTION WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO
PERFORM ANY OF THEIR OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF
THEM OF ANY REPRESENTATIONS OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF
SUCH OTHER AGREEMENTS SHALL NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS
AGREEMENT; AND PROVIDED FURTHER ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS
OR AGREEMENTS LISTED ON THE SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS THAT HE HAS
NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO
ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS,
LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS
RELEASED HEREIN. EACH OF THE STOCKHOLDERS COVENANTS AND AGREES THAT HE WILL
NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF
THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION
OR OBLIGATIONS TO BE RELEASED HEREIN. EACH OF THE STOCKHOLDERS REPRESENTS AND
WARRANTS THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION
6.13 AND THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN
CONNECTION WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Leases. Stockholders hereby agree to cause certain of their
affiliates to enter into a lease agreement with the Company on the basic terms,
and covering the real property and improvements, described on Exhibit B.
6.15 Employment Agreements. The Stockholders agree to enter into
employment agreements with Group 1 and the Company in form and substance
substantially similar to Exhibit C attached hereto.
6.16 Certain Tax Matters
(a) The Stockholders shall use the amounts reflected in
Section 1.6(b)(i) of the Plan of Merger for purposes of preparation of
their Tax Returns. With respect to the shares of Group 1 Common Stock
received by the Stockholders, $14.00 per share shall be used for
purposes of determining the value of the stock portion of the purchase
price.
(b) The Stockholders shall (i) file all required 1998
federal income tax returns of the Company by September 30, 1998; (ii)
use an interim closing of the books of the Company effective as of the
Closing Date for the purposes of preparing such returns; and (iii)
deliver such returns to Group 1 for its review at least five (5) days
prior to the filing of such returns.
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6.17 Phase I Environmental Assessments. The Stockholders
have delivered all Phase I Environmental Surveys requested by Group 1.
Prior to Closing the Stockholders will complete at their cost all cure
and remediation efforts recommended in such surveys, and, to the best
of Stockholders' knowledge, the Company will have no residual
liability with regard to any matter revealed in such surveys.
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Merger is not consummated, Group 1 will return all non-public
documents and other material obtained from the Company or its representatives
in connection with the transactions contemplated hereby or certify to the
Company that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Merger.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger;
and (ii) take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Effective Time, Group 1
agrees to cooperate and use reasonable efforts to defend against and respond
thereto. Costs of this defense and response will be borne by Group 1.
7.5 Delivery of Certificates. On the Closing Date, Group 1 will
deliver to each holder of certificates which represented Company Common Stock
prior to the Effective Time a letter of transmittal and other information
advising such holder of the consummation of the Merger and to enable such
holder to effect the exchange of stock certificates as contemplated by Article
II of this Agreement.
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7.6 Certain Tax Matters
(a) Group 1 shall use the amounts reflected in Section
1.6(b)(i) of the Plan of Merger for purposes of preparation of its Tax
Returns. With respect to the shares of Group 1 Common Stock received
by the Stockholders, $14.00 per share shall be used for purposes of
determining the value of the stock portion of the purchase price.
(b) Group 1 shall act as reasonably necessary to assist
the Stockholders in preparing their federal income tax returns in
accordance with Section 6.16(b) hereof.
(c) Group 1 shall cause the Company, as soon as
practicable, to calculate and distribute pro rata to the Stockholders
a cash amount equal to the net assets of the Company as of the Closing
Date less the applicable manufacturer's minimum working capital
requirement as of the Closing Date.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the Merger;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Merger;
(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated; and
(d) Receipt of Ford Motor Company's approval of the
Merger and the transactions contemplated thereby.
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Merger is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Company and
the Stockholders contained in Article III and Article IV,
respectively, shall be true and correct in all respects as of the date
when made and as of the Closing Date as though such representations
and warranties had been made at and as of the Closing Date; all of the
terms, covenants and
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conditions of this Agreement to be complied with and performed by the
Company and the Stockholders on or before the Closing Date shall have
been duly complied with and performed in all respects, a certificate
to the foregoing effect dated the Closing Date and signed by the chief
executive officer of the Company and each of the Stockholders shall
have been delivered to Group 1, and a copy of the resolutions of each
Company's Board of Directors, certified by the Secretary of the
Company as of the Closing Date, approving the terms of this Agreement
and all transactions contemplated hereby shall have been delivered to
Group 1;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Merger and the transactions contemplated
thereby will be in compliance with applicable laws;
(c) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements and the simultaneous
closing of each of the Other Mergers;
(d) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.10 and 6.11 hereto;
(e) Group 1 shall have received executed representations
from each Stockholder stating that such Stockholder (with respect to
shares owned beneficially or of record by him or her) has no current
plan or intention to sell or otherwise dispose of the Group 1 Common
Stock to be received by him or her in the Merger;
(f) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have occurred, and the
Company shall not have suffered any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting
the properties or business of the Company and Group 1 shall have
received a certificate signed by the chief executive officer of the
Company dated the Closing Date to such effect;
(g) Receipt by Group 1, at Stockholders' expense, of a
Policy of Title Insurance, issued by a title company, approved by
Group 1, subject only to the exceptions described in Schedule 8.2(g)
("Permitted Title Exceptions");
(h) Receipt by Group 1, at Stockholders' expense, of a
current survey of the Leased Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1;
(i) Closing of the purchase by Group 1 of the Premier
Auto Finance, L.P., limited partnership interest from J. Carroll
Enterprises, Inc.;
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(j) Execution of employment agreements pursuant to
Section 6.15; and
(k) Execution of the lease agreement pursuant to Section
6.14.
8.3 Additional Conditions Precedent to Obligations of the
Stockholders. The obligation of the Stockholders to effect the Merger is also
subject to the fulfillment at or prior to the Closing Date of the following
condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date, all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects, a certificate to the foregoing effect dated the Closing Date
and signed by the chief executive officer of Group 1 shall have been
delivered to the Company, and a copy of the resolutions of the Board
of Directors of Group 1, certified by the Secretary of Group 1 as of
the Closing Date, approving the terms of this Agreement and all
transactions contemplated hereby shall have been delivered to the
Company; and
(b) Receipt of an opinion from Crowe Chisek & Company,
dated as of the Closing Date, to the effect that the Merger will
constitute a non-taxable reorganization as defined in Section 368(a)
of the Code.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Stockholders to indemnify. Each of the
Stockholders agrees to severally indemnify, defend and hold Group 1 harmless
(subject to the limitations set forth in Section 9.1(e) below) from and against
the aggregate of all Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all actual
expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by Group 1, on a pre-tax consolidated basis to
the extent (i) resulting from any breach of a representation or
warranty made by the Company or such Stockholder in or pursuant to
this Agreement, (ii) resulting from any breach of the covenants or
agreements made by the Company or such Stockholder pursuant to this
Agreement, or (iii) resulting from any inaccuracy in any certificate
delivered by the Company or any of the Stockholders pursuant to this
Agreement; provided, however, that "Indemnifiable Damages" shall not
include any damages arising from the employment agreements executed
pursuant to Section 6.15, the lease agreements executed pursuant to
Section 6.14 and the non- competition provisions of Section 10.4.
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(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Group 1
shall have the right to be put in the same pre-tax consolidated
financial position as Group 1 would have been in had each of the
representations and warranties of the Company and such Stockholder
hereunder been true and correct and had the covenants and agreements
of the Company and such Stockholder hereunder been performed in full.
(c) Each of the representations and warranties made by
the Company and the Stockholders in this Agreement or pursuant hereto
shall survive for a period of three years after the Closing Date,
except that the representations and warranties of the Stockholders
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 4.1, 4.2, 4.3 and
4.4 shall not expire, but shall continue indefinitely. No claim for
the recovery of Indemnifiable Damages may be asserted by Group 1
against the Stockholders after such representations and warranties
shall expire, provided, however, that claims for Indemnifiable Damages
first asserted within the applicable period shall not thereafter be
barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the
right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Group 1 believes it is entitled to a claim for any
Indemnifiable Damages hereunder, Group 1 shall promptly give written
notice to the Stockholders of such claim and the amount or the
estimated amount of such claim, and the basis for such claim. If the
Stockholders do not pay the amount of the claim for Indemnifiable
Damages to Group 1 within 10 days, then Group 1 may exercise its
respective rights under Section 9.3 and/or take any action or exercise
any remedy available to it by appropriate legal proceedings to collect
the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, the Stockholders' liability for Indemnifiable
Damages shall be limited as follows:
(1) Group 1 shall have no claim for Indemnifiable
Damages unless and until all Indemnifiable
Damages incurred by Group 1 exceed an
aggregate of $350,000.00 with respect to this
Agreement and the Other Agreements (the
"Basket Amount"), in which event the
Stockholders shall be liable for only such
Indemnifiable Damages in excess of the Basket
Amount; and
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(2) The total amount of Indemnifiable Damages for
which each Stockholder shall be liable to
Group 1 shall not exceed the total value of
the Initial Stock Consideration and the
Initial Cash Consideration received by such
Stockholder in the Merger and the Other
Mergers. For the purposes of this Section
9.1(e)(2), all Initial Stock Consideration
shall be assigned a per share value of
$14.00.
THE STOCKHOLDERS ACKNOWLEDGE AND AGREE THAT FOR PURPOSES OF
THE BASKET AMOUNT, INDEMNIFIABLE DAMAGES UNDER THE OTHER AGREEMENTS
WILL AFFECT THEIR OBLIGATION TO INDEMNIFY GROUP 1 UNDER THIS
AGREEMENT, EVEN THOUGH THE STOCKHOLDERS MAY OWN DIFFERING PERCENTAGES
OF THE DEALERSHIPS BEING ACQUIRED BY GROUP 1 PURSUANT TO THE OTHER
AGREEMENTS. FOR EXAMPLE, IF CLAIMS FOR INDEMNIFIABLE DAMAGES UNDER
ONE OF THE OTHER AGREEMENTS EQUAL OR EXCEED $350,000, THEN THE
STOCKHOLDERS UNDER THIS AGREEMENT WILL BE OBLIGATED TO INDEMNIFY GROUP
1 FOR CLAIMS FOR ALL AMOUNTS WITHOUT THE BENEFIT OF ANY BASKET AMOUNT.
9.2 Agreement by Group 1 to Indemnify. Group 1 agrees to
indemnify, defend and hold the Stockholders harmless from and against the
aggregate of all Stockholders Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Stockholders
Indemnifiable Damages" means, without duplication, the aggregate of
all expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel and paralegal fees and expenses)
incurred or suffered by the Stockholders, on a pre-tax consolidated
basis, to the extent (i) resulting from any breach of a representation
or warranty made by Group 1 in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by Group
1 in or pursuant to this Agreement, or (iii) resulting from any
inaccuracy in any certificate delivered by Group 1 pursuant to this
Agreement; provided, however, that "Stockholders Indemnifiable
Damages" shall not include any damages arising from the employment
agreements executed pursuant to Section 6.15, the lease agreements
executed pursuant to Section 6.14 and the non-competition provisions
of Section 10.4.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Stockholders Indemnifiable Damages,
the Stockholders have the right to be put in the same pre-tax
consolidated financial position as he, she or it would have been in
had each of the representations and warranties of Group 1 hereunder
been true and correct and had the covenants and agreements of Group 1
hereunder been performed in full.
(c) Each of the representations and warranties made by
Group 1 in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date, except that the
representations and warranties of Group 1 contained in Sections 5.1,
5.2, 5.3, 5.4 and 5.5 shall not expire, but shall continue
indefinitely. No claim for the recovery of Stockholders Indemnifiable
Damages may be asserted by the Stockholders against Group 1 after such
representations and warranties shall thus expire, provided, however,
that claims
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for Stockholders Indemnifiable Damages first asserted within the
applicable period shall not thereafter be barred. Notwithstanding any
knowledge of facts determined or determinable by any party by
investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other
parties contained in this Agreement or in any other documents or
papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this
Agreement is independent of each other representation, warranty,
covenant and agreement.
(d) In the event that the Stockholders believe they are
entitled to a claim for any Stockholders Indemnifiable Damages
hereunder, the Stockholders shall promptly give written notice to
Group 1 of such claim and the amount or the estimated amount of such
claim, and the basis for such claim. If Group 1 does not pay the
amount of the claim for Indemnifiable Damages to the Stockholders
within 10 days, then the Stockholders may exercise their respective
rights under Section 9.3 and/or take any action or exercise any remedy
available to them by appropriate legal proceedings to collect the
Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.2, the Stockholders shall have no claim for
Stockholders Indemnifiable Damages unless and until the aggregate
Stockholders Indemnifiable Damages incurred by the Stockholders under
this Agreement and the Other Agreements shall exceed an aggregate of
$350,000, in which event Group 1 shall be liable for only such
Stockholders Indemnifiable Damages in excess of $350,000.
9.3 Conditions of Indemnification. The obligations and
liabilities of the Stockholders and Group 1 hereunder with respect to their
respective indemnities pursuant to this Article IX resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such Indemnifying Party is
harmed by the failure of the Indemnified Party to provide timely
notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Group 1 or Merger Sub, then Group 1 shall have the right to
control the defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to
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defend, the Indemnified Party (upon further written notice to the
Indemnifying Party) shall have the right to undertake the defense,
compromise or settlement of such Claim, by counsel or other
representatives of its own choosing, on behalf of and for the account
and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Claim at any time prior
to settlement, compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
ARTICLE X
MISCELLANEOUS
10.1 Certain Additional Rights.
(a) In connection with Group 1's future dealership
acquisitions in which the seller of such dealership seeks to sell the
real estate and facilities component thereof (and Group 1 elects not
to purchase such real estate and facilities), Group 1 agrees to
introduce and recommend World Partner Associates, Ltd. as a suitable
buyer of such real estate and facilities, with the understanding that
World Partner Associates, Ltd. will lease such real estate and
facilities to Group 1 under terms and conditions substantially similar
to the lease agreement between the Company and K.C. Partnership
entered into as of the Closing Date (and providing for an annual
rental of 10% of the purchase price for such real estate), provided,
however, that if Group 1 has a business arrangement with an affiliated
real estate company or with a Group 1 lender providing for economic
benefit to Group 1 as a result of the real estate company's
acquisition of the real estate and facilities component of an acquired
dealership, such business arrangement will supersede Group 1's
obligations to World Associates, Ltd. hereunder. The rights and
obligations created hereunder shall expire on the tenth anniversary of
the Closing Date.
(b) Group 1 agrees that if a third party makes an offer
to purchase one or more of the Companies in a transaction not
involving (i) a substantial portion of the other operations of Group 1
(other than the Companies) or (ii) a substantial portion of the Group
1 operations under the management of James S. Carroll in Florida and
Georgia (other than the Companies), James S. Carroll has the right of
first refusal to purchase the Company or Companies subject to the
third party offer on the same terms as such offer, provided,
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however, that as a condition of closing such offer, all Designated
Persons (as defined herein) who will own, operate or manage the
repurchased Company or Companies shall resign from employment with
Group 1. The right granted hereunder shall expire on the tenth
anniversary of the Closing Date and is personal to James S. Carroll
and is non-assignable and non-transferrable.
10.2 Certain Post-Closing Payments.
(a) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 10.2(a). Beginning
with the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section
10.2(a) will be paid in cash and Group 1 Common Stock, in the same
proportions as the aggregate consideration received by each
Stockholder in the Merger and the Other Mergers. For the purposes of
determining the number of shares of Group 1 Common Stock payable to
the Stockholders hereunder, such shares shall be assigned a per share
value of the average closing price of the Group 1 Common Stock on the
New York Stock Exchange for the five trading days preceding the date
on which such shares are issued.
The aggregate consideration paid by Group 1 pursuant to this
Section 10.2(a) and Section 10.2(a) of the Other Agreements (the
"Contingent Consideration") shall not exceed $7.5 million, $2.5
million of which (the "Guaranteed Payments") will be paid regardless
of the results of the above computation, as follows: $900,000 on the
first anniversary of the Closing Date, $900,000 on the second
anniversary of the Closing Date, and $700,000 on the third anniversary
of the Closing Date. The aggregate Guaranteed Payments actually paid
to the Stockholders shall carry forward and be applied against any
additional Contingent Consideration payable to the Stockholders
hereunder. The Guaranteed Payments shall be reduced by the difference
between the aggregate Contingent Consideration previously paid to the
Stockholders and $2.5 million.
The Contingent Consideration payable under this Section
10.2(a) is additional consideration for the Stockholders' interests in
the Company, and the parties hereto agree to report such amounts on
such basis for income tax purposes.
(b) If a Stockholder sells any of the Initial Stock
Consideration received by such Stockholder pursuant to the Plan of
Merger for a per share price of less than fourteen dollars ($14.00),
Group 1 shall pay the difference between the price per share at which
such shares
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were sold and $14.00 per share; provided, that this Section 10.2(b)
shall only apply to sales (i) occurring after the expiration of the
applicable Stockholder's Restricted Period and (ii) made in the public
market; and provided, further that this Section 10.2(b) shall
terminate five (5) years following the termination of the applicable
Stockholder's Restricted Period. A Stockholder shall promptly notify
Group 1 in writing of any sale of Group 1 Common Stock pursuant to
this Section 10.2(b), and Group 1 shall make any payments due to such
Stockholder hereunder within ten (10) business days of receipt of
notice.
10.3 Schedules to this Agreement. The Schedules to this Agreement
contain all disclosure required to be made by the Company under the various
terms and provisions of this Agreement.
10.4 Non-Competition Obligations.
(a) As part of the consideration for the Merger, and as
an additional incentive for Group 1 to enter into this Agreement,
James S. Carroll, Janet L. Giles and Ralph S. Kerr (each a "Designated
Person" and collectively, the "Designated Persons") and Group 1 agree
to the non-competition provisions of this Section 10.4. Each
Designated Person agrees that during the period of such Designated
Person's non-competition obligations hereunder, such Designated Person
will not, directly or indirectly for such Designated Person or for
others, within twelve miles of or in the county of any operations sold
to Group 1 under this Agreement or operations subsequently managed by
such Designated Person as of the date in question or during the
previous twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates engaged in automotive retailing;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates engaged in automotive
retailing; or
(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or affiliates, or hire
or assist in the hiring of any such employee by person,
association, or entity not affiliated with Group 1 or any of
its subsidiaries or affiliates.
For the purposes of this Section 10.4, "operations
subsequently managed" shall mean (i) in the case of James S. Carroll,
all Florida and Georgia operations of Group 1 and its affiliates under
the executive management authority of James S. Carroll and (ii) in the
case of the other Designated Persons, all operations of Group 1 and
its affiliates under the day-to-day general management authority of
such Designated Persons.
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These non-competition obligations shall apply until the later
of (i) three years after the Closing or (ii) the period specified in
any employment agreement entered into by such Designated Person with
Group 1 or its Subsidiaries.
If Group 1 or any of its subsidiaries or affiliates abandons a
particular aspect of its business, that is, ceases such aspect of its
business with the intention to permanently refrain from such aspect of
its business, then this non-competition covenant shall not apply to
such former aspect of that business.
Notwithstanding the foregoing, the non-competition obligations
of this Section 10.4 shall not apply to (x) the leasing of property or
facilities owned by the Designated Persons or their affiliates to a
competitor of Group 1 if such property or facilities were previously
leased to Group 1 under a lease agreement which Group 1 materially
breached, failed to renew or terminated (for reasons other than
lessor's breach), or (y) any Designated Person's operation and
management of any dealership purchased in accordance with Section
10.1(b) hereof.
(b) During this non-competition period James S. Carroll
will not engage in these restricted activities or assist in the
industry consolidation efforts on behalf of any publicly held entity
in the automotive retailing industry (nor any entity with the ultimate
intention of becoming a publicly held entity or being acquired in any
manner by a publicly held entity), regardless of geographic area or
market; provided, however, that this paragraph (b) shall not prohibit
James S. Carroll from selling, to a publicly held entity, any
dealership acquired by him in full compliance with his post-employment
non-competition obligations hereunder and held by him for at least one
year.
(c) The Designated Persons understand that the foregoing
restrictions may limit their ability to engage in certain businesses
during the period provided for above, but acknowledge that the
Designated Persons will receive sufficiently high remuneration and
other benefits under this Agreement to justify such restriction. Each
of the Designated Persons acknowledges that money damages would not be
sufficient remedy for any breach of this Section 10.4 by such
Designated Person, and such remedies shall not be deemed the
exclusive remedies for a breach of this Section 10.4, but shall be in
addition to all remedies available at law or in equity to Group 1 or
any of its subsidiaries or affiliates, including, without limitation,
the recovery of damages from Group 1 and such Designated Person's
agents involved in such breach.
(d) It is expressly understood and agreed that Group 1
and the Designated Persons consider the restrictions contained in this
Section 10.4 to be reasonably necessary to protect the legitimate
business interests of Group 1 and its affiliates, including the
confidential and proprietary information and trade secrets of Group 1
and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or
otherwise
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<PAGE> 41
unenforceable, the parties intend for the restrictions therein set
forth to be modified by such courts so as to be reasonable and
enforceable and, as so modified by the court, to be fully enforced.
(e) The parties hereto expressly acknowledge that Group
1's rights under this Section 10.4 are assignable and that such rights
shall be fully enforceable by any of Group 1's assignees or successors
in interest.
10.5 Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated herein may be abandoned at any time
prior to the Closing:
(a) by mutual consent of Group 1 and the Stockholders;
(b) by either Group 1 or the Stockholders if the Merger
has not been effected on or before March 31, 1998;
(c) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate under
this Section 10.5(c) shall expire at midnight on January 31, 1998;
(d) by either Group 1 or the Stockholders if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Merger or the other transactions contemplated hereby shall have been
entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations,
financial condition or prospects of the Company; (ii) there has been a
material breach of any representation, warranty, covenant or other
agreement set forth in this Agreement by the Company or the
Stockholders (except for any representation, warranty or covenant
qualified by materiality or knowledge according to its terms, in which
case any breach thereof will give rise to Group 1's right to terminate
hereunder) which breach has not been cured within ten business days
following receipt by the Company of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice) or (iii) there is a material adverse change in the aggregate
projected 1998 pre-tax income of $6.8 million expected for the Company
and the Other Companies, on which the consideration paid to the
Stockholders in connection with the Merger was based; or
(f) by the Stockholders if there has been a material
breach of any representation or warranty set forth in this Agreement
by Group 1 which breach has not been cured within ten business days
following receipt by Group 1 of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice).
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10.6 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.5, the parties hereto shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.7 survive any such termination.
10.7 Expenses. Regardless of whether the Merger is consummated,
all costs and expenses in connection with this Agreement and the transactions
contemplated hereby incurred by Group 1 shall be paid by Group 1 and all such
costs and expenses incurred by the Stockholders shall be paid by the Company
and the Stockholders; provided, that all expenses borne by the Company will be
paid prior to the completion of the distributions contemplated by Sections
6.3(j) and 7.6(c) hereof, and that such expenses will be deducted from the
Company's working capital for the purpose of calculating such distributions.
The Stockholder and Group 1 each represent and warrant to each other that there
is no broker or finder involved in the transactions contemplated hereby.
10.8 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period") (two-year period with respect to James S. Carroll), no
Stockholder voluntarily will: (i) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (A) any shares of Group 1
Common Stock received by any Stockholder in the Merger or (B) any interest in
(including any option to buy or sell) any of those shares of Group 1 Common
Stock, in whole or in part, and Group 1 will have no obligation to, and shall
not, treat any such attempted transfer as effective for any purpose; or (ii)
engage in any transaction, whether or not with respect to any shares of Group 1
Common Stock or any interest therein, the intent or effect of which is to
reduce the risk of owning the shares of Group 1 Common Stock acquired pursuant
to the Plan of Merger (including for example engaging in put, call, short-sale,
straddle or similar market transactions). Notwithstanding the foregoing, each
Stockholder may (i) pledge shares of Group 1 Common Stock, provided that the
pledgee of such shares shall agree not to sell or otherwise dispose of any such
shares for the Restricted Period; (ii) transfer shares to immediate family
members or the estate of any such individual (including, without limitation,
any transfer by such Stockholder to or among any trust, custodial or other
similar accounts or funds that are for the benefit of his or her immediate
family members), provided that such person or entity shall agree not to sell or
otherwise dispose of any such shares for the Restricted Period; and (iii)
transfer shares by will or the laws of descent and distribution or otherwise by
reason of such Stockholder's death. The certificates evidencing the Group 1
Common Stock delivered to each Stockholder pursuant to the Plan of Merger will
bear a legend substantially in the form set forth below and containing such
other information as Group 1 may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER
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DISPOSITION OF ANY OF THOSE SHARES, DURING THE [ONE-YEAR] [TWO-YEAR]
PERIOD ENDING ON ______________ [DATE THAT IS THE [FIRST] [SECOND]
ANNIVERSARY OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of Group 1 Common Stock to be
delivered to that Stockholder pursuant to the Plan of Merger have not been and,
if applicable, will not be registered under the Securities Act and therefore
may not be resold by that Stockholder without compliance with the Securities
Act and (ii) covenants that none of the shares of Group 1 Common Stock issued
to that Stockholder pursuant to the Plan of Merger will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all the applicable provisions of the Securities Act
and the rules and regulations of the Commission and applicable state securities
laws and regulations. All certificates evidencing shares of Group 1 Common
Stock issued pursuant to the Plan of Merger will bear the following legend in
addition to the legend prescribed by Section 10.8(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Plan of Merger to each Stockholder will bear any legend
required by the securities or blue sky laws of the state in which that
Stockholder resides.
10.9 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto. The waiver by any
party hereto of any condition or of a breach of another provision of this
Agreement shall not operate or be construed as a waiver of any other condition
or subsequent breach. The waiver by any party hereto of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement other than with respect to the
condition so waived.
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10.10 Legal Fees. Except as otherwise provided herein, the losing
party shall pay all reasonable legal fees and expenses and costs of litigation
through appeal incurred by the prevailing party in any dispute arising from
this Agreement.
10.11 Public Statements. The Stockholders and Group 1 agree to
consult with each other prior to issuing any press release or otherwise making
any public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
10.12 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
10.13 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to the Company: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
if to the Stockholders: J. Carroll Enterprises, Inc.
3101 N. State Road 7
Hollywood, Florida 33021
Telecopy: (954) 964-4760
Attention: James S. Carroll
with a copy to: Bernard A. Singer, P.A.
4700-B Sheridan Street
Hollywood, Florida 33021
Telecopy: (954) 985-0941
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<PAGE> 45
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and
Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.13. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor. Delivery to the Stockholders' representative, if any, of any
notice to Stockholders hereunder shall constitute delivery to all Stockholders
and any notice given by such Stockholders' representative shall be deemed to be
notice given by all Stockholders.
10.14 Governing Law. Except as otherwise specified herein, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, excluding any choice of law rules that may direct the
application of the laws of another jurisdiction.
10.15 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.16 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.17 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.18 Entire Agreement; Third Party Beneficiaries. This Agreement,
including the Exhibits and the Schedules hereto, constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
oral and written, among the parties or any of them, with respect to the subject
matter hereof (except as contemplated otherwise by this Agreement) and neither
this nor any
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<PAGE> 46
document delivered in connection with this Agreement, confers upon any Person
not a party hereto any rights or remedies hereunder.
[signature page follows]
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<PAGE> 47
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B. B. HOLLINGSWORTH, JR.
---------------------------------------------
Name: B.B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
COURTESY MERGER, INC.
By: /s/ JOHN T. TURNER
---------------------------------------------
Name: John T. Turner
Title: President
COURTESY FORD, INC.
By: /s/ JAMES S. CARROLL
---------------------------------------------
Name: James S. Carroll
Title: President
STOCKHOLDERS
J. CARROLL ENTERPRISES TRUST
/s/ JAMES S. CARROLL
-------------------------------------------------
By: James S. Carroll, Trustee
/s/ RALPH S. KERR
-------------------------------------------------
Ralph S. Kerr
<PAGE> 48
JANET L. GILES REVOCABLE LIVING TRUST
/s/ JANET L. GILES
-------------------------------------------------
By: Janet L. Giles, Trustee
<PAGE> 49
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Agreement and Plan of Reorganization made
and entered into as of December ____, 1997 by and among Group 1, Merger Sub,
the Company and the Stockholders thereof, including any amendments thereto and
each Annex (including this Annex A), Exhibit and schedule thereto (including
the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Leased Properties, whether personal or mixed, tangible
or intangible, wherever located.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.17.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Carroll Group" shall mean all dealerships under the executive
management responsibility of James S. Carroll in Florida and Georgia (including
the Companies and any other dealerships acquired by Group 1 after the Closing
Date) and additional dealerships acquired by Group 1 as a result of the efforts
of James S. Carroll (whether or not such dealerships are under the executive
management control of James S. Carroll).
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Courtesy Ford, Inc., a Florida corporation, all
predecessor entities of the Company and its successors from time to time.
"Company Common Stock" shall mean the issued and outstanding common
stock of the Company, as set forth in Section 3.7.
"Company's 1996 Balance Sheet" shall have the meaning set forth in
Section 3.8 herein.
"Company's 1996 Financial Statements" shall have the meaning set forth
in Section 3.8 herein.
"Contingent Consideration" shall have the meaning set forth in Section
10.2(a) herein.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Designated Person" and "Designated Persons" shall have the meanings
set forth in Section 10.4 herein.
"Effective Time" shall mean the effective time of the issuance of a
certificate of merger by the Secretary of State of the State of Florida
recognizing the Merger.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the 1996 Balance Sheet or acquired by the Company since the
date of the 1996 Balance Sheet.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Group 1" shall mean Group 1 Automotive, Inc., a Delaware corporation.
"Group 1 Common Stock" shall mean the common stock, par value $.01 per
share of Group 1.
"Guaranteed Payments" shall have the meaning set forth in Section
10.2(a) herein.
"Guarantees" shall have the meaning set forth in Section 3.11 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has
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been or shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Incremental Return" shall mean return on Group 1's investment in the
operations of the Carroll Group that were not a part of the Companies on the
date of this Agreement (total income after income taxes divided by total
investment). " Income" and "investment" used for these purposes will be before
any Group 1 management fees, allocations of indirect costs, cost of capital
(including interest, loan origination fees, points and any other expenses
incurred in obtaining or maintaining a loan) or amortization of goodwill.
"Total investment" in these operations will include any loan proceeds, cash or
stock invested by Group 1 to acquire the operations added to the Carroll Group
after the date of this Agreement (including all investments made by Group 1 as
a condition to manufacturer approval of such acquisitions).
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" shall have the meaning set
forth in Section 3.18 herein.
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
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"Material Contract" has the meaning set forth in Section 3.11 herein.
"Material Leases" shall have the meaning set forth in Section 3.11
herein.
"Merger" shall mean the merger of Merger Sub with and into the
Company.
"Merger Sub" shall mean Courtesy Merger, Inc., a Florida corporation
and a wholly owned subsidiary of Group 1.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Other Agreements" shall have the meaning set forth in the Recitals
hereto.
"Other Company" and "Other Companies" shall have the meanings set
forth in the Recitals hereto.
"Owned Properties" shall mean any real estate previously owned by the
Company.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
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(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Phase I Environmental Surveys" shall mean the environmental reports
of S.E. Environmental Consultants, Inc. dated September, 1997.
"Plan" shall have the meaning set forth in Section 3.17.
"Plan of Merger" shall mean the Agreement and Plan of Merger made and
entered into as of __________, 1998 by and between Merger Sub and the Company.
"Related Party Agreements" shall have the meaning set forth in Section
3.11 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person with any Governmental Authority.
"Restricted Period" shall have the meaning set forth in Section 10.8
herein.
"Schedules" shall mean all schedules required to be provided by the
Company or the Stockholders under this Agreement, including any amendments or
supplements thereto.
"SEC Documents" shall mean the Group 1 Automotive, Inc. Prospectus
dated October 29, 1997 and the Form 10-Q for the third quarter ended September
30, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Stockholders Indemnifiable Damages" shall have the meaning set forth
in Section 9.2 herein.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of
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the board of directors or other governing body of such corporation or other
legal entity or of which the specified Person controls the management.
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person within six
years prior to the date of the Agreement but which have been terminated prior
to the date of the Agreement.
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
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EXHIBIT A
______________, 1998
AGREEMENT AND PLAN OF MERGER
Merging COURTESY FORD, INC. into COURTESY MERGER, INC.
THIS AGREEMENT AND PLAN OF MERGER, dated as of _________, 1998 (this
"Plan of Merger"), is by and between Courtesy Merger, Inc., a Florida
corporation ("Merger Sub") and a wholly owned subsidiary of Group 1 Automotive,
Inc., a Delaware corporation ("Group 1") and Courtesy Ford, Inc., a Florida
corporation (the "Company"). Merger Sub and the Company are hereinafter
sometimes referred to as the "Constituent Corporations."
PRELIMINARY STATEMENT
Group 1, Merger Sub and the Company desire that the Company merge with
and into Merger Sub.
This Plan of Merger is being entered into pursuant to an Agreement and
Plan of Reorganization dated as of December 17, 1997 (the "Agreement") among
Group 1, Merger Sub, the Company and the stockholders of the Company.
Group 1 will acquire by merger (the "Other Mergers") Koons Ford, Inc.,
a Florida corporation and Perimeter Ford, Inc., a Delaware corporation
(collectively, the "Other Companies") pursuant to plans of merger entered into
among the Other Companies and subsidiaries of Group 1 (collectively, the "Other
Plans of Merger").
The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $.01 per share ("Merger Sub Common Stock"), of which
1,000 shares are outstanding, all of which are owned by Group 1. The
authorized capital stock of the Company consists of 1,000 shares of common
stock, par value $1.00 per share ("Company Common Stock"), of which 750 shares
are outstanding and no shares are held in the Company's treasury.
The Boards of Directors of each of the Constituent Corporations,
respectively, have approved the Agreement and the Plan of Merger.
Accordingly, in consideration of the premises, and the mutual
covenants and agreements herein contained, the parties hereto hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.3), the Company shall be merged with and into the Merger Sub, the separate
existence of the Company shall cease, and the Merger Sub (i) shall continue as
the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") under the corporate name "Courtesy Ford, Inc.", (ii) shall be
governed by the laws of Florida (iii) shall maintain a registered office in the
State of Florida at 15551 South Dixie Highway, Miami, Florida 33157, and shall
(iv) succeed to and assume all of the rights, properties and obligations of
Merger Sub and the Company in accordance with the applicable provisions of the
Florida Business Corporation Act (the "Code").
1.2 Effect of the Merger. The Merger shall have the effects set
forth in Section ______________ of the Code.
1.3 Consummation of the Merger. As soon as practicable after all
conditions set forth in Article VIII of the Agreement have been satisfied or
waived, the parties hereto will file with the Secretary of State of the State
of Florida articles of merger in such form as required by, and executed in
accordance with, the relevant provisions of the Code, with instructions that
such articles of merger are to be issued and effective as of the last day of
the month in which such articles are filed (the effective time of the issuance
of a certificate of merger by the Secretary of State of the State of Florida
being the "Effective Time").
1.4 Certificate of Incorporation; Bylaws. The certificate of
incorporation and bylaws of the Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation and bylaws of the
Surviving Corporation and thereafter shall continue to be its certificate of
incorporation and bylaws until amended as provided therein and under the Code.
1.5 Directors and Officers. The directors of the Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation. The initial officers
of the Surviving Corporation shall be as follows: (i) James S.
Carroll--President; (ii) Janet L. Giles--Treasurer, and (iii) Frank R.
Todaro--Secretary, in each case until their respective successors are duly
elected or appointed and qualified.
1.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the Company, Merger Sub or
their respective stockholders:
(a) The shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (the "Shares")
shall be converted, subject to the provisions of this Section 1.6,
into (i) the rights to receive, immediately following the Effective
Date, a number of shares of Group 1 Common Stock (the "Initial Stock
Consideration") and an
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amount in cash (the "Initial Cash Consideration," and together with
the Initial Stock Consideration, the "Initial Consideration") as set
forth in Section 1.6(b) below, and (ii) the rights to receive,
periodically upon satisfaction of the conditions set forth in Section
1.6(c) below, additional shares of Group 1 Common Stock (the
"Contingent Stock Consideration") and amounts in cash (the "Contingent
Cash Consideration," and together with the Contingent Stock
Consideration, the "Contingent Consideration") as set forth in Section
1.6(c) hereof; provided, however, that no fractional shares of Group 1
Common Stock shall be issued, and, in lieu thereof, a cash payment
shall be made pursuant to Sections 1.6(h) and 1.6(i) hereof.
(b)(i) The Shares owned by J. Carroll Enterprises Trust shall
be converted into the right to receive Initial Stock Consideration of
740,884 shares and the rights to receive a portion of any Contingent
Consideration periodically payable to it in accordance with Section
1.6(c) hereof; (ii) the Shares owned by Janet L. Giles Revocable
Living Trust shall be converted into the right to receive Initial
Stock Consideration of 41,440 shares, Initial Cash Consideration of
$217,722 and the rights to receive a portion of any Contingent
Consideration periodically payable to it in accordance with Section
1.6(c) hereof; and (iii) the Shares owned by Ralph S. Kerr shall be
converted into the right to receive Initial Stock Consideration of
104,318 shares, Initial Cash Consideration of $135,293 and the rights
to receive a portion of any Contingent Consideration periodically
payable to him in accordance with Section 1.6(c) hereof.
(c) As additional consideration for the capital stock of
the Company, Group 1 hereby agrees to pay the Stockholders certain
additional amounts as provided in this Section 1.6(c). Beginning with
the year ended December 31, 1999, the audited operations of the
Carroll Group will be reviewed with respect to their operations during
the full twelve calendar months of 1999. To the extent that Group 1's
Incremental Return exceeds 11%, the Group 1 investment will be
increased to a level which will yield this required rate of
Incremental Return. This increase will be paid to the Stockholders no
later than April 30 of the following year, as additional consideration
for the Merger and the Other Mergers. This review will be conducted
after each of the five years commencing with calendar 1999, and
increases in investment as determined above will be paid until such
time as the maximum increase has been reached. All additional
consideration paid to the Stockholders pursuant to this Section 1.6(c)
will be paid in cash and Group 1 Common Stock, in the same proportions
as the aggregate consideration received by each Stockholder in the
Merger and the Other Mergers. For the purposes of determining the
number of shares of Group 1 Common Stock payable to the Stockholders
hereunder, such shares shall be assigned a per share value of the
average closing price of the Group 1 Common Stock on the New York
Stock Exchange for the five trading days preceding the date on which
such shares are issued.
The Contingent Consideration paid by Group 1 pursuant to this
Section 1.6(c) and Section 1.6(c) of the Other Plans of Merger shall
not exceed $7.5 million, $2.5 million of which (the "Guaranteed
Payments") will be paid regardless of the results of the above
computation, as follows: $900,000 on the first anniversary of the
Closing Date, $900,000 on the second anniversary of the Closing Date,
and $700,000 on the third anniversary of the
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Closing Date. The aggregate Guaranteed Payments actually paid to the
Stockholders shall carry forward and be applied against any additional
Contingent Consideration payable to the Stockholders hereunder. The
Guaranteed Payments shall be reduced by the difference between the
aggregate Contingent Consideration previously paid to the Stockholders
and $2.5 million.
The Contingent Consideration payable under this Section 1.6(c)
is additional consideration for the Stockholders' interests in the
Company, and the parties hereto agree to report such amounts on such
basis for income tax purposes.
(d) Each share of Company Common Stock that immediately
prior to the Effective Time was held in the treasury of the Company
shall be canceled and retired as a result of the Merger and no
securities or cash shall be issued or paid with respect thereto. Any
shares of preferred stock of the Company and any options, warrants or
other rights to purchase Company Common Stock or any other securities
of the Company which remain outstanding at the Effective Time shall
automatically be canceled and retired as a result of the Merger
without consideration therefor, and each holder thereof shall cease to
have any rights with respect thereto.
(e) At or after the Effective Time, each holder of an
outstanding certificate that prior thereto represented Shares shall be
entitled, upon surrender thereof to Group 1, to receive immediately in
exchange therefor (i) a certificate or certificates representing the
number of whole shares of Initial Stock Consideration in such
denominations and registered in such names as such holder may request
and (ii) cash in the amount equal to the Initial Cash Consideration,
into which the Shares so surrendered shall have been converted as
described above. Each holder of Shares who would otherwise be
entitled to a fraction of a share of Group 1 Common Stock shall, upon
surrender of the certificates that, prior to the Effective Time,
represented Shares held by such holder, to Group 1, be paid an amount
in cash in accordance with the provisions of Sections 1.6(i) and
1.6(j). Until so surrendered, each outstanding certificate that,
prior to the Effective Time, represented Shares shall be deemed from
and after the Effective Time, for all corporate purposes, other than
the payment of earlier dividends and distributions, to evidence the
ownership of the number of full shares of Initial Stock Consideration
and Initial Cash Consideration into which such Shares shall have been
converted pursuant to this Section 1.6. Unless and until any such
outstanding certificates shall be surrendered, no dividends or other
distributions payable to the holders of Group 1 Common Stock, as of
any time on or after the Effective Time, shall be paid to the holders
of such outstanding certificates which prior to the Effective Time
represented Shares; provided, however, that, upon surrender and
exchange of such outstanding certificates, there shall be paid to the
record holders of the certificates issued and exchanged therefor, the
amount, without interest thereon, of dividends and other
distributions, if any, that theretofore were declared and became
payable since the Effective Time with respect to the number of full
shares of Group 1 Common Stock issued to such holders.
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(f) All shares of Group 1 Common Stock into which the
Shares shall have been converted pursuant to this Section 1.6 shall be
issued and paid in full satisfaction of all rights pertaining to such
converted shares.
(g) If any certificate for shares of Group 1 Common Stock
is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall have paid to Group
1 any transfer or other taxes required by reason of the issuance of a
certificate for shares of Group 1 Common Stock in any name other than
that of the registered holder of the certificate surrendered, or
established to the satisfaction of Group 1 that such tax has been paid
or is not payable.
(h) In lieu of any fraction of a share of Initial Common
Stock, each holder of Shares who would otherwise be entitled to a
fraction of a share of Group 1 Common Stock shall, upon surrender of
the Shares held by such holder to Group 1, be paid an amount in cash
equal to the value of such fraction of a share based upon a per share
price $14.00. No interest shall be paid on such amount.
(i) In lieu of any fraction of a share of Contingent
Common Stock, each person who would otherwise be entitled to a
fraction of a share of Contingent Common Stock shall, upon
satisfaction of the conditions precedent to such persons receipt of
Contingent Common Stock, be paid an amount in cash equal to the value
of such fraction of a share based upon the average closing price of
Group 1 Common Stock on the New York Stock Exchange for the five
trading days preceding each respective issuance of Contingent Common
Stock. No interest shall be paid on such amount.
(j) None of Group 1, Merger Sub, the Company or the
Surviving Corporation shall be liable to a holder of the Shares for
any amount properly paid to a public official pursuant to applicable
property, escheat or similar law.
1.8 Taking of Necessary Action; Further Action. Merger Sub and
the Company shall take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company or Merger
Sub, such corporations shall direct their respective officers and directors to
take all such lawful and necessary action.
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ARTICLE II
MISCELLANEOUS
2.1 Counterparts. This Plan of Merger may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to each of the other parties.
2.2 Governing Law. This Plan of Merger shall be governed by and
construed in accordance with the laws of the State of Florida.
2.3 Waiver and Amendment. Any provision of this Plan of Merger
may be waived at any time by the party that is, or whose stockholders are,
entitled to the benefits thereof. This Plan of Merger may not be amended or
supplemented at any time, except by an instrument in writing signed on behalf
of each party hereto, only as may be permitted by applicable provisions of the
Code. The waiver by any party hereto of any condition or of a breach of
another provision of this Plan of Merger shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this Plan of
Merger shall not preclude it from seeking redress for breach of this Plan of
Merger other than with respect to the condition so waived.
2.4 Certain Definitions.
(a) "Carroll Group" shall mean all dealerships under the
executive management responsibility of James S. Carroll in Florida and
Georgia (including the Companies and any other dealerships acquired by
Group 1 after the Closing Date) and additional dealerships acquired by
Group 1 as a result of the efforts of James S. Carroll (whether or
not such dealerships are under the executive management control of
James S. Carroll).
(b) "Incremental Return" shall mean return on Group 1's
investment in the operations of the Carroll Group that were not a part
of the Companies on the date of this Agreement (total income after
income taxes divided by total investment). " Income" and "investment"
used for these purposes will be before any Group 1 management fees,
allocations of indirect costs, cost of capital (including interest,
loan origination fees, points and any other expenses incurred in
obtaining or maintaining a loan) or amortization of goodwill. "Total
investment" in these operations will include any loan proceeds, cash
or stock invested by Group 1 to acquire the operations added to the
Carroll Group after the date of this Agreement (including all
investments made by Group 1 as a condition to manufacturer approval of
such acquisitions).
[signature page follows]
6
<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
to be duly executed as of the date first above written.
COURTESY MERGER, INC.
By:
-----------------------------------------
Name: James S. Carroll
Title: President
COURTESY FORD, INC.
By:
-----------------------------------------
Name: James S. Carroll
Title: President
7
<PAGE> 1
EXHIBIT 10.42
================================================================================
LEASE AGREEMENT
between
WORLD PARTNER ENTERPRISES LTD., A FLORIDA LIMITED PARTNERSHIP
(Landlord)
and
KOONS FORD, INC.
(Tenant)
PINES BOULEVARD
================================================================================
<PAGE> 2
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
LEASE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Premises Leased . . . . . . . . . . . . . . . . . . 1
Section 1.2 Premises Defined . . . . . . . . . . . . . . . . . 1
Section 1.3 Habendum . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Initial Term and Commencement . . . . . . . . . . . 1
Section 2.2 Lease Year . . . . . . . . . . . . . . . . . . . . 1
Section 2.3 Lease Month . . . . . . . . . . . . . . . . . . . . 1
Section 2.4 Renewal Term . . . . . . . . . . . . . . . . . . . 1
Section 2.5 Rezoning . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3
RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1 Base Rent . . . . . . . . . . . . . . . . . . . . . 2
Section 3.2 Additional Rent and Rent . . . . . . . . . . . . . 2
Section 3.3 Payment of Rent . . . . . . . . . . . . . . . . . . 3
Section 3.4 Late Charge . . . . . . . . . . . . . . . . . . . . 3
Section 3.5 Adjustment to Rent for Ford Improvements . . . . . 3
ARTICLE 4
TAXES; UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1 Impositions Defined . . . . . . . . . . . . . . . . 3
Section 4.2 Tenant's Obligations . . . . . . . . . . . . . . . 3
Section 4.3 Tax Contest . . . . . . . . . . . . . . . . . . . . 4
Section 4.4 Evidence Concerning Impositions . . . . . . . . . . 4
Section 4.5 Utilities . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 5
IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.1 Construction of Premises . . . . . . . . . . . . . 4
Section 5.2 Alterations . . . . . . . . . . . . . . . . . . . . 5
Section 5.3 Mechanic's and Materialmen's Liens . . . . . . . . 6
Section 5.4 Ownership of Improvements . . . . . . . . . . . . . 6
Section 5.5 Asbestos and Other Hazardous Substances . . . . . . 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6
USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS . . . . . . . . . . . . 7
Section 6.1 Use . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.2 Environmental. . . . . . . . . . . . . . . . . . . 7
Section 6.3 Maintenance and Repairs . . . . . . . . . . . . . . 10
Section 6.4 Americans with Disabilities Act . . . . . . . . . . 11
ARTICLE 7
INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.1 Building Insurance . . . . . . . . . . . . . . . . 11
Section 7.2 Liability Insurance . . . . . . . . . . . . . . . . 12
Section 7.3 Policies . . . . . . . . . . . . . . . . . . . . . 12
Section 7.4 Tenant's Indemnity . . . . . . . . . . . . . . . . 12
Section 7.5 Landlord's Indemnity . . . . . . . . . . . . . . . 12
Section 7.6 Subrogation . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 8
CASUALTY; CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.1 Tenant's Obligation to Restore . . . . . . . . . . 13
Section 8.2 Restoration and Deposit of Funds . . . . . . . . . 14
Section 8.3 Notice of Damage . . . . . . . . . . . . . . . . . 16
Section 8.4 Total Taking . . . . . . . . . . . . . . . . . . . 16
Section 8.5 Partial Taking . . . . . . . . . . . . . . . . . . 16
Section 8.6 Temporary Taking . . . . . . . . . . . . . . . . . 16
Section 8.7 Notice of Taking, Cooperation . . . . . . . . . . . 17
ARTICLE 9
TENANT'S FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.1 Tenant's Right to Encumber . . . . . . . . . . . . 17
Section 9.2 Tenant's Mortgage . . . . . . . . . . . . . . . . . 17
ARTICLE 10
WARRANTY OF TITLE AND PEACEFUL POSSESSIONAND LANDLORD'S FINANCING . 18
Section 10.1 Warranty As to Encumbrances . . . . . . . . . . . . 18
Section 10.2 Landlord's Mortgage . . . . . . . . . . . . . . . . 19
Section 10.3 Representations of Landlord . . . . . . . . . . . . 19
ARTICLE 11
DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.1 Default . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.2 Remedies . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.1 Notices . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.2 Performance of Other Party's Obligations . . . . . 23
Section 12.3 Modification and Non-Waiver . . . . . . . . . . . . 24
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . 24
Section 12.5 Number and Gender; Captions; References . . . . . . 24
Section 12.6 CPI . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12.7 Estoppel Certificate . . . . . . . . . . . . . . . 24
Section 12.8 Severability . . . . . . . . . . . . . . . . . . . 24
Section 12.9 Attorney Fees . . . . . . . . . . . . . . . . . . . 25
Section 12.10 Surrender of Premises; Holding Over . . . . . . . . 25
Section 12.11 Relation of Parties . . . . . . . . . . . . . . . . 25
Section 12.12 Force Majeure . . . . . . . . . . . . . . . . . . . 25
Section 12.13 Non-Merger . . . . . . . . . . . . . . . . . . . . 25
Section 12.14 Entireties . . . . . . . . . . . . . . . . . . . . 25
Section 12.15 Recordation . . . . . . . . . . . . . . . . . . . . 25
Section 12.16 Successors and Assigns . . . . . . . . . . . . . . 26
Section 12.17 Landlord's Joinder . . . . . . . . . . . . . . . . 26
Section 12.18 No Third Parties Benefitted . . . . . . . . . . . . 26
Section 12.19 Survival . . . . . . . . . . . . . . . . . . . . . 26
Section 12.20 Perpetuities . . . . . . . . . . . . . . . . . . . 26
Section 12.21 Transfer of Landlord's Interest . . . . . . . . . . 26
Section 12.22 Tenant's Right To Assign . . . . . . . . . . . . . 26
Section 12.23 Past Due Amounts . . . . . . . . . . . . . . . . . 27
Section 12.24 Independent Counsel . . . . . . . . . . . . . . . . 27
Section 12.25 Cooperation with Landlord's Lender. . . . . . . . . 27
ARTICLE 13
OPTION TO PURCHASE PREMISES . . . . . . . . . . . . . . . . . . . . 27
Section 13.1 Right of First Refusal . . . . . . . . . . . . . . 27
Section 13.2 Option . . . . . . . . . . . . . . . . . . . . . . 28
Section 13.3 Specific Performance . . . . . . . . . . . . . . . 30
ARTICLE 14
ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 14.1 Arbitration Provisions . . . . . . . . . . . . . . 30
ARTICLE 15
SUBORDINATION AND ATTORNMENT . . . . . . . . . . . . . . . . . . . . 31
Section 15.1 Subordination . . . . . . . . . . . . . . . . . . . 31
Section 15.2 Attornment . . . . . . . . . . . . . . . . . . . . 31
Section 15.3 Radon Gas Disclosure . . . . . . . . . . . . . . . 31
</TABLE>
iii
<PAGE> 5
EXHIBITS
EXHIBIT A DESCRIPTION OF LAND
EXHIBIT B EXCEPTIONS TO TITLE TO LAND
EXHIBIT C BASE RENT DETERMINATION
EXHIBIT D LANDLORD'S WORK
EXHIBIT E TENANT'S WORK
iv
<PAGE> 6
LEASE AGREEMENT
This Lease Agreement ("LEASE") is entered into as of the 16th day
of March, 1998, between WORLD PARTNER ENTERPRISES LTD., A FLORIDA
LIMITED PARTNERSHIP as ("LANDLORD"), and KOONS FORD, INC., a Florida
corporation ("TENANT").
ARTICLE 1
LEASE OF PROPERTY
SECTION 1.1 PREMISES LEASED. Landlord subleases to Tenant, and
Tenant leases from Landlord the real property and premises described on EXHIBIT
A (the "LAND"), including but not limited to all of the rights, interests,
estates, and appurtenances thereto, all improvements thereon, and all other
rights, titles, interests, and estates, if any, in adjacent streets and roads.
SECTION 1.2 PREMISES DEFINED. All of the Land, properties,
rights, estates, appurtenances, and interests leased to Tenant pursuant to
Section 1.1, together with all improvements now or hereafter constructed
thereon, are hereinafter collectively referred to as the "PREMISES".
SECTION 1.3 HABENDUM. To have and to hold the Premises, together
with all and singular the rights, privileges, and appurtenances thereunto
attaching or in anywise belonging, exclusively unto Tenant, its successors and
assigns, upon the terms and conditions set forth herein and subject to the
matters set forth on EXHIBIT B.
ARTICLE 2
TERM OF LEASE
SECTION 2.1 INITIAL TERM AND COMMENCEMENT. The initial term
("INITIAL TERM") of this Lease shall commence as of the date of the later to
occur of (i) the improvements to be constructed on the premises are certified
by the architect for such improvements as complete in accordance with the plans
and specifications approved in writing by Landlord and Tenant, and (ii) a
certificate of occupancy has been issued for such improvements as hereinafter
set forth ("COMMENCEMENT DATE") and unless sooner terminated pursuant to the
terms of this Lease, the initial term of this Lease shall expire on the
"EXPIRATION DATE" (herein so called), which shall be (i) the last day of the
one hundred twentieth (120th) Lease Month from and after the first day of the
calendar month following the Commencement Date.
SECTION 2.2 LEASE YEAR. A "LEASE YEAR" shall mean a twelve (12)
Lease Month period commencing with the first day of the calendar month
following the Commencement Date or any anniversary date thereof.
SECTION 2.3 LEASE MONTH. A "LEASE MONTH" shall mean a period of
time during the term of this Lease commencing the first day of the calendar
month and ending on the last day of the calendar month. The first Lease Month
shall begin on the first day of the calendar month following the Commencement
Date.
<PAGE> 7
SECTION 2.4 RENEWAL TERM.
(a) If on the Expiration Date and the date Tenant notifies
Landlord of its intention to renew the term of this Lease (as provided below),
(i) Tenant has not been given notice of default under this Lease (based upon a
Default as hereinafter defined), and (ii) this Lease is in full force and
effect, then Tenant, shall have and may exercise an option to renew this Lease
for four (4) additional terms (each, a "RENEWAL TERM") of five (5) years each;
upon the same Rent (hereinafter defined), as adjusted pursuant to the terms of
Section 3.1, and other terms and conditions contained in this Lease. Whenever
used in this Lease, "TERM", unless modified or specifically noted otherwise in
the applicable context, shall mean the Initial Term together with each Renewal
Term to the extent Tenant has exercised any option with respect to any Renewal
Term.
(b) If Tenant desires to renew this Lease, Tenant must notify
Landlord in writing of its intention to renew on or before the date which is at
least six (6) months but no more than twelve (12) months prior to the
Expiration Date or the expiration date of any Renewal Term, as the case may be.
SECTION 2.5 REZONING. The Land upon which improvements will be
constructed for the Dealership contemplated by the Landlord and Tenant, is
presently under consideration for rezoning so as to permit the use of the
property contemplated by this Lease. In the event the Landlord is unable to
secure all required governmental approvals (except for final approval of plans
of the Improvements) for the construction and operation of the Dealership on or
before May 1, 1998, then Tenant, at its option, may terminate this Lease upon
written notice to the Landlord. Landlord hereby agrees to diligently pursue
the obtaining of such governmental approvals.
ARTICLE 3
RENT
SECTION 3.1 BASE RENT. Subject to the terms and provisions
contained in this Section 3.1, Tenant shall pay Landlord monthly "BASE RENT"
(herein so called) in the amount determined in EXHIBIT C attached hereto, in
advance on or before the first day of each Lease Month during the Term, subject
to adjustment as hereafter provided. If the Term commences on a day other than
the first day of a calendar month, or ends on a day other than the last day of
a calendar month, then the Base Rent for such month shall be prorated on the
basis of one thirtieth (1/30th) of the monthly Base Rent for each day of such
month. If the CPI on any Adjustment Date shall be greater than the CPI for the
Commencement Date, monthly Base Rent commencing on the Adjustment Date shall be
adjusted to be the original monthly Base Rent specified in this Section 3.1
plus an amount equal to one-half (1/2) of the product obtained by multiplying:
(i) the original monthly Base Rent specified in this Section 3.1 by (ii) the
percentage increase in the CPI from the Commencement Date through the January
1st prior to the Adjustment Date. "ADJUSTMENT DATE" shall be the first day of
the first Lease Month of each Renewal Term. The term "CPI" shall have the
meaning specified therefor in Section 12.6.
Tenant shall also pay at the same times and places as the
rental installments such Florida State Sales Tax, other such applicable taxes
due on rentals and all other sums due hereunder either city, state, county or
federal as may be in effect from time to time.
2
<PAGE> 8
SECTION 3.2 ADDITIONAL RENT AND RENT. All amounts required to be
paid by Tenant under the terms of this Lease, other than Base Rent, are herein
from time to time collectively referred to as "ADDITIONAL RENT." Base Rent and
Additional Rent are herein collectively referred to as "RENT."
SECTION 3.3 PAYMENT OF RENT. Base Rent shall be payable to
Landlord at the original or changed address of Landlord as set forth in Section
12.1 or to such other persons or at such other addresses in the United States
of America as Landlord may designate from time to time in writing to Tenant;
however, if Tenant receives notice of a default under the Landlord's Financing
(defined below), then Tenant shall have the right, but not the obligation, to
pay to Landlord's Financing Lender (defined below) any sums due and owing on
such Landlord's Financing and all such payments by Tenant shall reduce the
amount of Rent owing to Landlord. Additional Rent shall be paid as herein set
forth.
SECTION 3.4 LATE CHARGE. Any rent or other sum which is not
paid within fifteen (15) days after the date due shall bear interest at the
Default Rate from the date when the same is payable under the terms of this
Lease until the same shall be paid.
SECTION 3.5 ADJUSTMENT TO RENT FOR FORD IMPROVEMENTS. Landlord
and Tenant recognize that Ford Leasing or its related entities ("FORD") may
from time to time require that structural improvements to the Premises be made
as a condition to the continuation of a Ford Dealership upon the Premises. In
the event that Ford requires that such structural improvements be made to the
Premises, Landlord shall, at its expense, construct such improvements. The
Base Rent due pursuant to Section 3.1 hereinabove shall be increased by an
amount equal to the costs of the improvements required by Ford, amortized over
a fifteen (15) year period. The new Base Rent shall commence effective the
next monthly period following the completion of the required improvements.
ARTICLE 4
TAXES; UTILITIES
SECTION 4.1 IMPOSITIONS DEFINED. "IMPOSITIONS" means all real
estate and ad valorem taxes, and associated levies, including penalties levied
for failure of Tenant to pay any of same in a timely manner, which shall or may
during the Term be assessed, levied or imposed by any Governmental Authority
(defined below) upon (a) the Premises or any part thereof, (b) the buildings or
improvements now or hereafter comprising a part thereof, the appurtenances
thereto or the sidewalks, streets, or vaults adjacent thereto. Impositions
shall not include any income tax, capital levy, estate, succession, inheritance
or transfer taxes, or similar tax of Landlord; any franchise tax imposed upon
any owner of the fee of the Premises; or any income, profits, or revenue tax,
assessment, or charge imposed upon the rent or other benefit received by
Landlord under this Lease by any municipality, county, state, the United States
of America, or any other governmental body, subdivision, agency, or authority
(all of such foregoing governmental bodies are collectively referred to herein
as "GOVERNMENTAL AUTHORITIES").
SECTION 4.2 TENANT'S OBLIGATIONS. During the Term, Tenant will
pay all Impositions before they become delinquent. Impositions that are
payable by Tenant for the tax year in which this Lease commences as well as
during the year in which the Term ends shall be apportioned so that Tenant
shall pay its share of the Impositions payable by Tenant for the portion of
such Taxes
3
<PAGE> 9
allocable to the portion of such year occurring during the Term. Where any
Imposition that Tenant is obligated to pay may be paid pursuant to law in
installments, Tenant may pay such Imposition in installments as and when such
installments become due. Tenant shall, if so requested, deliver to Landlord
evidence of payment of all Impositions Tenant is obligated to pay hereunder,
concurrently with the making of such payment.
SECTION 4.3 TAX CONTEST. Tenant may, at its expense, contest the
validity or amount of any Imposition for which it is responsible, in which
event the payment thereof may be deferred, as permitted by law, during the
pendency of such contest, if diligently prosecuted. Landlord shall cooperate
with Tenant in connection with any such contest but Landlord shall not be
required to spend any sums or incur any liability in cooperating with Tenant.
All taxes must be paid prior to the date they become delinquent. In the event
that the property subject to this Agreement is encumbered by financing, the
Tenant shall pay all taxes within the time frame established by such lender.
SECTION 4.4 EVIDENCE CONCERNING IMPOSITIONS. The certificate,
advice, bill, or statement issued or given by the appropriate officials
authorized by law to issue the same or to receive payment of any Imposition of
the existence, nonpayment, or amount of such Imposition shall be prima facie
evidence for all purposes of the existence, nonpayment, or amount of such
Imposition.
SECTION 4.5 UTILITIES. Tenant shall pay all charges for gas,
electricity, light, heat, air conditioning, power, telephone, and other
communication services, and all other utilities and similar services rendered
or supplied to the Premises, and all water, refuse, sewer service charges, or
other similar charges levied or charged against, or in connection with, the
Premises.
ARTICLE 5
IMPROVEMENTS
SECTION 5.1 CONSTRUCTION OF PREMISES. Landlord will, at its sole
expense, perform all work specified to be performed by Landlord more
specifically set forth in EXHIBIT D attached hereto as "LANDLORD'S WORK", and
Tenant will, at its sole expense, perform all other work necessary to complete
the Premises for its business purposes including, without limitation, the work
specified to be performed by Tenant more particularly described in EXHIBIT E
attached hereto as "TENANT'S WORK". Nothing in this Lease shall prevent
Landlord, in its construction of the Improvements (the "DEALERSHIP") or
completion of Landlord's Work, from making such non-material variations,
alterations or additions in such work and in any plans and specifications
relating thereto as it may reasonably see fit, so long as the Dealership and
its facilities as finally constructed are generally similar to the Dealership
and its facilities as set out in the plans and specifications presented to
Tenant by Landlord. Landlord agrees to complete construction of the Dealership
in good faith prior to May 1, 1999, subject to Force Majeure, as hereinafter
defined. The date at such time as the construction is completed in accordance
with the plans and specifications approved in writing by Landlord and Tenant as
certified by the supervising architect and a Certificate of Occupancy is issued
by the applicable governmental agency, shall constitute the Commencement Date
of this Lease for the purposes of payment of Rent pursuant to Section 3.1 and
all other obligations of Tenant. Subject to Force Majeure, Tenant agrees to
attempt to complete construction of Tenant's work in good faith prior to May 1,
1999. In the event that the Tenant fails to complete Tenant's Work in a timely
fashion, subject to Force Majeure, and as a result the completion date of the
Landlord's Work and/or the Commencement Date is delayed, then the Commencement
Date shall be deemed to be the date
4
<PAGE> 10
Tenant should have completed Tenant's Work and a Certificate of Final
Completion issued were it not for the delays caused by Tenant's failure to
timely complete Tenant's Work.
Nothing hereinabove withstanding to the contrary, the Tenant will be
advancing to Landlord (or Landlord's associated enterprise Koons Ford, Inc.) a
portion of the costs associated with the carry and construction of the
improvements preceding the Commencement Date of this Lease, said amounts as set
forth in EXHIBIT D attached hereto. The advances will be preceded by periodic
written "advance requests" from the Landlord, accompanied by documentation
supporting the nature of the disposition of the funds to be so advanced. The
Tenant will review the advance request prior to payment of any advance to
Landlord. Each advance request for payment by Landlord shall be made on ten
(10) days prior written notice to Tenant and shall be accompanied by a
certificate to be made by the architect or engineer supervising Landlord's
Work, stating, among such other matters as may be reasonably required by Tenant
that: all of the Landlord's Work completed has been done in compliance with the
approved plans and specifications of Tenant; the sum requested is justly
required to reimburse Landlord for payments by Landlord to, or is justly due
to, the contractor, subcontractors, materialmen, laborers, engineers,
architects or other persons rendering services or materials for the Landlord's
Work (giving a brief description of such services and materials); when added to
all sums previously paid out by Tenant for Landlord's Work, the sum requested
does not exceed the value of the Landlord's Work done to the date of such
certificate; and the remaining amount to be disbursed as set forth on EXHIBIT C
under "Advances Pursuant to Section 5.1" will be sufficient on completion of
the Landlord's Work to pay for the same in full (giving in such reasonable
detail as Tenant may require an estimate of the cost of such completion); each
request shall be accompanied by waivers of lien satisfactory in form and
substance to Tenant covering that part of Landlord's Work for which payment or
reimbursement is being requested and by a search prepared by a title company or
licensed abstracter or by other evidence satisfactory to Tenant that there has
not been filed with respect to the Premises any Mechanics lien or other lien,
affidavit or instrument asserting any lien or any lien rights with respect to
the Premises, there has not occurred any default by Landlord under this Lease;
in the case of the request for the final disbursement, such request is
accompanied by a copy of any Certificate of Occupancy or other certificate
required by any law, rule, ordinance or regulation of any governmental
authority to render occupancy of the Premises lawful. Nothing herein shall be
interpreted to prohibit Tenant from withholding from each such disbursement ten
percent (10%) (or a greater amount, if permitted or required by any law, rule,
regulation or statute) of the amount otherwise herein provided to be disbursed,
and from continuing to withhold such sum, until the time permitted for
perfecting liens against the Premises, has expired, at which time the amount
withheld shall be disbursed to Landlord (or to Landlord and any person or
persons furnishing labor and/or material for the Landlord's Work or directly to
such persons). The Tenant shall receive a credit against the Base Rent due
pursuant to Section 3.1 hereinabove in an amount equal to the amount advanced
pursuant to this Section 5.1, together with interest at the Tenant's parent
company's customary borrowing rate as may be in effect from time to time. Such
credit shall be charged against the monthly Base Rent installments, commencing
as of the first monthly rental payment due, until such time as the entire
amount of such credit is exhausted. Thereafter, Base Rent shall commence in
amounts required in Section 3.1 hereinabove, including payment of any partial
installment which may be due as a result of a credit to the final monthly
credit which is less than the full monthly Base Rent due.
SECTION 5.2 ALTERATIONS. At any time and from time to time
during the Term, Tenant may perform such alteration, renovation, repair,
refurbishment, and other work (herein such matters being
5
<PAGE> 11
collectively called the "ALTERATIONS") with regard to any Improvements as
Tenant may elect. All buildings, structures, and other improvements located at
any time on the Land are herein called the "IMPROVEMENTS." Any and all
alterations, renovation, repair, refurbishment, or other work with regard
thereto shall be performed, in accordance with the following "CONSTRUCTION
STANDARDS" (herein so referenced): (i) All such construction or work shall be
performed in a good and workmanlike manner in accordance with good industry
practice for the type of work in question; (ii) All such construction or work
shall be done in compliance with all applicable building codes, ordinances, and
other laws or regulations of Governmental Authorities having jurisdiction;
(iii) Tenant shall have obtained and shall maintain in force and effect the
insurance coverage required in Article 7 with respect to the type of
construction or work in question; (iv) After commencement, such construction or
work shall be prosecuted with due diligence to its completion; and (v) With the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed and shall be deemed given if a request is not approved or
denied within thirty (30) days after notice, no Alteration shall be made which
(x) involves any material repairs or modifications to the structural portions
of the Premises, or (y) would impair the market value, structural integrity or
usefulness of the Premises for the purposes for which the same are presently
being used.
SECTION 5.3 MECHANIC'S AND MATERIALMEN'S LIENS. Tenant shall
have no right, authority, or power to bind Landlord or any interest of Landlord
in the Premises for any claim for labor or for material or for any other charge
or expense incurred in construction of any Improvements or performing any
alteration, renovation, repair, refurbishment, or other work with regard
thereto, nor to render Landlord's interest in the Premises liable for any lien
or right of lien for any labor, materials, or other charge or expense incurred
in connection therewith, and Tenant shall in no way be considered as the agent
of Landlord in the construction, erection, or operation of any such
Improvements. If any liens or claims for labor or materials supplied or
claimed to have been supplied to the Premises shall be filed against the
interest of the Landlord, Tenant shall promptly pay or bond such liens to
Landlord's reasonable satisfaction or otherwise obtain the release or discharge
thereof.
SECTION 5.4 OWNERSHIP OF IMPROVEMENTS. During the Term all
currently existing Improvements shall be solely the property of Landlord. All
other Improvements created by Alterations or pursuant to Section 5.1 under
Landlord's Work (and to the extent not credited against rent due as provided in
Section 5.1 above) and Tenant's Work which have been paid for by Tenant to or
which may be added by Tenant (which do not constitute replacements of existing
Improvements) shall be the property of Tenant, but at the end of the Term, all
then-existing Improvements shall be the property of Landlord. However, upon
expiration or earlier termination of this Lease, Tenant shall have the right to
remove all trade fixtures, movable equipment, furniture, furnishings and other
personal property located in the Premises and other items not permanently
attached to the Premises provided that Tenant repairs any damages caused by the
removal of such items. Nothing hereinabove withstanding to the contrary, any
lifts or hydraulics installed upon the Premises by Tenant, whether as an
original installation or replacement, shall remain on the Premises and shall
become the property of the Landlord upon the expiration or termination of this
Lease.
SECTION 5.5 ASBESTOS AND OTHER HAZARDOUS SUBSTANCES. Landlord
shall remain fully liable and responsible for any asbestos and other Hazardous
Substances as hereinafter defined present on any portion of the Premises prior
to the Commencement Date even if such asbestos is in an unfriable or
undisturbed state on the Commencement Date and Tenant thereafter disturbs such
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materials in any manner including, without limitation, in connection with any
Alterations performed by Tenant on the Premises. If Tenant intentionally
disturbs or causes to be disturbed by any contractor or other party any
asbestos presently located on the Premises of which Tenant has actual
knowledge, then any such disturbance of such asbestos shall only be done in
accordance with all laws, regulations, ordinances, or requirements of any
Governmental Authority having jurisdiction in the Premises including, without
limitation, those which govern the disposition of Hazardous Substances. Any
expenses associated with correction of such disturbance caused by the Tenant or
its contractors shall be borne by the Tenant.
ARTICLE 6
USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS
SECTION 6.1 USE.
Subject to the terms and provisions hereof, Tenant may use and enjoy
the Premises for the sale, lease, trade, repair or service of motor or other
vehicles and other uses normally associated therewith including, without
limitation, the sale of parts and services. Without limiting the generality of
the foregoing, the provisions relating to use of the Premises shall be broadly
construed to encompass all uses normally associated with premises occupied by
automobile, boat and recreational vehicle dealerships. Tenant shall not use or
occupy, permit the Premises to be used or occupied, nor do or permit anything
to be done in or on the Premises in a manner which would constitute a public or
private nuisance, or which would violate any laws, regulations, ordinances, or
requirements of any Governmental Authority having jurisdiction in the Premises
including, without limitation, those which relate to Hazardous Substances.
SECTION 6.2 ENVIRONMENTAL.
(a) For purposes of this Lease, the term "HAZARDOUS SUBSTANCE"
means (i) any substance, product, waste or other material of any nature
whatsoever which is or becomes listed, regulated, or addressed pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq. ("RCRA"); the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et
seq.; the Federal Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Federal
Clean Water Act, 33 U.S.C. Section 1151 et seq.; the National Environmental
Policy Act, 42 U.S.C. Section 1857 et seq.; the Regulations of the
Environmental Protection Agency, 33 C.F.R. and 40 C.F.R.; Chapters 373, 376,
380 and 403 of the Florida Statutes and rules related thereto, including
Chapters 17, 27 and 40 of the Florida Administrative Code; and all Broward
County environmental protection ordinances, (the above-cited Florida state
statutes are hereinafter collectively referred to as the "STATE TOXIC
SUBSTANCES LAWS") or any other federal, state or local statute, law, ordinance,
resolution, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic or
dangerous waste, substance or material, as now or at any time hereafter in
effect, (ii) any substance, product, waste or other material of any
nature whatsoever which may give rise to liability under any of the above
statutes or under any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or under any reported
decisions of a state or
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federal court, (iii) petroleum or crude oil other than petroleum and petroleum
products which are contained within regularly operated motor vehicles, and (iv)
asbestos.
(b) Tenant represents, warrants, acknowledges and agrees that:
(i) Subject to the terms and provisions of this
Lease, Tenant will not undertake, permit,
authorize or suffer, the manufacture,
handling, generation, transportation,
storage, treatment, discharge, release,
burial or disposal on, under or about the
Premises of any Hazardous Substance, or the
transportation to or from the Premises of any
Hazardous Substance;
(ii) Tenant will not cause, permit, authorize or
suffer any Hazardous Substance to be placed,
held, located or disposed of, on, under or
about any other real property all or any
portion of which is legally or beneficially
owned (or any interest or estate therein
which is owned) by the Tenant in any
jurisdiction now or hereafter having in
effect a so-called "Superlien" law or
ordinance or any part thereof the effect of
which law or ordinance would be to create a
lien on the Premises to secure any obligation
in connection with the real property in such
other jurisdiction.
(c) From and after the Commencement Date, Tenant shall keep and
maintain the Premises in compliance with, and shall not cause or permit the
Premises to be in violation of, any federal, state or local laws, ordinances
or regulations relating to health and safety, industrial hygiene or to the
environmental conditions on, under or about the Premises including, but not
limited to, air, soil and ground water conditions. Tenant hereby covenants and
agrees that neither it nor any agent, servant, employee, or tenant shall
generate, manufacture, handle, store, treat, discharge, release, bury or
dispose of on, under or about the Premises, any Hazardous Substance. Without
limiting the generality of the foregoing provisions of this Subsection, Tenant
agrees at all times to comply fully and in a timely manner with, and to cause
all of its employees, agents, contractors, subcontractors, tenants and any
other persons occupying or present on the Premises to so comply with, all
federal, state and local laws, regulations, guidelines, codes, statutes and
ordinances applicable to the generation, manufacture, handling, storage,
treatment, discharge, release, burial or disposal of any Hazardous Substance
located or present on, under or about the Premises by, through or under Tenant
after the Commencement Date, or the transportation to or from the Premises of
any Hazardous Substance. Any sublease executed after the date hereof
concerning the Premises shall contain a provision prohibiting the lessee, and
any agent, servant, employee or tenant of the lessee, from generating,
manufacturing, storing, treating, discharging, releasing, burying or disposing
on, under or about the Premises, or transporting to or from the Premises, any
Hazardous Substance.
(d) If the release, threat of release, placement on, under or
about the Premises, or the use, generation, manufacture, storage, treatment,
discharge, release, burial or disposal on, under or about the Premises, or
transportation to or from the Premises, of any Hazardous Substance: (i) gives
rise to liability, costs or damages (including, but not limited to, a response
action, remedial action, or removal action) under RCRA, CERCLA, the State Toxic
Substances Laws, or any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or under any reported
decision of a state or federal court, (ii) causes or threatens to cause a
significant public health effect, or (iii) pollutes or threatens to pollute the
environment, the Tenant shall
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promptly take any and all response, remedial and removal action necessary to
clean up the Premises and any other effected property and mitigate exposure to
liability arising from the Hazardous Substance, if required by law or by any
governmental authority.
(e) Tenant shall indemnify, defend with counsel reasonably
satisfactory to Landlord, protect and hold harmless Landlord, its directors,
officers, employees, agents, assigns and any successor or successors to
Landlord's interest under this Lease from and against all claims, actual
damages (including but not limited to special and consequential damages),
punitive damages, injuries, costs, response costs, losses, demands, debts,
liens, liabilities, causes of action, suits, legal or administrative
proceedings, interest, fines, charges, penalties and expenses (including but
not limited to attorneys' and expert witness fees and costs incurred in
connection with defending against any of the foregoing or in enforcing this
indemnity) of any kind whatsoever paid, incurred or suffered by, or asserted
against, any indemnified party at any time prior to any retaking of the
Premises by Landlord directly or indirectly arising from or attributable to (i)
any breach by Tenant of any of its agreements, warranties or representations
set forth in this Section 6.2, or (ii) any repair, cleanup or detoxification,
or preparation and implementation of any removal, remedial, response, closure
or other plan concerning any Hazardous Substance which arises on, under or
about the Premises after the Commencement Date and is attributable to Tenant
and not to Landlord or any other party not under the control, employed by,
contracted with or affiliated with Tenant, regardless of whether undertaken due
to governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Landlord for any liability pursuant to such statute, to
the extent Tenant is liable pursuant to this Section 6.2.
(f) Tenant shall promptly give Landlord (i) a copy of any notice,
correspondence or information it receives from any federal, state or other
governmental authority regarding Hazardous Substances on, under or about the
Premises or Hazardous Substances which affect or may affect the Premises, or
regarding any actions instituted, completed or threatened by any such
governmental authority concerning Hazardous Substances which affect or may
affect the Premises, (ii) written notice of any knowledge or information Tenant
obtains regarding Hazardous Substances on, under or about the Premises or
incurred by Tenant (other than commercially reasonable quantities of
customarily used cleaning compounds and the like and the matters covered in
subsections (h) and (i) of this Section 6.2), a third party or any government
agency to study, assess, contain or remove any Hazardous Substances on, under,
about or near the Premises for which expense or loss Tenant may be liable or
for which a lien may be imposed on the Premises, (iii) written notice of any
knowledge or information Tenant obtains regarding the release or discovery of
Hazardous Substances on, under or about the Premises or on other sites owned,
occupied or operated by Tenant or by any person for whose conduct Tenant is or
may be responsible, or whose liability may result in a lien on or otherwise
affect the Premises, (iv) written notice of all claims made or threatened by
any third party against Tenant or the Premises relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Substance, and (v) written notice of Tenant's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of
the Premises that could subject the Premises to any restrictions on the
ownership, occupancy, transferability or use of the Premises under any of the
statutes cited in Subsection (a) of this Section or any regulation adopted
pursuant thereto. Notwithstanding anything to the contrary contained herein,
Tenant shall not be under any obligation to provide notice of any contamination
so long as
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any of the principal(s) of Landlord (currently being James S. Carroll, William
C. Carroll, Janet L. Giles and Ralph S. Kerr) are responsible for the operation
of the dealership at the Premises.
(g) Notwithstanding anything to the contrary contained herein,
the indemnity contained in this Section 6.2 shall continue indefinitely from
the date of Tenant's execution of this Lease and shall survive the termination
of all agreements between Tenant and Landlord. The indemnity contained in this
Section 6.2 in no way limits the scope or enforceability of any other indemnity
contained herein.
(h) Commercially reasonable quantities of customarily used
cleaning compounds and the like, which are stored, used and disposed of in
compliance with applicable environmental laws, shall be excluded from any
obligation of Tenant hereunder this Section 6.2. Commercially reasonable
quantities of products customarily used in Tenant's business and the like,
which are stored, used and disposed of in compliance with applicable
environmental laws, are hereby permitted by Landlord.
(i) Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have no liability or obligation under this Section 6.2 or
elsewhere in this Lease for any matter existing on, under or about the
Premises prior to the Commencement Date, including, without limitation, the
removal or remediation of any Hazardous Substances and Landlord shall maintain
full liability for such pre-Commencement Date contamination. Landlord shall
indemnify, defend with counsel reasonably satisfactory to Tenant, protect and
hold harmless Tenant, its directors, officers, employees, agents, assigns and
any successor or successors to Tenant's interest under this Lease from and
against all claims, actual damages (including but not limited to special and
consequential damages), punitive damages, injuries, costs, response costs,
losses, demands, debts, liens, liabilities, causes of action, suits, legal or
administrative proceedings, interest, fines, charges, penalties and expenses
(including but not limited to attorneys' and expert witness fees and costs
incurred in connection with defending against any of the foregoing or in
enforcing this indemnity) of any kind whatsoever paid, incurred or suffered by,
or asserted against, any indemnified party directly or indirectly arising from
or attributable to (1) any breach by Landlord any of its agreements, warranties
or representations set forth in this Section 6.2(i), or (2) any repair, cleanup
or detoxification, or preparation and implementation of any removal, remedial,
response, closure or other plan concerning any Hazardous Substance on, under or
about the Premises prior to the Commencement Date attributable to Landlord or
any other party under the control, employed by, contracted with or otherwise
associated with Landlord in any manner, regardless of whether undertaken due to
governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Tenant for any liability pursuant to such statute, to
the extent Landlord is liable pursuant to this Section 6.2(i).
SECTION 6.3 MAINTENANCE AND REPAIRS. During the Term of this
Lease, in addition to the Rent herein provided, Tenant agrees to pay all costs
and charges for repair and maintenance of the Premises, except as otherwise
provided herein. Tenant agrees to surrender the Premises at the expiration or
earlier termination of this Lease in as good condition as at the commencement
of the term of this Lease. Tenant shall also make any repairs to the
electrical equipment, air conditioning equipment, heating equipment or to any
other portions of the Premises, except when a manufacturer or supplier is
obligated to make or pay for the repairs under an expressed or implied warranty
and such repairs are made by such warranting manufacturer or supplier. Tenant
agrees to replace any
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plate, window or door glass broken in the Premises with glass of like kind and
quality. Tenant shall, comply with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act. Any repairs required to be made by the Tenant shall be made
in a prompt and workmanlike manner. All goods and materials used shall be in
quality equal to or better than that being replaced. The Tenant shall supply
the Landlord with copies of all warranties offered as to any replacements and
shall supply Landlord with copies of any invoices for repairs or replacements,
the cost of which exceeds $5,000.00. Tenant's failure to supply such
warranties and invoices shall not be deemed a default under the terms of this
Lease.
Subject to the other terms of this Lease, Tenant acknowledges that it
has inspected and that the Premises, including all fixtures, equipment and
furnishings contained therein, are in satisfactory or excellent condition and
accepts the Premises in its "AS IS" condition, without requiring Landlord to
make any repairs or replacements thereof. Tenant hereby waives any objection
to and releases Landlord from any liability arising from the condition of the
Premises from and after the Commencement Date, except for matters as herein set
forth.
The Improvements being constructed upon the Land together with all
equipment and hardware, may be warrantied by third party vendors who have
performed labor or rendered materials thereto. The Tenant shall be entitled to
the benefit of all such warranties and the Landlord shall fully cooperate in
securing the services of such third party vendors for warranty work during the
Term of this Lease.
SECTION 6.4 AMERICANS WITH DISABILITIES ACT. Landlord shall be
responsible for compliance with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, attributable to the Premises as of the Commencement Date of
this Lease. In the event the Tenant makes any modifications to the Premises,
all such modifications shall comply with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, including modifications which are required by such
governmental agencies, as a result of such modifications, to remaining
unmodified portions of the Premises.
ARTICLE 7
INSURANCE AND INDEMNITY
SECTION 7.1 BUILDING INSURANCE. Tenant will, at its cost and
expense, keep and maintain in force the following policies of insurance:
(1) Insurance on the Improvements against loss or damage by fire
and against loss or damage by any other risk now and from time to time insured
against by "extended coverage" provisions of policies generally in force on
improvements of like type in the city in which the Premises are located, and in
builder's risk completed value form during construction, in amounts sufficient
to provide coverage for the full insurable value of the Improvements; the
policy for such insurance shall have a replacement cost endorsement or similar
provision. "FULL INSURABLE VALUE," shall mean actual replacement value
(exclusive of cost of excavation, foundations, and footings below the surface
of the ground or below the lowest basement level), and such full insurable
value
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shall be determined by Tenant's insurer, and confirmed from time to time at the
request of Landlord by one of the insurers. The Tenant shall maintain all
storm and flood insurances which are customarily maintained for properties
similar to the Premises in the County in which the Premises are located, or
which is required by Landlord's Lender (if any), and only if such coverage is
available, to fully insure the Improvements including all such coverages which
might later come into existence as a result of changes in the insurance
coverages available or required in the future.
(2) Worker's Compensation Insurance as to Tenant's employees
involved in the construction, operation, or maintenance of the Premises in
compliance with applicable law.
(3) Such other insurance against other insurable hazards which at
the time are commonly insured against in the case of improvements similarly
situated, due regard being given to the height and type of the Improvements,
their construction, location, use, and occupancy.
SECTION 7.2 LIABILITY INSURANCE. Tenant shall secure and
maintain in force comprehensive general liability insurance, including
contractual liability specifically applying to the provisions of this Lease and
completed operations liability, with limits of not less than Ten Million
Dollars ($10,000,000) with respect to bodily injury or death to any number of
persons in any one accident or occurrence and with respect to property damage
in any one accident or occurrence, such limits to be increased in the event of
request by Landlord by an amount which may be reasonable at the time.
SECTION 7.3 POLICIES. All insurance maintained in accordance
with the provisions of this Article 7 shall be issued by companies reasonably
satisfactory to Landlord, and shall be carried in the name of both Landlord and
Tenant, as their respective interests may appear, and shall contain a mortgagee
clause acceptable to the Landlord's Financing Lender and the Permitted
Mortgagees. All property policies shall (i) be subject to prior written
approval of Landlord, which shall not be unreasonably withheld or delayed, and
(ii) expressly provide that any loss thereunder may be adjusted with Tenant,
Landlord's Financing Lender and Permitted Mortgagees, but, unless required
otherwise under Landlord's Financing, shall be payable to Tenant and disbursed
as set forth in Section 8.2. All property and liability insurance policies
shall name Landlord as an additional named insured and shall include
contractual liability endorsements. Tenant shall furnish Landlord, Landlord's
Financing Lender and each Permitted Mortgagee with evidence of all insurance
policies required under this Article 7 and shall furnish and maintain with each
of such parties, at all times, a certificate of the insurance carrier
certifying that such insurance shall not be canceled without at least fifteen
(15) days advance written notice to each of such parties.
SECTION 7.4 TENANT'S INDEMNITY. Subject to Section 7.6, Tenant
shall indemnify and hold harmless Landlord, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED LANDLORD PARTIES"), from all claims, suits, actions,
and proceedings whatsoever which may be brought or instituted on account of or
growing out of any Default and any and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the Claims, to the extent, but
only to the extent, such Claims are not attributable to events or conditions
that occurred or existed, in whole or in part, prior to the date when Tenant
first occupied the Premises ("CLAIMS"), Tenant shall assume on behalf of the
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Indemnified Landlord Parties and conduct with due diligence and in good faith
the defense of all such Claims against any of the Indemnified Landlord Parties.
Tenant may contest the validity of any such Claims, in the name of Landlord or
Tenant, as Tenant may deem appropriate, provided that the expenses thereof
shall be paid by Tenant. The foregoing covenants and agreements of Tenant
shall survive the expiration or termination of this Lease.
SECTION 7.5 LANDLORD'S INDEMNITY. Subject to Section 7.6,
Landlord shall indemnify and hold harmless Tenant, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED TENANT PARTIES"), from all claims which may be
brought or instituted on account of or growing out of any default by Landlord
of its obligations under this Lease and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the claims, to the extent, but
only to the extent, any such claims are attributable to or arise out of: (i)
events or conditions that existed or occurred, in whole or in part, prior to
the date when Tenant first occupied the Premises; (ii) Landlord's
representations or warranties or asbestos in any form which is present on the
Premises prior to the date of this Lease. Landlord shall assume on behalf of
the Indemnified Tenant Parties and conduct with due diligence and in good faith
the defense of all Claims against any of the Indemnified Tenant Parties.
Landlord may contest the validity of any Claims, in the name of Landlord or
Tenant, as Landlord may deem appropriate, provided that the expenses thereof
shall be paid by Landlord. The foregoing covenants and agreements of Landlord
shall survive the Term and expiration or termination of this Lease.
SECTION 7.6 SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each hereby waives any and all rights of
recovery, claims, actions, or causes of action against the other, its agents,
officers, and employees for any loss or damage that may occur to any
improvements located on the Premises, or any part thereof, or any personal
property of such party therein, by reason of fire, the elements, or any other
cause which is insured under standard "all risk of direct loss" insurance
policies available in the state in which the Premises are located, regardless
of cause or origin, including negligence of either party hereto, its agents,
officers, or employees. No insurer of one party shall hold any right of
subrogation against the other party as to any such loss or damage.
ARTICLE 8
CASUALTY; CONDEMNATION
SECTION 8.1 TENANT'S OBLIGATION TO RESTORE. Subject to the other
terms of this Section 8.1, in the event of damage to, or destruction of, any
Improvements by fire or other casualty, Tenant shall promptly repair, replace,
restore, and reconstruct the same, all in compliance with the provisions of
Section 8.2. If insurance proceeds are insufficient to pay for required
replacement, repairs, restoration, etc., then Tenant shall be obligated to
promptly repair, replace, restore, and reconstruct the Improvements, all in
compliance with the provisions of Section 8.2, notwithstanding the
unavailability of insurance proceeds for such purpose. In the event that a
Permitted Mortgagee (as hereinafter defined) or Landlord's Financing Lender (as
hereinafter defined), as the case may be, requires that payment of insurance
proceeds be made to it and not be made available for required replacement,
repairs, restoration, etc., then to the extent that such funds are withheld,
the Tenant shall not be responsible for performing required replacement,
repairs, restoration, or reconstruction
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of the Improvements. In the event of a casualty loss wherein the insurance
proceeds are not be used for replacement, repairs, restoration, etc., or the
Improvements, as a result of Landlord's Financing Lender or by consent of the
parties, the insurance proceeds shall be applied as follows:
(1) first, to pay the cost of razing the Improvements and
leveling, cleaning and otherwise putting the Premises in good
order;
(2) second, to Landlord's Financing Lender;
(3) third, to the payment to Tenant for any of its improvements;
and
(4) fourth, to Landlord, to the extent of any remaining proceeds.
Distribution of insurance proceeds is being made in conformity with
Section 5.4 of this Lease.
Notwithstanding the foregoing, in the event of destruction or damage
involving more than seventy-five percent (75%) of the interior floor area of
the Improvements, Tenant shall have no obligation to rebuild unless the
Landlord and Tenant may agree to rebuild the Improvements. In the event the
parties have not agreed to rebuild the Premises then it is recognized between
Landlord and Tenant that it is their intent to relocate the operations to
another location. In the event of such relocation, this Lease shall terminate
effective as to the affected Premises as of the date of such damage or
destruction and the insurance proceeds received by the Landlord and Tenant [as
to Tenant, for Tenant's Improvements, the right to same carrying forward as to
the new location] shall be utilized for the construction of new Improvements at
an alternative location. In the event that the costs of construction of the
Improvements for which the Landlord is responsible exceeds the insurable value
of the operation which was subject to the casualty, the Landlord shall pay the
additional costs for Improvements, and the annual Base Rent due pursuant to
Section 3.1 shall be increased by an amount equal to ten (10%) percent of the
Landlord's additional cost of construction of the new facility. This Lease,
except for the adjustment of Base Rent as described above, shall govern as to
the rights and obligations of the Landlord and Tenant at the substituted
location, however, the Term of the Lease shall be in abeyance during the period
of construction of the alternative Improvements. Tenant's obligation for
payment of Base Rent and other monetary sums under this Lease as applicable to
the new Premises shall commence as of the later to occur of (i) the date the
improvements to be constructed on the new Premises are certified as complete by
the applicable architect for such improvements in accordance with the plans and
specifications agreed to in writing by Landlord and Tenant and (ii) the date a
Certificate of Occupancy is obtained for the operation of such new
improvements. Landlord and Tenant shall, in good faith, fully cooperate with
one another in the selection of the alternative site and relative to
preparation of plans for Improvements and construction thereof. Nothing
hereinabove withstanding to the contrary, if the Tenant failed to maintain
insurance coverage required herein and as a result, proceeds are paid by the
insurance company which are less than the full insurable value of the
Improvements, Tenant shall be solely responsible for any such deficiency.
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SECTION 8.2 RESTORATION AND DEPOSIT OF FUNDS.
(a) Prior to Tenant commencing any repair, restoration or
rebuilding pursuant to Section 8.1 involving an estimated cost of more than One
Hundred Thousand Dollars ($100,000), Tenant shall submit to Landlord for its
approval, which will not be unreasonably withheld or delayed: (i) plans and
specifications therefor, prepared by a licensed architect reasonably
satisfactory to Landlord; (ii) copies of appropriate governmental permits;
(iii) an estimate of the cost of the proposed work, certified to by said
architect (iv) a fixed price construction contract in an amount not in excess
of such architect's estimated cost from a reputable and experienced general
contractor; and (v) satisfactory evidence of sufficient contractor's
comprehensive general liability insurance covering Landlord, builder's risk
insurance, and worker's compensation insurance. Upon completion of any such
work by or on behalf of Tenant, Tenant shall provide Landlord with written
evidence, in form and substance reasonably satisfactory to Landlord, showing
that (i) Tenant has paid all contractors for all costs incurred in connection
with such repair, restoration or rebuilding, and (ii) that the Premises is not
encumbered by any mechanic's or materialmen's liens relating to such repair,
restoration or rebuilding. Regarding Tenant's obligations with respect to
mechanic's or materialmen's liens, reference is made herein to all of the terms
and provisions of Section 5.3 in connection with such repair, restoration or
rebuilding.
(b) Provided that a Default does not then exist, then all sums
arising by reason of such loss under insurance policies maintained by Tenant,
shall be deposited with the Depositary (as hereinafter defined) to be available
to Tenant for the repair, restoration and rebuilding of the Premises. Tenant
shall diligently pursue the repair, restoration and rebuilding of the
improvements in a good and workmanlike manner using only materials which are of
a quality comparable to the quality of the materials used in the Improvements
prior to their destruction or damage. The insurance proceeds will be disbursed
to Tenant by the Depositary after delivery of evidence reasonably satisfactory
to the Depositary that (A) such repairs, restoration, or rebuilding have been
completed and effected in compliance with the plans and specifications for the
restoration or rebuilding, (B) no mechanic's and materialman's liens against
the Premises have been filed, or that all such liens have been paid or bonded
around, and (C) all payments for work performed and materials purchased as of
the date of such disbursement for which mechanic's and materialman's liens
might arise have been paid or will be paid from such disbursement or that all
such potential liens have been paid or bonded around. At the option of Tenant,
such proceeds shall be advanced in reasonable installments. Each such
installment (except the final installment) shall be advanced in an amount equal
to the cost of the construction work completed since the last prior advance (or
since commencement of work as to the first advance) less statutorily required
retainage in respect of mechanic's and materialman's liens or retainage which
may be required by Landlord's Financing Lender in an amount not to exceed ten
percent (10%) of such cost. The amount of each installment requested shall be
certified as being due and owing by Tenant's architect in charge, and each
request shall include all bills for labor and materials for which reimbursement
is requested and reasonably satisfactory evidence that no lien has been placed
against the Premises for any labor or material furnished for such work. The
final disbursement, which shall be an amount equal to the balance of the
insurance proceeds, shall be made upon receipt of (1) an architect's
certificate of substantial completion as to the work from Tenant's architect,
(2) reasonably satisfactory evidence that all bills incurred in connection with
the work have been paid and (3) issuance of a certificate of occupancy by the
applicable governmental agency, if required. The term "DEPOSITARY", as used
herein, shall mean either: (i) Landlord's Financing Lender, or its designee
provided that Landlord's Financing Lender is an institutional lender, its
designee is not an Affiliate of Landlord, and such entity holds such funds in
accordance with the terms of this lease, or related in any other manner to
Landlord), or (ii) such other party that
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is acceptable to Landlord and Tenant, if there is no such Landlord's Financing
Lender or if such Landlord's Financing Lender has refused to act as Depositary.
(c) If no Default then exists, any excess of money received from
insurance policies remaining with the Depositary after the repair or rebuilding
of the Improvements shall, to the extent required by any Permitted Mortgagee,
be applied to payment of Tenant's Permitted Mortgage, otherwise any such
proceeds shall be paid to Tenant.
(d) If Tenant shall not commence the repair or rebuilding of the
Improvements within a period of sixty (60) days after damage or destruction by
fire or other casualty and prosecute the same thereafter with such dispatch as
may be necessary to complete the same within a reasonable period after said
damage or destruction occurs; then, in addition to all other remedies Landlord
may have either under this Lease, at law or in equity, the money received by
and remaining in the hands of the Depositary shall be paid to and retained by
Landlord as security for the continued performance and observance by Tenant of
Tenant's covenants and agreements hereunder.
SECTION 8.3 NOTICE OF DAMAGE. Tenant shall immediately notify
Landlord and each Permitted Mortgagee of any destruction or damage to the
Premises.
SECTION 8.4 TOTAL TAKING. Should the entire Premises be taken
(which term, as used in this Article 8, shall include any conveyance in
avoidance or settlement of eminent domain, condemnation, or other similar
proceedings) by any Governmental Authority, corporation, or other entity under
the right of eminent domain, condemnation, or similar right, then Tenant's
right of possession under this Lease shall terminate as of the date of taking
possession by the condemning authority, and the award therefor will be
distributed as follows: (1) first, to the payment of all reasonable fees and
expenses incurred in collecting the award; (2) second, to Landlord's Financing
Lender; and (3) third, to Landlord and Tenant, to the extent of their interests
in the Premises, as the court having such jurisdiction of such taking shall
determine taking into account certain factors including, without limitation,
the term of the leasehold estate of the Tenant and the ownership interest of
Landlord. After the determination and distribution of the condemnation award
as herein provided, the Lease shall terminate.
SECTION 8.5 PARTIAL TAKING. Should a portion of the Premises be
taken by any Governmental Authority, corporation, or other entity under the
right of eminent domain, condemnation, or similar right, this Lease shall
nevertheless continue in effect as to the remainder of the Premises unless, in
Tenant's reasonable judgment, so much of the Premises shall be so taken as to
make it economically unsound to use the remainder for the uses and purposes
contemplated hereby, whereupon this Lease shall terminate as of the date of
taking of possession by the condemning authority in the same manner as if the
whole of the Premises had thus been taken, and the award therefor shall be
distributed as provided in Section 8.4. In the event of a partial taking where
this Lease is not terminated, all awards payable in respect thereof shall be
payable to Landlord and Tenant, to the extent of their interests in the
Premises, as the applicable condemning authority shall determine taking into
account certain factors including, without limitation, the term of the
leasehold estate of the Tenant and the ownership interest of Landlord.
Following such partial taking, Landlord shall make all necessary repairs or
alterations to the remaining Premises, required to make the remaining portions
of the Premises an architectural whole. The Base Rent payable hereunder during
the unexpired portion of the Lease shall be reduced to the extent fair and
reasonable under
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the circumstances, effective on the date physical possession is taken by the
condemning authority. It is contemplated that Broward County, Florida, make
seek to purchase or take a parcel of land along the Douglas Road (west) line of
the property for a bus stop. Landlord represents and warrants to Tenant that
Broward County's acquisition of such parcel will be di minimis and shall have
no adverse effect on the business of Tenant. Accordingly, so long as such
taking does not have an adverse effect on the business of Tenant, the rent
payments or other obligations due Landlord from Tenant shall not be reduced.
Any proceeds from the sale or taking of such parcel shall belong solely to the
Landlord.
SECTION 8.6 TEMPORARY TAKING. If the whole or any portion of the
Premises shall be taken for temporary use or occupancy, the Term shall not be
reduced or affected. The Base Rent payable hereunder during the unexpired
portion of the Lease shall be reduced to the extent fair and reasonable under
the circumstances and Tenant shall be entitled to receive the entire amount of
any award therefor, less the amount of the reduction in the Base Rent.
SECTION 8.7 NOTICE OF TAKING, COOPERATION. Tenant shall
immediately notify Landlord and each Permitted Mortgagee of the commencement of
any eminent domain, condemnation, or other similar proceedings with regard to
Premises. Landlord and Tenant covenant and agree to fully cooperate in any
condemnation, eminent domain, or similar proceeding in order to maximize the
total award receivable in respect thereof.
ARTICLE 9
TENANT'S FINANCING
SECTION 9.1 TENANT'S RIGHT TO ENCUMBER. Tenant shall have the
right, from time to time and at any time, without Landlord's consent or
joinder, to encumber its interest in this Lease and the leasehold estate hereby
created with one or more deeds of trust, mortgages, or other lien instruments
to secure any borrowings or obligations of Tenant. Any such mortgages, deeds
of trust, and/or other lien instruments, and the indebtedness secured thereby,
provided that Landlord has been given notice thereof, are herein referred to as
"PERMITTED MORTGAGES," and the holder or other beneficiary thereof are herein
referred to as "PERMITTED MORTGAGEES."
SECTION 9.2 TENANT'S MORTGAGE. If Tenant encumbers its interest
in this Lease and the leasehold estate hereby created with liens as above
provided, then Tenant shall notify Landlord thereof, providing with such notice
the name and mailing address of the Permitted Mortgagee in question, Landlord
shall upon request, acknowledge receipt of such notice, and for so long as the
Permitted Mortgage in question remains in effect the following shall apply:
(a) Landlord shall give to the Permitted Mortgagee a duplicate
copy of any and all notices which Landlord gives to Tenant pursuant to the
terms hereof, including notices of default, and no such notice shall be
effective until such duplicate copy is transmitted to such Permitted Mortgagee,
in the manner provided in Section 12.1.
(b) There shall be no cancellation, surrender, or modification of
this Lease by joint action of Landlord and Tenant without the prior written
consent of the Permitted Mortgagee.
(c) If a Default should occur hereunder, then Landlord
specifically agrees that:
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(1) Landlord shall not enforce or seek to enforce any of
its rights, recourses, or remedies, until a notice specifying the event giving
rise to such Default has been transmitted to the Permitted Mortgagee, in the
manner provided in Section 12.1, and if the Permitted Mortgagee proceeds to
cure the Default within a period of thirty (30) days after receipt of such
notice or, as to non-monetary events of Default which by their very nature
cannot be cured within such time period, the Permitted Mortgagee commences
curing such Default within such time period and thereafter diligently pursues
such cure to completion within sixty (60) days thereafter, then any payments
made and all things done by the Permitted Mortgagee to effect such cure shall
be as fully effective to prevent the exercise of any rights, recourses, or
remedies by Landlord as if done by Tenant;
(2) if the Default is a non-monetary default, the
Permitted Mortgagee shall have a period of time in which to cure such Default
equal to the greater of (i) the time period for such curing that is applicable
to Tenant under the terms of this Lease, or (ii) sixty (60) days after the date
that the Permitted Mortgagee has been notified of such Default, provided that
the Permitted Mortgagee cures all defaults relating to the payment of Base Rent
and neither Landlord nor the Premises is or would be liable or subject to any
lien, tax, penalty, expense, liability, or damages because of such Default. If
Landlord or the Premises is or will be liable or subject to any such lien, tax,
penalty, expense, liability or damages because of the Default, then for so long
as the Permitted Mortgagee is diligently and with continuity attempting to
secure possession of the Premises (whether by foreclosure or other procedures),
and provided such delay does not result in a foreclosure by Landlord's
Financing Lender or loss of Landlord's interest in the Premises, Landlord shall
allow the Permitted Mortgagee such time as may be reasonably necessary under
the circumstances to obtain possession of the Premises in order to cure such
Default, and during such time Landlord shall not enforce or seek to enforce any
of its rights, remedies or recourses hereunder; and
(d) No Permitted Mortgagee shall be or become liable to Landlord
as an assignee of this Lease until such time as such Permitted Mortgagee, by
foreclosure or other procedures, shall either acquire the rights and interests
of Tenant under this Lease or shall actually take possession of the Premises,
and upon such Permitted Mortgagee's assigning such rights and interests to
another party or upon relinquishment of such possession, as the case may be,
such Permitted Mortgagee shall have no further such liability.
ARTICLE 10
WARRANTY OF TITLE AND PEACEFUL POSSESSION
AND LANDLORD'S FINANCING
SECTION 10.1 WARRANTY AS TO ENCUMBRANCES. Landlord represents,
warrants and covenants that: (i) the representations and warranties set forth
in Section 10.3 are true and correct; (ii) it owns title to the Land and the
Premises free and clear of all liens, claims and encumbrances except the liens
described in EXHIBIT B hereto securing the financing described therein
("LANDLORD'S FINANCING") and the other encumbrances specifically described in
such EXHIBIT B; (iii) except as otherwise set forth in Section 10.2, Landlord's
Financing shall not be modified in any manner without the prior written consent
of Tenant; and (iv) the lender providing such Landlord's Financing ("LANDLORD'S
FINANCING LENDER") has executed, caused to be acknowledged (notarized in
accordance with applicable law) and delivered to Landlord and Tenant a mutual
recognition and attornment agreement, in form and substance reasonably
satisfactory to Tenant, suitable for recording in the appropriate records to
notify third parties of the existence of such agreement and
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that the Land and the Premises are subject thereto. Such agreement shall
provide, among other provisions, that the Tenant's interest under this Lease
shall be subordinate to the Landlord's Financing and that the Landlord's
Financing Lender shall (i) give to Tenant a duplicate copy of any and all
notices which Landlord's Financing Lender gives to Landlord, including notices
of default, and no such notice shall be effective until such duplicate copy is
actually received by Tenant in the manner provided in Section 12.1; (ii) give
Tenant the right and opportunity to cure any defaults under the Landlord's
Financing; and (iii) recognize and consent to Tenant's rights under this Lease
in the event of a foreclosure or deed in lieu thereof so long as Tenant
continues to perform its obligations under this Lease. As used herein, the
term (A) "LANDLORD'S FINANCING LENDER" shall also include any lender that
refinances Landlord's Financing or makes a new loan to Landlord, subject to
Section 10.2, and (B) "LANDLORD'S FINANCING" shall include all financing
secured by liens covering all or any portion of the Premises which are
permitted under the terms of this Lease including, without limitation, all new
loans.
Moreover, Landlord covenants that Tenant shall and may peaceably and
quietly have, hold, occupy, use, and enjoy the Premises during the Term, and
may exercise all of its rights hereunder, subject only to the provisions of
this Lease and applicable governmental laws, rules, and regulations; and
Landlord agrees to warrant and forever defend Tenant's right to such occupancy,
use, and enjoyment and the title to the Premises against the claims of any and
all persons whomsoever lawfully claim the same, or any part thereof, subject
only to provisions of this Lease and all applicable governmental laws, rules,
and regulations.
Landlord's Financing Lender shall not be or become liable to Tenant as
an assignee of Landlord's interest in this Lease until such time as such
Landlord's Financing Lender, by foreclosure or other procedures, shall either
acquire the rights and interests of Landlord under this Lease, and upon
Landlord's Financing Lender's assigning such rights and interests to another
party, Landlord's Financing Lender shall have no further such liability.
To the extent that Tenant cures any defaults of Landlord under
Landlord's Financing, Tenant shall receive a credit against the Base Rent due
pursuant to Section 3.1 hereinabove in an amount equal to the amount advanced
by Tenant to cure such defaults, together with interest at the Tenant's parent
company's customary borrowing rate as may be in effect from time to time. Such
credit shall be charged against the monthly Base Rent installments, commencing
as of the first monthly rental payment due after the first of such advances,
until such time as the entire amount of such credit is exhausted. Thereafter,
Base Rent shall commence in amounts required in Section 3.1 hereinabove,
including payment of any partial installment which may be due as a result of a
credit to the final monthly credit which is less than the full monthly Base
Rent due.
SECTION 10.2 LANDLORD'S MORTGAGE. During the Term, none of
Landlord's Financing may be modified or refinanced or any new loan made except
in accordance with the following:
(a) The total mortgage indebtedness and encumbrances of any type
against the Premises after the proposed refinancing or modification or new loan
of Landlord's Financing does not exceed eighty percent (80%) of the fair market
value of the Premises or the loan balance in existence as of the effective date
of this Lease, whichever is greater; and
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(b) The effect of any such modification, refinancing or new loan
does not result in an increase in principal and interest payable by Landlord
during any Lease Year which exceeds Base Rent required to be paid by Tenant
during any Lease Year.
SECTION 10.3 REPRESENTATIONS OF LANDLORD. Landlord represents and
warrants to Tenant as of the date of this Lease that:
(a) The Premises are not subject to any prior lease, easement,
adverse claim, or claims of parties in possession, whether or not shown by the
public records, except as set forth on EXHIBIT B.
(b) There is no pending or threatened condemnation action or
agreement in lieu thereof which will or may affect the Premises or any part
thereof in any respect whatsoever, except as noted in Section 8.5 hereinabove.
(c) There is no action, suit or proceeding, including
environmental, pending or threatened against or affecting the Premises or any
part thereof.
(d) The execution, delivery and performance of this Lease by
Landlord has been duly authorized and this Lease is valid and enforceable
against Landlord in accordance with its terms.
(e) Landlord has no knowledge of any fact, action or proceeding,
including environmental, whether actual, pending or threatened, which could
result in the modification or termination of the present zoning classification
of the Premises, or the termination of full free and adequate access to and
from the Premises from all adjoining public highways and roads.
(f) Landlord has not agreed to lease or convey or granted any
rights with respect to or any part of the Premises or any interest therein to
any other person or entity except as shown on EXHIBIT B.
(g) The Premises are not subject to any restrictions (recorded or
unrecorded), building and zoning laws or ordinances, or other laws, ordinances,
rules, regulations and requirements of any Governmental Authority having
jurisdiction which do or could prohibit the use of the Premises for the uses
set forth in this Lease.
(h) Landlord has not received any notice from any Governmental
Authority having jurisdiction over the Premises requiring or specifying any
work to be done to the Premises.
(i) Landlord has no knowledge of any existing, threatened or
contemplated action, circumstances or conditions (including but not limited to
subsurface conditions) which would materially interfere with the development or
use of the Premises for an automobile dealership.
(j) As of the date hereof the Premises are, and on the
Commencement Date the Premises will be in compliance in all material respects
with all restrictive covenants and other restrictions applicable to the
Premises and all applicable statutes, ordinances, rules and regulations
(federal, state, county and municipal), including without limitation all
zoning, environmental, building, health, subdivision regulations. Except as to
matters relating to the presence of asbestos contained
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in the Premises, if any, the representation and warranty set forth in this
Subsection (j) shall not be applicable to the matters covered under Subsection
(m) herein below.
(k) The Premises have legal and physical public access to and from
abutting roadways dedicated to and accepted by the State, City, or County where
the Premises are located.
(l) To the extent zoning regulations are applicable to the
Premises, the Premises are zoned for use as an automobile dealership facility,
for sale, trade, display, service and repair, painting, and other activities
normally associated with a full service automobile dealership.
(m) To the best of Landlord's knowledge, except as may otherwise
be disclosed to Tenant in any written environmental audit report delivered to
Tenant prior to the date of this Lease, no Hazardous Materials, pollutants or
toxic substances have been placed, dumped, deposited or buried upon, in or
under the Premises, there have been no leaks of petroleum, toxic or Hazardous
Materials from any of the underground storage tank facilities and there is no
contaminated soil, as defined by federal, state and/or local laws or
regulations, in, upon or under the Premises by reason of any such wastes,
pollutants, toxins, substances, or facilities.
(n) The Premises have an assured water supply sufficient to permit
the operations now being conducted thereon, and as contemplated in this Lease
with respect to the Improvements to be constructed on the Land, to be conducted
in accordance with all governmental requirements.
(o) All dimensions in the description to the Premises are net of
existing and proposed rights-of-way, easements and dedications except as set
forth on EXHIBIT B.
(p) The Premises are not located in a flood plain or a flood
hazard area for which flood insurance would be required or for which flood
insurance is available.
(q) Landlord warrants and guarantees that on the Commencement Date
the Premises and all appurtenances thereto, will comply with the building
codes, fire, sanitary and safety regulations, ordinances and laws of the United
States of America, city, county and state in which the Premises are located.
Landlord further warrants and guarantees that at the commencement of this
Lease, the Premises may be used for the purposes set out in this Lease without
violating any such codes, regulations, ordinances, laws or any restrictive
covenants running with the land.
(r) Landlord warrants and guarantees that on the Commencement
Date, the wiring, floors, plumbing, underground plumbing, heating, air
conditioning equipment, roofs, outer walls, stairways, doors, windows, plate
glass and sprinkler equipment of the Premises are each and every one in good
repair and are adequate to furnish the proper service for which each was
installed and the heating plant will heat and air conditioning will cool the
buildings constituting part of the Premises in accordance with the generally
accepted design temperatures for the city and state in which the Premises is
located.
(s) Landlord will have acquired, as of the Commencement Date all
required occupancy permits and other licenses or permits required for the use
and occupancy of the Premises.
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ARTICLE 11
DEFAULT AND REMEDIES
SECTION 11.1 DEFAULT. Each of the following shall be deemed a
"DEFAULT" by Tenant hereunder and a material breach of this Lease:
(a) Whenever Tenant shall fail to pay any sum payable by Tenant to
Landlord or any third party under this Lease on the date upon which the same is
due to be paid, and such default shall continue for ten (10) days after Tenant
shall have been given a written notice specifying such default;
(b) Whenever Tenant shall fail to keep, perform, or observe any of
the covenants, agreements, terms, or provisions contained in this Lease that
are to be kept or performed by Tenant other than with respect to payment of
Rent or other liquidated sums of money, and Tenant shall fail to immediately
commence and take such steps as are necessary to remedy the same within thirty
(30) days after Tenant shall have been given a written notice specifying the
same, or having so commenced, shall thereafter fail to proceed diligently and
with continuity to remedy the same;
(c) Whenever an involuntary petition shall be filed against Tenant
under any bankruptcy or insolvency law or under the reorganization provisions
of any law of like import or whenever a receiver of Tenant, or of all or
substantially all of the property of Tenant, shall be appointed without
acquiescence, and such petition or appointment is not discharged or stayed
within sixty (60) days after the happening of such event; or
(d) Whenever Tenant shall make an assignment of its property for
the benefit of creditors or shall file a voluntary petition under any
bankruptcy or insolvency law, or seek relief under any other law for the
benefit of debtors.
SECTION 11.2 REMEDIES. If a Default occurs, then subject to the
rights of any Permitted Mortgagee as provided in Section 9, Landlord may at any
time thereafter prior to the curing thereof and without waiving any other
rights hereunder or available to Landlord at law or in equity (Landlord's
rights being cumulative), do any one or more of the following:
(a) Landlord may terminate this Lease by giving Tenant written
notice thereof, in which event this Lease and the leasehold estate hereby
created and all interest of Tenant and all parties claiming by, through, or
under Tenant shall automatically terminate upon the effective date of such
notice with the same force and effect and to the same extent as if the
effective date of such notice were the day originally fixed in Article 2 hereof
for the expiration of the Term; and Landlord, its agents or representatives,
shall have the right, without further demand or notice, to reenter and take
possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing
breaches hereof. In the event of such termination, Tenant shall be liable to
Landlord for damages in an amount equal to (A) the discounted present value of
the amount by which the Rent reserved hereunder for the remainder of the
existing Term (Initial or Renewal) exceeds the then net fair market rental
value of the Premises for such period of time, plus (B) all expenses incurred
by Landlord enforcing its rights hereunder.
(b) Landlord may terminate Tenant's right to possession of the
Premises and enjoyment of the rents, issues, and profits therefrom without
terminating this Lease or the leasehold estate
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created hereby, reenter and take possession of the Premises and remove all
persons and property therefrom with or without process of law, without being
deemed guilty of any manner of trespass and without prejudice to any remedies
for arrears of Rent or existing breaches hereof, and lease, manage, and operate
the Premises and collect the rents, issues, and profits therefrom all for the
account of Tenant, and credit to the satisfaction of Tenant's obligations
hereunder the net rental thus received (after deducting therefrom all
reasonable costs and expenses of repossessing, leasing, managing, and operating
the Premises). If the net rental so received by Landlord exceeds the amounts
necessary to satisfy all of Tenant's obligations under this Lease, Landlord
shall retain such excess. In no event shall Landlord be liable for failure to
so lease, manage, or operate the Premises or collect the rentals due under any
subleases and any such failure shall not reduce Tenant's liability hereunder.
If Landlord elects to proceed under this Section 11.2(2), it may at any time
thereafter elect to terminate this Lease as provided in Section 11.2(1).
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 NOTICES. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required by
law shall be in writing and shall be deemed to have been validly given or
served by (a) delivery of the same in person to the intended addressee, (b) by
depositing the same with Federal Express or another reputable private courier
service for next business day delivery to the intended addressee at its address
set forth on the first page of this Agreement or at such other address as may
be designated by such party as herein provided, (c) by facsimile copy
transmission [confirmation sheet indicating transmission to be retained] or (d)
by depositing the same in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the intended
addressee at its address set forth below or at such other address as may be
designated by such party as herein provided. All notices, demands and requests
shall be effective upon such personal delivery upon actual receipt, or one (1)
business day after being deposited with the private courier service, or two (2)
business days after being deposited in the United States mail as required
above. Rejection or other refusal to accept or the inability to deliver because
of changed address of which no notice was given as herein required shall be
deemed to be receipt of the notice, demand or request sent. By giving to the
other party hereto at least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America. For purposes of notice the addresses of the parties hereto shall,
until changed, be as follows:
Landlord: World Partner Enterprises, Ltd.
3101 N. State Road 7
Hollywood, FL 33021
Facsimile: (954) 964-4760
Tenant: Koons Ford, Inc.
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, Texas 77024
Attention: John Turner
Facsimile: (713) 627-6468
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The parties hereto shall have the right from time to time to change their
respective addresses for purposes of notice hereunder to any other location
within the United States by giving a notice to such effect in accordance with
the provisions of this Section 12.1.
SECTION 12.2 PERFORMANCE OF OTHER PARTY'S OBLIGATIONS. If either
party hereto fails to perform or observe any of its covenants, agreements, or
obligations hereunder for a period of thirty (30) days after notice of such
failure is given by the other party, then the other party shall have the right,
but not the obligation, at its sole election but not as its exclusive remedy),
to perform or observe the covenants, agreements, or obligations which are
asserted to have not been performed or observed at the expense of the failing
party and to recover all costs or expenses incurred in connection therewith,
together with interest thereon from the date expended until repaid at an annual
rate ("DEFAULT RATE") equal to the lesser of (a) three (3) percent above the
prime rate of interest established from time to time by NationsBank (or a
comparable rate of interest if such rate is not in effect) or (b) the maximum
rate of interest permitted by applicable law. Any performance or observance by
a party pursuant to this Section 12.2 shall not constitute a waiver of the
other party's failure to perform or observe.
SECTION 12.3 MODIFICATION AND NON-WAIVER. No variations,
modifications, or changes herein or hereof shall be binding upon any party
hereto unless set forth in a writing executed by it or by a duly authorized
officer or agent. No waiver by either party of any breach or default of any
term, condition, or provision hereof, including without limitation the
acceptance by Landlord of any Rent at any time or in any manner other than as
herein provided, shall be deemed a waiver of any other or subsequent breaches
or defaults of any kind, character, or description under any circumstance. No
waiver of any breach or default of any term, condition, or provision hereof
shall be implied from any action of any party, and any such waiver, to be
effective, shall be set out in a written instrument signed by the waiving
party.
SECTION 12.4 GOVERNING LAW. This Lease shall be construed and
enforced in accordance with the laws of the state in which the Premises are
located.
SECTION 12.5 NUMBER AND GENDER; CAPTIONS; REFERENCES. Pronouns,
wherever used herein, and of whatever gender, shall include natural persons and
corporations and associations of every kind and character, and the singular
shall include the plural wherever and as often as may be appropriate. Article
and Section headings in this Lease are for convenience of reference and shall
not affect the construction or interpretation of this Lease. Whenever the
terms "hereof," "hereby," "herein," or words of similar import are used in this
Lease, they shall be construed as referring to this Lease in its entirety
rather than to a particular Section or provision, unless the context
specifically indicates to the contrary. Any reference to a particular
"Article" or "Section" shall be construed as referring to the indicated Article
or Section of this Lease.
SECTION 12.6 CPI. "CPI" shall mean the Consumer Price Index for
All Urban Consumers, All Items (Base Year 1982-84 = 100) published by the
United States Department of Labor, Bureau of Labor Statistics. If the 1982-84
Base Year shall no longer be used as an index of
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<PAGE> 30
100, the revised index which would produce results equivalent, as nearly as
possible to those which would be obtained hereunder if the CPI were not so
revised.
SECTION 12.7 ESTOPPEL CERTIFICATE. Landlord and Tenant shall
execute and deliver to each other, promptly upon any request therefor by the
other party, a certificate addressed as indicated by the requesting party and
stating: (a) whether or not this Lease is in full force and effect; (b) whether
or not this Lease has been modified or amended in any respect, and submitting
copies of such modifications or amendments; (c) whether or not there are any
existing defaults hereunder known to the party executing the certificate, and
specifying the nature thereof; (d) whether or not any particular Article,
Section, or provision of this Lease has been complied with; and (e) such other
matters as may be reasonably requested.
SECTION 12.8 SEVERABILITY. If any provision of this Lease or the
application thereof to any person or circumstance shall, at any time or to any
extent, be invalid or unenforceable, and the basis of the bargain between the
parties hereto is not destroyed or rendered ineffective thereby, the remainder
of this Lease, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
SECTION 12.9 ATTORNEY FEES. If litigation is ever instituted by
either party hereto to enforce, or to seek damages for the breach of, any
provision hereof, the prevailing party therein shall be promptly reimbursed by
the other party for all attorneys' fees reasonably incurred by the prevailing
party in connection with such litigation, including all trial and appellate
levels.
SECTION 12.10 SURRENDER OF PREMISES; HOLDING OVER. Upon
termination or the expiration of this Lease, Tenant shall peaceably quit,
deliver up, and surrender the Premises. If Tenant does not surrender
possession of the Premises at the end of the Term, such action shall not extend
the Term, Tenant shall be a tenant at sufferance, and during such time of
occupancy Tenant shall pay to Landlord, as damages, an amount equal to twice
the amount of Rent that was being paid immediately prior to the end of the
Term. Landlord shall not be deemed to have accepted a surrender of the
Premises by Tenant, or to have extended the Term, other than by execution of a
written agreement specifically so stating.
SECTION 12.11 RELATION OF PARTIES. It is the intention of Landlord
and Tenant to hereby create the relationship of landlord and tenant, and no
other relationship whatsoever is hereby created. Nothing in this Lease shall
be construed to make Landlord and Tenant partners or joint venturer or to
render either party hereto liable for any obligation of the other.
SECTION 12.12 FORCE MAJEURE. As used herein "FORCE MAJEURE" means
the occurrence of any event whereby Landlord or Tenant shall be delayed or
prevented from the performance of any act required hereunder by reason of acts
of God, strikes, lockouts, labor troubles, failure or refusal of governmental
authorities or agencies to timely issue permits or approvals or conduct reviews
or inspections, civil disorder, inability to procure materials, restrictive
governmental laws or regulations or other cause without fault and beyond the
control of the party obligated (financial inability excepted). If Tenant or
Landlord shall be delayed, hindered, or prevented from performance of any of
its obligations by reason of Force Majeure, the time for performance of such
25
<PAGE> 31
obligation shall be extended for the period of such delay. In no event shall
this provision pertain to any monetary obligations set forth in this Lease
including payment of Rent from Tenant to Landlord.
SECTION 12.13 NON-MERGER. Notwithstanding the fact that fee title
to the land and to the leasehold estate hereby created may, at any time, be
held by the same party, there shall be no merger of the leasehold estate hereby
created unless the owner thereof executes and files for record in the
appropriate real property records a document expressly providing for the merger
of such estates.
SECTION 12.14 ENTIRETIES. This Lease constitutes the entire
agreement of the parties hereto with respect to its subject matter, and all
prior agreements with respect thereto are merged herein. Any agreements
entered into between Landlord and Tenant of even date herewith are not,
however, merged herein.
SECTION 12.15 RECORDATION. Landlord and Tenant will, at the
request of the other, promptly execute an instrument in recordable form
constituting a short form of this Lease, which shall be filed for record in the
appropriate real property records, or at the request of either party this Lease
shall be so filed for record.
SECTION 12.16 SUCCESSORS AND ASSIGNS. This Lease shall constitute
a real right and covenant running with the Premises, and shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Whenever a reference is made herein to either party, such
reference shall include the party's successors and assigns.
SECTION 12.17 LANDLORD'S JOINDER. Landlord agrees to join with
Tenant in the execution of such applications for permits and licenses from any
Governmental Authority as may be reasonably necessary or appropriate to
effectuate the intents and purposes of this Lease, provided that Landlord shall
not incur or become liable for any obligation as a result thereof.
SECTION 12.18 NO THIRD PARTIES BENEFITTED. Except as herein
specifically and expressly otherwise provided with regard to notices and
opportunities to cure defaults and certain enumerated rights granted to
Permitted Mortgagees, the terms and provisions of this Lease are for the sole
benefit of Landlord and Tenant, and no third party whatsoever, is intended to
benefit herefrom.
SECTION 12.19 SURVIVAL. Any terms and provisions of this Lease
pertaining to rights, duties, or liabilities extending beyond the expiration or
termination of this Lease shall survive the end of the Term.
SECTION 12.20 PERPETUITIES. To the extent that the rule against
perpetuities is applicable thereto, but not otherwise, the rights granted to
Tenant in Article 13 hereof shall expire upon the earlier to occur of (a) the
date set forth for expiration of such rights in said Article 13 or (b) the date
which is 21 years after the date of death of the last to die of the following
parties: the last grandchild to survive of the presently living grandchildren
of George Bush, former President of the United States of America.
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SECTION 12.21 TRANSFER OF LANDLORD'S INTEREST. Subject to the
terms of the Landlord's Financing, Landlord may freely transfer and/or mortgage
its interest in the Premises and under this Lease from time to time and at any
time, provided that any such transfer or mortgage is expressly made subject to
the terms, provisions, and conditions of this Lease, including specifically but
without limitation Tenant's rights under Article 13, and the transferee or
mortgagee agrees to be bound by the provisions hereof (in the case of a
mortgagee, such agreement being contingent upon the mortgagee actually
succeeding to the Landlord's interest in the Premises and hereunder by virtue
of a foreclosure or conveyance in lieu thereof).
SECTION 12.22 TENANT'S RIGHT TO ASSIGN. Tenant may assign its
rights hereunder or sublease all or a portion of the Premises with Landlord's
prior written approval, which approval will not be unreasonably withheld.
provided that Tenant shall remain liable for all liabilities and obligations
arising under this Lease. An assignment by Tenant to an affiliate under common
control as that of the herein Tenant shall be deemed by Landlord to be
approved. Tenant acknowledges that Landlord's approval may require the consent
and/or joinder of Landlord's Financing Lender.
SECTION 12.23 PAST DUE AMOUNTS. All amounts required to be paid by
Tenant or Landlord under the terms and provisions of this Lease shall bear
interest at the Default Rate from the date due until paid.
SECTION 12.24 INDEPENDENT COUNSEL. Landlord and Tenant declare
that each has had independent legal advice by counsel of their own selection;
that each fully understands the facts and has been fully informed of all legal
rights or liabilities; that after such advice or knowledge, each believes the
Lease to be fair, just, reasonable and that each signs the Lease freely and
voluntarily.
SECTION 12.25 COOPERATION WITH LANDLORD'S LENDER. Tenant agrees to
cooperate with any Lender utilized by Landlord relative to financing associated
with this Lease and Improvements located upon the Premises, should such Lender
request reasonable modifications to this Lease provided such modifications do
not adversely diminish or otherwise modify the obligations of Landlord under
this Lease or affect the rights of the Tenant granted under this Lease or
create additional liability or obligations for Tenant beyond Tenant's current
liability and obligations under this Lease.
ARTICLE 13
OPTION TO PURCHASE PREMISES
SECTION 13.1 RIGHT OF FIRST REFUSAL.
(a) If Landlord shall receive a bona fide offer to purchase the
Premises during the Term, then any contract which may be entered into between
Landlord and a third party purchaser shall provide that the sale shall be
subject to Tenant's right of refusal set forth in this Section 13.1. If
Landlord shall receive such offer or execute such contract, Landlord shall send
to Tenant a true and complete copy of the executed contract and the complete
terms of the offer with Landlord's certification that it will accept the offer,
and Tenant shall have the option, to be exercised within thirty (30) days after
receipt thereof, to make a contract with Landlord on the same terms and
27
<PAGE> 33
conditions set forth in such third party contract or offer. If Tenant, after
receipt of the third party contract or the terms of the offer acceptable to
Landlord, shall fail to exercise its option within the thirty (30) day period,
Landlord shall have the right to conclude the proposed sale on the same terms
as in the offer or contract originally forwarded to Tenant, provided the sale
shall close within the timeframe set forth in the third party contract plus
thirty (30) days. If the sale shall not close within said time frame plus
thirty (30) days, Landlord shall repeat the procedure specified in this Section
13.1 before it can conclude any sale of the Premises.
(b) Notwithstanding Tenant's failure to exercise its option, any
sale of the Premises shall be subject to this Lease and Tenant's option to
purchase the Premises and Tenant's right of first refusal shall remain in force
and be binding on any party to the same extent as if said subsequent owner were
Landlord herein, and said subsequent owner shall be required to do all of the
things required of Landlord in this Lease prior to any such sale of the
Premises.
(c) If any third party contract or offer for the Premises shall
include property other than the Premises, Tenant's right of first refusal
shall, at its election, be either applicable to the entire property covered by
such contract or offer, or applicable to the Premises only at a purchase price
which shall be that part of the price offered by the third party, which the
value of the Premises shall bear to the value of all the property included in
such third party contract or offer.
(d) Tenant's right to purchase shall not be extinguished, canceled
or waived by Tenant failing to exercise its option as to any offer, contract or
conveyance which is between Landlord and a related party, a nominee and his
principal, or a sole shareholder and his corporation, or a corporation and its
subsidiary or affiliate.
SECTION 13.2 OPTION.
(a) For and in consideration of the execution of this Lease by Tenant
and the sum of Ten Dollars ($10.00), Tenant shall have the option to purchase
the Premises at any time during the Term (including any extensions thereof),
without premium or penalty, for the Purchase Price determined pursuant to this
Section 13.2 (the "PURCHASE PRICE"), provided Landlord is given sixty (60) days
written notice of Tenant's election to purchase and provided further that
Tenant is not then in default under the terms of this Lease.
(1) The purchase price of the Premises shall be
determined by an appraisal conducted using an M.A.I. appraiser (or an appraiser
having the same class of certification of an M.A.I. appraiser by the successor
certification organization in the case that the designation of M.A.I. appraiser
is changed or succeeded). The appraisal shall not take into consideration the
Base Rent, terms or conditions of this Lease. The appraised value shall be
reduced by the cost of any leasehold improvements made to the Premises by
Tenant.
(2) The Tenant, at its sole expense, shall obtain, and
submit to Landlord, an appraisal of the fair market value of the Premises (the
"FIRST APPRAISAL") from an M.A.I. appraiser (the "FIRST APPRAISER"), and if
Landlord shall accept such appraisal, then such First Appraisal shall be the
Purchase Price.
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(3) If Landlord does not accept such First Appraisal,
Landlord, at Landlord's sole expense shall obtain, and submit to Tenant, a
second appraisal of the fair market value of the Premises (the "SECOND
APPRAISAL") from an M.A.I. appraiser (the "SECOND APPRAISER"). If the
numerical difference between the value of the First Appraisal and the value of
the Second Appraisal is less than ten percent (10%) of the appraisal with the
lower value, then the two appraisal values shall be averaged and that averaged
value shall be the Purchase Price.
(4) If the numerical difference between the value of the
First Appraisal and the value of the Second Appraisal is equal to or greater
than ten percent (10%) of the appraisal with the lower value, then the First
Appraiser and the Second Appraiser shall choose a third M.A.I. appraiser (the
"THIRD APPRAISER") who shall appraise the fair market value of the Premises
(the "THIRD APPRAISAL"), and the three appraisal values shall be averaged and
that averaged value shall be the Purchase Price. If the Third Appraisal is
requested, the Landlord and Tenant shall each pay one-half (1/2) of the cost of
such Third Appraisal.
(b) In the event that the option herein granted shall be exercised
as aforesaid, Landlord agrees to sell and Tenant agrees to purchase the
Premises for the Purchase Price aforesaid and upon the following terms and
conditions:
(1) The Premises is to be conveyed at the time full
payment of the Purchase Price is made by Tenant to Landlord (hereinafter called
"CLOSING DATE"), but in no event later than three (3) months from the date of
receipt of Tenant's notice of election, by general warranty deed conveying to
Tenant or Tenant's nominee, title to the same, subject only to (i) the matters
set forth in EXHIBIT B and other matters previously approved in writing by
Tenant, (ii) any matters created by Tenant, and (iii) taxes and other
Impositions assessed against the Premises or any part thereof but not yet due
and payable, which charges, assessments, taxes and other Impositions shall be
paid by Tenant; but free and clear of any mortgages, liens or encumbrances upon
Landlord's interest.
(2) For such deed and conveyance Tenant is to pay the
Purchase Price in cash or by certified or bank check upon the delivery of such
deed.
(3) Full possession of the Premises is to be delivered to
Tenant at the time of delivery of the deed.
(4) The cost and expense of preparing the deed and any
other documents relating to said conveyance and recording the same including
title insurance premiums, Landlord's reasonable attorney's fees and real estate
transfer taxes (including documentary stamps and sur-tax, if applicable), if
any, shall be paid by Tenant.
(5) The Rent provided for in this Lease shall be
apportioned as of the Closing Date.
(6) The recording of a deed after the expiration of the
Term of this Lease, conveying the Premises to a third party and reciting that
the option in this Article has expired and
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<PAGE> 35
has not been exercised shall be, as to all persons other than Tenant,
conclusive evidence of such expiration and nonexercise.
(c) Notwithstanding anything to the contrary contained herein
Landlord may convey the Premises subject to the option herein granted;
provided, however, that the Landlord has complied with the provisions of this
Section 13.1 and the party to whom the Landlord conveys the Premises assumes in
writing all of Landlord's obligations under this Lease. No such conveyance
shall relieve the Landlord for liability for breach of representations as set
forth in Article 10 of this Lease.
(d) It is further understood and agreed that in the event Tenant
gives written notice to Landlord sixty (60) days before the Expiration Date or
the end of any Renewal Term, of Tenant's intention to purchase the Premises,
the Term of this Lease then shall be extended until the payment to Landlord of
the Purchase Price but in no event later than three (3) months therefrom. The
Purchase Price shall be paid no later than the expiration of such three (3)
month extension. In the event Tenant does not consummate the purchase pursuant
to the terms and conditions of this Section 13.2, then the Tenant's options as
set forth in this Section13.2 shall terminate.
(e) Landlord will, at the request of Tenant, promptly execute an
instrument in recordable form, reflecting Tenant's option to purchase the
Premises, and may be part of the recorded instrument referred to in Section
12.15, pursuant to this Article 13, which shall be filed for record in the
appropriate real property records.
(f) In the event that such option shall not be exercised as
aforesaid, Tenant shall, within ten (10) days upon demand of Landlord, deliver
to Landlord an instrument in form suitable for recording and executed and
acknowledged by Tenant whereby the option and all rights hereunder shall be
released and discharged.
SECTION 13.3 SPECIFIC PERFORMANCE. It is expressly agreed that
the remedy at law for breach of any of the obligations set forth in this
Article 13 is inadequate in view of the complexities and uncertainties in
measuring the actual damages that would be sustained by reason of the failure
of Landlord or Tenant to comply fully with each of such obligations.
Accordingly, each of the aforesaid obligations shall be, and is hereby
expressly made, enforceable by specific performance.
ARTICLE 14
ARBITRATION
SECTION 14.1 ARBITRATION PROVISIONS. EXCEPT AS TO TENANT'S
EXERCISE OF REASONABLE JUDGMENT PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY
CONTROVERSY OR CLAIM BETWEEN THE PARTES HERETO RELATING TO THIS LEASE,
INCLUDING, WITHOUT LIMITATION, ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED
TORT, SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN THE
COUNTY AND STATE WHERE THE PREMISES ARE LOCATED. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT
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HAVING JURISDICTION. EXCEPT AS TO TENANT'S EXERCISE OF REASONABLE JUDGMENT
PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY PARTY TO THIS LEASE MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF
ANY CONTROVERSY OR CLAIM TO WHICH THIS LEASE APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN NINETY (90) DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL ONLY, UPON SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF
SUCH HEARING FOR UP TO AN ADDITIONAL SIXTY (60) DAYS. ALL STATUTES OF
LIMITATIONS THAT WOULD OTHERWISE BE APPLICABLE SHALL) APPLY TO ANY DISPUTES
ASSERTED IN ANY ARBITRATION PROCEEDING HEREOF. THE ARBITRATORS SHALL HAVE THE
RIGHT, TO AWARD COUNSEL FEES TO ANY PARTY, TO GRANT TEMPORARY OR PERMANENT
INJUNCTIVE RELIEF, AND TO REQUIRE SPECIFIC PERFORMANCE. THE PARTIES
SPECIFICALLY AGREE THAT THE ARBITRATORS MAY NOT AWARD AND THE PARTIES WAIVE ANY
RIGHT TO ANY EXEMPLARY OR PUNITIVE DAMAGES. THE DECISION OR AWARD IN THE
ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING UPON EACH OF THE PARTIES AND
JUDGMENT ON SUCH AWARD OR DECISION MAY BE ENTERED IN ANY COURT OF COMPETENT
JURISDICTION. THE PARTIES BY EXECUTION OF THE LEASE AND INITIALING THIS
PROVISION REPRESENT THAT THEY WERE GIVEN FULL AND COMPLETE OPPORTUNITY TO
REVIEW SAME WITH COUNSEL OF THEIR CHOOSING AND THEY HAVE READ AND SIGNED SAME
AS THEIR FREE AND VOLUNTARY ACT AND DEED.
ARTICLE 15
SUBORDINATION AND ATTORNMENT
SECTION 15.1 SUBORDINATION. This Lease and all rights of Tenant
hereunder are and shall be subject and subordinate in all respects to all
mortgages encumbering Landlord's interest in the Premises as permitted in the
Lease (the "SUPERIOR MORTGAGE"). The provisions of this Section 15.1 shall be
self-operative and no further instrument of subordination shall be required.
If any Requesting Party shall seek confirmation of such subordination, Tenant
shall promptly execute and deliver, at its own cost and expense, an instrument,
in recordable form, to evidence such subordination; if Tenant fails to execute,
acknowledge or deliver any such instrument within ten (10) days after request
therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge
and deliver any such instruments for and on behalf of Tenant. However, nothing
herein withstanding to the contrary, the foregoing provisions shall not be
effective until the Landlord shall have delivered to Tenant a Non-Disturbance
Agreement, in the form required under Section 10.1, executed by each Landlord's
Financing Lender and each mortgagee and holder of a Superior Mortgage.
SECTION 15.2 ATTORNMENT. If, at any time prior to the termination
of this Lease, the holder of a Superior Mortgage, or its successors or assigns,
(herein collectively called the "SUPERIOR MORTGAGEE") who acquire the interest
of Landlord under this Lease through foreclosure action or
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<PAGE> 37
a transfer-in-lieu thereof, whereby the Superior Mortgagee succeeds to the
rights of Landlord under this Lease through possession or foreclosure or
delivery of a new lease or deed or otherwise, Tenant agrees, at the election
and upon request of any such party (hereinafter called the "SUCCESSOR
LANDLORD") to attorn fully and completely from time to time, and to recognize
any such Successor Landlord as Tenant's landlord under this Lease upon the
executory terms of this Lease. Provided Tenant is not in default under the
terms of this Lease, such Successor Landlord shall agree in writing to accept
Tenant's attornment. The foregoing provisions of this Section 15.2 shall inure
to the benefit of any such Successor Landlord and any successor or assign of
Tenant. Tenant, upon demand of any such Successor Landlord, agrees to execute
any instruments to evidence and confirm the foregoing provisions of this
Section 15.2, reasonably satisfactory to any such Successor Landlord,
acknowledging such attornment and setting forth the terms and conditions of its
tenancy.
SECTION 15.3 RADON GAS DISCLOSURE. Radon Gas: Radon is a
naturally occurring radioactive gas that, when it has accumulated in a building
in sufficient quantities, may present health risks to persons who are exposed
to it over time. Levels of radon that exceed federal and state guidelines have
been found in the buildings in Florida. Additional information regarding radon
and radon testing may be obtained from your county public health unit.
EXECUTED as of the date and year first above written.
"LANDLORD"
WORLD PARTNER ENTERPRISES, LTD., A FLORIDA LIMITED
PARTNERSHIP,
BY: /s/ JAMES S. CARROLL
------------------------------------------------
NAME: JAMES S. CARROLL, PRESIDENT OF
J.C. CORP. OF SOUTH FLORIDA, AS
GENERAL PARTNER OF CARROLL FAMILY
ENTERPRISES, LTD., A FLORIDA LIMITED
PARTNERSHIP, THE GENERAL PARTNER
"TENANT"
KOONS FORD, INC.,
A FLORIDA CORPORATION
BY: /s/ JAMES S. CARROLL
------------------------------------------------
NAME: JAMES S. CARROLL
TITLE: PRESIDENT
32
<PAGE> 38
LEASE AGREEMENT
EXHIBIT A
DESCRIPTION OF LAND
HOLLYWOOD AND DOUGLAS PLAT, according to the Plat thereof as recorded in Plat
Book 159, Page 3 of the Public Records of Broward County, Florida.
33
<PAGE> 39
LEASE AGREEMENT
EXHIBIT B
EXCEPTIONS TO TITLE TO LAND
<PAGE> 40
LEASE AGREEMENT
EXHIBIT C
METHOD FOR DETERMINATION OF INITIAL BASE RENT IN SECTION 3.1
The initial Monthly Base Rent due pursuant to Section 3.1 shall be equal to One
Hundred Twentieth (120th) of the final cost (the "COST") of the acquisition of
the Land, Improvements, carrying costs (which have been approved by Tenant)
including but limited to mortgage interest, impact fees, professional fees and
site plan expenses. A final determination as to the above amount shall be made
by the Landlord prior to the Commencement Date.
As of the date of the execution of this Lease, the Landlord approximates that
the Cost is approximately $20,000,000.00, which consists of the following:
1. Carry cost down payment $2,700,000.00
2. Cost of Land and mitigation $7,100,000.00
3. Cost of Improvements $12,000,000.00
The above amounts are estimates only and are subject to adjustment, and
Landlord shall provide Tenant prior to the Commencement Date, written evidence
of each of the Components of the Cost from each of the parties to whom such
sums were paid together with such other data verifying the Cost as may be
reasonably required by Tenant. The Cost shall be certified in writing by the
Landlord and Landlord's architect or certified public accountant, as being true
and correct in a written instrument, in form and substance reasonably
satisfactory to Tenant, delivered to Tenant on or before the Commencement Date.
The Cost is subject to adjustment based upon required changes in the costs of
the Improvements not originally contemplated. Any upward adjustment shall be
subject to the Tenant's verification that the increased costs are reasonably
necessary for the completion of the Improvements.
ADVANCES PURSUANT TO SECTION 5.1
<PAGE> 41
LEASE AGREEMENT
EXHIBIT D
DESCRIPTION OF LANDLORD'S WORK
<PAGE> 42
LEASE AGREEMENT
EXHIBIT E
DESCRIPTION OF TENANT'S WORK
<PAGE> 1
EXHIBIT 10.43
================================================================================
OPERATIONS / LEASE AGREEMENT
between
KC PARTNERSHIP, A FLORIDA GENERAL PARTNERSHIP
(Landlord)
and
PERIMETER FORD, INC., A DELAWARE CORPORATION
(Tenant)
Perimeter
================================================================================
LEASE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 LEASE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Parties Relationship and Property Interests . . . . 1
Section 1.2 Premises Leased . . . . . . . . . . . . . . . . . . 1
Section 1.3 Premises Defined . . . . . . . . . . . . . . . . . 1
Section 1.4 Habendum . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Initial Term and Commencement . . . . . . . . . . . 1
Section 2.2 Lease Year . . . . . . . . . . . . . . . . . . . . 2
Section 2.3 Lease Month . . . . . . . . . . . . . . . . . . . . 2
Section 2.4 Renewal Term . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1 Base Rent . . . . . . . . . . . . . . . . . . . . . 2
Section 3.2 Additional Rent and Rent . . . . . . . . . . . . . 3
Section 3.3 Payment of Rent . . . . . . . . . . . . . . . . . . 3
Section 3.4 Late Charge . . . . . . . . . . . . . . . . . . . . 3
Section 3.5 Adjustment to Rent for Ford Improvements . . . . . 3
ARTICLE 4 TAXES; UTILITIES . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1 Impositions Defined . . . . . . . . . . . . . . . . 3
Section 4.2 Tenant's Obligations . . . . . . . . . . . . . . . 3
Section 4.3 Tax Contest . . . . . . . . . . . . . . . . . . . . 4
Section 4.4 Evidence Concerning Impositions . . . . . . . . . . 4
Section 4.5 Utilities . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 5 IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.1 Alterations . . . . . . . . . . . . . . . . . . . . 4
Section 5.2 Mechanic's and Materialmen's Liens . . . . . . . . 4
Section 5.3 Ownership of Improvements . . . . . . . . . . . . . 5
Section 5.4 Asbestos . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 6 USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS . . . . . . . . 5
Section 6.1 Use . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6.2 Environmental . . . . . . . . . . . . . . . . . . . 6
Section 6.3 Maintenance and Repairs . . . . . . . . . . . . . . 9
Section 6.4 Americans with Disabilities Act . . . . . . . . . . 10
ARTICLE 7 INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . 10
Section 7.1 Building Insurance . . . . . . . . . . . . . . . . 10
Section 7.2 Liability Insurance . . . . . . . . . . . . . . . . 11
Section 7.3 Policies . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<TABLE>
<S> <C> <C>
Section 7.4 Tenant's Indemnity . . . . . . . . . . . . . . . . 11
Section 7.5 Landlord's Indemnity . . . . . . . . . . . . . . . 11
Section 7.6 Subrogation . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8 CASUALTY; CONDEMNATION; SURVIVAL OF LEASE . . . . . . . . . 12
Section 8.1 Tenant's Obligation to Restore . . . . . . . . . . 12
Section 8.2 Restoration and Deposit of Funds . . . . . . . . . 13
Section 8.3 Notice of Damage . . . . . . . . . . . . . . . . . 15
Section 8.4 Total Taking . . . . . . . . . . . . . . . . . . . 15
Section 8.5 Partial Taking . . . . . . . . . . . . . . . . . . 15
Section 8.6 Temporary Taking . . . . . . . . . . . . . . . . . 15
Section 8.7 Notice of Taking, Cooperation . . . . . . . . . . . 15
Section 8.8 Survival of Operations / Lease Agreement Upon
Termination of Ford Leases . . . . . . . . . . . . 16
ARTICLE 9 TENANT'S FINANCING . . . . . . . . . . . . . . . . . . . . . 16
Section 9.1 Tenant's Right to Encumber . . . . . . . . . . . . 16
Section 9.2 Tenant's Mortgage . . . . . . . . . . . . . . . . . 16
ARTICLE 10 WARRANTY OF TITLE AND PEACEFUL POSSESSION . . . . . . . . . 17
Section 10.1 Warranty As to Encumbrances . . . . . . . . . . . . 17
Section 10.2 Landlord's Mortgage . . . . . . . . . . . . . . . . 18
Section 10.3 Representations of Landlord . . . . . . . . . . . . 18
ARTICLE 11 DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . 20
Section 11.1 Default . . . . . . . . . . . . . . . . . . . . . . 20
Section 11.2 Remedies . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 22
Section 12.1 Notices. . . . . . . . . . . . . . . . . . . . . . 22
Section 12.2 Performance of Other Party's Obligations . . . . . 22
Section 12.3 Modification and Non-Waiver . . . . . . . . . . . . 23
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . 23
Section 12.5 Number and Gender; Captions; References . . . . . . 23
Section 12.6 CPI . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.7 Estoppel Certificate . . . . . . . . . . . . . . . 23
Section 12.8 Severability . . . . . . . . . . . . . . . . . . . 24
Section 12.9 Attorney Fees . . . . . . . . . . . . . . . . . . . 24
Section 12.10 Surrender of Premises; Holding Over . . . . . . . 24
Section 12.11 Relation of Parties . . . . . . . . . . . . . . . 24
Section 12.12 Force Majeure . . . . . . . . . . . . . . . . . . 24
Section 12.13 Non-Merger . . . . . . . . . . . . . . . . . . . . 24
Section 12.14 Entireties . . . . . . . . . . . . . . . . . . . . 24
Section 12.15 Recordation . . . . . . . . . . . . . . . . . . . 25
Section 12.16 Successors and Assigns . . . . . . . . . . . . . . 25
Section 12.17 Landlord's Joinder . . . . . . . . . . . . . . . . 25
Section 12.18 No Third Parties Benefitted . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C> <C>
Section 12.19 Survival . . . . . . . . . . . . . . . . . . . . . 25
Section 12.20 Perpetuities . . . . . . . . . . . . . . . . . . . 25
Section 12.21 Transfer of Landlord's Interest . . . . . . . . . 25
Section 12.22 Tenant's Right To Assign . . . . . . . . . . . . . 25
Section 12.23 Past Due Amounts . . . . . . . . . . . . . . . . . 26
Section 12.24 Independent Counsel . . . . . . . . . . . . . . . 26
Section 12.25 Cooperation with Landlord's Lender. . . . . . . . 26
ARTICLE 13 OPTION TO PURCHASE PREMISES . . . . . . . . . . . . . . . . 26
Section 13.1 Right of First Refusal . . . . . . . . . . . . . . 26
Section 13.2 Option . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.3 Specific Performance . . . . . . . . . . . . . . . 29
ARTICLE 14 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 14.1 Arbitration Provisions . . . . . . . . . . . . . . 29
ARTICLE 15 SUBORDINATION AND ATTORNMENT . . . . . . . . . . . . . . . . 30
Section 15.1 Subordination . . . . . . . . . . . . . . . . . . . 30
Section 15.2 Attornment . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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EXHIBITS
EXHIBIT A Description of Land
EXHIBIT B Exceptions to Title to Land
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OPERATIONS / LEASE AGREEMENT
This Operations / Lease Agreement ("LEASE") is entered into as of the
16th day of March, 1998, between KC PARTNERSHIP, A FLORIDA GENERAL PARTNERSHIP
as ("LANDLORD"), and PERIMETER FORD, INC., a Delaware corporation ("TENANT").
ARTICLE 1
LEASE OF PROPERTY
SECTION 1.1 PARTIES RELATIONSHIP AND PROPERTY INTERESTS.
Landlord is the owner of the real property subject to this Lease and as
hereinafter defined in Section 1.2. By instrument entitled "LEASE AGREEMENT"
Owner leased the Premises to Ford Leasing Development Company (the "MAIN
LEASE"). A "SHORT FORM LEASE" regarding the Main Lease was recorded at Deed
Book 10561, Page 435, Public Records of Fulton County, Georgia (the "MAIN LEASE
NOTICE"). Ford Leasing Development Company ("FORD LEASING") has entered into a
Sublease Agreement (the "FORD SUBLEASE") wherein Ford Leasing has subleased the
Premises to Tenant. The Main Lease and Ford Sublease do not set forth numerous
provisions which more particularly define the rights and obligations of the
herein Landlord and Tenant. Landlord and Tenant, by execution of this Lease
hereby memorialize such rights and obligations. Except as otherwise indicated
herein and/or enumerated in a revised agreement being executed and pertaining
to the Main Lease and Ford Sublease among the parties hereto, Comerica Bank,
Perimeter Ford and Ford Leasing, the terms and conditions hereof shall prevail
over the Sublease. For purposes of this Lease, the terms "LANDLORD" and
"TENANT" shall define the parties hereto as, and the term sublease and/or lease
shall symbolize the agreement and the relationship of the parties, and except
for the intervening provisions of any agreements entered into with Ford
Leasing, the parties hereto are acting as landlord and tenant.
SECTION 1.2 PREMISES LEASED. Landlord leases to Tenant, and
Tenant leases from Landlord the real property and premises described on EXHIBIT
A (the "LAND"), including but not limited to all of the rights, interests,
estates, and appurtenances thereto, all improvements thereon, and all other
rights, titles, interests, and estates, if any, in adjacent streets and roads.
SECTION 1.3 PREMISES DEFINED. All of the Land, properties,
rights, estates, appurtenances, and interests leased to Tenant pursuant to
Section 1.2, together with all improvements now or hereafter constructed
thereon, are hereinafter collectively referred to as the "PREMISES".
SECTION 1.4 HABENDUM. To have and to hold the Premises, together
with all and singular the rights, privileges, and appurtenances thereunto
attaching or in anywise belonging, exclusively unto Tenant, its successors and
assigns, upon the terms and conditions set forth herein and subject to the
matters set forth on EXHIBIT B.
ARTICLE 2
TERM OF LEASE
SECTION 2.1 INITIAL TERM AND COMMENCEMENT. The initial term
("INITIAL TERM") of this Lease shall commence on the date hereof ("COMMENCEMENT
DATE") and unless sooner terminated pursuant to the terms of this Lease, the
initial term of this Lease shall expire on the "EXPIRATION DATE" (herein so
called), which shall be (i) the last day of the one hundred twentieth (120th)
Lease Month from and after the first day of the calendar month following the
Commencement Date.
<PAGE> 7
SECTION 2.2 LEASE YEAR. A "LEASE YEAR" shall mean a twelve (12)
Lease Month period commencing with the first day of the calendar month
following the Commencement Date or any anniversary date thereof.
SECTION 2.3 LEASE MONTH. A "LEASE MONTH" shall mean a period of
time during the term of this Lease commencing the first day of the calendar
month and ending on the last day of the calendar month. The first Lease Month
shall begin on the first day of the calendar month following the Commencement
Date.
SECTION 2.4 RENEWAL TERM.
(a) If on the Expiration Date and the date Tenant notifies
Landlord of its intention to renew the term of this Lease (as provided below),
(i) Tenant has not been given notice of default under this Lease, based upon a
Default as hereinafter defined, and (ii) this Lease is in full force and
effect, then Tenant, shall have and may exercise an option to renew this Lease
for four (4) additional terms (each, a "RENEWAL TERM") of five (5) years each,
upon the same Rent (hereinafter defined), as adjusted pursuant to the terms of
Section 3.1, and other terms and conditions contained in this Lease. Whenever
used in this Lease, "TERM", unless modified or specifically noted otherwise in
the applicable context, shall mean the Initial Term together with each Renewal
Term to the extent Tenant has exercised any option with respect to any Renewal
Term.
(b) If Tenant desires to renew this Lease, Tenant must notify
Landlord in writing of its intention to renew on or before the date which is at
least six (6) months but no more than twelve (12) months prior to the
Expiration Date or the expiration date of any Renewal Term, as the case may be.
ARTICLE 3
RENT
SECTION 3.1 BASE RENT. Subject to the terms and provisions
contained in this Section 3.1, Tenant shall pay Landlord monthly "BASE RENT"
(herein so called) of Fifty Seven Thousand Two Hundred Fifty and no/100 Dollars
($57,250.00), in advance on or before the first day of each Lease Month during
the Term, subject to adjustment as hereafter provided. If the Term commences
on a day other than the first day of a calendar month, or ends on a day other
than the last day of a calendar month, then the Base Rent for such month shall
be prorated on the basis of one thirtieth (1/30th) of the monthly Base Rent for
each day of such month. If the CPI on any Adjustment Date shall be greater
than the CPI for the Commencement Date, monthly Base Rent commencing on the
Adjustment Date shall be adjusted to be the original monthly Base Rent
specified in this Section 3.1 plus an amount equal to one-half (1/2) of the
product obtained by multiplying: (i) the original monthly Base Rent specified
in this Section 3.1 by (ii) the percentage increase in the CPI from the
Commencement Date through the January 1st prior to the Adjustment Date.
"ADJUSTMENT DATE" shall be the first day of the first Lease Month of each
Renewal Term. The term "CPI" shall have the meaning specified therefor in
Section 12.6.
Tenant shall also pay at the same times and places as the
rental installments such Georgia State Sales Tax, other such applicable taxes
due on rentals and all other sums due hereunder either city, state, county or
federal as may be in effect from time to time.
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SECTION 3.2 ADDITIONAL RENT AND RENT. All amounts required to be
paid by Tenant under the terms of this Lease, other than Base Rent, are herein
from time to time collectively referred to as "ADDITIONAL RENT." Base Rent and
Additional Rent are herein collectively referred to as "RENT."
SECTION 3.3 PAYMENT OF RENT. Base Rent shall be payable to
Landlord at the original or changed address of Landlord as set forth in Section
12.1 or to such other persons or at such other addresses in the United States
of America as Landlord may designate from time to time in writing to Tenant;
however, if Tenant receives notice of a default under the Landlord's Financing
(defined below), then Tenant shall have the right, but not the obligation, to
pay to Landlord's Financing Lender (defined below) any sums due and owing on
such Landlord's Financing and all such payments by Tenant shall reduce the
amount of Rent owing to Landlord. Additional Rent shall be paid as herein set
forth.
SECTION 3.4 LATE CHARGE. Any rent or other sum which is not
paid within fifteen (15) days after the date due shall bear interest at the
Default Rate from the date when the same is payable under the terms of this
Lease until the same shall be paid.
SECTION 3.5 ADJUSTMENT TO RENT FOR FORD IMPROVEMENTS. Landlord
and Tenant recognize that Ford Leasing or its related entities ("FORD") may
from time to time require that structural improvements to the Premises be made
as a condition to the continuation of a Ford Dealership upon the Premises. In
the event that Ford requires that such structural improvements be made to the
Premises, Landlord shall, at its expense, construct such improvements. The
Base Rent due pursuant to Section 3.1 hereinabove shall be increased by an
amount equal to the costs of the improvements required by Ford, amortized over
a fifteen (15) year period. The new Base Rent shall commence effective the
next monthly period following the completion of the required improvements.
ARTICLE 4
TAXES; UTILITIES
SECTION 4.1 IMPOSITIONS DEFINED. "IMPOSITIONS" means all real
estate and ad valorem taxes, and associated levies, including penalties levied
for failure of Tenant to pay any of same in a timely manner, which shall or may
during the Term be assessed, levied or imposed by any Governmental Authority
(defined below) upon (a) the Premises or any part thereof, (b) the buildings or
improvements now or hereafter comprising a part thereof, the appurtenances
thereto or the sidewalks, streets, or vaults adjacent thereto. Impositions
shall not include any income tax, capital levy, estate, succession, inheritance
or transfer taxes, or similar tax of Landlord; any franchise tax imposed upon
any owner of the fee of the Premises; or any income, profits, or revenue tax,
assessment, or charge imposed upon the rent or other benefit received by
Landlord under this Lease by any municipality, county, state, the United States
of America, or any other governmental body, subdivision, agency, or authority
(all of such foregoing governmental bodies are collectively referred to herein
as "GOVERNMENTAL AUTHORITIES").
SECTION 4.2 TENANT'S OBLIGATIONS. During the Term, Tenant will
pay all Impositions before they become delinquent. Impositions that are
payable by Tenant for the tax year in which this Lease commences as well as
during the year in which the Term ends shall be apportioned so that Tenant
shall pay its share of the Impositions payable by Tenant for the portion of
such Taxes allocable to the portion of such year occurring during the Term.
Where any Imposition that Tenant is obligated to pay may be paid pursuant to
law in installments, Tenant may pay such Imposition in installments as and when
such
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installments become due. Tenant shall, if so requested, deliver to Landlord
evidence of payment of all Impositions Tenant is obligated to pay hereunder,
concurrently with the making of such payment.
SECTION 4.3 TAX CONTEST. Tenant may, at its expense, contest the
validity or amount of any Imposition for which it is responsible, in which
event the payment thereof may be deferred, as permitted by law, during the
pendency of such contest, if diligently prosecuted. Landlord shall cooperate
with Tenant in connection with any such contest but Landlord shall not be
required to spend any sums or incur any liability in cooperating with Tenant.
All taxes must be paid prior to the date they become delinquent. In the event
that the property subject to this Agreement is encumbered by financing, the
Tenant shall pay all taxes within the timeframe established by such lender.
SECTION 4.4 EVIDENCE CONCERNING IMPOSITIONS. The certificate,
advice, bill, or statement issued or given by the appropriate officials
authorized by law to issue the same or to receive payment of any Imposition of
the existence, nonpayment, or amount of such Imposition shall be prima facie
evidence for all purposes of the existence, nonpayment, or amount of such
Imposition.
SECTION 4.5 UTILITIES. Tenant shall pay all charges for gas,
electricity, light, heat, air conditioning, power, telephone, and other
communication services, and all other utilities and similar services rendered
or supplied to the Premises, and all water, refuse, sewer service charges, or
other similar charges levied or charged against, or in connection with, the
Premises.
ARTICLE 5
IMPROVEMENTS
SECTION 5.1 ALTERATIONS. At any time and from time to time
during the Term, Tenant may perform such alteration, renovation, repair,
refurbishment, and other work (herein such matters being collectively called
the "ALTERATIONS") with regard to any Improvements as Tenant may elect. All
buildings, structures, and other improvements located at any time on the Land
are herein called the "IMPROVEMENTS." Any and all alterations, renovation,
repair, refurbishment, or other work with regard thereto shall be performed, in
accordance with the following "CONSTRUCTION STANDARDS" (herein so referenced):
(i) All such construction or work shall be performed in a good and workmanlike
manner in accordance with good industry practice for the type of work in
question; (ii) All such construction or work shall be done in compliance with
all applicable building codes, ordinances, and other laws or regulations of
Governmental Authorities having jurisdiction; (iii) Tenant shall have obtained
and shall maintain in force and effect the insurance coverage required in
Article 7 with respect to the type of construction or work in question; (iv)
After commencement, such construction or work shall be prosecuted with due
diligence to its completion; and (v) With the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed and shall
be deemed given if a request is not approved or denied within thirty (30) days
after notice, no Alteration shall be made which (x) involves any material
repairs or modifications to the structural portions of the Premises, or (y)
would impair the market value, structural integrity or usefulness of the
Premises for the purposes for which the same are presently being used.
SECTION 5.2 MECHANIC'S AND MATERIALMEN'S LIENS. Tenant shall
have no right, authority, or power to bind Landlord or any interest of Landlord
in the Premises for any claim for labor or for material or for any other charge
or expense incurred in construction of any Improvements or performing any
alteration, renovation, repair, refurbishment, or other work with regard
thereto, nor to render Landlord's
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interest in the Premises liable for any lien or right of lien for any labor,
materials, or other charge or expense incurred in connection therewith, and
Tenant shall in no way be considered as the agent of Landlord in the
construction, erection, or operation of any such Improvements. If any liens or
claims for labor or materials supplied or claimed to have been supplied to the
Premises shall be filed against the interest of the Landlord, Tenant shall
promptly pay or bond such liens to Landlord's reasonable satisfaction or
otherwise obtain the release or discharge thereof.
SECTION 5.3 OWNERSHIP OF IMPROVEMENTS. During the Term all
currently existing Improvements shall be solely the property of Landlord. All
other Improvements created by Alterations which may be added by Tenant (which
do not constitute replacements of existing Improvements) shall be the property
of Tenant, but at the end of the Term, all then-existing Improvements shall be
the property of Landlord. However, upon expiration or earlier termination of
this Lease, Tenant shall have the right to remove all trade fixtures, movable
equipment, furniture, furnishings and other personal property located in the
Premises and other items not permanently attached to the Premises provided that
Tenant repairs any damages caused by the removal of such items. Nothing
hereinabove withstanding to the contrary, any lifts or hydraulics installed
upon the Premises by Tenant, whether as an original installation or
replacement, shall remain on the Premises and shall become the property of the
Landlord upon the expiration or termination of this Lease.
SECTION 5.4 ASBESTOS. Landlord shall remain fully liable and
responsible for any asbestos and other Hazardous Substances as hereinafter
defined present on any portion of the Premises prior to the date of this Lease
even if such asbestos is in an unfriable or undisturbed state on the date of
this Lease and Tenant thereafter disturbs such materials in any manner
including, without limitation, in connection with any Alterations performed by
Tenant on the Premises. If Tenant intentionally disturbs or causes to be
disturbed by any contractor or other party any asbestos presently located on
the Premises of which Tenant has actual knowledge, then any such disturbance of
such asbestos shall only be done in accordance with all laws, regulations,
ordinances, or requirements of any Governmental Authority having jurisdiction
in the Premises including, without limitation, those which govern the
disposition of Hazardous Substances. Any expenses associated with correction
of such disturbance caused by the Tenant or its contractors shall be borne by
the Tenant.
ARTICLE 6
USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS
SECTION 6.1 USE.
Subject to the terms and provisions hereof, Tenant may use and enjoy
the Premises for the sale, lease, trade, repair or service of motor or other
vehicles and other uses normally associated therewith including, without
limitation, the sale of parts and services. Without limiting the generality of
the foregoing, the provisions relating to use of the Premises shall be broadly
construed to encompass all uses normally associated with premises occupied by
automobile, boat and recreational vehicle dealerships. Tenant shall not use or
occupy, permit the Premises to be used or occupied, nor do or permit anything
to be done in or on the Premises in a manner which would constitute a public or
private nuisance, or which would violate any laws, regulations, ordinances, or
requirements of any Governmental Authority having jurisdiction in the Premises
including, without limitation, those which relate to Hazardous Substances.
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SECTION 6.2 ENVIRONMENTAL.
(a) For purposes of this Lease, the term "HAZARDOUS SUBSTANCE"
means (i) any substance, product, waste or other material of any nature
whatsoever which is or becomes listed, regulated, or addressed pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq. ("RCRA"); the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et
seq.; the Federal Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Federal
Clean Water Act, 33 U.S.C. Section 1151 et seq.; the National Environmental
Policy Act, 42 U.S.C. Section 1857 et seq.; the Regulations of the
Environmental Protection Agency, 33 C.F.R. and 40 C.F.R.; applicable state,
county and city codes and statues or any other federal, state or local statute,
law, ordinance, resolution, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect, (ii) any substance, product, waste or other
material of any nature whatsoever which may give rise to liability under any
of the above statutes or under any statutory or common law theory based on
negligence, trespass, intentional tort, nuisance or strict liability or under
any reported decisions of a state or federal court, (iii) petroleum or crude
oil other than petroleum and petroleum products which are contained within
regularly operated motor vehicles, and (iv) asbestos.
(b) Tenant represents, warrants, acknowledges and agrees that:
(i) Subject to the terms and provisions of this
Lease, Tenant will not undertake, permit,
authorize or suffer, the manufacture,
handling, generation, transportation,
storage, treatment, discharge, release,
burial or disposal on, under or about the
Premises of any Hazardous Substance, or the
transportation to or from the Premises of any
Hazardous Substance;
(ii) Tenant will not cause, permit, authorize or
suffer any Hazardous Substance to be placed,
held, located or disposed of, on, under or
about any other real property all or any
portion of which is legally or beneficially
owned (or any interest or estate therein
which is owned) by the Tenant in any
jurisdiction now or hereafter having in
effect a so-called "Superlien" law or
ordinance or any part thereof the effect of
which law or ordinance would be to create a
lien on the Premises to secure any obligation
in connection with the real property in such
other jurisdiction.
(c) From and after the Commencement Date, Tenant shall keep and
maintain the Premises in compliance with, and shall not cause or permit the
Premises to be in violation of, any federal, state or local laws, ordinances
or regulations relating to health and safety, industrial hygiene or to the
environmental conditions on, under or about the Premises including, but not
limited to, air, soil and ground water conditions. Tenant hereby covenants and
agrees that neither it nor any agent, servant, employee, or tenant shall
generate, manufacture, handle, store, treat, discharge, release, bury or
dispose of on, under or about the Premises, any Hazardous Substance. Without
limiting the generality of the foregoing provisions of this Subsection, Tenant
agrees at all times to comply fully and in a timely manner with, and to cause
all of its employees, agents, contractors, subcontractors, tenants and any
other persons occupying or present on the Premises to so comply with, all
federal, state and local laws, regulations, guidelines, codes, statutes and
ordinances applicable to the generation, manufacture, handling, storage,
treatment, discharge, release, burial or disposal of any Hazardous Substance
located or present on, under or about the Premises by, through or under Tenant
after the Commencement Date, or the transportation to or from the Premises of
any Hazardous Substance. Any sublease executed after the date hereof
concerning the Premises shall contain a provision prohibiting
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the lessee, and any agent, servant, employee or tenant of the lessee, from
generating, manufacturing, storing, treating, discharging, releasing, burying
or disposing on, under or about the Premises, or transporting to or from the
Premises, any Hazardous Substance.
(d) If the release, threat of release, placement on, under or
about the Premises, or the use, generation, manufacture, storage, treatment,
discharge, release, burial or disposal on, under or about the Premises, or
transportation to or from the Premises, of any Hazardous Substance: (i) gives
rise to liability, costs or damages (including, but not limited to, a response
action, remedial action, or removal action) under RCRA, CERCLA, the State Toxic
Substances Laws, or any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or under any reported
decision of a state or federal court, (ii) causes or threatens to cause a
significant public health effect, or (iii) pollutes or threatens to pollute the
environment, the Tenant shall promptly take any and all response, remedial and
removal action necessary to clean up the Premises and any other effected
property and mitigate exposure to liability arising from the Hazardous
Substance, if required by law or by any governmental authority.
(e) Tenant shall indemnify, defend with counsel reasonably
satisfactory to Landlord, protect and hold harmless Landlord, its directors,
officers, employees, agents, assigns and any successor or successors to
Landlord's interest under this Lease from and against all claims, actual
damages (including but not limited to special and consequential damages),
punitive damages, injuries, costs, response costs, losses, demands, debts,
liens, liabilities, causes of action, suits, legal or administrative
proceedings, interest, fines, charges, penalties and expenses (including but
not limited to attorneys' and expert witness fees and costs incurred in
connection with defending against any of the foregoing or in enforcing this
indemnity) of any kind whatsoever paid, incurred or suffered by, or asserted
against, any indemnified party at any time prior to any retaking of the
Premises by Landlord directly or indirectly arising from or attributable to (i)
any breach by Tenant of any of its agreements, warranties or representations
set forth in this Section 6.2, or (ii) any repair, cleanup or detoxification,
or preparation and implementation of any removal, remedial, response, closure
or other plan concerning any Hazardous Substance which arises on, under or
about the Premises after the Commencement Date and is attributable to Tenant
and not to Landlord or any other party not under the control, employed by,
contracted with or affiliated with Tenant, regardless of whether undertaken due
to governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Landlord for any liability pursuant to such statute, to
the extent Tenant is liable pursuant to this Section 6.2.
(f) Tenant shall promptly give Landlord (i) a copy of any notice,
correspondence or information it receives from any federal, state or other
governmental authority regarding Hazardous Substances on, under or about the
Premises or Hazardous Substances which affect or may affect the Premises, or
regarding any actions instituted, completed or threatened by any such
governmental authority concerning Hazardous Substances which affect or may
affect the Premises, (ii) written notice of any knowledge or information Tenant
obtains regarding Hazardous Substances on, under or about the Premises or
incurred by Tenant (other than commercially reasonable quantities of
customarily used cleaning compounds and the like and the matters covered in
subsections (h) and (i) of this Section 6.2), a third party or any government
agency to study, assess, contain or remove any Hazardous Substances on, under,
about or near the Premises for which expense or loss Tenant may be liable or
for which a lien may be imposed on the Premises, (iii) written notice of any
knowledge or information Tenant obtains regarding the release or discovery of
Hazardous Substances on, under or about the Premises or on other sites owned,
occupied or operated by Tenant or by any person for whose conduct Tenant is or
may be responsible, or whose liability may result in a lien on or otherwise
affect the Premises, (iv) written notice of all claims made or threatened by
any third party against Tenant or the Premises relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Substance, and (v) written notice of Tenant's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of
the Premises that could subject the Premises to any restrictions on the
ownership, occupancy, transferability or use of the Premises under any of the
statutes cited in Subsection (a) of this Section 6.2 or any regulation adopted
pursuant thereto.
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Notwithstanding anything to the contrary contained herein, Tenant shall not be
under any obligation to provide notice of any contamination so long as any of
the principal(s) of Landlord (currently being James S. Carroll, William C.
Carroll, Janet L. Giles and Ralph S. Kerr) are responsible for the operation of
the dealership at the Premises.
(g) Notwithstanding anything to the contrary contained herein,
the indemnity contained in this Section 6.2 shall continue indefinitely from
the date of Tenant's execution of this Lease and shall survive the termination
of all agreements between Tenant and Landlord. The indemnity contained in this
Section 6.2 in no way limits the scope or enforceability of any other indemnity
contained herein.
(h) Commercially reasonable quantities of customarily used
cleaning compounds and the like, which are stored, used and disposed of in
compliance with applicable environmental laws, shall be excluded from any
obligation of Tenant hereunder this Section 6.2. Commercially reasonable
quantities of products customarily used in Tenant's business and the like,
which are stored, used and disposed of in compliance with applicable
environmental laws, are hereby permitted by Landlord.
(i) Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have no liability or obligation under this Section 6.2 or
elsewhere in this Lease for any matter existing on, under or about the
Premises prior to the Commencement Date, including, without limitation, the
removal or remediation of any Hazardous Substances and Landlord shall maintain
full liability for such pre-Commencement Date contamination. Landlord shall
indemnify, defend with counsel reasonably satisfactory to Tenant, protect and
hold harmless Tenant, its directors, officers, employees, agents, assigns and
any successor or successors to Tenant's interest under this Lease from and
against all claims, actual damages (including but not limited to special and
consequential damages), punitive damages, injuries, costs, response costs,
losses, demands, debts, liens, liabilities, causes of action, suits, legal or
administrative proceedings, interest, fines, charges, penalties and expenses
(including but not limited to attorneys' and expert witness fees and costs
incurred in connection with defending against any of the foregoing or in
enforcing this indemnity) of any kind whatsoever paid, incurred or suffered by,
or asserted against, any indemnified party directly or indirectly arising from
or attributable to (1) any breach by Landlord any of its agreements, warranties
or representations set forth in this Section 6.2(i), or (2) any repair, cleanup
or detoxification, or preparation and implementation of any removal, remedial,
response, closure or other plan concerning any Hazardous Substance on, under or
about the Premises prior to the Commencement Date attributable to Landlord or
any other party under the control, employed by, contracted with or otherwise
associated with Landlord in any manner, regardless of whether undertaken due to
governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Tenant for any liability pursuant to such statute, to
the extent Landlord is liable pursuant to this Section 6.2(i).
SECTION 6.3 MAINTENANCE AND REPAIRS. During the Term of this
Lease, in addition to the Rent herein provided, Tenant agrees to pay all costs
and charges for repair and maintenance of the Premises, except as otherwise
provided herein. Tenant agrees to surrender the Premises at the expiration or
earlier termination of this Lease in as good condition as at the commencement
of the term of this Lease except, Tenant shall not be responsible for the
repair or condition of those portions of the Premises which Landlord agrees to
maintain nor damage by dry rot, termites, sinking of floors, or ordinary wear
and tear. Landlord agrees to maintain in good repair, at Landlord's cost, the
roof, outer walls (which will include the bulkheads under plate glass windows),
downspouts, underground plumbing, underground and in the wall wiring, support
of floors, and, without limitation, structural portions of the Premises.
Tenant shall
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keep in good repair the electrical equipment, air conditioning equipment and
heating equipment, and when required, Tenant shall replace such components with
items of at least scope and quality of those being replaced. In the event
Tenant has replaced any of such equipment prior to the end of its normal useful
life and the Term of this Lease terminates or expires in accordance with the
provisions contained in this Lease, then Landlord shall pay to Tenant on such
termination date or expiration date, as the case may be, an amount equal to the
cost of such equipment paid for by Tenant times a fraction, the numerator of
which is the number of months in the normal useful life of such equipment minus
the number of months from the date of installation of such equipment to the
date of termination or expiration, as the case may be, of the Term, and the
denominator of which is the number of months in the normal useful life of such
equipment. No such payment shall be required to made by Landlord if the Term
is terminated due to the occurrence and continuation of a Default by Tenant.
Tenant agrees to replace any plate, window or door glass broken in the Premises
with glass of like kind and quality, except Tenant shall not be required to
replace glass broken due to settlement or defective construction of the
building or due to the failure of Landlord to maintain and repair those
portions of the Premises which Landlord agrees herein to maintain and repair or
due to negligent repair of the Premises by Landlord. Landlord agrees to
replace glass broken in the Premises when breakage is due to any of the causes
set forth in the next preceding sentence which shall relieve Tenant from
replacing said glass as set forth herein. Landlord and Tenant shall, comply
with all laws, rules, orders, ordinances, directions, regulations and
requirements of federal, state, county and municipal authorities pertaining to
the Premises, including the Americans with Disabilities Act. Any repairs
required to be made by the Landlord and Tenant shall be made in a prompt and
workmanlike manner. All goods and materials used shall be in quality equal to
or better than that being replaced. The Tenant shall supply the Landlord with
copies of all warranties offered as to any replacements and shall supply
Landlord with copies of any invoices for repairs or replacements, the cost of
which exceeds $5,000.00. Tenant's failure to supply such warranties and
invoices shall not be deemed a default under the terms of this Lease.
Subject to the other terms of this Lease, Tenant acknowledges that it
has inspected and that the Premises, including all fixtures, equipment and
furnishings contained therein, are in satisfactory or excellent condition and
accepts the Premises in its "AS IS" condition, without requiring Landlord to
make any repairs or replacements thereof. Tenant hereby waives any objection
to and releases Landlord from any liability arising from the condition of the
Premises from and after the Commencement Date, except for matters as herein set
forth.
Any Improvements being constructed upon the Land together with all
equipment and hardware, may be warrantied by third party vendors who have
performed labor or rendered materials thereto. The Tenant shall be entitled to
the benefit of all such warranties and the Landlord shall fully cooperate in
securing the services of such third party vendors for warranty work during the
Term of this Lease.
SECTION 6.4 AMERICANS WITH DISABILITIES ACT. Landlord shall be
responsible for compliance with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, attributable to the Premises as of the Commencement Date of
this Lease. In the event the Tenant makes any modifications to the Premises,
all such modifications shall comply with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, including modifications which
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are required by such governmental agencies, as a result of such modifications,
to remaining unmodified portions of the Premises.
ARTICLE 7
INSURANCE AND INDEMNITY
SECTION 7.1 BUILDING INSURANCE. Tenant will, at its cost and
expense, keep and maintain in force the following policies of insurance:
(1) Insurance on the Improvements against loss or damage by fire
and against loss or damage by any other risk now and from time to time insured
against by "extended coverage" provisions of policies generally in force on
improvements of like type in the city in which the Premises are located, and in
builder's risk completed value form during construction of improvements by
Tenant, in amounts sufficient to provide coverage for the full insurable value
of the Improvements; the policy for such insurance shall have a replacement
cost endorsement or similar provision. "FULL INSURABLE VALUE," shall mean
actual replacement value (exclusive of cost of excavation, foundations, and
footings below the surface of the ground or below the lowest basement level),
and such full insurable value shall be determined by Tenant's insurer, and
confirmed from time to time at the request of Landlord by one of the insurers.
The Tenant shall maintain all storm and flood insurances which are customarily
maintained for properties similar to the Premises in the County in which the
Premises are located, or which is required by Landlord's Lender (if any), and
only if such coverage is available, to fully insure the Improvements including
all such coverages which might later come into existence as a result of changes
in the insurance coverages available or required in the future.
(2) Worker's Compensation Insurance as to Tenant's employees
involved in the construction, operation, or maintenance of the Premises in
compliance with applicable law.
(3) Such other insurance against other insurable hazards which at
the time are commonly insured against in the case of improvements similarly
situated, due regard being given to the height and type of the Improvements,
their construction, location, use, and occupancy.
SECTION 7.2 LIABILITY INSURANCE. Tenant shall secure and
maintain in force comprehensive general liability insurance, including
contractual liability specifically applying to the provisions of this Lease and
completed operations liability, with limits of not less than Ten Million
Dollars ($10,000,000) with respect to bodily injury or death to any number of
persons in any one accident or occurrence and with respect to property damage
in any one accident or occurrence, such limits to be increased in the event of
request by Landlord by an amount which may be reasonable at the time.
SECTION 7.3 POLICIES. All insurance maintained in accordance
with the provisions of this Article 7 shall be issued by companies reasonably
satisfactory to Landlord, and shall be carried in the name of Landlord, Tenant
and Ford Leasing, as their respective interests may appear, and shall contain a
mortgagee clause acceptable to the Landlord's Financing Lender and the
Permitted Mortgagees. All property policies shall (i) be subject to prior
written approval of Landlord, which shall not be unreasonably withheld or
delayed, (ii) be subject to prior written approval of Ford Leasing, which shall
not be unreasonably withheld or delayed, and (iii) expressly provide that any
loss thereunder may be adjusted with Tenant, Landlord's Financing Lender, Ford
Leasing and Permitted Mortgagees, but, unless
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required otherwise under Landlord's Financing, shall be payable to Tenant and
disbursed as set forth in Section 8.2. All property and liability insurance
policies shall name Landlord as an additional named insured and shall include
contractual liability endorsements. Tenant shall furnish Landlord, Ford
Leasing, Landlord's Financing Lender and each Permitted Mortgagee with evidence
of all insurance policies required under this Article 7 and shall furnish and
maintain with each of such parties, at all times, a certificate of the
insurance carrier certifying that such insurance shall not be canceled without
at least fifteen (15) days advance written notice to each of such parties.
SECTION 7.4 TENANT'S INDEMNITY. Subject to Section 7.6, Tenant
shall indemnify and hold harmless Landlord, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED LANDLORD PARTIES"), from all claims, suits, actions,
and proceedings whatsoever which may be brought or instituted on account of or
growing out of any Default and any and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the Claims, to the extent, but
only to the extent, such Claims are not attributable to (i) events or
conditions that occurred or existed, in whole or in part, prior to the date
when Tenant first occupied the Premises or (ii) failure of any components of
the Improvements that Landlord is required to maintain ("CLAIMS"), Tenant shall
assume on behalf of the Indemnified Landlord Parties and conduct with due
diligence and in good faith the defense of all such Claims against any of the
Indemnified Landlord Parties. Tenant may contest the validity of any such
Claims, in the name of Landlord or Tenant, as Tenant may deem appropriate,
provided that the expenses thereof shall be paid by Tenant. The foregoing
covenants and agreements of Tenant shall survive the expiration or termination
of this Lease.
SECTION 7.5 LANDLORD'S INDEMNITY. Subject to Section 7.6,
Landlord shall indemnify and hold harmless Tenant, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED TENANT PARTIES"), from all claims which may be
brought or instituted on account of or growing out of any default by Landlord
of its obligations under this Lease and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the claims, to the extent, but
only to the extent, any such claims are attributable to or arise out of: (i)
events or conditions that existed or occurred, in whole or in part, prior to
the date when Tenant first occupied the Premises; and (ii) failure of any
components of the Improvements which Landlord is required to maintain and (iii)
Landlord's representations or warranties or asbestos in any form which is
present on the Premises prior to the date of this Lease. Landlord shall assume
on behalf of the Indemnified Tenant Parties and conduct with due diligence and
in good faith the defense of all Claims against any of the Indemnified Tenant
Parties. Landlord may contest the validity of any Claims, in the name of
Landlord or Tenant, as Landlord may deem appropriate, provided that the
expenses thereof shall be paid by Landlord. The foregoing covenants and
agreements of Landlord shall survive the Term and expiration or termination of
this Lease.
SECTION 7.6 SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each hereby waives any and all rights of
recovery, claims, actions, or causes of action against the other, its agents,
officers, and employees for any loss or damage that may occur to any
improvements located on the Premises, or any part thereof, or any personal
property of such party therein, by reason of fire, the elements, or any other
cause which is insured under standard "all risk of direct loss" insurance
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policies available in the state in which the Premises are located, regardless
of cause or origin, including negligence of either party hereto, its agents,
officers, or employees. No insurer of one party shall hold any right of
subrogation against the other party as to any such loss or damage.
ARTICLE 8
CASUALTY; CONDEMNATION; SURVIVAL OF LEASE
SECTION 8.1 TENANT'S OBLIGATION TO RESTORE. Subject to the other
terms of this Section 8.1, in the event of damage to, or destruction of, any
Improvements by fire or other casualty, Tenant shall promptly repair, replace,
restore, and reconstruct the same, all in compliance with the provisions of
Section 8.2. If insurance proceeds are insufficient to pay for required
replacement, repairs, restoration, etc., then Tenant shall be obligated to
promptly repair, replace, restore, and reconstruct the Improvements, all in
compliance with the provisions of Section 8.2, notwithstanding the
unavailability of insurance proceeds for such purpose. In the event that a
Permitted Mortgagee (as hereinafter defined) or Landlord's Financing Lender (as
hereinafter defined), as the case may be, requires that payment of insurance
proceeds be made to it and not be made available for required replacement,
repairs, restoration, etc., then to the extent that such funds are withheld,
the Tenant shall not be responsible for performing required replacement,
repairs, restoration, or reconstruction of the Improvements. In the event of a
casualty loss wherein the insurance proceeds are not be used for replacement,
repairs, restoration, etc., or the Improvements, as a result of Landlord's
Financing Lender or by consent of the parties, the insurance proceeds shall be
applied as follows:
(1) first, to pay the cost of razing the Improvements and
leveling, cleaning and otherwise putting the Premises in good
order;
(2) second, to Landlord's Financing Lender;
(3) third, to the payment to Tenant for any of its improvements;
and
(4) fourth, to Landlord, to the extent of any remaining proceeds.
Distribution of insurance proceeds is being made in conformity with
Section 5.3 of this Lease.
Notwithstanding the foregoing, in the event of destruction or damage
involving more than seventy-five percent (75%) of the interior floor area of
the Improvements, Tenant shall have no obligation to rebuild unless the
Landlord and Tenant may agree to rebuild the Improvements. In the event the
parties have not agreed to rebuild the Premises then it is recognized between
Landlord and Tenant that it is their intent to relocate the operations to
another location. In the event of such relocation, this Lease shall terminate
effective as to the affected Premises as of the date of such damage or
destruction and the insurance proceeds received by the Landlord and Tenant [as
to Tenant, for Tenant's Improvements, the right to same carrying forward as to
the new location] shall be utilized for the construction of new Improvements at
an alternative location. In the event that the costs of construction of the
Improvements for which the Landlord is responsible exceeds the insurable value
of the operation which was subject to the casualty, the Landlord shall pay the
additional costs for Improvements, and the annual Base Rent due pursuant to
Section 3.1 shall be increased by an amount equal to ten (10%) percent of the
Landlord's additional cost of construction of the new facility. This Lease,
except for the adjustment of Base Rent
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as described above, shall govern as to the rights and obligations of the
Landlord and Tenant at the substituted location, however, the Term of the Lease
shall be in abeyance during the period of construction of the alternative
Improvements. Tenant's obligation for payment of Base Rent and other monetary
sums under this Lease as applicable to the new Premises shall commence as of
the later to occur of (i) the date the improvements to be constructed on the
new Premises are certified as complete by the applicable architect for such
improvements in accordance with the plans and specifications agreed to in
writing by Landlord and Tenant and (ii) the date a Certificate of Occupancy is
obtained for the operation of such new improvements. Landlord and Tenant
shall, in good faith, fully cooperate with one another in the selection of the
alternative site and relative to preparation of plans for Improvements and
construction thereof. Nothing hereinabove withstanding to the contrary, if the
Tenant failed to maintain insurance coverage required herein and as a result,
proceeds are paid by the insurance company which are less than the full
insurable value of the Improvements, Tenant shall be solely responsible for any
such deficiency.
SECTION 8.2 RESTORATION AND DEPOSIT OF FUNDS.
(a) Prior to Tenant commencing any repair, restoration or
rebuilding pursuant to Section 8.1 involving an estimated cost of more than One
Hundred Thousand Dollars ($100,000), Tenant shall submit to Landlord for its
approval, which will not be unreasonably withheld or delayed: (i) plans and
specifications therefor, prepared by a licensed architect reasonably
satisfactory to Landlord; (ii) copies of appropriate governmental permits;
(iii) an estimate of the cost of the proposed work, certified to by said
architect (iv) a fixed price construction contract in an amount not in excess
of such architect's estimated cost from a reputable and experienced general
contractor; and (v) satisfactory evidence of sufficient contractor's
comprehensive general liability insurance covering Landlord, builder's risk
insurance, and worker's compensation insurance. Upon completion of any such
work by or on behalf of Tenant, Tenant shall provide Landlord with written
evidence, in form and substance reasonably satisfactory to Landlord, showing
that (i) Tenant has paid all contractors for all costs incurred in connection
with such repair, restoration or rebuilding, and (ii) that the Premises is not
encumbered by any mechanic's or materialmen's liens relating to such repair,
restoration or rebuilding. Regarding Tenant's obligations with respect to
mechanic's or materialmen's liens, reference is made herein to all of the terms
and provisions of Section 5.2 in connection with such repair, restoration or
rebuilding.
(b) Provided that a Default does not then exist, then all sums
arising by reason of such loss under insurance policies maintained by Tenant,
shall be deposited with the Depositary (as hereinafter defined) to be available
to Tenant for the repair, restoration and rebuilding of the Premises. Tenant
shall diligently pursue the repair, restoration and rebuilding of the
improvements in a good and workmanlike manner using only materials which are of
a quality comparable to the quality of the materials used in the Improvements
prior to their destruction or damage. The insurance proceeds will be disbursed
to Tenant by the Depositary after delivery of evidence reasonably satisfactory
to the Depositary that (A) such repairs, restoration, or rebuilding have been
completed and effected in compliance with the plans and specifications for the
restoration or rebuilding, (B) no mechanic's and materialman's liens against
the Premises have been filed, or that all such liens have been paid or bonded
around, and (C) all payments for work performed and materials purchased as of
the date of such disbursement for which mechanic's and materialman's liens
might arise have been paid or will be paid from such disbursement or that all
such potential liens have been paid or bonded around. At the option of Tenant,
such proceeds shall be advanced in reasonable installments. Each such
installment (except the final installment) shall be
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advanced in an amount equal to the cost of the construction work completed
since the last prior advance (or since commencement of work as to the first
advance) less statutorily required retainage in respect of mechanic's and
materialman's liens or retainage which may be required by Landlord's Financing
Lender in an amount not to exceed ten percent (10%) of such cost. The amount
of each installment requested shall be certified as being due and owing by
Tenant's architect in charge, and each request shall include all bills for
labor and materials for which reimbursement is requested and reasonably
satisfactory evidence that no lien has been placed against the Premises for any
labor or material furnished for such work. The final disbursement, which shall
be an amount equal to the balance of the insurance proceeds, shall be made upon
receipt of (1) an architect's certificate of substantial completion as to the
work from Tenant's architect, (2) reasonably satisfactory evidence that all
bills incurred in connection with the work have been paid and (3) issuance of a
certificate of occupancy by the applicable governmental agency, if required.
The term "DEPOSITARY", as used herein, shall mean either: (i) Landlord's
Financing Lender, or its designee provided that Landlord's Financing Lender is
an institutional lender, its designee is not an Affiliate of Landlord, and such
entity holds such funds in accordance with the terms of this lease, or related
in any other manner to Landlord), or (ii) such other party that is acceptable
to Landlord and Tenant, if there is no such Landlord's Financing Lender or if
such Landlord's Financing Lender has refused to act as Depositary.
(c) If no Default then exists, any excess of money received from
insurance policies remaining with the Depositary after the repair or rebuilding
of the Improvements shall, to the extent required by any Permitted Mortgagee,
be applied to payment of Tenant's Permitted Mortgage, otherwise any such
proceeds shall be paid to Tenant.
(d) If Tenant shall not commence the repair or rebuilding of the
Improvements within a period of sixty (60) days after damage or destruction by
fire or other casualty and prosecute the same thereafter with such dispatch as
may be necessary to complete the same within a reasonable period after said
damage or destruction occurs; then, in addition to all other remedies Landlord
may have either under this Lease, at law or in equity, the money received by
and remaining in the hands of the Depositary shall be paid to and retained by
Landlord as security for the continued performance and observance by Tenant of
Tenant's covenants and agreements hereunder.
SECTION 8.3 NOTICE OF DAMAGE. Tenant shall immediately notify
Landlord and each Permitted Mortgagee of any destruction or damage to the
Premises.
SECTION 8.4 TOTAL TAKING. Should the entire Premises be taken
(which term, as used in this Article 8, shall include any conveyance in
avoidance or settlement of eminent domain, condemnation, or other similar
proceedings) by any Governmental Authority, corporation, or other entity under
the right of eminent domain, condemnation, or similar right, then Tenant's
right of possession under this Lease shall terminate as of the date of taking
possession by the condemning authority, and the award therefor will be
distributed as follows: (1) first, to the payment of all reasonable fees and
expenses incurred in collecting the award; (2) second, to Landlord's Financing
Lender; and (3) third, to Landlord and Tenant, to the extent of their interests
in the Premises, as the court having such jurisdiction of such taking shall
determine taking into account certain factors including, without limitation,
the term of the leasehold estate of the Tenant and the ownership interest of
Landlord. After the determination and distribution of the condemnation award
as herein provided, the Lease shall terminate.
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SECTION 8.5 PARTIAL TAKING. Should a portion of the Premises be
taken by any Governmental Authority, corporation, or other entity under the
right of eminent domain, condemnation, or similar right, this Lease shall
nevertheless continue in effect as to the remainder of the Premises unless, in
Tenant's reasonable judgment, so much of the Premises shall be so taken as to
make it economically unsound to use the remainder for the uses and purposes
contemplated hereby, whereupon this Lease shall terminate as of the date of
taking of possession by the condemning authority in the same manner as if the
whole of the Premises had thus been taken, and the award therefor shall be
distributed as provided in Section 8.4. In the event of a partial taking where
this Lease is not terminated, all awards payable in respect thereof shall be
payable to Landlord and Tenant, to the extent of their interests in the
Premises, as the applicable condemning authority shall determine taking into
account certain factors including, without limitation, the term of the
leasehold estate of the Tenant and the ownership interest of Landlord.
Following such partial taking, Landlord shall make all necessary repairs or
alterations to the remaining Premises, required to make the remaining portions
of the Premises an architectural whole. The Base Rent payable hereunder during
the unexpired portion of the Lease shall be reduced to the extent fair and
reasonable under the circumstances, effective on the date physical possession
is taken by the condemning authority.
SECTION 8.6 TEMPORARY TAKING. If the whole or any portion of the
Premises shall be taken for temporary use or occupancy, the Term shall not be
reduced or affected. The Base Rent payable hereunder during the unexpired
portion of the Lease shall be reduced to the extent fair and reasonable under
the circumstances and Tenant shall be entitled to receive the entire amount of
any award therefor, less the amount of the reduction in the Base Rent.
SECTION 8.7 NOTICE OF TAKING, COOPERATION. Tenant shall
immediately notify Landlord and each Permitted Mortgagee of the commencement of
any eminent domain, condemnation, or other similar proceedings with regard to
Premises. Landlord and Tenant covenant and agree to fully cooperate in any
condemnation, eminent domain, or similar proceeding in order to maximize the
total award receivable in respect thereof.
SECTION 8.8 SURVIVAL OF OPERATIONS / LEASE AGREEMENT UPON
TERMINATION OF FORD LEASES. Landlord and Tenant agree that should the Main
Lease and Ford Sublease be terminated by Ford Leasing as a result of Ford
Leasing's exercise of termination pursuant to the applicable provisions
contained therein, the rights and obligations of the Landlord and Tenant shall
be governed by the terms of this Lease. Should the Main Lease and Ford
Sublease be terminated by Ford Leasing, then and in such event, this Lease
shall become the sole controlling agreement between Landlord and Tenant as it
relates to the Premises.
ARTICLE 9
TENANT'S FINANCING
SECTION 9.1 TENANT'S RIGHT TO ENCUMBER. Tenant shall have the
right, from time to time and at any time, without Landlord's consent or
joinder, to encumber its interest in this Lease and the leasehold estate hereby
created with one or more deeds to secure debt, mortgages, or other lien
instruments to secure any borrowings or obligations of Tenant. Any such
mortgages, deeds to secure debt, and/or other lien instruments, and the
indebtedness secured thereby, provided that Landlord has been given notice
thereof, are herein referred to as "PERMITTED MORTGAGES," and the holder or
other beneficiary thereof are herein referred to as "PERMITTED MORTGAGEES."
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SECTION 9.2 TENANT'S MORTGAGE. If Tenant encumbers its interest
in this Lease and the leasehold estate hereby created with liens as above
provided, then Tenant shall notify Landlord thereof, providing with such notice
the name and mailing address of the Permitted Mortgagee in question, Landlord
shall upon request, acknowledge receipt of such notice, and for so long as the
Permitted Mortgage in question remains in effect the following shall apply:
(a) Landlord shall give to the Permitted Mortgagee a duplicate
copy of any and all notices which Landlord gives to Tenant pursuant to the
terms hereof, including notices of default, and no such notice shall be
effective until such duplicate copy is transmitted to such Permitted Mortgagee,
in the manner provided in Section 12.1.
(b) There shall be no cancellation, surrender, or modification of
this Lease by joint action of Landlord and Tenant without the prior written
consent of the Permitted Mortgagee.
(c) If a Default should occur hereunder, then Landlord
specifically agrees that:
(1) Landlord shall not enforce or seek to enforce any of
its rights, recourses, or remedies, until a notice specifying the event giving
rise to such Default has been transmitted to the Permitted Mortgagee, in the
manner provided in Section 12.1, and if the Permitted Mortgagee proceeds to
cure the Default within a period of thirty (30) days after receipt of such
notice or, as to non-monetary events of Default which by their very nature
cannot be cured within such time period, the Permitted Mortgagee commences
curing such Default within such time period and thereafter diligently pursues
such cure to completion within sixty (60) days thereafter, then any payments
made and all things done by the Permitted Mortgagee to effect such cure shall
be as fully effective to prevent the exercise of any rights, recourses, or
remedies by Landlord as if done by Tenant;
(2) if the Default is a non-monetary default, the
Permitted Mortgagee shall have a period of time in which to cure such Default
equal to the greater of (i) the time period for such curing that is applicable
to Tenant under the terms of this Lease, or (ii) sixty (60) days after the date
that the Permitted Mortgagee has been notified of such Default, provided that
the Permitted Mortgagee cures all defaults relating to the payment of Base Rent
and neither Landlord nor the Premises is or would be liable or subject to any
lien, tax, penalty, expense, liability, or damages because of such Default. If
Landlord or the Premises is or will be liable or subject to any such lien, tax,
penalty, expense, liability or damages because of the Default, then for so long
as the Permitted Mortgagee is diligently and with continuity attempting to
secure possession of the Premises (whether by foreclosure or other procedures),
and provided such delay does not result in a foreclosure by Landlord's
Financing Lender or loss of Landlord's interest in the Premises, Landlord shall
allow the Permitted Mortgagee such time as may be reasonably necessary under
the circumstances to obtain possession of the Premises in order to cure such
Default, and during such time Landlord shall not enforce or seek to enforce any
of its rights, remedies or recourses hereunder; and
(d) No Permitted Mortgagee shall be or become liable to Landlord
as an assignee of this Lease until such time as such Permitted Mortgagee, by
foreclosure or other procedures, shall either acquire the rights and interests
of Tenant under this Lease or shall actually take possession of the Premises,
and upon such Permitted Mortgagee's assigning such rights and interests to
another party or
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upon relinquishment of such possession, as the case may be, such Permitted
Mortgagee shall have no further such liability.
ARTICLE 10
WARRANTY OF TITLE AND PEACEFUL POSSESSION
AND LANDLORD'S FINANCING
SECTION 10.1 WARRANTY AS TO ENCUMBRANCES. Landlord represents,
warrants and covenants that: (i) the representations and warranties set forth
in Section 10.3 are true and correct; (ii) it owns title to the Land and the
Premises free and clear of all liens, claims and encumbrances except the liens
described in EXHIBIT B hereto securing the financing described therein
("LANDLORD'S FINANCING") and the other encumbrances specifically described in
such EXHIBIT B; (iii) except as otherwise set forth in Section 10.2, Landlord's
Financing shall not be modified in any manner without the prior written consent
of Tenant; and (iv) the lender providing such Landlord's Financing ("LANDLORD'S
FINANCING LENDER") has executed, caused to be acknowledged (notarized in
accordance with applicable law) and delivered to Landlord and Tenant a mutual
recognition and attornment agreement, in form and substance reasonably
satisfactory to Tenant, suitable for recording in the appropriate records to
notify third parties of the existence of such agreement and that the Land and
the Premises are subject thereto. Such agreement shall provide, among other
provisions, that the Tenant's interest under this Lease shall be subordinate to
the Landlord's Financing and that the Landlord's Financing Lender shall (i)
give to Tenant a duplicate copy of any and all notices which Landlord's
Financing Lender gives to Landlord, including notices of default, and no such
notice shall be effective until such duplicate copy is actually received by
Tenant in the manner provided in Section 12.1; (ii) give Tenant the right and
opportunity to cure any defaults under the Landlord's Financing; and (iii)
recognize and consent to Tenant's rights under this Lease in the event of a
foreclosure or deed in lieu thereof so long as Tenant continues to perform its
obligations under this Lease. As used herein, the term (A) "LANDLORD'S
FINANCING LENDER" shall also include any lender that refinances Landlord's
Financing or makes a new loan to Landlord, subject to Section 10.2, and (B)
"LANDLORD'S FINANCING" shall include all financing secured by liens covering
all or any portion of the Premises which are permitted under the terms of this
Lease including, without limitation, all new loans.
Moreover, Landlord covenants that Tenant shall and may peaceably and
quietly have, hold, occupy, use, and enjoy the Premises during the Term, and
may exercise all of its rights hereunder, subject only to the provisions of
this Lease and applicable governmental laws, rules, and regulations; and
Landlord agrees to warrant and forever defend Tenant's right to such occupancy,
use, and enjoyment and the title to the Premises against the claims of any and
all persons whomsoever lawfully claim the same, or any part thereof, subject
only to provisions of this Lease and all applicable governmental laws, rules,
and regulations.
Landlord's Financing Lender shall not be or become liable to Tenant as
an assignee of Landlord's interest in this Lease until such time as such
Landlord's Financing Lender, by foreclosure or other procedures, shall either
acquire the rights and interests of Landlord under this Lease, and upon
Landlord's Financing Lender's assigning such rights and interests to another
party, Landlord's Financing Lender shall have no further such liability.
To the extent that Tenant cures any defaults of Landlord under
Landlord's Financing, Tenant shall receive a credit against the Base Rent due
pursuant to Section 3.1 hereinabove in an amount equal
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to the amount advanced by Tenant to cure such defaults, together with interest
at the Tenant's parent company's customary borrowing rate as may be in effect
from time to time. Such credit shall be charged against the monthly Base Rent
installments, commencing as of the first monthly rental payment due after the
first of such advances, until such time as the entire amount of such credit is
exhausted. Thereafter, Base Rent shall commence in amounts required in Section
3.1 hereinabove, including payment of any partial installment which may be due
as a result of a credit to the final monthly credit which is less than the full
monthly Base Rent due.
SECTION 10.2 LANDLORD'S MORTGAGE. During the Term, none of
Landlord's Financing may be modified or refinanced or any new loan made except
in accordance with the following:
(a) The total mortgage indebtedness and encumbrances of any type
against the Premises after the proposed refinancing or modification or new loan
of Landlord's Financing does not exceed eighty percent (80%) of the fair market
value of the Premises including any improvements being made with financing
obtained for such construction or the loan balance in existence as of the
effective date of this Lease, whichever is greater; and
(b) The effect of any such modification, refinancing or new loan
does not result in an increase in principal and interest payable by Landlord
during any Lease Year which exceeds Base Rent required to be paid by Tenant
during any Lease Year.
SECTION 10.3 REPRESENTATIONS OF LANDLORD. Landlord represents and
warrants to Tenant as of the effective date of this Lease that:
(a) The Premises are not subject to any prior lease, easement,
adverse claim, or claims of parties in possession, whether or not shown by the
public records, except as set forth on EXHIBIT B.
(b) There is no pending or threatened condemnation action or
agreement in lieu thereof which will or may affect the Premises or any part
thereof in any respect whatsoever.
(c) There is no action, suit or proceeding, including
environmental, pending or threatened against or affecting the Premises or any
part thereof.
(d) The execution, delivery and performance of this Lease by
Landlord has been duly authorized and this Lease is valid and enforceable
against Landlord in accordance with its terms.
(e) Landlord has no knowledge of any fact, action or proceeding,
including environmental, whether actual, pending or threatened, which could
result in the modification or termination of the present zoning classification
of the Premises, or the termination of full free and adequate access to and
from the Premises from all adjoining public highways and roads.
(f) Landlord has not agreed to lease or convey or granted any
rights with respect to or any part of the Premises or any interest therein to
any other person or entity except as shown on EXHIBIT B.
(g) The Premises are not subject to any restrictions (recorded or
unrecorded), building and zoning laws or ordinances, or other laws, ordinances,
rules, regulations and requirements of any
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Governmental Authority having jurisdiction which do or could prohibit the use
of the Premises for the uses set forth in this Lease.
(h) Landlord has not received any notice from any Governmental
Authority having jurisdiction over the Premises requiring or specifying any
work to be done to the Premises.
(i) Landlord has no knowledge of any existing, threatened or
contemplated action, circumstances or conditions (including but not limited to
subsurface conditions) which would materially interfere with the development or
use of the Premises for an automobile dealership.
(j) As of the date hereof the Premises are, and on the
Commencement Date the Premises will be in compliance in all material respects
with all restrictive covenants and other restrictions applicable to the
Premises and all applicable statutes, ordinances, rules and regulations
(federal, state, county and municipal), including without limitation all
zoning, environmental, building, health, subdivision regulations. Except as to
matters relating to the presence of asbestos contained in the Premises, if any,
the representation and warranty set forth in this Subsection (j) shall not be
applicable to the matters covered under Subsection (m) herein below.
(k) The Premises have legal and physical public access to and from
abutting roadways dedicated to and accepted by the State, City, or County where
the Premises are located.
(l) To the extent zoning regulations are applicable to the
Premises, the Premises are zoned for use as an automobile dealership facility,
for sale, trade, display, service and repair, painting, and other activities
normally associated with a full service automobile dealership.
(m) To the best of Landlord's knowledge, except as may otherwise
be disclosed to Tenant in any written environmental audit report delivered to
Tenant prior to the date of this Lease, no Hazardous Materials, pollutants or
toxic substances have been placed, dumped, deposited or buried upon, in or
under the Premises, there have been no leaks of petroleum, toxic or Hazardous
Materials from any of the underground storage tank facilities and there is no
contaminated soil, as defined by federal, state and/or local laws or
regulations, in, upon or under the Premises by reason of any such wastes,
pollutants, toxins, substances, or facilities. Tenant acknowledges that
certain materials which may be considered Hazardous Materials are used in the
normal course of the business operated on the Premises prior to the
Commencement Date. Landlord represents that to the best of Landlord's
knowledge, such use complies with all applicable governmental regulations and
that it has no knowledge of any contamination on the Premises.
(n) The Premises have an assured water supply sufficient to permit
the operations now being conducted thereon, and as contemplated in this Lease
with respect to the Improvements to be constructed on the Land, to be conducted
in accordance with all governmental requirements.
(o) All dimensions in the description to the Premises are net of
existing and proposed rights-of-way, easements and dedications except as set
forth on EXHIBIT B.
(p) The Premises are not located in a flood plain or a flood
hazard area for which flood insurance would be required or for which flood
insurance is available.
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(q) Landlord warrants and guarantees that on the Commencement Date
the wiring, floors, plumbing, underground plumbing, heating, air conditioning
equipment, roofs, outer walls, stairways, doors, windows, plate glass and
sprinkler equipment of the Premises are each and every one in good repair and
are adequate to furnish the proper service for which each was installed and the
heating plant will heat and air conditioning will cool the buildings
constituting part of the Premises in accordance with the generally accepted
design temperatures for the city and state in which the Premises is located.
Landlord further warrants and guaranties that on the Commencement Date, the
Premises and all appurtenances thereto, will comply with the building codes,
fire, sanitary and safety regulations, ordinances and laws of the United States
of America, city, county and state in which the Premises are located. Landlord
further warrants and guarantees that at the commencement of this Lease, the
Premises may be used for the purposes set out in this Lease without violating
any such codes, regulations, ordinances, laws or any restrictive covenants
running with the land.
(r) Landlord has all required occupancy permits and other licenses
or permits required for the use and occupancy of the Premises.
ARTICLE 11
DEFAULT AND REMEDIES
SECTION 11.1 DEFAULT. Each of the following shall be deemed a
"DEFAULT" by Tenant hereunder and a material breach of this Lease:
(a) Whenever Tenant shall fail to pay any sum payable by Tenant to
Landlord or any third party under this Lease on the date upon which the same is
due to be paid, and such default shall continue for ten (10) days after Tenant
shall have been given a written notice specifying such default;
(b) Whenever Tenant shall fail to keep, perform, or observe any of
the covenants, agreements, terms, or provisions contained in this Lease that
are to be kept or performed by Tenant other than with respect to payment of
Rent or other liquidated sums of money, and Tenant shall fail to immediately
commence and take such steps as are necessary to remedy the same within thirty
(30) days after Tenant shall have been given a written notice specifying the
same, or having so commenced, shall thereafter fail to proceed diligently and
with continuity to remedy the same;
(c) Whenever an involuntary petition shall be filed against Tenant
under any bankruptcy or insolvency law or under the reorganization provisions
of any law of like import or whenever a receiver of Tenant, or of all or
substantially all of the property of Tenant, shall be appointed without
acquiescence, and such petition or appointment is not discharged or stayed
within sixty (60) days after the happening of such event; or
(d) Whenever Tenant shall make an assignment of its property for
the benefit of creditors or shall file a voluntary petition under any
bankruptcy or insolvency law, or seek relief under any other law for the
benefit of debtors.
SECTION 11.2 REMEDIES. If a Default occurs, then subject to the
rights of any Permitted Mortgagee as provided in Section 9, Landlord may at any
time thereafter prior to the curing thereof and
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without waiving any other rights hereunder or available to Landlord at law or
in equity (Landlord's rights being cumulative), do any one or more of the
following:
(a) Landlord may terminate this Lease by giving Tenant written
notice thereof, in which event this Lease and the leasehold estate hereby
created and all interest of Tenant and all parties claiming by, through, or
under Tenant shall automatically terminate upon the effective date of such
notice with the same force and effect and to the same extent as if the
effective date of such notice were the day originally fixed in Article 2 hereof
for the expiration of the Term; and Landlord, its agents or representatives,
shall have the right, without further demand or notice, to reenter and take
possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing
breaches hereof. In the event of such termination, Tenant shall be liable to
Landlord for damages in an amount equal to (A) the discounted present value of
the amount by which the Rent reserved hereunder for the remainder of the
existing Term (Initial or Renewal) exceeds the then net fair market rental
value of the Premises for such period of time, plus (B) all expenses incurred
by Landlord enforcing its rights hereunder.
(b) Landlord may terminate Tenant's right to possession of the
Premises and enjoyment of the rents, issues, and profits therefrom without
terminating this Lease or the leasehold estate created hereby, reenter and take
possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing
breaches hereof, and lease, manage, and operate the Premises and collect the
rents, issues, and profits therefrom all for the account of Tenant, and credit
to the satisfaction of Tenant's obligations hereunder the net rental thus
received (after deducting therefrom all reasonable costs and expenses of
repossessing, leasing, managing, and operating the Premises). If the net
rental so received by Landlord exceeds the amounts necessary to satisfy all of
Tenant's obligations under this Lease, Landlord shall retain such excess. In
no event shall Landlord be liable for failure to so lease, manage, or operate
the Premises or collect the rentals due under any subleases and any such
failure shall not reduce Tenant's liability hereunder. If Landlord elects to
proceed under this Section 11.2(2), it may at any time thereafter elect to
terminate this Lease as provided in Section 11.2(1).
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 NOTICES. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required by
law shall be in writing and shall be deemed to have been validly given or
served by (a) delivery of the same in person to the intended addressee, (b) by
depositing the same with Federal Express or another reputable private courier
service for next business day delivery to the intended addressee at its address
set forth on the first page of this Agreement or at such other address as may
be designated by such party as herein provided, (c) by facsimile copy
transmission [confirmation sheet indicating transmission to be retained] or (d)
by depositing the same in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the intended
addressee at its address set forth below or at such other address as may be
designated by such party as herein provided. All notices, demands and requests
shall
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be effective upon such personal delivery upon actual receipt, or one (1)
business day after being deposited with the private courier service, or two (2)
business days after being deposited in the United States mail as required
above. Rejection or other refusal to accept or the inability to deliver because
of changed address of which no notice was given as herein required shall be
deemed to be receipt of the notice, demand or request sent. By giving to the
other party hereto at least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America. For purposes of notice the addresses of the parties hereto shall,
until changed, be as follows:
Landlord: KC Partnership
3101 N. State Road 7
Hollywood, FL 33021
Facsimile: (954) 964-4760
Tenant: Perimeter Ford, Inc.
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, Texas 77024
Attention: John Turner
Facsimile: (713) 627-6468
The parties hereto shall have the right from time to time to change their
respective addresses for purposes of notice hereunder to any other location
within the United States by giving a notice to such effect in accordance with
the provisions of this Section 12.1.
SECTION 12.2 PERFORMANCE OF OTHER PARTY'S OBLIGATIONS. If either
party hereto fails to perform or observe any of its covenants, agreements, or
obligations hereunder for a period of thirty (30) days after notice of such
failure is given by the other party, then the other party shall have the right,
but not the obligation, at its sole election but not as its exclusive remedy),
to perform or observe the covenants, agreements, or obligations which are
asserted to have not been performed or observed at the expense of the failing
party and to recover all costs or expenses incurred in connection therewith,
together with interest thereon from the date expended until repaid at an annual
rate ("DEFAULT RATE") equal to the lesser of (a) three (3) percent above the
prime rate of interest established from time to time by NationsBank (or a
comparable rate of interest if such rate is not in effect) or (b) the maximum
rate of interest permitted by applicable law. Any performance or observance by
a party pursuant to this Section 12.2 shall not constitute a waiver of the
other party's failure to perform or observe.
SECTION 12.3 MODIFICATION AND NON-WAIVER. No variations,
modifications, or changes herein or hereof shall be binding upon any party
hereto unless set forth in a writing executed by it or by a duly authorized
officer or agent. No waiver by either party of any breach or default of any
term, condition, or provision hereof, including without limitation the
acceptance by Landlord of any Rent at any time or in any manner other than as
herein provided, shall be deemed a waiver of any other or subsequent breaches
or defaults of any kind, character, or description under any circumstance. No
waiver of any
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breach or default of any term, condition, or provision hereof shall be implied
from any action of any party, and any such waiver, to be effective, shall be
set out in a written instrument signed by the waiving party.
SECTION 12.4 GOVERNING LAW. This Lease shall be construed and
enforced in accordance with the laws of the state in which the Premises are
located.
SECTION 12.5 NUMBER AND GENDER; CAPTIONS; REFERENCES. Pronouns,
wherever used herein, and of whatever gender, shall include natural persons and
corporations and associations of every kind and character, and the singular
shall include the plural wherever and as often as may be appropriate. Article
and Section headings in this Lease are for convenience of reference and shall
not affect the construction or interpretation of this Lease. Whenever the
terms "hereof," "hereby," "herein," or words of similar import are used in this
Lease, they shall be construed as referring to this Lease in its entirety
rather than to a particular Section or provision, unless the context
specifically indicates to the contrary. Any reference to a particular
"Article" or "Section" shall be construed as referring to the indicated Article
or Section of this Lease.
SECTION 12.6 CPI. "CPI" shall mean the Consumer Price Index for
All Urban Consumers, All Items (Base Year 1982-84 = 100) published by the
United States Department of Labor, Bureau of Labor Statistics. If the 1982-84
Base Year shall no longer be used as an index of 100, the revised index which
would produce results equivalent, as nearly as possible to those which would be
obtained hereunder if the CPI were not so revised.
SECTION 12.7 ESTOPPEL CERTIFICATE. Landlord and Tenant shall
execute and deliver to each other, promptly upon any request therefor by the
other party, a certificate addressed as indicated by the requesting party and
stating: (a) whether or not this Lease is in full force and effect; (b) whether
or not this Lease has been modified or amended in any respect, and submitting
copies of such modifications or amendments; (c) whether or not there are any
existing defaults hereunder known to the party executing the certificate, and
specifying the nature thereof; (d) whether or not any particular Article,
Section, or provision of this Lease has been complied with; and (e) such other
matters as may be reasonably requested.
SECTION 12.8 SEVERABILITY. If any provision of this Lease or the
application thereof to any person or circumstance shall, at any time or to any
extent, be invalid or unenforceable, and the basis of the bargain between the
parties hereto is not destroyed or rendered ineffective thereby, the remainder
of this Lease, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
SECTION 12.9 ATTORNEY FEES. If litigation is ever instituted by
either party hereto to enforce, or to seek damages for the breach of, any
provision hereof, the prevailing party therein shall be promptly reimbursed by
the other party for all attorneys' fees reasonably incurred by the prevailing
party in connection with such litigation, including all trial and appellate
levels.
SECTION 12.10 SURRENDER OF PREMISES; HOLDING OVER. Upon
termination or the expiration of this Lease, Tenant shall peaceably quit,
deliver up, and surrender the Premises. If Tenant does not surrender
possession of the Premises at the end of the Term, such action shall not extend
the Term,
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Tenant shall be a tenant at sufferance, and during such time of occupancy
Tenant shall pay to Landlord, as damages, an amount equal to twice the amount
of Rent that was being paid immediately prior to the end of the Term. Landlord
shall not be deemed to have accepted a surrender of the Premises by Tenant, or
to have extended the Term, other than by execution of a written agreement
specifically so stating.
SECTION 12.11 RELATION OF PARTIES. It is the intention of
Landlord and Tenant to hereby create the relationship of landlord and tenant,
and no other relationship whatsoever is hereby created. Nothing in this Lease
shall be construed to make Landlord and Tenant partners or joint venturers or
to render either party hereto liable for any obligation of the other.
SECTION 12.12 FORCE MAJEURE. As used herein "FORCE MAJEURE" means
the occurrence of any event whereby Landlord or Tenant shall be delayed or
prevented from the performance of any act required hereunder by reason of acts
of God, strikes, lockouts, labor troubles, failure or refusal of governmental
authorities or agencies to timely issue permits or approvals or conduct reviews
or inspections, civil disorder, inability to procure materials, restrictive
governmental laws or regulations or other cause without fault and beyond the
control of the party obligated (financial inability excepted). If Tenant or
Landlord shall be delayed, hindered, or prevented from performance of any of
its obligations by reason of Force Majeure, the time for performance of such
obligation shall be extended for the period of such delay. In no event shall
this provision pertain to any monetary obligations set forth in this Lease
including payment of Rent from Tenant to Landlord.
SECTION 12.13 NON-MERGER. Notwithstanding the fact that fee title
to the land and to the leasehold estate hereby created may, at any time, be
held by the same party, there shall be no merger of the leasehold estate hereby
created unless the owner thereof executes and files for record in the
appropriate real property records a document expressly providing for the merger
of such estates.
SECTION 12.14 ENTIRETIES. This Lease constitutes the entire
agreement of the parties hereto with respect to its subject matter, and all
prior agreements with respect thereto are merged herein. Any agreements
entered into between Landlord and Tenant of even date herewith are not,
however, merged herein.
SECTION 12.15 RECORDATION. Landlord and Tenant will, at the
request of the other, promptly execute an instrument in recordable form
constituting a short form of this Lease, which shall be filed for record in the
appropriate real property records, or at the request of either party this Lease
shall be so filed for record.
SECTION 12.16 SUCCESSORS AND ASSIGNS. This Lease shall constitute
a real right and covenant running with the Premises, and shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Whenever a reference is made herein to either party, such
reference shall include the party's successors and assigns.
SECTION 12.17 LANDLORD'S JOINDER. Landlord agrees to join with
Tenant in the execution of such applications for permits and licenses from any
Governmental Authority as may be reasonably necessary or appropriate to
effectuate the intents and purposes of this Lease, provided that Landlord shall
not incur or become liable for any obligation as a result thereof.
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SECTION 12.18 NO THIRD PARTIES BENEFITTED. Except as herein
specifically and expressly otherwise provided with regard to notices and
opportunities to cure defaults and certain enumerated rights granted to
Permitted Mortgagees, the terms and provisions of this Lease are for the sole
benefit of Landlord and Tenant, and no third party whatsoever, is intended to
benefit herefrom.
SECTION 12.19 SURVIVAL. Any terms and provisions of this Lease
pertaining to rights, duties, or liabilities extending beyond the expiration or
termination of this Lease shall survive the end of the Term.
SECTION 12.20 PERPETUITIES. To the extent that the rule against
perpetuities is applicable thereto, but not otherwise, the rights granted to
Tenant in Article 13 hereof shall expire upon the earlier to occur of (a) the
date set forth for expiration of such rights in said Article 13 or (b) the date
which is 21 years after the date of death of the last to die of the following
parties: the last grandchild to survive of the presently living grandchildren
of George Bush, former President of the United States of America.
SECTION 12.21 TRANSFER OF LANDLORD'S INTEREST. Subject to the
terms of the Landlord's Financing, Landlord may freely transfer and/or mortgage
its interest in the Premises and under this Lease from time to time and at any
time, provided that any such transfer or mortgage is expressly made subject to
the terms, provisions, and conditions of this Lease, including specifically but
without limitation Tenant's rights under Article 13, and the transferee or
mortgagee agrees to be bound by the provisions hereof (in the case of a
mortgagee, such agreement being contingent upon the mortgagee actually
succeeding to the Landlord's interest in the Premises and hereunder by virtue
of a foreclosure or conveyance in lieu thereof).
SECTION 12.22 TENANT'S RIGHT TO ASSIGN. Tenant may assign its
rights hereunder or sublease all or a portion of the Premises with Landlord's
prior written approval, which approval will not be unreasonably withheld.
provided that Tenant shall remain liable for all liabilities and obligations
arising under this Lease. An assignment by Tenant to an affiliate under common
control as that of the herein Tenant shall be deemed by Landlord to be
approved. Tenant acknowledges that Landlord's approval may require the consent
and/or joinder of Landlord's Financing Lender.
SECTION 12.23 PAST DUE AMOUNTS. All amounts required to be paid
by Tenant or Landlord under the terms and provisions of this Lease shall bear
interest at the Default Rate from the date due until paid.
SECTION 12.24 INDEPENDENT COUNSEL. Landlord and Tenant declare
that each has had independent legal advice by counsel of their own selection;
that each fully understands the facts and has been fully informed of all legal
rights or liabilities; that after such advice or knowledge, each believes the
Lease to be fair, just, reasonable and that each signs the Lease freely and
voluntarily.
SECTION 12.25 COOPERATION WITH LANDLORD'S LENDER. Tenant agrees
to cooperate with any Lender utilized by Landlord relative to financing
associated with this Lease and Improvements located upon the Premises, should
such Lender request reasonable modifications to this Lease provided such
modifications do not adversely diminish or otherwise modify the obligations of
Landlord under this
25
<PAGE> 31
Lease or affect the rights of the Tenant granted under this Lease or create
additional liability or obligations for Tenant beyond Tenant's current
liability and obligations under this Lease.
ARTICLE 13
OPTION TO PURCHASE PREMISES
SECTION 13.1 RIGHT OF FIRST REFUSAL.
(a) If Landlord shall receive a bona fide offer to purchase the
Premises during the Term, then any contract which may be entered into between
Landlord and a third party purchaser shall provide that the sale shall be
subject to Tenant's right of refusal set forth in this Section 13.1. If
Landlord shall receive such offer or execute such contract, Landlord shall send
to Tenant a true and complete copy of the executed contract and the complete
terms of the offer with Landlord's certification that it will accept the offer,
and Tenant shall have the option, to be exercised within thirty (30) days after
receipt thereof, to make a contract with Landlord on the same terms and
conditions set forth in such third party contract or offer. If Tenant, after
receipt of the third party contract or the terms of the offer acceptable to
Landlord, shall fail to exercise its option within the thirty (30) day period,
Landlord shall have the right to conclude the proposed sale on the same terms
as in the offer or contract originally forwarded to Tenant, provided the sale
shall close within the timeframe set forth in the third party contract plus
thirty (30) days. If the sale shall not close within said time frame plus
thirty (30) days, Landlord shall repeat the procedure specified in this Section
13.1 before it can conclude any sale of the Premises.
(b) Notwithstanding Tenant's failure to exercise its option, any
sale of the Premises shall be subject to this Lease and Tenant's option to
purchase the Premises and Tenant's right of first refusal shall remain in force
and be binding on any party to the same extent as if said subsequent owner were
Landlord herein, and said subsequent owner shall be required to do all of the
things required of Landlord in this Lease prior to any such sale of the
Premises.
(c) If any third party contract or offer for the Premises shall
include property other than the Premises, Tenant's right of first refusal
shall, at its election, be either applicable to the entire property covered by
such contract or offer, or applicable to the Premises only at a purchase price
which shall be that part of the price offered by the third party, which the
value of the Premises shall bear to the value of all the property included in
such third party contract or offer.
(d) Tenant's right to purchase shall not be extinguished, canceled
or waived by Tenant failing to exercise its option as to any offer, contract or
conveyance which is between Landlord and a related party, a nominee and his
principal, or a sole shareholder and his corporation, or a corporation and its
subsidiary or affiliate.
(e) To the extent that the provisions set forth in this Section
13.1 conflict with the terms of the Ford Lease, the Ford Lease shall prevail to
the extent the Ford Lease is in effect. All rights of the Tenant to purchase
the property are subordinate to the rights of Ford Leasing as set forth in the
Ford Lease.
26
<PAGE> 32
SECTION 13.2 OPTION.
(a) For and in consideration of the execution of this Lease by Tenant
and the sum of Ten Dollars ($10.00), Tenant shall have the option to purchase
the Premises at any time during the Term (including any extensions thereof),
without premium or penalty, for the Purchase Price determined pursuant to this
Section 13.2 (the "PURCHASE PRICE"), provided Landlord is given sixty (60) days
written notice of Tenant's election to purchase and provided further that
Tenant is not then in default under the terms of this Lease.
(1) The purchase price of the Premises shall be
determined by an appraisal conducted using an M.A.I. appraiser (or an appraiser
having the same class of certification of an M.A.I. appraiser by the successor
certification organization in the case that the designation of M.A.I. appraiser
is changed or succeeded). The appraisal shall not take into consideration the
Base Rent, terms or conditions of this Lease. The appraised value shall be
reduced by the cost of any leasehold improvements made to the Premises by
Tenant.
(2) The Tenant, at its sole expense, shall obtain, and
submit to Landlord, an appraisal of the fair market value of the Premises (the
"FIRST APPRAISAL") from an M.A.I. appraiser (the "FIRST APPRAISER"), and if
Landlord shall accept such appraisal, then such First Appraisal shall be the
Purchase Price.
(3) If Landlord does not accept such First Appraisal,
Landlord, at Landlord's sole expense shall obtain, and submit to Tenant, a
second appraisal of the fair market value of the Premises (the "SECOND
APPRAISAL") from an M.A.I. appraiser (the "SECOND APPRAISER"). If the
numerical difference between the value of the First Appraisal and the value of
the Second Appraisal is less than ten percent (10%) of the appraisal with the
lower value, then the two appraisal values shall be averaged and that averaged
value shall be the Purchase Price.
(4) If the numerical difference between the value of the
First Appraisal and the value of the Second Appraisal is equal to or greater
than ten percent (10%) of the appraisal with the lower value, then the First
Appraiser and the Second Appraiser shall choose a third M.A.I. appraiser (the
"THIRD APPRAISER") who shall appraise the fair market value of the Premises
(the "THIRD APPRAISAL"), and the three appraisal values shall be averaged and
that averaged value shall be the Purchase Price. If the Third Appraisal is
requested, the Landlord and Tenant shall each pay one-half (1/2) of the cost of
such Third Appraisal.
(b) In the event that the option herein granted shall be exercised
as aforesaid, Landlord agrees to sell and Tenant agrees to purchase the
Premises for the Purchase Price aforesaid and upon the following terms and
conditions:
(1) The Premises is to be conveyed at the time full
payment of the Purchase Price is made by Tenant to Landlord (hereinafter called
"CLOSING DATE"), but in no event later than three (3) months from the date of
receipt of Tenant's notice of election, by general warranty deed conveying to
Tenant or Tenant's nominee, title to the same, subject only to (i) the matters
set forth in EXHIBIT B and other matters previously approved in writing by
Tenant, (ii) any matters created by Tenant, and (iii) taxes and other
Impositions assessed against the Premises or any part thereof but not yet due
and
27
<PAGE> 33
payable, which charges, assessments, taxes and other Impositions shall be paid
by Tenant; but free and clear of any mortgages, liens or encumbrances upon
Landlord's interest.
(2) For such deed and conveyance Tenant is to pay the
Purchase Price in cash or by certified or bank check upon the delivery of such
deed.
(3) Full possession of the Premises is to be delivered to
Tenant at the time of delivery of the deed.
(4) The cost and expense of preparing the deed and any
other documents relating to said conveyance and recording the same including
title insurance premiums, Landlord's reasonable attorney's fees and real estate
transfer taxes (including documentary stamps and sur-tax, if applicable), if
any, shall be paid by Tenant.
(5) The Rent provided for in this Lease shall be
apportioned as of the Closing Date.
(6) The recording of a deed after the expiration of the
Term of this Lease, conveying the Premises to a third party and reciting that
the option in this Article has expired and has not been exercised shall be, as
to all persons other than Tenant, conclusive evidence of such expiration and
nonexercise.
(c) Notwithstanding anything to the contrary contained herein
Landlord may convey the Premises subject to the option herein granted;
provided, however, that the Landlord has complied with the provisions of this
Section 13.1 and the party to whom the Landlord conveys the Premises assumes in
writing all of Landlord's obligations under this Lease. No such conveyance
shall relieve the Landlord for liability for breach of representations as set
forth in Article 10 of this Lease.
(d) It is further understood and agreed that in the event Tenant
gives written notice to Landlord sixty (60) days before the Expiration Date or
the end of any Renewal Term, of Tenant's intention to purchase the Premises,
the Term of this Lease then shall be extended until the payment to Landlord of
the Purchase Price but in no event later than three (3) months therefrom. The
Purchase Price shall be paid no later than the expiration of such three (3)
month extension. In the event Tenant does not consummate the purchase pursuant
to the terms and conditions of this Section 13.2, then the Tenant's options as
set forth in this Section13.2 shall terminate.
(e) Landlord will, at the request of Tenant, promptly execute an
instrument in recordable form, reflecting Tenant's option to purchase the
Premises, and may be part of the recorded instrument referred to in Section
12.15, pursuant to this Article 13, which shall be filed for record in the
appropriate real property records.
(f) In the event that such option shall not be exercised as
aforesaid, Tenant shall, within ten (10) days upon demand of Landlord, deliver
to Landlord an instrument in form suitable for recording and executed and
acknowledged by Tenant whereby the option and all rights hereunder shall be
released and discharged.
28
<PAGE> 34
(g) To the extent that the provisions set forth in this Section
13.1 conflict with the terms of the Ford Lease, the Ford Lease shall prevail.
All right of the Tenant to purchase the property are subordinate to the rights
of Ford Leasing as set forth in the Ford Lease.
SECTION 13.3 SPECIFIC PERFORMANCE. It is expressly agreed that
the remedy at law for breach of any of the obligations set forth in this
Article 13 is inadequate in view of the complexities and uncertainties in
measuring the actual damages that would be sustained by reason of the failure
of Landlord or Tenant to comply fully with each of such obligations.
Accordingly, each of the aforesaid obligations shall be, and is hereby
expressly made, enforceable by specific performance.
ARTICLE 14
ARBITRATION
SECTION 14.1 ARBITRATION PROVISIONS. EXCEPT AS TO TENANT'S
EXERCISE OF REASONABLE JUDGMENT PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY
CONTROVERSY OR CLAIM BETWEEN THE PARTES HERETO RELATING TO THIS LEASE,
INCLUDING, WITHOUT LIMITATION, ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED
TORT, SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN THE
COUNTY AND STATE WHERE THE PREMISES ARE LOCATED. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. EXCEPT AS TO TENANT'S
EXERCISE OF REASONABLE JUDGMENT PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY
PARTY TO THIS LEASE MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
LEASE APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL
SIXTY (60) DAYS. ALL STATUTES OF LIMITATIONS THAT WOULD OTHERWISE BE
APPLICABLE SHALL) APPLY TO ANY DISPUTES ASSERTED IN ANY ARBITRATION PROCEEDING
HEREOF. THE ARBITRATORS SHALL HAVE THE RIGHT, TO AWARD COUNSEL FEES TO ANY
PARTY, TO GRANT TEMPORARY OR PERMANENT INJUNCTIVE RELIEF, AND TO REQUIRE
SPECIFIC PERFORMANCE. THE PARTIES SPECIFICALLY AGREE THAT THE ARBITRATORS MAY
NOT AWARD AND THE PARTIES WAIVE ANY RIGHT TO ANY EXEMPLARY OR PUNITIVE DAMAGES.
THE DECISION OR AWARD IN THE ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING
UPON EACH OF THE PARTIES AND JUDGMENT ON SUCH AWARD OR DECISION MAY BE ENTERED
IN ANY COURT OF COMPETENT JURISDICTION. THE PARTIES BY EXECUTION OF THE LEASE
AND INITIALING THIS PROVISION REPRESENT THAT THEY WERE GIVEN FULL AND COMPLETE
OPPORTUNITY TO REVIEW SAME WITH COUNSEL OF THEIR CHOOSING AND THEY HAVE READ
AND SIGNED SAME AS THEIR FREE AND VOLUNTARY ACT AND DEED.
29
<PAGE> 35
ARTICLE 15
SUBORDINATION AND ATTORNMENT
SECTION 15.1 SUBORDINATION. This Lease and all rights of Tenant
hereunder are and shall be subject and subordinate in all respects to all
mortgages encumbering Landlord's interest in the Premises as permitted in the
Lease (the "SUPERIOR MORTGAGE"). The provisions of this Section 15.1 shall be
self-operative and no further instrument of subordination shall be required.
If any Requesting Party shall seek confirmation of such subordination, Tenant
shall promptly execute and deliver, at its own cost and expense, an instrument,
in recordable form, to evidence such subordination; if Tenant fails to execute,
acknowledge or deliver any such instrument within ten (10) days after request
therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge
and deliver any such instruments for and on behalf of Tenant. However, nothing
herein withstanding to the contrary, the foregoing provisions shall not be
effective until the Landlord shall have delivered to Tenant a Non-Disturbance
Agreement, in the form required under Section 10.1, executed by each Landlord's
Financing Lender and each mortgagee and holder of a Superior Mortgage.
SECTION 15.2 ATTORNMENT. If, at any time prior to the termination
of this Lease, the holder of a Superior Mortgage, or its successors or assigns,
(herein collectively called the "SUPERIOR MORTGAGEE") who acquire the interest
of Landlord under this Lease through foreclosure action or a transfer-in-lieu
thereof, whereby the Superior Mortgagee succeeds to the rights of Landlord
under this Lease through possession or foreclosure or delivery of a new lease
or deed or otherwise, Tenant agrees, at the election and upon request of any
such party (hereinafter called the "SUCCESSOR LANDLORD") to attorn fully and
completely from time to time, and to recognize any such Successor Landlord as
Tenant's landlord under this Lease upon the executory terms of this Lease.
Provided Tenant is not in default under the terms of this Lease, such Successor
Landlord shall agree in writing to accept Tenant's attornment. The foregoing
provisions of this Section 15.2 shall inure to the benefit of any such
Successor Landlord and any successor or assign of Tenant. Tenant, upon demand
of any such Successor Landlord, agrees to execute any instruments to evidence
and confirm the foregoing provisions of this Section 15.2, reasonably
satisfactory to any such Successor Landlord, acknowledging such attornment and
setting forth the terms and conditions of its tenancy.
END OF PAGE
30
<PAGE> 36
EXECUTED as of the date and year first above written.
"LANDLORD"
KC PARTNERSHIP, A FLORIDA GENERAL PARTNERSHIP,
BY: /s/ JAMES S. CARROLL
-----------------------------------------
NAME: JAMES S. CARROLL, TRUSTEE OF THE
J. CARROLL ENTERPRISES TRUST UNDER
AMENDED AND RESTATED TRUST AGREEMENT
DATED AUGUST 3, 1993, GENERAL
PARTNER
"TENANT"
PERIMETER FORD, INC., a Delaware corporation
BY: /s/ JAMES S. CARROLL
-----------------------------------------
NAME: JAMES S. CARROLL
TITLE: VICE-PRESIDENT
31
<PAGE> 37
LEASE AGREEMENT
EXHIBIT A
DESCRIPTION OF LAND
ALL THAT TRACT OR PARCEL OF LAND LYING AND BEING IN LAND LOT 35 OF THE 17TH
DISTRICT OF FULTON COUNTY, GEORGIA AND BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
BEGINNING AT A 1/2" REBAR IRON PIN FOUND AT THE INTERSECTION OF THE WESTERLY
RIGHT-OF-WAY OF GEORGIA HIGHWAY NO. 400 WITH THE NORTHERLY RIGHT-OF-WAY OF
MOUNT VERNON HIGHWAY (80' R/W); THENCE RUNNING SOUTH 68 DEGREES 39 MINUTES WEST
ALONG THE NORTHWESTERLY RIGHT-OF-WAY OF MOUNT VERNON HIGHWAY A DISTANCE OF
381.4 FEET TO A 1/2" REBAR IRON PIN FOUND AT THE INTERSECTION OF THE
NORTHWESTERLY RIGHT-OF-WAY OF MOUNT VERNON HIGHWAY WITH THE NORTHEASTERLY
RIGHT-OF-WAY OF BARFIELD ROAD EXTENSION (80' R/W); THENCE RUNNING NORTH 59
DEGREES 36 MINUTES WEST A DISTANCE OF 37.1 FEET TO A 1/2" REBAR IRON PIN FOUND
ON THE NORTHEASTERLY RIGHT-OF-WAY OF BARFIELD ROAD EXTENSION; THENCE RUNNING
NORTH 19 DEGREES 22 MINUTES 30 SECONDS WEST ALONG SAID RIGHT-OF-WAY AN ARC
DISTANCE OF 231.36 FEET (CORD = 229.62') TO A POINT; THENCE RUNNING NORTH 31
DEGREES 13 MINUTES WEST ALONG SAID RIGHT-OF-WAY A DISTANCE OF 414.3 FEET TO A
1/2" REBAR IRON PIN FOUND; THENCE RUNNING NORTH 25 DEGREES 22 MINUTES WEST
ALONG SAID RIGHT-OF-WAY A DISTANCE OF 54.0 FEET TO AN 1/2" REBAR IRON PIN
FOUND; THENCE RUNNING NORTH 30 DEGREES 57 MINUTES 33 SECONDS WEST ALONG SAID
RIGHT-OF-WAY A DISTANCE OF 270.2 FEET TO A 1/2" REBAR IRON PIN FOUND; THENCE
RUNNING NORTH 89 DEGREES 30 MINUTES EAST A DISTANCE OF 409.3 FEET TO A 1/2"
REBAR IRON PIN FOUND; THENCE RUNNING SOUTH 00 DEGREES 14 MINUTES WEST A
DISTANCE OF 161.7 FEET TO A 1/2" REBAR IRON PIN FOUND; THENCE RUNNING NORTH 89
DEGREES 40 MINUTES EAST A DISTANCE OF 383.25 FEET TO A MARKER FOUND ON THE
WESTERLY RIGHT-OF-WAY OF GEORGIA HIGHWAY NO. 400; THENCE RUNNING SOUTH 09
DEGREES 47 MINUTES EAST ALONG SAID RIGHT-OF-WAY A DISTANCE OF 257.0 FEET TO A
CONCRETE MONUMENT FOUND; THENCE RUNNING SOUTH 01 DEGREES 41 MINUTES EAST ALONG
SAID RIGHT-OF-WAY A DISTANCE OF 81.1 FEET TO A CONCRETE MONUMENT FOUND; THENCE
RUNNING SOUTH 01 DEGREES 21 MINUTES EAST ALONG SAID RIGHT-OF-WAY A DISTANCE OF
239.54 FEET TO A CONCRETE MONUMENT FOUND AT THE INTERSECTION OF THE SAID
WESTERLY RIGHT-OF-WAY OF GEORGIA HIGHWAY NO. 400 WITH THE NORTHWESTERLY RIGHT-
OF-WAY OF MOUNT VERNON HIGHWAY AND THE TRUE POINT OF BEGINNING.
<PAGE> 38
LEASE AGREEMENT
EXHIBIT B
EXCEPTIONS TO TITLE TO LAND
1. Right of Way Deed from Glenn McCullough, et al., to Fulton County,
Georgia, dated August 8, 1958, recorded at Deed Book 3396, commencing
at page 632, Records of the Clerk of the Superior Court, Fulton
County, Georgia.
2. Right of Way Deed from R. Ben Smith, to Fulton County, Georgia, dated
October 27, 1958, recorded at Deed Book 3396, commencing at page 637,
aforesaid records.
3. Georgia Power Company Right of Way Easement from R. H. Nix, to Georgia
Power Company, dated March 30, 1959, recorded at Deed Book 3470,
commencing at page 515, aforesaid records.
4. Right of Way Deed from Corrie S. Carter, to State Highway Department
of Georgia, undated, recorded at Deed Book 4645, commencing at page
558, aforesaid records.
5. Right of Way Deed from J. N. Shaffer and J. Aronoff, dated October 10,
1966, recorded at Deed Book 4650, commencing at page 301, aforesaid
records.
6. Georgia Power Company Right of Way Deed from Mrs. Carrie Carter, to
Georgia Power Company, dated May 23, 1967, recorded at Deed Book 4755,
commencing at page 149, aforesaid records.
7. Permit for Anchors, Guy Poles and Wires from Margaret G. Ford, to
Georgia Power Company, dated August 25, 1967, recorded at Deed Book
4802, commencing at page 169, aforesaid records.
8. Right of Way Deed from Melrose Carter, as Co-Administrator of the
Estate of Tilden Thomas Carter, et al., to Fulton County, Georgia,
dated July 5, 1977, recorded at Deed Book 6752, commencing at page
468, aforesaid records.
9. Right of Way Deed from T & B Scottdale Contractors, Inc., dated May
19, 1978, recorded at Deed Book 6981, commencing at page 166,
aforesaid records.
10. Right of Way Deed from Margaret A. Ford, to Fulton County, Georgia,
dated June 6, 1978, recorded at Deed Book 6992, commencing at page 58,
aforesaid records.
11. Right of Way Deed from James H. Allen, to Fulton County, Georgia,
dated September 21, 1979, recorded at Deed Book 7434, commencing at
page 239, aforesaid records.
12. Declaration of Protective Covenants and Restrictions running with the
land, dated January 26, 1980, recorded at Deed Book 7470, commencing
at page 68, aforesaid records.
<PAGE> 39
13. Covenant contained in that Warranty Deed dated January 26, 1980,
recorded at Deed Book 7470, commencing at page 99, aforesaid records.
14. Easement from Ted W. Russell, et al., to Georgia Power Company, dated
June 30, 1980, recorded at Deed Book 7606, commencing at page 370,
aforesaid records.
15. Right of Way Deed from Church of Christ of Sandy Springs, Inc., to
Fulton County, Georgia, dated June 14, 1978, recorded at Deed Book
7117, commencing at page 298, aforesaid records.
16. Freedom Financial Leasing Corporation Lease No. 122951001 executed by
K. C. Partnership, dated January 18, 1996, recorded at Deed Book
20617, commencing at page 238, aforesaid records.
18. Freedom Financial Leasing Corporation Lease No. 126692001 and A306573
executed by K. C. Partnership, dated February 8, 1996, recorded at
Deed Book 21372, commencing at page 72, aforesaid records.
19. Right of First Refusal and Options contained in that Deed from Ford
Leasing Development Company, to K.C. Partnership, dated December,
1986, recorded at Deed Book 10561, commencing at page 432, aforesaid
records.
20. Lease between Ford Leasing Development Company and KC Partnership,
dated May 8, 1986.
21. Dealership Sublease between Ford Leasing Development Company and
Perimeter Ford, Inc.
<PAGE> 1
EXHIBIT 10.44
================================================================================
LEASE AGREEMENT
between
K.C. PARTNERSHIP, A FLORIDA GENERAL PARTNERSHIP
(Landlord)
and
COURTESY FORD, INC.
(Tenant)
Courtesy
================================================================================
<PAGE> 2
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 LEASE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Premises Leased . . . . . . . . . . . . . . . . . . 1
Section 1.2 Premises Defined . . . . . . . . . . . . . . . . . 1
Section 1.3 Habendum . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4 Termination of Prior Lease . . . . . . . . . . . . 1
ARTICLE 2 TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Initial Term and Commencement . . . . . . . . . . . 1
Section 2.2 Lease Year . . . . . . . . . . . . . . . . . . . . 1
Section 2.3 Lease Month . . . . . . . . . . . . . . . . . . . . 1
Section 2.4 Renewal Term . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1 Base Rent . . . . . . . . . . . . . . . . . . . . . 2
Section 3.2 Additional Rent and Rent . . . . . . . . . . . . . 2
Section 3.3 Payment of Rent . . . . . . . . . . . . . . . . . . 2
Section 3.4 Late Charge . . . . . . . . . . . . . . . . . . . . 3
Section 3.5 Adjustment to Rent for Ford Improvements . . . . . 3
ARTICLE 4 TAXES; UTILITIES . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1 Impositions Defined . . . . . . . . . . . . . . . . 3
Section 4.2 Tenant's Obligations . . . . . . . . . . . . . . . 3
Section 4.3 Tax Contest . . . . . . . . . . . . . . . . . . . . 3
Section 4.4 Evidence Concerning Impositions . . . . . . . . . . 4
Section 4.5 Utilities . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 5 IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.1 Alterations . . . . . . . . . . . . . . . . . . . . 4
Section 5.2 Mechanic's and Materialmen's Liens . . . . . . . . 4
Section 5.3 Ownership of Improvements . . . . . . . . . . . . . 5
Section 5.4 Asbestos . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 6 USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS . . . . . . . . 5
Section 6.1 Use . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 6.2 Environmental. . . . . . . . . . . . . . . . . . . 5
Section 6.3 Maintenance and Repairs . . . . . . . . . . . . . . 9
Section 6.4 Americans with Disabilities Act . . . . . . . . . . 10
ARTICLE 7 INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . 10
Section 7.1 Building Insurance . . . . . . . . . . . . . . . . 10
Section 7.2 Liability Insurance . . . . . . . . . . . . . . . . 10
Section 7.3 Policies . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 7.4 Tenant's Indemnity . . . . . . . . . . . . . . . . 11
Section 7.5 Landlord's Indemnity . . . . . . . . . . . . . . . 11
Section 7.6 Subrogation . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8 CASUALTY; CONDEMNATION . . . . . . . . . . . . . . . . . . . 12
Section 8.1 Tenant's Obligation to Restore . . . . . . . . . . 12
Section 8.2 Restoration and Deposit of Funds . . . . . . . . . 13
Section 8.3 Notice of Damage . . . . . . . . . . . . . . . . . 15
Section 8.4 Total Taking . . . . . . . . . . . . . . . . . . . 15
Section 8.5 Partial Taking . . . . . . . . . . . . . . . . . . 15
Section 8.6 Temporary Taking . . . . . . . . . . . . . . . . . 15
Section 8.7 Notice of Taking, Cooperation . . . . . . . . . . . 15
ARTICLE 9 TENANT'S FINANCING . . . . . . . . . . . . . . . . . . . . . 16
Section 9.1 Tenant's Right to Encumber . . . . . . . . . . . . 16
Section 9.2 Tenant's Mortgage . . . . . . . . . . . . . . . . . 16
ARTICLE 10 WARRANTY OF TITLE AND PEACEFUL POSSESSION . . . . . . . . . 17
Section 10.1 Warranty As to Encumbrances . . . . . . . . . . . . 17
Section 10.2 Landlord's Mortgage . . . . . . . . . . . . . . . . 18
Section 10.3 Representations of Landlord . . . . . . . . . . . . 18
ARTICLE 11 DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . 20
Section 11.1 Default . . . . . . . . . . . . . . . . . . . . . . 20
Section 11.2 Remedies . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 22
Section 12.1 Notices. . . . . . . . . . . . . . . . . . . . . . 22
Section 12.2 Performance of Other Party's Obligations . . . . . 22
Section 12.3 Modification and Non-Waiver . . . . . . . . . . . . 23
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.5 Number and Gender; Captions; References . . . . . . 23
Section 12.6 CPI . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.7 Estoppel Certificate . . . . . . . . . . . . . . . 23
Section 12.8 Severability . . . . . . . . . . . . . . . . . . . 23
Section 12.9 Attorney Fees . . . . . . . . . . . . . . . . . . . 24
Section 12.10 Surrender of Premises; Holding Over . . . . . . . 24
Section 12.11 Relation of Parties . . . . . . . . . . . . . . . 24
Section 12.12 Force Majeure . . . . . . . . . . . . . . . . . . 24
Section 12.13 Non-Merger . . . . . . . . . . . . . . . . . . . . 24
Section 12.14 Entireties . . . . . . . . . . . . . . . . . . . . 24
Section 12.15 Recordation . . . . . . . . . . . . . . . . . . . 24
Section 12.16 Successors and Assigns . . . . . . . . . . . . . . 25
Section 12.17 Landlord's Joinder . . . . . . . . . . . . . . . . 25
Section 12.18 No Third Parties Benefitted . . . . . . . . . . . 25
Section 12.19 Survival . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C>
Section 12.20 Perpetuities . . . . . . . . . . . . . . . . . . . 25
Section 12.21 Transfer of Landlord's Interest . . . . . . . . . 25
Section 12.22 Tenant's Right To Assign . . . . . . . . . . . . . 25
Section 12.23 Past Due Amounts . . . . . . . . . . . . . . . . . 26
Section 12.24 Independent Counsel . . . . . . . . . . . . . . . 26
Section 12.25 Cooperation with Landlord's Lender. . . . . . . . 26
ARTICLE 13 OPTION TO PURCHASE PREMISES . . . . . . . . . . . . . . . . 26
Section 13.1 Right of First Refusal . . . . . . . . . . . . . . 26
Section 13.2 Option . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.3 Specific Performance . . . . . . . . . . . . . . . 29
ARTICLE 14 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 14.1 Arbitration Provisions . . . . . . . . . . . . . . 29
ARTICLE 15 SUBORDINATION AND ATTORNMENT . . . . . . . . . . . . . . . . 30
Section 15.1 Subordination. . . . . . . . . . . . . . . . . . . 30
Section 15.2 Attornment . . . . . . . . . . . . . . . . . . . . 30
Section 15.3 Radon Gas Disclosure . . . . . . . . . . . . . . . 30
</TABLE>
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EXHIBITS
EXHIBIT A Description of Land
EXHIBIT B Exceptions to Title to Land
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<PAGE> 6
LEASE AGREEMENT
This Lease Agreement ("LEASE") is entered into as of the 16th day
of March, 1998, between K.C. PARTNERSHIP, A FLORIDA GENERAL PARTNERSHIP as
("LANDLORD"), and COURTESY FORD, INC., a Florida corporation ("TENANT").
ARTICLE 1
LEASE OF PROPERTY
SECTION 1.1 PREMISES LEASED. Landlord subleases to Tenant, and
Tenant leases from Landlord the real property and premises described on EXHIBIT
A (the "LAND"), including but not limited to all of the rights, interests,
estates, and appurtenances thereto, all improvements thereon, and all other
rights, titles, interests, and estates, if any, in adjacent streets and roads.
SECTION 1.2 PREMISES DEFINED. All of the Land, properties,
rights, estates, appurtenances, and interests leased to Tenant pursuant to
Section 1.1, together with all improvements now or hereafter constructed
thereon, are hereinafter collectively referred to as the "PREMISES".
SECTION 1.3 HABENDUM. To have and to hold the Premises, together
with all and singular the rights, privileges, and appurtenances thereunto
attaching or in anywise belonging, exclusively unto Tenant, its successors and
assigns, upon the terms and conditions set forth herein and subject to the
matters set forth on EXHIBIT B.
SECTION 1.4 TERMINATION OF PRIOR LEASE. The Premises was
previously subject to a lease agreement by and between Landlord and Tenant's
predecessor ("PRIOR LEASE"). Immediately upon the execution (and delivery to
each other) by Landlord and Tenant of this Lease, the Prior Lease shall
automatically terminate and be of no further force and effect. Landlord and
Tenant's predecessor shall execute and deliver to Tenant a written instrument
evidencing such termination.
ARTICLE 2
TERM OF LEASE
SECTION 2.1 INITIAL TERM AND COMMENCEMENT. The initial term
("INITIAL TERM") of this Lease shall commence on the date hereof ("COMMENCEMENT
DATE") and unless sooner terminated pursuant to the terms of this Lease, the
initial term of this Lease shall expire on the "EXPIRATION DATE" (herein so
called), which shall be (i) the last day of the one hundred twentieth (120th)
Lease Month from and after the first day of the calendar month following the
Commencement Date.
SECTION 2.2 LEASE YEAR. A "LEASE YEAR" shall mean a twelve (12)
Lease Month period commencing with the first day of the calendar month
following the Commencement Date or any anniversary date thereof.
SECTION 2.3 LEASE MONTH. A "LEASE MONTH" shall mean a period of
time during the term of this Lease commencing the first day of the calendar
month and ending on the last day of the calendar month. The first Lease Month
shall begin on the first day of the calendar month following the Commencement
Date.
<PAGE> 7
SECTION 2.4 RENEWAL TERM.
(a) If on the Expiration Date and the date Tenant notifies
Landlord of its intention to renew the term of this Lease (as provided below),
(i) Tenant has not been given notice of default under this Lease based upon a
Default, as hereinafter defined, and (ii) this Lease is in full force and
effect, then Tenant, shall have and may exercise an option to renew this Lease
for four (4) additional terms (each, a "RENEWAL TERM") of five (5) years each,
upon the same Rent (hereinafter defined), as adjusted pursuant to the terms of
Section 3.1, and other terms and conditions contained in this Lease. Whenever
used in this Lease, "TERM", unless modified or specifically noted otherwise in
the applicable context, shall mean the Initial Term together with each Renewal
Term to the extent Tenant has exercised any option with respect to any Renewal
Term.
(b) If Tenant desires to renew this Lease, Tenant must notify
Landlord in writing of its intention to renew on or before the date which is at
least six (6) months but no more than twelve (12) months prior to the
Expiration Date or the expiration date of any Renewal Term, as the case may be.
ARTICLE 3
RENT
SECTION 3.1 BASE RENT. Subject to the terms and provisions
contained in this Section 3.1, Tenant shall pay Landlord monthly "BASE RENT"
(herein so called) of Sixty Seven Thousand and no/100 Dollars ($67,000.00), in
advance on or before the first day of each Lease Month during the Term, subject
to adjustment as hereafter provided. If the Term commences on a day other than
the first day of a calendar month, or ends on a day other than the last day of
a calendar month, then the Base Rent for such month shall be prorated on the
basis of one thirtieth (1/30th) of the monthly Base Rent for each day of such
month. If the CPI on any Adjustment Date shall be greater than the CPI for the
Commencement Date, monthly Base Rent commencing on the Adjustment Date shall be
adjusted to be the original monthly Base Rent specified in this Section 3.1
plus an amount equal to one-half (1/2) of the product obtained by multiplying:
(i) the original monthly Base Rent specified in this Section 3.1 by (ii) the
percentage increase in the CPI from the Commencement Date through the January
1st prior to the Adjustment Date. "ADJUSTMENT DATE" shall be the first day of
the first Lease Month of each Renewal Term. The term "CPI" shall have the
meaning specified therefor in Section 12.6.
Tenant shall also pay at the same times and places as the
rental installments such Florida State Sales Tax, other such applicable taxes
due on rentals and all other sums due hereunder either city, state, county or
federal as may be in effect from time to time.
SECTION 3.2 ADDITIONAL RENT AND RENT. All amounts required to be
paid by Tenant under the terms of this Lease, other than Base Rent, are herein
from time to time collectively referred to as "ADDITIONAL RENT." Base Rent and
Additional Rent are herein collectively referred to as "RENT."
SECTION 3.3 PAYMENT OF RENT. Base Rent shall be payable to
Landlord at the original or changed address of Landlord as set forth in Section
12.1 or to such other persons or at such other addresses in the United States
of America as Landlord may designate from time to time in writing to Tenant;
however, if Tenant receives notice of a default under the Landlord's Financing
(defined below), then Tenant shall have the right, but not the obligation, to
pay to Landlord's Financing Lender (defined
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<PAGE> 8
below) any sums due and owing on such Landlord's Financing and all such
payments by Tenant shall reduce the amount of Rent owing to Landlord.
Additional Rent shall be paid as herein set forth.
SECTION 3.4 LATE CHARGE. Any rent or other sum which is not
paid within fifteen (15) days after the date due shall bear interest at the
Default Rate from the date when the same is payable under the terms of this
Lease until the same shall be paid.
SECTION 3.5 ADJUSTMENT TO RENT FOR FORD IMPROVEMENTS. Landlord
and Tenant recognize that Ford Leasing or its related entities ("FORD") may
from time to time require that structural improvements to the Premises be made
as a condition to the continuation of a Ford Dealership upon the Premises. In
the event that Ford requires that such structural improvements be made to the
Premises, Landlord shall, at its expense, construct such improvements. The
Base Rent due pursuant to Section 3.1 hereinabove shall be increased by an
amount equal to the costs of the improvements required by Ford, amortized over
a fifteen (15) year period. The new Base Rent shall commence effective the
next monthly period following the completion of the required improvements.
ARTICLE 4
TAXES; UTILITIES
SECTION 4.1 IMPOSITIONS DEFINED. "IMPOSITIONS" means all real
estate and ad valorem taxes, and associated levies, including penalties levied
for failure of Tenant to pay any of same in a timely manner, which shall or may
during the Term be assessed, levied or imposed by any Governmental Authority
(defined below) upon (a) the Premises or any part thereof, (b) the buildings or
improvements now or hereafter comprising a part thereof, the appurtenances
thereto or the sidewalks, streets, or vaults adjacent thereto. Impositions
shall not include any income tax, capital levy, estate, succession, inheritance
or transfer taxes, or similar tax of Landlord; any franchise tax imposed upon
any owner of the fee of the Premises; or any income, profits, or revenue tax,
assessment, or charge imposed upon the rent or other benefit received by
Landlord under this Lease by any municipality, county, state, the United States
of America, or any other governmental body, subdivision, agency, or authority
(all of such foregoing governmental bodies are collectively referred to herein
as "GOVERNMENTAL AUTHORITIES").
SECTION 4.2 TENANT'S OBLIGATIONS. During the Term, Tenant will
pay all Impositions before they become delinquent. Impositions that are
payable by Tenant for the tax year in which this Lease commences as well as
during the year in which the Term ends shall be apportioned so that Tenant
shall pay its share of the Impositions payable by Tenant for the portion of
such Taxes allocable to the portion of such year occurring during the Term.
Where any Imposition that Tenant is obligated to pay may be paid pursuant to
law in installments, Tenant may pay such Imposition in installments as and when
such installments become due. Tenant shall, if so requested, deliver to
Landlord evidence of payment of all Impositions Tenant is obligated to pay
hereunder, concurrently with the making of such payment.
SECTION 4.3 TAX CONTEST. Tenant may, at its expense, contest the
validity or amount of any Imposition for which it is responsible, in which
event the payment thereof may be deferred, as permitted by law, during the
pendency of such contest, if diligently prosecuted. Landlord shall cooperate
with Tenant in connection with any such contest but Landlord shall not be
required to spend any sums or incur any liability in cooperating with Tenant.
All taxes must be paid prior to the date they become delinquent.
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<PAGE> 9
In the event that the property subject to this Agreement is encumbered by
financing, the Tenant shall pay all taxes within the time frame established by
such lender.
SECTION 4.4 EVIDENCE CONCERNING IMPOSITIONS. The certificate,
advice, bill, or statement issued or given by the appropriate officials
authorized by law to issue the same or to receive payment of any Imposition of
the existence, nonpayment, or amount of such Imposition shall be prima facie
evidence for all purposes of the existence, nonpayment, or amount of such
Imposition.
SECTION 4.5 UTILITIES. Tenant shall pay all charges for gas,
electricity, light, heat, air conditioning, power, telephone, and other
communication services, and all other utilities and similar services rendered
or supplied to the Premises, and all water, refuse, sewer service charges, or
other similar charges levied or charged against, or in connection with, the
Premises.
ARTICLE 5
IMPROVEMENTS
SECTION 5.1 ALTERATIONS. At any time and from time to time
during the Term, Tenant may perform such alteration, renovation, repair,
refurbishment, and other work (herein such matters being collectively called
the "ALTERATIONS") with regard to any Improvements as Tenant may elect. All
buildings, structures, and other improvements located at any time on the Land
are herein called the "IMPROVEMENTS." Any and all alterations, renovation,
repair, refurbishment, or other work with regard thereto shall be performed, in
accordance with the following "CONSTRUCTION STANDARDS" (herein so referenced):
(i) All such construction or work shall be performed in a good and workmanlike
manner in accordance with good industry practice for the type of work in
question; (ii) All such construction or work shall be done in compliance with
all applicable building codes, ordinances, and other laws or regulations of
Governmental Authorities having jurisdiction; (iii) Tenant shall have obtained
and shall maintain in force and effect the insurance coverage required in
Article 7 with respect to the type of construction or work in question; (iv)
After commencement, such construction or work shall be prosecuted with due
diligence to its completion; and (v) With the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed and shall
be deemed given if a request is not approved or denied within thirty (30) days
after notice, no Alteration shall be made which (x) involves any material
repairs or modifications to the structural portions of the Premises, or (y)
would impair the market value, structural integrity or usefulness of the
Premises for the purposes for which the same are presently being used.
SECTION 5.2 MECHANIC'S AND MATERIALMEN'S LIENS. Tenant shall
have no right, authority, or power to bind Landlord or any interest of Landlord
in the Premises for any claim for labor or for material or for any other charge
or expense incurred in construction of any Improvements or performing any
alteration, renovation, repair, refurbishment, or other work with regard
thereto, nor to render Landlord's interest in the Premises liable for any lien
or right of lien for any labor, materials, or other charge or expense incurred
in connection therewith, and Tenant shall in no way be considered as the agent
of Landlord in the construction, erection, or operation of any such
Improvements. If any liens or claims for labor or materials supplied or
claimed to have been supplied to the Premises shall be filed against the
interest of the Landlord, Tenant shall promptly pay or bond such liens to
Landlord's reasonable satisfaction or otherwise obtain the release or discharge
thereof.
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<PAGE> 10
SECTION 5.3 OWNERSHIP OF IMPROVEMENTS. During the Term all
currently existing Improvements shall be solely the property of Landlord. All
other Improvements created by Alterations which may be added by Tenant (which
do not constitute replacements of existing Improvements) shall be the property
of Tenant, but at the end of the Term, all then-existing Improvements shall be
the property of Landlord. However, upon expiration or earlier termination of
this Lease, Tenant shall have the right to remove all trade fixtures, movable
equipment, furniture, furnishings and other personal property located in the
Premises and other items not permanently attached to the Premises provided that
Tenant repairs any damages caused by the removal of such items. Nothing
hereinabove withstanding to the contrary, any lifts or hydraulics installed
upon the Premises by Tenant, whether as an original installation or
replacement, shall remain on the Premises and shall become the property of the
Landlord upon expiration or termination of this Lease.
SECTION 5.4 ASBESTOS. Landlord shall remain fully liable and
responsible for any asbestos and other Hazardous Substances as hereinafter
defined present on any portion of the Premises prior to the date of this Lease
even if such asbestos is in an unfriable or undisturbed state on the date of
this Lease and Tenant thereafter disturbs such materials in any manner
including, without limitation, in connection with any Alterations performed by
Tenant on the Premises. If Tenant intentionally disturbs or causes to be
disturbed by any contractor or other party any asbestos presently located on
the Premises of which Tenant has actual knowledge, then any such disturbance of
such asbestos shall only be done in accordance with all laws, regulations,
ordinances, or requirements of any Governmental Authority having jurisdiction
in the Premises including, without limitation, those which govern the
disposition of Hazardous Substances. Any expenses associated with correction
of such disturbance caused by the Tenant or its contractors shall be borne by
the Tenant.
ARTICLE 6
USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS
SECTION 6.1 USE.
Subject to the terms and provisions hereof, Tenant may use and enjoy
the Premises for the sale, lease, trade, repair or service of motor or other
vehicles and other uses normally associated therewith including, without
limitation, the sale of parts and services. Without limiting the generality of
the foregoing, the provisions relating to use of the Premises shall be broadly
construed to encompass all uses normally associated with premises occupied by
automobile, boat and recreational vehicle dealerships. Tenant shall not use or
occupy, permit the Premises to be used or occupied, nor do or permit anything
to be done in or on the Premises in a manner which would constitute a public or
private nuisance, or which would violate any laws, regulations, ordinances, or
requirements of any Governmental Authority having jurisdiction in the Premises
including, without limitation, those which relate to Hazardous Substances.
SECTION 6.2 ENVIRONMENTAL.
(a) For purposes of this Lease, the term "HAZARDOUS SUBSTANCE"
means (i) any substance, product, waste or other material of any nature
whatsoever which is or becomes listed, regulated, or addressed pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.
5
<PAGE> 11
("RCRA"); the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the
Clean Water Act, 33 U.S.C. Section 1251 et seq.; the Federal Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Federal Clean Water Act, 33 U.S.C. Section
1151 et seq.; the National Environmental Policy Act, 42 U.S.C. Section 1857 et
seq.; the Regulations of the Environmental Protection Agency, 33 C.F.R. and 40
C.F.R.; Chapters 373, 376, 380 and 403 of the Florida Statutes and rules
related thereto, including Chapters 17, 27 and 40 of the Florida Administrative
Code; and all Dade County environmental protection ordinances, (the above-cited
Florida state statutes are hereinafter collectively referred to as the "STATE
TOXIC SUBSTANCES LAWS") or any other federal, state or local statute, law,
ordinance, resolution, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect, (ii) any substance, product, waste or other
material of any nature whatsoever which may give rise to liability under any
of the above statutes or under any statutory or common law theory based on
negligence, trespass, intentional tort, nuisance or strict liability or under
any reported decisions of a state or federal court, (iii) petroleum or crude
oil other than petroleum and petroleum products which are contained within
regularly operated motor vehicles, and (iv) asbestos.
(b) Tenant represents, warrants, acknowledges and agrees that:
(i) Subject to the terms and provisions of this
Lease, Tenant will not undertake, permit,
authorize or suffer, the manufacture,
handling, generation, transportation,
storage, treatment, discharge, release,
burial or disposal on, under or about the
Premises of any Hazardous Substance, or the
transportation to or from the Premises of any
Hazardous Substance;
(ii) Tenant will not cause, permit, authorize or
suffer any Hazardous Substance to be placed,
held, located or disposed of, on, under or
about any other real property all or any
portion of which is legally or beneficially
owned (or any interest or estate therein
which is owned) by the Tenant in any
jurisdiction now or hereafter having in
effect a so-called "Superlien" law or
ordinance or any part thereof the effect of
which law or ordinance would be to create a
lien on the Premises to secure any obligation
in connection with the real property in such
other jurisdiction.
(c) From and after the Commencement Date, Tenant shall keep and
maintain the Premises in compliance with, and shall not cause or permit the
Premises to be in violation of, any federal, state or local laws, ordinances
or regulations relating to health and safety, industrial hygiene or to the
environmental conditions on, under or about the Premises including, but not
limited to, air, soil and ground water conditions. Tenant hereby covenants and
agrees that neither it nor any agent, servant, employee, or tenant shall
generate, manufacture, handle, store, treat, discharge, release, bury or
dispose of on, under or about the Premises, any Hazardous Substance. Without
limiting the generality of the foregoing provisions of this Subsection, Tenant
agrees at all times to comply fully and in a timely manner with, and to cause
all of its employees, agents, contractors, subcontractors, tenants and any
other persons occupying or present on the Premises to so comply with, all
federal, state and local laws, regulations, guidelines, codes, statutes and
ordinances applicable to the generation, manufacture, handling, storage,
treatment, discharge, release, burial or disposal of any Hazardous Substance
located or present on, under or about the Premises by, through or under Tenant
after the Commencement Date, or the transportation to or from the Premises of
any Hazardous Substance. Any sublease executed after the date hereof
concerning the Premises shall contain a provision prohibiting the lessee, and
any agent, servant, employee or tenant of the lessee, from generating,
manufacturing, storing, treating, discharging, releasing, burying or disposing
on, under or about the Premises, or transporting to or from the Premises, any
Hazardous Substance.
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<PAGE> 12
(d) If the release, threat of release, placement on, under or
about the Premises, or the use, generation, manufacture, storage, treatment,
discharge, release, burial or disposal on, under or about the Premises, or
transportation to or from the Premises, of any Hazardous Substance: (i) gives
rise to liability, costs or damages (including, but not limited to, a response
action, remedial action, or removal action) under RCRA, CERCLA, the State Toxic
Substances Laws, or any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or under any reported
decision of a state or federal court, (ii) causes or threatens to cause a
significant public health effect, or (iii) pollutes or threatens to pollute the
environment, the Tenant shall promptly take any and all response, remedial and
removal action necessary to clean up the Premises and any other effected
property and mitigate exposure to liability arising from the Hazardous
Substance, if required by law or by any governmental authority.
(e) Tenant shall indemnify, defend with counsel reasonably
satisfactory to Landlord, protect and hold harmless Landlord, its directors,
officers, employees, agents, assigns and any successor or successors to
Landlord's interest under this Lease from and against all claims, actual
damages (including but not limited to special and consequential damages),
punitive damages, injuries, costs, response costs, losses, demands, debts,
liens, liabilities, causes of action, suits, legal or administrative
proceedings, interest, fines, charges, penalties and expenses (including but
not limited to attorneys' and expert witness fees and costs incurred in
connection with defending against any of the foregoing or in enforcing this
indemnity) of any kind whatsoever paid, incurred or suffered by, or asserted
against, any indemnified party at any time prior to any retaking of the
Premises by Landlord directly or indirectly arising from or attributable to (i)
any breach by Tenant of any of its agreements, warranties or representations
set forth in this Section 6.2, or (ii) any repair, cleanup or detoxification,
or preparation and implementation of any removal, remedial, response, closure
or other plan concerning any Hazardous Substance which arises on, under or
about the Premises after the Commencement Date and is attributable to Tenant
and not to Landlord or any other party not under the control, employed by,
contracted with or affiliated with Tenant, regardless of whether undertaken due
to governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Landlord for any liability pursuant to such statute, to
the extent Tenant is liable pursuant to this Section 6.2.
(f) Tenant shall promptly give Landlord (i) a copy of any notice,
correspondence or information it receives from any federal, state or other
governmental authority regarding Hazardous Substances on, under or about the
Premises or Hazardous Substances which affect or may affect the Premises, or
regarding any actions instituted, completed or threatened by any such
governmental authority concerning Hazardous Substances which affect or may
affect the Premises, (ii) written notice of any knowledge or information Tenant
obtains regarding Hazardous Substances on, under or about the Premises or
incurred by Tenant (other than commercially reasonable quantities of
customarily used cleaning compounds and the like and the matters covered in
subsections (h) and (i) of this Section 6.2), a third party or any government
agency to study, assess, contain or remove any Hazardous Substances on, under,
about or near the Premises for which expense or loss Tenant may be liable or
for which a lien may be imposed on the Premises, (iii) written notice of any
knowledge or information Tenant obtains regarding the release or discovery of
Hazardous Substances on, under or about the Premises or on other sites owned,
occupied or operated by Tenant or by any person for whose conduct Tenant is or
may be responsible, or whose liability may result in a lien on or otherwise
affect the Premises, (iv) written notice of all claims made or threatened by
any third party against Tenant or the Premises relating to damage,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Substance, and (v) written notice of Tenant's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of
the Premises that could subject the Premises to any restrictions on the
ownership, occupancy, transferability or use of the Premises under any of the
statutes cited in Subsection (a) of this Section 6.2 or any regulation adopted
pursuant thereto. Notwithstanding anything to the contrary contained herein,
Tenant shall not be under any obligation to provide notice of any contamination
so long as any of the principal(s) of Landlord (currently being James S.
Carroll, William C. Carroll, Janet L. Giles and Ralph S. Kerr) are responsible
for the operation of the dealership at the Premises.
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(g) Notwithstanding anything to the contrary contained herein,
the indemnity contained in this Section 6.2 shall continue indefinitely from
the date of Tenant's execution of this Lease and shall survive the termination
of all agreements between Tenant and Landlord. The indemnity contained in this
Section 6.2 in no way limits the scope or enforceability of any other indemnity
contained herein.
(h) Commercially reasonable quantities of customarily used
cleaning compounds and the like, which are stored, used and disposed of in
compliance with applicable environmental laws, shall be excluded from any
obligation of Tenant hereunder this Section 6.2. Commercially reasonable
quantities of products customarily used in Tenant's business and the like,
which are stored, used and disposed of in compliance with applicable
environmental laws, are hereby permitted by Landlord.
(i) Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have no liability or obligation under this Section 6.2 or
elsewhere in this Lease for any matter existing on, under or about the
Premises prior to the Commencement Date, including, without limitation, the
removal or remediation of any Hazardous Substances and Landlord shall maintain
full liability for such pre-Commencement Date contamination. Landlord shall
indemnify, defend with counsel reasonably satisfactory to Tenant, protect and
hold harmless Tenant, its directors, officers, employees, agents, assigns and
any successor or successors to Tenant's interest under this Lease from and
against all claims, actual damages (including but not limited to special and
consequential damages), punitive damages, injuries, costs, response costs,
losses, demands, debts, liens, liabilities, causes of action, suits, legal or
administrative proceedings, interest, fines, charges, penalties and expenses
(including but not limited to attorneys' and expert witness fees and costs
incurred in connection with defending against any of the foregoing or in
enforcing this indemnity) of any kind whatsoever paid, incurred or suffered by,
or asserted against, any indemnified party directly or indirectly arising from
or attributable to (1) any breach by Landlord any of its agreements, warranties
or representations set forth in this Section 6.2(i), or (2) any repair, cleanup
or detoxification, or preparation and implementation of any removal, remedial,
response, closure or other plan concerning any Hazardous Substance on, under or
about the Premises prior to the Commencement Date attributable to Landlord or
any other party under the control, employed by, contracted with or otherwise
associated with Landlord in any manner, regardless of whether undertaken due to
governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Tenant for any liability pursuant to such statute, to
the extent Landlord is liable pursuant to this Section 6.2(i).
SECTION 6.3 MAINTENANCE AND REPAIRS. During the Term of this
Lease, in addition to the Rent herein provided, Tenant agrees to pay all costs
and charges for repair and maintenance of the Premises, except as otherwise
provided herein. Tenant agrees to surrender the Premises at the expiration or
earlier termination of this Lease in as good condition as at the commencement
of the term of this Lease except, Tenant shall not be responsible for the
repair or condition of those portions of the Premises which Landlord agrees to
maintain nor damage by dry rot, termites, sinking of floors, or ordinary wear
and tear. Landlord agrees to maintain in good repair, at Landlord's cost, the
roof, outer walls (which will include the bulkheads under plate glass windows),
downspouts, underground plumbing, underground and in the wall wiring, support
of floors, and, without limitation, structural portions of the Premises.
Tenant shall keep in good repair the electrical equipment, air conditioning
equipment and heating equipment, and when required, Tenant shall replace such
components with items of at least scope and quality of those being replaced.
In the event Tenant has replaced any of such equipment prior to the end of its
normal useful life and the Term of this Lease terminates or expires in
accordance with the provisions contained in
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this Lease, then Landlord shall pay to Tenant on such termination date or
expiration date, as the case may be, an amount equal to the cost of such
equipment paid by Tenant times a fraction, the numerator of which is the number
of months in the normal useful life of such equipment minus the number of
months from the date of installation of such equipment to the date of
termination or expiration, as the case may be, of the Term, and the denominator
of which is the number of months in the normal useful life of such equipment.
No such payment shall be required to made by Landlord if the Term is terminated
due to the occurrence and continuation of a Default by Tenant. Tenant agrees
to replace any plate, window or door glass broken in the Premises with glass of
like kind and quality, except Tenant shall not be required to replace glass
broken due to settlement or defective construction of the building or due to
the failure of Landlord to maintain and repair those portions of the Premises
which Landlord agrees herein to maintain and repair or due to negligent repair
of said premises by Landlord. Landlord agrees to replace glass broken in the
Premises when breakage is due to any of the causes set forth in the next
preceding sentence which shall relieve Tenant from replacing said glass as set
forth herein. Landlord and Tenant shall, comply with all laws, rules, orders,
ordinances, directions, regulations and requirements of federal, state, county
and municipal authorities pertaining to the Premises, including the Americans
with Disabilities Act. Any repairs required to be made by the Landlord and
Tenant shall be made in a prompt and workmanlike manner. All goods and
materials used shall be in quality equal to or better than that being replaced.
The Tenant shall supply the Landlord with copies of all warranties offered as
to any replacements and shall supply Landlord with copies of any invoices for
repairs or replacements, the cost of which exceeds $5,000.00. Tenant's failure
to supply such warranties and invoices shall not be deemed a default under the
terms of this Lease.
Subject to the other terms of this Lease, Tenant acknowledges that it
has inspected and that the Premises, including all fixtures, equipment and
furnishings contained therein, are in satisfactory or excellent condition and
accepts the Premises in its "AS IS" condition, without requiring Landlord to
make any repairs or replacements thereof. Tenant hereby waives any objection
to and releases Landlord from any liability arising from the condition of the
Premises from and after the Commencement Date, except for matters as herein set
forth.
Any Improvements being constructed upon the Land together with all
equipment and hardware, may be warrantied by third party vendors who have
performed labor or rendered materials thereto. The Tenant shall be entitled to
the benefit of all such warranties and the Landlord shall fully cooperate in
securing the services of such third party vendors for warranty work during the
Term of this Lease.
SECTION 6.4 AMERICANS WITH DISABILITIES ACT. Landlord shall be
responsible for compliance with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, attributable to the Premises as of the Commencement Date of
this Lease. In the event the Tenant makes any modifications to the Premises,
all such modifications shall comply with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, including modifications which are required by such
governmental agencies, as a result of such modifications, to remaining
unmodified portions of the Premises.
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ARTICLE 7
INSURANCE AND INDEMNITY
SECTION 7.1 BUILDING INSURANCE. Tenant will, at its cost and
expense, keep and maintain in force the following policies of insurance:
(1) Insurance on the Improvements against loss or damage by fire
and against loss or damage by any other risk now and from time to time insured
against by "extended coverage" provisions of policies generally in force on
improvements of like type in the city in which the Premises are located, and in
builder's risk completed value form during construction of improvements by
Tenant, in amounts sufficient to provide coverage for the full insurable value
of the Improvements; the policy for such insurance shall have a replacement
cost endorsement or similar provision. "FULL INSURABLE VALUE," shall mean
actual replacement value (exclusive of cost of excavation, foundations, and
footings below the surface of the ground or below the lowest basement level),
and such full insurable value shall be determined by Tenant's insurer, and
confirmed from time to time at the request of Landlord by one of the insurers.
The Tenant shall maintain all storm and flood insurances which are customarily
maintained for properties similar to the Premises in the County in which the
Premises are located, or which is required by Landlord's Lender (if any), and
only if such coverage is available, to fully insure the Improvements including
all such coverages which might later come into existence as a result of changes
in the insurance coverages available or required in the future.
(2) Worker's Compensation Insurance as to Tenant's employees
involved in the construction, operation, or maintenance of the Premises in
compliance with applicable law.
(3) Such other insurance against other insurable hazards which at
the time are commonly insured against in the case of improvements similarly
situated, due regard being given to the height and type of the Improvements,
their construction, location, use, and occupancy.
SECTION 7.2 LIABILITY INSURANCE. Tenant shall secure and
maintain in force comprehensive general liability insurance, including
contractual liability specifically applying to the provisions of this Lease and
completed operations liability, with limits of not less than Ten Million
Dollars ($10,000,000) with respect to bodily injury or death to any number of
persons in any one accident or occurrence and with respect to property damage
in any one accident or occurrence, such limits to be increased in the event of
request by Landlord by an amount which may be reasonable at the time.
SECTION 7.3 POLICIES. All insurance maintained in accordance
with the provisions of this Article 7 shall be issued by companies reasonably
satisfactory to Landlord, and shall be carried in the name of both Landlord and
Tenant, as their respective interests may appear, and shall contain a mortgagee
clause acceptable to the Landlord's Financing Lender and the Permitted
Mortgagees. All property policies shall (i) be subject to prior written
approval of Landlord, which shall not be unreasonably withheld or delayed, and
(ii) expressly provide that any loss thereunder may be adjusted with Tenant,
Landlord's Financing Lender and Permitted Mortgagees, but, unless required
otherwise under Landlord's Financing, shall be payable to Tenant and disbursed
as set forth in Section 8.2. All property and liability insurance policies
shall name Landlord as an additional named insured and shall include
contractual liability endorsements. Tenant shall furnish Landlord, Landlord's
Financing Lender and each Permitted Mortgagee with evidence of all insurance
policies required under this Article 7 and shall furnish and maintain with each
of such parties, at all times, a certificate of the insurance carrier
certifying that such
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insurance shall not be canceled without at least fifteen (15) days advance
written notice to each of such parties.
SECTION 7.4 TENANT'S INDEMNITY. Subject to Section 7.6, Tenant
shall indemnify and hold harmless Landlord, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED LANDLORD PARTIES"), from all claims, suits, actions,
and proceedings whatsoever which may be brought or instituted on account of or
growing out of any Default and any and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the Claims, to the extent, but
only to the extent, such Claims are not attributable to (i) events or
conditions that occurred or existed, in whole or in part, prior to the date
when Tenant first occupied the Premises or (ii) failure of any components of
the Improvements that Landlord is required to maintain ("CLAIMS"), Tenant shall
assume on behalf of the Indemnified Landlord Parties and conduct with due
diligence and in good faith the defense of all such Claims against any of the
Indemnified Landlord Parties. Tenant may contest the validity of any such
Claims, in the name of Landlord or Tenant, as Tenant may deem appropriate,
provided that the expenses thereof shall be paid by Tenant. The foregoing
covenants and agreements of Tenant shall survive the expiration or termination
of this Lease.
SECTION 7.5 LANDLORD'S INDEMNITY. Subject to Section 7.6,
Landlord shall indemnify and hold harmless Tenant, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED TENANT PARTIES"), from all claims which may be
brought or instituted on account of or growing out of any default by Landlord
of its obligations under this Lease and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the claims, to the extent, but
only to the extent, any such claims are attributable to or arise out of: (i)
events or conditions that existed or occurred, in whole or in part, prior to
the date when Tenant first occupied the Premises; (ii) failure of any
components of the Improvements which Landlord is required to maintain; and
(iii) Landlord's representations or warranties or asbestos in any form which is
present on the Premises prior to the date of this Lease. Landlord shall assume
on behalf of the Indemnified Tenant Parties and conduct with due diligence and
in good faith the defense of all Claims against any of the Indemnified Tenant
Parties. Landlord may contest the validity of any Claims, in the name of
Landlord or Tenant, as Landlord may deem appropriate, provided that the
expenses thereof shall be paid by Landlord. The foregoing covenants and
agreements of Landlord shall survive the Term and expiration or termination of
this Lease.
SECTION 7.6 SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each hereby waives any and all rights of
recovery, claims, actions, or causes of action against the other, its agents,
officers, and employees for any loss or damage that may occur to any
improvements located on the Premises, or any part thereof, or any personal
property of such party therein, by reason of fire, the elements, or any other
cause which is insured under standard "all risk of direct loss" insurance
policies available in the state in which the Premises are located, regardless
of cause or origin, including negligence of either party hereto, its agents,
officers, or employees. No insurer of one party shall hold any right of
subrogation against the other party as to any such loss or damage.
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ARTICLE 8
CASUALTY; CONDEMNATION
SECTION 8.1 TENANT'S OBLIGATION TO RESTORE. Subject to the other
terms of this Section 8.1, in the event of damage to, or destruction of, any
Improvements by fire or other casualty, Tenant shall promptly repair, replace,
restore, and reconstruct the same, all in compliance with the provisions of
Section 8.2. If insurance proceeds are insufficient to pay for required
replacement, repairs, restoration, etc., then Tenant shall be obligated to
promptly repair, replace, restore, and reconstruct the Improvements, all in
compliance with the provisions of Section 8.2, notwithstanding the
unavailability of insurance proceeds for such purpose. In the event that a
Permitted Mortgagee (as hereinafter defined) or Landlord's Financing Lender (as
hereinafter defined), as the case may be, requires that payment of insurance
proceeds be made to it and not be made available for required replacement,
repairs, restoration, etc., then to the extent that such funds are withheld,
the Tenant shall not be responsible for performing required replacement,
repairs, restoration, or reconstruction of the Improvements. In the event of a
casualty loss wherein the insurance proceeds are not be used for replacement,
repairs, restoration, etc., or the Improvements, as a result of Landlord's
Financing Lender or by consent of the parties, the insurance proceeds shall be
applied as follows:
(1) first, to pay the cost of razing the Improvements and
leveling, cleaning and otherwise putting the Premises in good
order;
(2) second, to Landlord's Financing Lender;
(3) third, to the payment to Tenant for any of its improvements;
and
(4) fourth, to Landlord, to the extent of any remaining proceeds.
Distribution of insurance proceeds is being made in conformity with
Section 5.4 of this Lease.
Notwithstanding the foregoing, in the event of destruction or damage
involving more than seventy-five percent (75%) of the interior floor area of
the Improvements, Tenant shall have no obligation to rebuild unless the
Landlord and Tenant may agree to rebuild the Improvements. In the event the
parties have not agreed to rebuild the Premises then it is recognized between
Landlord and Tenant that it is their intent to relocate the operations to
another location. In the event of such relocation, this Lease shall terminate
effective as to the affected Premises as of the date of such damage or
destruction and the insurance proceeds received by the Landlord and Tenant [as
to Tenant, for Tenant's Improvements, the right to same carrying forward as to
the new location] shall be utilized for the construction of new Improvements at
an alternative location. In the event that the costs of construction of the
Improvements for which the Landlord is responsible exceeds the insurable value
of the operation which was subject to the casualty, the Landlord shall pay the
additional costs for Improvements, and the annual Base Rent due pursuant to
Section 3.1 shall be increased by an amount equal to ten (10%) percent of the
Landlord's additional cost of construction of the new facility. This Lease,
except for the adjustment of Base Rent as described above, shall govern as to
the rights and obligations of the Landlord and Tenant at the substituted
location, however, the Term of the Lease shall be in abeyance during the period
of construction of the alternative Improvements. Tenant's obligation for
payment of Base Rent and other monetary sums under this Lease as applicable to
the new Premises shall commence as of the later to occur of (i) the date the
improvements to be constructed on the new Premises are certified as complete by
the applicable architect for such improvements in accordance with the plans and
specifications agreed to in
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writing by Landlord and Tenant and (ii) the date a Certificate of Occupancy is
obtained for the operation of such new improvements. Landlord and Tenant
shall, in good faith, fully cooperate with one another in the selection of the
alternative site and relative to preparation of plans for Improvements and
construction thereof. Nothing hereinabove withstanding to the contrary, if the
Tenant failed to maintain insurance coverage required herein and as a result,
proceeds are paid by the insurance company which are less than the full
insurable value of the Improvements, Tenant shall be solely responsible for any
such deficiency.
SECTION 8.2 RESTORATION AND DEPOSIT OF FUNDS.
(a) Prior to Tenant commencing any repair, restoration or
rebuilding pursuant to Section 8.1 involving an estimated cost of more than One
Hundred Thousand Dollars ($100,000), Tenant shall submit to Landlord for its
approval, which will not be unreasonably withheld or delayed: (i) plans and
specifications therefor, prepared by a licensed architect reasonably
satisfactory to Landlord; (ii) copies of appropriate governmental permits;
(iii) an estimate of the cost of the proposed work, certified to by said
architect (iv) a fixed price construction contract in an amount not in excess
of such architect's estimated cost from a reputable and experienced general
contractor; and (v) satisfactory evidence of sufficient contractor's
comprehensive general liability insurance covering Landlord, builder's risk
insurance, and worker's compensation insurance. Upon completion of any such
work by or on behalf of Tenant, Tenant shall provide Landlord with written
evidence, in form and substance reasonably satisfactory to Landlord, showing
that (i) Tenant has paid all contractors for all costs incurred in connection
with such repair, restoration or rebuilding, and (ii) that the Premises is not
encumbered by any mechanic's or materialmen's liens relating to such repair,
restoration or rebuilding. Regarding Tenant's obligations with respect to
mechanic's or materialmen's liens, reference is made herein to all of the terms
and provisions of Section 5.2 in connection with such repair, restoration or
rebuilding.
(b) Provided that a Default does not then exist, then all sums
arising by reason of such loss under insurance policies maintained by Tenant,
shall be deposited with the Depositary (as hereinafter defined) to be available
to Tenant for the repair, restoration and rebuilding of the Premises. Tenant
shall diligently pursue the repair, restoration and rebuilding of the
improvements in a good and workmanlike manner using only materials which are of
a quality comparable to the quality of the materials used in the Improvements
prior to their destruction or damage. The insurance proceeds will be disbursed
to Tenant by the Depositary after delivery of evidence reasonably satisfactory
to the Depositary that (A) such repairs, restoration, or rebuilding have been
completed and effected in compliance with the plans and specifications for the
restoration or rebuilding, (B) no mechanic's and materialman's liens against
the Premises have been filed, or that all such liens have been paid or bonded
around, and (C) all payments for work performed and materials purchased as of
the date of such disbursement for which mechanic's and materialman's liens
might arise have been paid or will be paid from such disbursement or that all
such potential liens have been paid or bonded around. At the option of Tenant,
such proceeds shall be advanced in reasonable installments. Each such
installment (except the final installment) shall be advanced in an amount equal
to the cost of the construction work completed since the last prior advance (or
since commencement of work as to the first advance) less statutorily required
retainage in respect of mechanic's and materialman's liens or retainage which
may be required by Landlord's Financing Lender in an amount not to exceed ten
percent (10%) of such cost. The amount of each installment requested shall be
certified as being due and owing by Tenant's architect in charge, and each
request shall include all bills for labor and materials for which reimbursement
is requested and reasonably satisfactory evidence
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that no lien has been placed against the Premises for any labor or material
furnished for such work. The final disbursement, which shall be an amount
equal to the balance of the insurance proceeds, shall be made upon receipt of
(1) an architect's certificate of substantial completion as to the work from
Tenant's architect, (2) reasonably satisfactory evidence that all bills
incurred in connection with the work have been paid and (3) issuance of a
certificate of occupancy by the applicable governmental agency, if required.
The term "DEPOSITARY", as used herein, shall mean either: (i) Landlord's
Financing Lender, or its designee provided that Landlord's Financing Lender is
an institutional lender, its designee is not an Affiliate of Landlord, and such
entity holds such funds in accordance with the terms of this lease, or related
in any other manner to Landlord), or (ii) such other party that is acceptable
to Landlord and Tenant, if there is no such Landlord's Financing Lender or if
such Landlord's Financing Lender has refused to act as Depositary.
(c) If no Default then exists, any excess of money received from
insurance policies remaining with the Depositary after the repair or rebuilding
of the Improvements shall, to the extent required by any Permitted Mortgagee,
be applied to payment of Tenant's Permitted Mortgage, otherwise any such
proceeds shall be paid to Tenant.
(d) If Tenant shall not commence the repair or rebuilding of the
Improvements within a period of sixty (60) days after damage or destruction by
fire or other casualty and prosecute the same thereafter with such dispatch as
may be necessary to complete the same within a reasonable period after said
damage or destruction occurs; then, in addition to all other remedies Landlord
may have either under this Lease, at law or in equity, the money received by
and remaining in the hands of the Depositary shall be paid to and retained by
Landlord as security for the continued performance and observance by Tenant of
Tenant's covenants and agreements hereunder.
SECTION 8.3 NOTICE OF DAMAGE. Tenant shall immediately notify
Landlord and each Permitted Mortgagee of any destruction or damage to the
Premises.
SECTION 8.4 TOTAL TAKING. Should the entire Premises be taken
(which term, as used in this Article 8, shall include any conveyance in
avoidance or settlement of eminent domain, condemnation, or other similar
proceedings) by any Governmental Authority, corporation, or other entity under
the right of eminent domain, condemnation, or similar right, then Tenant's
right of possession under this Lease shall terminate as of the date of taking
possession by the condemning authority, and the award therefor will be
distributed as follows: (1) first, to the payment of all reasonable fees and
expenses incurred in collecting the award; (2) second, to Landlord's Financing
Lender; and (3) third, to Landlord and Tenant, to the extent of their interests
in the Premises, as the court having such jurisdiction of such taking shall
determine taking into account certain factors including, without limitation,
the term of the leasehold estate of the Tenant and the ownership interest of
Landlord. After the determination and distribution of the condemnation award
as herein provided, the Lease shall terminate.
SECTION 8.5 PARTIAL TAKING. Should a portion of the Premises be
taken by any Governmental Authority, corporation, or other entity under the
right of eminent domain, condemnation, or similar right, this Lease shall
nevertheless continue in effect as to the remainder of the Premises unless, in
Tenant's reasonable judgment, so much of the Premises shall be so taken as to
make it economically unsound to use the remainder for the uses and purposes
contemplated hereby, whereupon this Lease shall terminate as of the date of
taking of possession by the condemning authority in the same manner as if the
whole of
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the Premises had thus been taken, and the award therefor shall be distributed
as provided in Section 8.4. In the event of a partial taking where this Lease
is not terminated, all awards payable in respect thereof shall be payable to
Landlord and Tenant, to the extent of their interests in the Premises, as the
applicable condemning authority shall determine taking into account certain
factors including, without limitation, the term of the leasehold estate of the
Tenant and the ownership interest of Landlord. Following such partial taking,
Landlord shall make all necessary repairs or alterations to the remaining
Premises, required to make the remaining portions of the Premises an
architectural whole. The Base Rent payable hereunder during the unexpired
portion of the Lease shall be reduced to the extent fair and reasonable under
the circumstances, effective on the date physical possession is taken by the
condemning authority.
SECTION 8.6 TEMPORARY TAKING. If the whole or any portion of the
Premises shall be taken for temporary use or occupancy, the Term shall not be
reduced or affected. The Base Rent payable hereunder during the unexpired
portion of the Lease shall be reduced to the extent fair and reasonable under
the circumstances and Tenant shall be entitled to receive the entire amount of
any award therefor, less the amount of the reduction in the Base Rent.
SECTION 8.7 NOTICE OF TAKING, COOPERATION. Tenant shall
immediately notify Landlord and each Permitted Mortgagee of the commencement of
any eminent domain, condemnation, or other similar proceedings with regard to
Premises. Landlord and Tenant covenant and agree to fully cooperate in any
condemnation, eminent domain, or similar proceeding in order to maximize the
total award receivable in respect thereof.
ARTICLE 9
TENANT'S FINANCING
SECTION 9.1 TENANT'S RIGHT TO ENCUMBER. Tenant shall have the
right, from time to time and at any time, without Landlord's consent or
joinder, to encumber its interest in this Lease and the leasehold estate hereby
created with one or more deeds of trust, mortgages, or other lien instruments
to secure any borrowings or obligations of Tenant. Any such mortgages, deeds
of trust, and/or other lien instruments, and the indebtedness secured thereby,
provided that Landlord has been given notice thereof, are herein referred to as
"PERMITTED MORTGAGES," and the holder or other beneficiary thereof are herein
referred to as "PERMITTED MORTGAGEES."
SECTION 9.2 TENANT'S MORTGAGE. If Tenant encumbers its interest
in this Lease and the leasehold estate hereby created with liens as above
provided, then Tenant shall notify Landlord thereof, providing with such notice
the name and mailing address of the Permitted Mortgagee in question, Landlord
shall upon request, acknowledge receipt of such notice, and for so long as the
Permitted Mortgage in question remains in effect the following shall apply:
(a) Landlord shall give to the Permitted Mortgagee a duplicate
copy of any and all notices which Landlord gives to Tenant pursuant to the
terms hereof, including notices of default, and no such notice shall be
effective until such duplicate copy is transmitted to such Permitted Mortgagee,
in the manner provided in Section 12.1.
(b) There shall be no cancellation, surrender, or modification of
this Lease by joint action of Landlord and Tenant without the prior written
consent of the Permitted Mortgagee.
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(c) If a Default should occur hereunder, then Landlord
specifically agrees that:
(1) Landlord shall not enforce or seek to enforce any of
its rights, recourses, or remedies, until a notice specifying the event giving
rise to such Default has been transmitted to the Permitted Mortgagee, in the
manner provided in Section 12.1, and if the Permitted Mortgagee proceeds to
cure the Default within a period of thirty (30) days after receipt of such
notice or, as to non-monetary events of Default which by their very nature
cannot be cured within such time period, the Permitted Mortgagee commences
curing such Default within such time period and thereafter diligently pursues
such cure to completion within sixty (60) days thereafter, then any payments
made and all things done by the Permitted Mortgagee to effect such cure shall
be as fully effective to prevent the exercise of any rights, recourses, or
remedies by Landlord as if done by Tenant;
(2) if the Default is a non-monetary default, the
Permitted Mortgagee shall have a period of time in which to cure such Default
equal to the greater of (i) the time period for such curing that is applicable
to Tenant under the terms of this Lease, or (ii) sixty (60) days after the date
that the Permitted Mortgagee has been notified of such Default, provided that
the Permitted Mortgagee cures all defaults relating to the payment of Base Rent
and neither Landlord nor the Premises is or would be liable or subject to any
lien, tax, penalty, expense, liability, or damages because of such Default. If
Landlord or the Premises is or will be liable or subject to any such lien, tax,
penalty, expense, liability or damages because of the Default, then for so long
as the Permitted Mortgagee is diligently and with continuity attempting to
secure possession of the Premises (whether by foreclosure or other procedures),
and provided such delay does not result in a foreclosure by Landlord's
Financing Lender or loss of Landlord's interest in the Premises, Landlord shall
allow the Permitted Mortgagee such time as may be reasonably necessary under
the circumstances to obtain possession of the Premises in order to cure such
Default, and during such time Landlord shall not enforce or seek to enforce any
of its rights, remedies or recourses hereunder; and
(d) No Permitted Mortgagee shall be or become liable to Landlord
as an assignee of this Lease until such time as such Permitted Mortgagee, by
foreclosure or other procedures, shall either acquire the rights and interests
of Tenant under this Lease or shall actually take possession of the Premises,
and upon such Permitted Mortgagee's assigning such rights and interests to
another party or upon relinquishment of such possession, as the case may be,
such Permitted Mortgagee shall have no further such liability.
ARTICLE 10
WARRANTY OF TITLE AND PEACEFUL POSSESSION
AND LANDLORD'S FINANCING
SECTION 10.1 WARRANTY AS TO ENCUMBRANCES. Landlord represents,
warrants and covenants that: (i) the representations and warranties set forth
in Section 10.3 are true and correct; (ii) it owns title to the Land and the
Premises free and clear of all liens, claims and encumbrances except the liens
described in EXHIBIT B hereto securing the financing described therein
("LANDLORD'S FINANCING") and the other encumbrances specifically described in
such EXHIBIT B; (iii) except as otherwise set forth in Section 10.2, Landlord's
Financing shall not be modified in any manner without the prior written consent
of Tenant; and (iv) the lender providing such Landlord's Financing ("LANDLORD'S
FINANCING LENDER") has
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executed, caused to be acknowledged (notarized in accordance with applicable
law) and delivered to Landlord and Tenant a mutual recognition and attornment
agreement, in form and substance reasonably satisfactory to Tenant, suitable
for recording in the appropriate records to notify third parties of the
existence of such agreement and that the Land and the Premises are subject
thereto. Such agreement shall provide, among other provisions, that the
Tenant's interest under this Lease shall be subordinate to the Landlord's
Financing and that the Landlord's Financing Lender shall (i) give to Tenant a
duplicate copy of any and all notices which Landlord's Financing Lender gives
to Landlord, including notices of default, and no such notice shall be
effective until such duplicate copy is actually received by Tenant in the
manner provided in Section 12.1; (ii) give Tenant the right and opportunity to
cure any defaults under the Landlord's Financing; and (iii) recognize and
consent to Tenant's rights under this Lease in the event of a foreclosure or
deed in lieu thereof so long as Tenant continues to perform its obligations
under this Lease. As used herein, the term (A) "LANDLORD'S FINANCING LENDER"
shall also include any lender that refinances Landlord's Financing or makes a
new loan to Landlord, subject to Section 10.2, and (B) "LANDLORD'S FINANCING"
shall include all finances secured by liens covering all or any portion of the
Premises which are permitted under the terms of this Lease including, without
limitation, all new loans.
Moreover, Landlord covenants that Tenant shall and may peaceably and
quietly have, hold, occupy, use, and enjoy the Premises during the Term, and
may exercise all of its rights hereunder, subject only to the provisions of
this Lease and applicable governmental laws, rules, and regulations; and
Landlord agrees to warrant and forever defend Tenant's right to such occupancy,
use, and enjoyment and the title to the Premises against the claims of any and
all persons whomsoever lawfully claim the same, or any part thereof, subject
only to provisions of this Lease and all applicable governmental laws, rules,
and regulations.
Landlord's Financing Lender shall not be or become liable to Tenant as
an assignee of Landlord's interest in this Lease until such time as such
Landlord's Financing Lender, by foreclosure or other procedures, shall either
acquire the rights and interests of Landlord under this Lease, and upon
Landlord's Financing Lender's assigning such rights and interests to another
party, Landlord's Financing Lender shall have no further such liability.
To the extent that Tenant cures any defaults of Landlord under
Landlord's Financing, Tenant shall receive a credit against the Base Rent due
pursuant to Section 3.1 hereinabove in an amount equal to the amount advanced
by Tenant to cure such defaults, together with interest at the Tenant's parent
company's customary borrowing rate as may be in effect from time to time. Such
credit shall be charged against the monthly Base Rent installments, commencing
as of the first monthly rental payment due after the first of such advances,
until such time as the entire amount of such credit is exhausted. Thereafter,
Base Rent shall commence in amounts required in Section 3.1 hereinabove,
including payment of any partial installment which may be due as a result of a
credit to the final monthly credit which is less than the full monthly Base
Rent due.
SECTION 10.2 LANDLORD'S MORTGAGE. During the Term, none of
Landlord's Financing may be modified or refinanced or any new loan made except
in accordance with the following:
(a) The total mortgage indebtedness and encumbrances of any type
against the Premises after the proposed refinancing or modification or new loan
of Landlord's Financing does not exceed eighty percent (80%) of the fair market
value of the Premises [including any improvements being made with
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financing obtained for such construction] or the loan balance in existence as
of the effective date of this Lease, whichever is greater; and
(b) The effect of any such modification, refinancing or new loan
does not result in an increase in principal and interest payable by Landlord
during any Lease Year which exceeds Base Rent required to be paid by Tenant
during any Lease Year.
SECTION 10.3 REPRESENTATIONS OF LANDLORD. Landlord represents and
warrants to Tenant as of the effective date of this Lease that:
(a) The Premises are not subject to any prior lease, easement,
adverse claim, or claims of parties in possession, whether or not shown by the
public records, except as set forth on EXHIBIT B.
(b) There is no pending or threatened condemnation action or
agreement in lieu thereof which will or may affect the Premises or any part
thereof in any respect whatsoever.
(c) There is no action, suit or proceeding, including
environmental, pending or threatened against or affecting the Premises or any
part thereof.
(d) The execution, delivery and performance of this Lease by
Landlord has been duly authorized and this Lease is valid and enforceable
against Landlord in accordance with its terms.
(e) Landlord has no knowledge of any fact, action or proceeding,
including environmental, whether actual, pending or threatened, which could
result in the modification or termination of the present zoning classification
of the Premises, or the termination of full free and adequate access to and
from the Premises from all adjoining public highways and roads.
(f) Landlord has not agreed to lease or convey or granted any
rights with respect to or any part of the Premises or any interest therein to
any other person or entity except as shown on EXHIBIT B.
(g) The Premises are not subject to any restrictions (recorded or
unrecorded), building and zoning laws or ordinances, or other laws, ordinances,
rules, regulations and requirements of any Governmental Authority having
jurisdiction which do or could prohibit the use of the Premises for the uses
set forth in this Lease.
(h) Landlord has not received any notice from any Governmental
Authority having jurisdiction over the Premises requiring or specifying any
work to be done to the Premises.
(i) Landlord has no knowledge of any existing, threatened or
contemplated action, circumstances or conditions (including but not limited to
subsurface conditions) which would materially interfere with the development or
use of the Premises for an automobile dealership.
(j) As of the date hereof the Premises are, and on the
Commencement Date the Premises will be in compliance in all material respects
with all restrictive covenants and other restrictions applicable to the
Premises and all applicable statutes, ordinances, rules and regulations
(federal, state, county and municipal), including without limitation all
zoning, environmental, building, health, subdivision regulations. Except as to
matters relating to the presence of asbestos contained in the Premises, if any,
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the representation and warranty set forth in this Subsection (j) shall not be
applicable to the matters covered under Subsection (m) herein below.
(k) The Premises have legal and physical public access to and from
abutting roadways dedicated to and accepted by the State, City, or County where
the Premises are located.
(l) To the extent zoning regulations are applicable to the
Premises, the Premises are zoned for use as an automobile dealership facility,
for sale, trade, display, service and repair, painting, and other activities
normally associated with a full service automobile dealership.
(m) To the best of Landlord's knowledge, except as may otherwise
be disclosed to Tenant in any written environmental audit report delivered to
Tenant prior to the date of this Lease, no Hazardous Materials, pollutants or
toxic substances have been placed, dumped, deposited or buried upon, in or
under the Premises, there have been no leaks of petroleum, toxic or Hazardous
Materials from any of the underground storage tank facilities and there is no
contaminated soil, as defined by federal, state and/or local laws or
regulations, in, upon or under the Premises by reason of any such wastes,
pollutants, toxins, substances, or facilities. Tenant acknowledges that
certain materials which may be considered Hazardous Materials are used in the
normal course of the business operated on the Premises prior to the
commencement date. Landlord represents that to the best of Landlord's
knowledge, such use complies with all applicable governmental regulations and
that it has no knowledge of any contamination on the Premises.
(n) The Premises have an assured water supply sufficient to permit
the operations now being conducted thereon, and as contemplated in this Lease
with respect to the Improvements to be constructed on the Land, to be conducted
in accordance with all governmental requirements.
(o) All dimensions in the description to the Premises are net of
existing and proposed rights-of-way, easements and dedications except as set
forth on EXHIBIT B.
(p) The Premises are not located in a flood plain or a flood
hazard area for which flood insurance would be required or for which flood
insurance is available.
(q) Landlord warrants and guarantees that on the Commencement Date
the wiring, floors, plumbing, underground plumbing, heating, air conditioning
equipment, roofs, outer walls, stairways, doors, windows, plate glass and
sprinkler equipment of the Premises are each and every one in good repair and
are adequate to furnish the proper service for which each was installed and the
heating plant will heat and air conditioning will cool the buildings
constituting part of the Premises in accordance with the generally accepted
design temperatures for the city and state in which the Premises is located.
Landlord further warrants and guaranties that on the Commencement Date, the
Premises and all appurtenances thereto, will comply with the building codes,
fire, sanitary and safety regulations, ordinances and laws of the United States
of America, city, county and state in which the Premises are located. Landlord
further warrants and guarantees that at the commencement of this Lease, the
Premises may be used for the purposes set out in this Lease without violating
any such codes, regulations, ordinances, laws or any restrictive covenants
running with the land.
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(r) Landlord has all required occupancy permits and other licenses
or permits required for the use and occupancy of the Premises.
ARTICLE 11
DEFAULT AND REMEDIES
SECTION 11.1 DEFAULT. Each of the following shall be deemed a
"DEFAULT" by Tenant hereunder and a material breach of this Lease:
(a) Whenever Tenant shall fail to pay any sum payable by Tenant to
Landlord or any third party under this Lease on the date upon which the same is
due to be paid, and such default shall continue for ten (10) days after Tenant
shall have been given a written notice specifying such default;
(b) Whenever Tenant shall fail to keep, perform, or observe any of
the covenants, agreements, terms, or provisions contained in this Lease that
are to be kept or performed by Tenant other than with respect to payment of
Rent or other liquidated sums of money, and Tenant shall fail to immediately
commence and take such steps as are necessary to remedy the same within thirty
(30) days after Tenant shall have been given a written notice specifying the
same, or having so commenced, shall thereafter fail to proceed diligently and
with continuity to remedy the same;
(c) Whenever an involuntary petition shall be filed against Tenant
under any bankruptcy or insolvency law or under the reorganization provisions
of any law of like import or whenever a receiver of Tenant, or of all or
substantially all of the property of Tenant, shall be appointed without
acquiescence, and such petition or appointment is not discharged or stayed
within sixty (60) days after the happening of such event; or
(d) Whenever Tenant shall make an assignment of its property for
the benefit of creditors or shall file a voluntary petition under any
bankruptcy or insolvency law, or seek relief under any other law for the
benefit of debtors.
SECTION 11.2 REMEDIES. If a Default occurs, then subject to the
rights of any Permitted Mortgagee as provided in Section 9, Landlord may at any
time thereafter prior to the curing thereof and without waiving any other
rights hereunder or available to Landlord at law or in equity (Landlord's
rights being cumulative), do any one or more of the following:
(a) Landlord may terminate this Lease by giving Tenant written
notice thereof, in which event this Lease and the leasehold estate hereby
created and all interest of Tenant and all parties claiming by, through, or
under Tenant shall automatically terminate upon the effective date of such
notice with the same force and effect and to the same extent as if the
effective date of such notice were the day originally fixed in Article 2 hereof
for the expiration of the Term; and Landlord, its agents or representatives,
shall have the right, without further demand or notice, to reenter and take
possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing
breaches hereof. In the event of such termination, Tenant shall be liable to
Landlord for damages in an amount equal to (A) the discounted present value of
the amount by which the Rent reserved hereunder for the remainder of the
existing Term (Initial or Renewal) exceeds the then net fair market rental
value of the
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Premises for such period of time, plus (B) all expenses incurred by Landlord
enforcing its rights hereunder.
(b) Landlord may terminate Tenant's right to possession of the
Premises and enjoyment of the rents, issues, and profits therefrom without
terminating this Lease or the leasehold estate created hereby, reenter and take
possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing
breaches hereof, and lease, manage, and operate the Premises and collect the
rents, issues, and profits therefrom all for the account of Tenant, and credit
to the satisfaction of Tenant's obligations hereunder the net rental thus
received (after deducting therefrom all reasonable costs and expenses of
repossessing, leasing, managing, and operating the Premises). If the net
rental so received by Landlord exceeds the amounts necessary to satisfy all of
Tenant's obligations under this Lease, Landlord shall retain such excess. In
no event shall Landlord be liable for failure to so lease, manage, or operate
the Premises or collect the rentals due under any subleases and any such
failure shall not reduce Tenant's liability hereunder. If Landlord elects to
proceed under this Section 11.2(2), it may at any time thereafter elect to
terminate this Lease as provided in Section 11.2(1).
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 NOTICES. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required by
law shall be in writing and shall be deemed to have been validly given or
served by (a) delivery of the same in person to the intended addressee, (b) by
depositing the same with Federal Express or another reputable private courier
service for next business day delivery to the intended addressee at its address
set forth on the first page of this Agreement or at such other address as may
be designated by such party as herein provided, (c) by facsimile copy
transmission [confirmation sheet indicating transmission to be retained] or (d)
by depositing the same in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the intended
addressee at its address set forth below or at such other address as may be
designated by such party as herein provided. All notices, demands and requests
shall be effective upon such personal delivery upon actual receipt, or one (1)
business day after being deposited with the private courier service, or two (2)
business days after being deposited in the United States mail as required
above. Rejection or other refusal to accept or the inability to deliver because
of changed address of which no notice was given as herein required shall be
deemed to be receipt of the notice, demand or request sent. By giving to the
other party hereto at least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America. For purposes of notice the addresses of the parties hereto shall,
until changed, be as follows:
Landlord: KC Partnership
3101 N. State Road 7
Hollywood, FL 33021
Facsimile: (954) 964-4760
Tenant: Courtesy Ford, Inc.
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, Texas 77024
Attention: John Turner
Facsimile: (713) 627-6468
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The parties hereto shall have the right from time to time to change their
respective addresses for purposes of notice hereunder to any other location
within the United States by giving a notice to such effect in accordance with
the provisions of this Section 12.1.
SECTION 12.2 PERFORMANCE OF OTHER PARTY'S OBLIGATIONS. If either
party hereto fails to perform or observe any of its covenants, agreements, or
obligations hereunder for a period of thirty (30) days after notice of such
failure is given by the other party, then the other party shall have the right,
but not the obligation, at its sole election but not as its exclusive remedy),
to perform or observe the covenants, agreements, or obligations which are
asserted to have not been performed or observed at the expense of the failing
party and to recover all costs or expenses incurred in connection therewith,
together with interest thereon from the date expended until repaid at an annual
rate ("DEFAULT RATE") equal to the lesser of (a) three (3) percent above the
prime rate of interest established from time to time by NationsBank (or a
comparable rate of interest if such rate is not in effect) or (b) the maximum
rate of interest permitted by applicable law. Any performance or observance by
a party pursuant to this Section 12.2 shall not constitute a waiver of the
other party's failure to perform or observe.
SECTION 12.3 MODIFICATION AND NON-WAIVER. No variations,
modifications, or changes herein or hereof shall be binding upon any party
hereto unless set forth in a writing executed by it or by a duly authorized
officer or agent. No waiver by either party of any breach or default of any
term, condition, or provision hereof, including without limitation the
acceptance by Landlord of any Rent at any time or in any manner other than as
herein provided, shall be deemed a waiver of any other or subsequent breaches
or defaults of any kind, character, or description under any circumstance. No
waiver of any breach or default of any term, condition, or provision hereof
shall be implied from any action of any party, and any such waiver, to be
effective, shall be set out in a written instrument signed by the waiving
party.
SECTION 12.4 GOVERNING LAW. This Lease shall be construed and
enforced in accordance with the laws of the state in which the Premises are
located.
SECTION 12.5 NUMBER AND GENDER; CAPTIONS; REFERENCES. Pronouns,
wherever used herein, and of whatever gender, shall include natural persons and
corporations and associations of every kind and character, and the singular
shall include the plural wherever and as often as may be appropriate. Article
and Section headings in this Lease are for convenience of reference and shall
not affect the construction or interpretation of this Lease. Whenever the
terms "hereof," "hereby," "herein," or words of similar import are used in this
Lease, they shall be construed as referring to this Lease in its entirety
rather than to a particular Section or provision, unless the context
specifically indicates to the contrary. Any
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reference to a particular "Article" or "Section" shall be construed as
referring to the indicated Article or Section of this Lease.
SECTION 12.6 CPI. "CPI" shall mean the Consumer Price Index for
All Urban Consumers, All Items (Base Year 1982-84 = 100) published by the
United States Department of Labor, Bureau of Labor Statistics. If the 1982-84
Base Year shall no longer be used as an index of 100, the revised index which
would produce results equivalent, as nearly as possible to those which would be
obtained hereunder if the CPI were not so revised.
SECTION 12.7 ESTOPPEL CERTIFICATE. Landlord and Tenant shall
execute and deliver to each other, promptly upon any request therefor by the
other party, a certificate addressed as indicated by the requesting party and
stating: (a) whether or not this Lease is in full force and effect; (b) whether
or not this Lease has been modified or amended in any respect, and submitting
copies of such modifications or amendments; (c) whether or not there are any
existing defaults hereunder known to the party executing the certificate, and
specifying the nature thereof; (d) whether or not any particular Article,
Section, or provision of this Lease has been complied with; and (e) such other
matters as may be reasonably requested.
SECTION 12.8 SEVERABILITY. If any provision of this Lease or the
application thereof to any person or circumstance shall, at any time or to any
extent, be invalid or unenforceable, and the basis of the bargain between the
parties hereto is not destroyed or rendered ineffective thereby, the remainder
of this Lease, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
SECTION 12.9 ATTORNEY FEES. If litigation is ever instituted by
either party hereto to enforce, or to seek damages for the breach of, any
provision hereof, the prevailing party therein shall be promptly reimbursed by
the other party for all attorneys' fees reasonably incurred by the prevailing
party in connection with such litigation, including all trial and appellate
levels.
SECTION 12.10 SURRENDER OF PREMISES; HOLDING OVER. Upon
termination or the expiration of this Lease, Tenant shall peaceably quit,
deliver up, and surrender the Premises. If Tenant does not surrender
possession of the Premises at the end of the Term, such action shall not extend
the Term, Tenant shall be a tenant at sufferance, and during such time of
occupancy Tenant shall pay to Landlord, as damages, an amount equal to twice
the amount of Rent that was being paid immediately prior to the end of the
Term. Landlord shall not be deemed to have accepted a surrender of the
Premises by Tenant, or to have extended the Term, other than by execution of a
written agreement specifically so stating.
SECTION 12.11 RELATION OF PARTIES. It is the intention of
Landlord and Tenant to hereby create the relationship of landlord and tenant,
and no other relationship whatsoever is hereby created. Nothing in this Lease
shall be construed to make Landlord and Tenant partners or joint venturers or
to render either party hereto liable for any obligation of the other.
SECTION 12.12 FORCE MAJEURE. As used herein "FORCE MAJEURE" means
the occurrence of any event whereby Landlord or Tenant shall be delayed or
prevented from the performance of any act required hereunder by reason of acts
of God, strikes, lockouts, labor troubles, failure or refusal of
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governmental authorities or agencies to timely issue permits or approvals or
conduct reviews or inspections, civil disorder, inability to procure materials,
restrictive governmental laws or regulations or other cause without fault and
beyond the control of the party obligated (financial inability excepted). If
Tenant or Landlord shall be delayed, hindered, or prevented from performance of
any of its obligations by reason of Force Majeure, the time for performance of
such obligation shall be extended for the period of such delay. In no event
shall this provision pertain to any monetary obligations set forth in this
Lease including payment of Rent from Tenant to Landlord.
SECTION 12.13 NON-MERGER. Notwithstanding the fact that fee title
to the land and to the leasehold estate hereby created may, at any time, be
held by the same party, there shall be no merger of the leasehold estate hereby
created unless the owner thereof executes and files for record in the
appropriate real property records a document expressly providing for the merger
of such estates.
SECTION 12.14 ENTIRETIES. This Lease constitutes the entire
agreement of the parties hereto with respect to its subject matter, and all
prior agreements with respect thereto are merged herein. Any agreements
entered into between Landlord and Tenant of even date herewith are not,
however, merged herein.
SECTION 12.15 RECORDATION. Landlord and Tenant will, at the
request of the other, promptly execute an instrument in recordable form
constituting a short form of this Lease, which shall be filed for record in the
appropriate real property records, or at the request of either party this Lease
shall be so filed for record.
SECTION 12.16 SUCCESSORS AND ASSIGNS. This Lease shall constitute
a real right and covenant running with the Premises, and shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Whenever a reference is made herein to either party, such
reference shall include the party's successors and assigns.
SECTION 12.17 LANDLORD'S JOINDER. Landlord agrees to join with
Tenant in the execution of such applications for permits and licenses from any
Governmental Authority as may be reasonably necessary or appropriate to
effectuate the intents and purposes of this Lease, provided that Landlord shall
not incur or become liable for any obligation as a result thereof.
SECTION 12.18 NO THIRD PARTIES BENEFITTED. Except as herein
specifically and expressly otherwise provided with regard to notices and
opportunities to cure defaults and certain enumerated rights granted to
Permitted Mortgagees, the terms and provisions of this Lease are for the sole
benefit of Landlord and Tenant, and no third party whatsoever, is intended to
benefit herefrom.
SECTION 12.19 SURVIVAL. Any terms and provisions of this Lease
pertaining to rights, duties, or liabilities extending beyond the expiration or
termination of this Lease shall survive the end of the Term.
SECTION 12.20 PERPETUITIES. To the extent that the rule against
perpetuities is applicable thereto, but not otherwise, the rights granted to
Tenant in Article 13 hereof shall expire upon the earlier to occur of (a) the
date set forth for expiration of such rights in said Article 13 or (b) the date
which
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is 21 years after the date of death of the last to die of the following
parties: the last grandchild to survive of the presently living grandchildren
of George Bush, former President of the United States of America.
SECTION 12.21 TRANSFER OF LANDLORD'S INTEREST. Subject to the
terms of the Landlord's Financing, Landlord may freely transfer and/or mortgage
its interest in the Premises and under this Lease from time to time and at any
time, provided that any such transfer or mortgage is expressly made subject to
the terms, provisions, and conditions of this Lease, including specifically but
without limitation Tenant's rights under Article 13, and the transferee or
mortgagee agrees to be bound by the provisions hereof (in the case of a
mortgagee, such agreement being contingent upon the mortgagee actually
succeeding to the Landlord's interest in the Premises and hereunder by virtue
of a foreclosure or conveyance in lieu thereof).
SECTION 12.22 TENANT'S RIGHT TO ASSIGN. Tenant may assign its
rights hereunder or sublease all or a portion of the Premises with Landlord's
prior written approval, which approval will not be unreasonably withheld.
provided that Tenant shall remain liable for all liabilities and obligations
arising under this Lease. An assignment by Tenant to an affiliate under common
control as that of the herein Tenant shall be deemed by Landlord to be
approved. Tenant acknowledges that Landlord's approval may require the consent
and/or joinder of Landlord's Financing Lender.
SECTION 12.23 PAST DUE AMOUNTS. All amounts required to be paid
by Tenant or Landlord under the terms and provisions of this Lease shall bear
interest at the Default Rate from the date due until paid.
SECTION 12.24 INDEPENDENT COUNSEL. Landlord and Tenant declare
that each has had independent legal advice by counsel of their own selection;
that each fully understands the facts and has been fully informed of all legal
rights or liabilities; that after such advice or knowledge, each believes the
Lease to be fair, just, reasonable and that each signs the Lease freely and
voluntarily.
SECTION 12.25 COOPERATION WITH LANDLORD'S LENDER. Tenant agrees
to cooperate with any Lender utilized by Landlord relative to financing
associated with this Lease and Improvements located upon the Premises, should
such Lender request reasonable modifications to this Lease provided such
modifications do not adversely diminish or otherwise modify the obligations of
Landlord under this Lease or affect the rights of the Tenant granted under this
Lease or create additional liability or obligations for Tenant beyond Tenant's
current liability and obligations under this Lease.
ARTICLE 13
OPTION TO PURCHASE PREMISES
SECTION 13.1 RIGHT OF FIRST REFUSAL.
(a) If Landlord shall receive a bona fide offer to purchase the
Premises during the Term, then any contract which may be entered into between
Landlord and a third party purchaser shall provide that the sale shall be
subject to Tenant's right of refusal set forth in this Section 13.1. If
Landlord shall receive such offer or execute such contract, Landlord shall send
to Tenant a true and complete copy of the executed contract and the complete
terms of the offer with Landlord's certification that it will accept
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the offer, and Tenant shall have the option, to be exercised within thirty (30)
days after receipt thereof, to make a contract with Landlord on the same terms
and conditions set forth in such third party contract or offer. If Tenant,
after receipt of the third party contract or the terms of the offer acceptable
to Landlord, shall fail to exercise its option within the thirty (30) day
period, Landlord shall have the right to conclude the proposed sale on the same
terms as in the offer or contract originally forwarded to Tenant, provided the
sale shall close within the timeframe set forth in the third party contract
plus thirty (30) days. If the sale shall not close within said time frame plus
thirty (30) days, Landlord shall repeat the procedure specified in this Section
13.1 before it can conclude any sale of the Premises.
(b) Notwithstanding Tenant's failure to exercise its option, any
sale of the Premises shall be subject to this Lease and Tenant's option to
purchase the Premises and Tenant's right of first refusal shall remain in force
and be binding on any party to the same extent as if said subsequent owner were
Landlord herein, and said subsequent owner shall be required to do all of the
things required of Landlord in this Lease prior to any such sale of the
Premises.
(c) If any third party contract or offer for the Premises shall
include property other than the Premises, Tenant's right of first refusal
shall, at its election, be either applicable to the entire property covered by
such contract or offer, or applicable to the Premises only at a purchase price
which shall be that part of the price offered by the third party, which the
value of the Premises shall bear to the value of all the property included in
such third party contract or offer.
(d) Tenant's right to purchase shall not be extinguished, canceled
or waived by Tenant failing to exercise its option as to any offer, contract or
conveyance which is between Landlord and a related party, a nominee and his
principal, or a sole shareholder and his corporation, or a corporation and its
subsidiary or affiliate.
SECTION 13.2 OPTION.
(a) For and in consideration of the execution of this Lease by Tenant
and the sum of Ten Dollars ($10.00), Tenant shall have the option to purchase
the Premises at any time during the Term (including any extensions thereof),
without premium or penalty, for the Purchase Price determined pursuant to this
Section 13.2 (the "PURCHASE PRICE"), provided Landlord is given sixty (60) days
written notice of Tenant's election to purchase and provided further that
Tenant is not then in default under the terms of this Lease.
(1) The purchase price of the Premises shall be
determined by an appraisal conducted using an M.A.I. appraiser (or an appraiser
having the same class of certification of an M.A.I. appraiser by the successor
certification organization in the case that the designation of M.A.I. appraiser
is changed or succeeded). The appraisal shall not take into consideration the
Base Rent, terms or conditions of this Lease. The appraised value shall be
reduced by the cost of any leasehold improvements made to the Premises by
Tenant.
(2) The Tenant, at its sole expense, shall obtain, and
submit to Landlord, an appraisal of the fair market value of the Premises (the
"FIRST APPRAISAL") from an M.A.I. appraiser (the
26
<PAGE> 32
"FIRST APPRAISER"), and if Landlord shall accept such appraisal, then such
First Appraisal shall be the Purchase Price.
(3) If Landlord does not accept such First Appraisal,
Landlord, at Landlord's sole expense shall obtain, and submit to Tenant, a
second appraisal of the fair market value of the Premises (the "SECOND
APPRAISAL") from an M.A.I. appraiser (the "SECOND APPRAISER"). If the
numerical difference between the value of the First Appraisal and the value of
the Second Appraisal is less than ten percent (10%) of the appraisal with the
lower value, then the two appraisal values shall be averaged and that averaged
value shall be the Purchase Price.
(4) If the numerical difference between the value of the
First Appraisal and the value of the Second Appraisal is equal to or greater
than ten percent (10%) of the appraisal with the lower value, then the First
Appraiser and the Second Appraiser shall choose a third M.A.I. appraiser (the
"THIRD APPRAISER") who shall appraise the fair market value of the Premises
(the "THIRD APPRAISAL"), and the three appraisal values shall be averaged and
that averaged value shall be the Purchase Price. If the Third Appraisal is
requested, the Landlord and Tenant shall each pay one-half (1/2) of the cost of
such Third Appraisal.
(b) In the event that the option herein granted shall be exercised
as aforesaid, Landlord agrees to sell and Tenant agrees to purchase the
Premises for the Purchase Price aforesaid and upon the following terms and
conditions:
(1) The Premises is to be conveyed at the time full
payment of the Purchase Price is made by Tenant to Landlord (hereinafter called
"CLOSING DATE"), but in no event later than three (3) months from the date of
receipt of Tenant's notice of election, by general warranty deed conveying to
Tenant or Tenant's nominee, title to the same, subject only to (i) the matters
set forth in EXHIBIT B and other matters previously approved in writing by
Tenant, (ii) any matters created by Tenant, and (iii) taxes and other
Impositions assessed against the Premises or any part thereof but not yet due
and payable, which charges, assessments, taxes and other Impositions shall be
paid by Tenant; but free and clear of any mortgages, liens or encumbrances upon
Landlord's interest.
(2) For such deed and conveyance Tenant is to pay the
Purchase Price in cash or by certified or bank check upon the delivery of such
deed.
(3) Full possession of the Premises is to be delivered to
Tenant at the time of delivery of the deed.
(4) The cost and expense of preparing the deed and any
other documents relating to said conveyance and recording the same including
title insurance premiums, Landlord's reasonable attorney's fees and real estate
transfer taxes (including documentary stamps and sur-tax, if applicable), if
any, shall be paid by Tenant.
(5) The Rent provided for in this Lease shall be
apportioned as of the Closing Date.
27
<PAGE> 33
(6) The recording of a deed after the expiration of the
Term of this Lease, conveying the Premises to a third party and reciting that
the option in this Article has expired and has not been exercised shall be, as
to all persons other than Tenant, conclusive evidence of such expiration and
nonexercise.
(c) Notwithstanding anything to the contrary contained herein
Landlord may convey the Premises subject to the option herein granted;
provided, however, that the Landlord has complied with the provisions of this
Section 13.1 and the party to whom the Landlord conveys the Premises assumes in
writing all of Landlord's obligations under this Lease. No such conveyance
shall relieve the Landlord for liability for breach of representations as set
forth in Article 10 of this Lease.
(d) It is further understood and agreed that in the event Tenant
gives written notice to Landlord sixty (60) days before the Expiration Date or
the end of any Renewal Term, of Tenant's intention to purchase the Premises,
the Term of this Lease then shall be extended until the payment to Landlord of
the Purchase Price but in no event later than three (3) months therefrom. The
Purchase Price shall be paid no later than the expiration of such three (3)
month extension. In the event Tenant does not consummate the purchase pursuant
to the terms and conditions of this Section 13.2, then the Tenant's options as
set forth in this Section13.2 shall terminate.
(e) Landlord will, at the request of Tenant, promptly execute an
instrument in recordable form, reflecting Tenant's option to purchase the
Premises, and may be part of the recorded instrument referred to in Section
12.15, pursuant to this Article 13, which shall be filed for record in the
appropriate real property records.
(f) In the event that such option shall not be exercised as
aforesaid, Tenant shall, within ten (10) days upon demand of Landlord, deliver
to Landlord an instrument in form suitable for recording and executed and
acknowledged by Tenant whereby the option and all rights hereunder shall be
released and discharged.
SECTION 13.3 SPECIFIC PERFORMANCE. It is expressly agreed that
the remedy at law for breach of any of the obligations set forth in this
Article 13 is inadequate in view of the complexities and uncertainties in
measuring the actual damages that would be sustained by reason of the failure
of Landlord or Tenant to comply fully with each of such obligations.
Accordingly, each of the aforesaid obligations shall be, and is hereby
expressly made, enforceable by specific performance.
ARTICLE 14
ARBITRATION
SECTION 14.1 ARBITRATION PROVISIONS. EXCEPT AS TO TENANT'S
EXERCISE OF REASONABLE JUDGMENT PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY
CONTROVERSY OR CLAIM BETWEEN THE PARTES HERETO RELATING TO THIS LEASE,
INCLUDING, WITHOUT LIMITATION, ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED
TORT, SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION
28
<PAGE> 34
ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN THE COUNTY AND STATE WHERE
THE PREMISES ARE LOCATED. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION. EXCEPT AS TO TENANT'S EXERCISE OF REASONABLE
JUDGMENT PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY PARTY TO THIS LEASE MAY
BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS LEASE APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION. ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL SIXTY (60) DAYS. ALL
STATUTES OF LIMITATIONS THAT WOULD OTHERWISE BE APPLICABLE SHALL) APPLY TO ANY
DISPUTES ASSERTED IN ANY ARBITRATION PROCEEDING HEREOF. THE ARBITRATORS SHALL
HAVE THE RIGHT, TO AWARD COUNSEL FEES TO ANY PARTY, TO GRANT TEMPORARY OR
PERMANENT INJUNCTIVE RELIEF, AND TO REQUIRE SPECIFIC PERFORMANCE. THE PARTIES
SPECIFICALLY AGREE THAT THE ARBITRATORS MAY NOT AWARD AND THE PARTIES WAIVE ANY
RIGHT TO ANY EXEMPLARY OR PUNITIVE DAMAGES. THE DECISION OR AWARD IN THE
ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING UPON EACH OF THE PARTIES AND
JUDGMENT ON SUCH AWARD OR DECISION MAY BE ENTERED IN ANY COURT OF COMPETENT
JURISDICTION. THE PARTIES BY EXECUTION OF THE LEASE AND INITIALING THIS
PROVISION REPRESENT THAT THEY WERE GIVEN FULL AND COMPLETE OPPORTUNITY TO
REVIEW SAME WITH COUNSEL OF THEIR CHOOSING AND THEY HAVE READ AND SIGNED SAME
AS THEIR FREE AND VOLUNTARY ACT AND DEED.
ARTICLE 15
SUBORDINATION AND ATTORNMENT
SECTION 15.1 SUBORDINATION. This Lease and all rights of Tenant
hereunder are and shall be subject and subordinate in all respects to all
mortgages encumbering Landlord's interest in the Premises as permitted in the
Lease (the "SUPERIOR MORTGAGE"). The provisions of this Section 15.1 shall be
self-operative and no further instrument of subordination shall be required.
If any Requesting Party shall seek confirmation of such subordination, Tenant
shall promptly execute and deliver, at its own cost and expense, an instrument,
in recordable form, to evidence such subordination; if Tenant fails to execute,
acknowledge or deliver any such instrument within ten (10) days after request
therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge
and deliver any such instruments for and on behalf of Tenant. However,
nothing herein withstanding to the contrary, the foregoing provisions shall not
be effective until the Landlord shall have delivered to Tenant a Non-
Disturbance Agreement, in the form required under Section 10.1, executed by
each Landlord's Financing Lender and each mortgagee and holder of a Superior
Mortgage.
SECTION 15.2 ATTORNMENT. If, at any time prior to the termination
of this Lease, the holder of a Superior Mortgage, or its successors or assigns,
(herein collectively called the "SUPERIOR
29
<PAGE> 35
MORTGAGEE") who acquire the interest of Landlord under this Lease through
foreclosure action or a transfer-in-lieu thereof, whereby the Superior
Mortgagee succeeds to the rights of Landlord under this Lease through
possession or foreclosure or delivery of a new lease or deed or otherwise,
Tenant agrees, at the election and upon request of any such party (hereinafter
called the "SUCCESSOR LANDLORD") to attorn fully and completely from time to
time, and to recognize any such Successor Landlord as Tenant's landlord under
this Lease upon the executory terms of this Lease. Provided Tenant is not in
default under the terms of this Lease, such Successor Landlord shall agree in
writing to accept Tenant's attornment. The foregoing provisions of this
Section 15.2 shall inure to the benefit of any such Successor Landlord and any
successor or assign of Tenant. Tenant, upon demand of any such Successor
Landlord, agrees to execute any instruments to evidence and confirm the
foregoing provisions of this Section 15.2, reasonably satisfactory to any such
Successor Landlord, acknowledging such attornment and setting forth the terms
and conditions of its tenancy.
SECTION 15.3 RADON GAS DISCLOSURE. Radon Gas: Radon is a
naturally occurring radioactive gas that, when it has accumulated in a building
in sufficient quantities, may present health risks to persons who are exposed
to it over time. Levels of radon that exceed federal and state guidelines have
been found in the buildings in Florida. Additional information regarding radon
and radon testing may be obtained from your county public health unit.
EXECUTED as of the date and year first above written.
"LANDLORD"
KC PARTNERSHIP, A FLORIDA GENERAL PARTNERSHIP,
BY: /s/ JAMES S. CARROLL
------------------------------------------
NAME: JAMES S. CARROLL, TRUSTEE OF
THE J. CARROLL ENTERPRISES TRUST
UNDER AMENDED AND RESTATED TRUST
AGREEMENT DATED AUGUST 3, 1993,
GENERAL PARTNER
"TENANT"
COURTESY FORD, INC.,
A FLORIDA CORPORATION
BY: /s/ JAMES S. CARROLL
---------------------------------
NAME: JAMES S. CARROLL
TITLE: PRESIDENT
30
<PAGE> 36
LEASE AGREEMENT
EXHIBIT A
DESCRIPTION OF LAND
Tract A of CORAL REEF ESTATES, according to the Plat thereof, as recorded in
Plat Book 81, Page 74, of the Public Records of Dade County, Florida.
<PAGE> 37
LEASE AGREEMENT
EXHIBIT B
EXCEPTIONS TO TITLE TO LAND
1. Restrictions, covenants, conditions and easements as contained on the
Plat of Coral Reef Estates Second Addition, recorded in Plat Book 81,
page 74, of the Public Records of Dade County, Florida.
2. Lease in favor of Freedom Financial Leasing Corporation filed April 1,
1996 in Official Records Book 17147, page 4641, of the Public Records
of Dade County, Florida.
3. Easement in favor of Florida Water and Utilities Inc. filed June 24,
1968 in Official Records Book 5993, page 429, of the Public Records of
Dade County, Florida.
4. Restrictions filed in Official Records Book 5342, page 381, of the
Public Records of Dade County, Florida.
5. Resolution filed in Official Records Book 1884, page 501, of the
Public Records of Dade County, Florida.
6. Easement in favor of Florida Water and Utilities filed in Official
Records Book 5319, page 297, of the Public Records of Dade County,
Florida.
7. Easement in favor of Florida Water and Utilities filed in Official
Records Book 1859, page 130, of the Public Records of Dade County,
Florida. No bldgs or structures.
<PAGE> 1
EXHIBIT 10.45
================================================================================
AMENDED AND RESTATED
SUBLEASE AGREEMENT
between
KOONS DEVELOPMENT CO., A FLORIDA GENERAL PARTNERSHIP
(Landlord)
and
KOONS FORD, INC., A FLORIDA CORPORATION
(Tenant)
HOLLYWOOD - - 441
================================================================================
<PAGE> 2
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 1 LEASE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Premises Leased . . . . . . . . . . . . . . . . . . 1
Section 1.2 Premises Defined . . . . . . . . . . . . . . . . . 1
Section 1.3 Habendum . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4 Amendment and Restatement of Prior Sub-Lease . . . 1
Section 1.5 Sublease Agreement . . . . . . . . . . . . . . . . 1
ARTICLE 2 TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Initial Term and Commencement . . . . . . . . . . . 1
Section 2.2 Lease Year . . . . . . . . . . . . . . . . . . . . 1
Section 2.3 Lease Month . . . . . . . . . . . . . . . . . . . . 2
Section 2.4 Renewal Term . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1 Base Rent . . . . . . . . . . . . . . . . . . . . . 2
Section 3.2 Additional Rent and Rent . . . . . . . . . . . . . 2
Section 3.3 Payment of Rent . . . . . . . . . . . . . . . . . . 3
Section 3.4 Late Charge . . . . . . . . . . . . . . . . . . . . 3
Section 3.5 Adjustment to Rent for Ford Improvements . . . . . 3
Section 3.6 Change of Facility Use. . . . . . . . . . . . . . . 3
ARTICLE 4 TAXES; UTILITIES . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1 Impositions Defined . . . . . . . . . . . . . . . . 3
Section 4.2 Tenant's Obligations . . . . . . . . . . . . . . . 4
Section 4.3 Tax Contest . . . . . . . . . . . . . . . . . . . . 4
Section 4.4 Evidence Concerning Impositions . . . . . . . . . . 4
Section 4.5 Utilities . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 5 IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5.1 Alterations . . . . . . . . . . . . . . . . . . . . 4
Section 5.2 Mechanic's and Materialmen's Liens . . . . . . . . 5
Section 5.3 Ownership of Improvements . . . . . . . . . . . . . 5
Section 5.4 Asbestos . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 6 USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS . . . . . . . . 6
Section 6.1 Use . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6.2 Environment . . . . . . . . . . . . . . . . . . . . 6
Section 6.3 Maintenance and Repairs . . . . . . . . . . . . . . 9
Section 6.4 Americans with Disabilities Act . . . . . . . . . . 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7 INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . 11
Section 7.1 Building Insurance . . . . . . . . . . . . . . . . 11
Section 7.2 Liability Insurance . . . . . . . . . . . . . . . . 11
Section 7.3 Policies . . . . . . . . . . . . . . . . . . . . . 11
Section 7.4 Tenant's Indemnity . . . . . . . . . . . . . . . . 12
Section 7.5 Landlord's Indemnity . . . . . . . . . . . . . . . 12
Section 7.6 Subrogation . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8 CASUALTY; CONDEMNATION . . . . . . . . . . . . . . . . . . . 13
Section 8.1 Tenant's Obligation to Restore . . . . . . . . . . 13
Section 8.2 Restoration and Deposit of Funds . . . . . . . . . 14
Section 8.3 Notice of Damage . . . . . . . . . . . . . . . . . 15
Section 8.4 Total Taking . . . . . . . . . . . . . . . . . . . 15
Section 8.5 Partial Taking . . . . . . . . . . . . . . . . . . 16
Section 8.6 Temporary Taking . . . . . . . . . . . . . . . . . 16
Section 8.7 Notice of Taking, Cooperation . . . . . . . . . . . 16
ARTICLE 9 TENANT'S FINANCING . . . . . . . . . . . . . . . . . . . . . 16
Section 9.1 Tenant's Right to Encumber . . . . . . . . . . . . 16
Section 9.2 Tenant's Mortgage . . . . . . . . . . . . . . . . . 17
ARTICLE 10 WARRANTY OF TITLE AND PEACEFUL POSSESSIONAND LANDLORD'S
FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10.1 Warranty As to Encumbrances . . . . . . . . . . . . 18
Section 10.2 Landlord's Mortgage . . . . . . . . . . . . . . . . 19
Section 10.3 Representations of Landlord . . . . . . . . . . . . 19
ARTICLE 11 DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . 21
Section 11.1 Default . . . . . . . . . . . . . . . . . . . . . . 21
Section 11.2 Remedies . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.1 Notices. . . . . . . . . . . . . . . . . . . . . . 23
Section 12.2 Performance of Other Party's Obligations . . . . . 23
Section 12.3 Modification and Non-Waiver . . . . . . . . . . . . 24
Section 12.4 Governing Law . . . . . . . . . . . . . . . . . . . 24
Section 12.5 Number and Gender; Captions; References . . . . . . 24
Section 12.6 CPI . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12.7 Estoppel Certificate . . . . . . . . . . . . . . . 24
Section 12.8 Severability . . . . . . . . . . . . . . . . . . . 25
Section 12.9 Attorney Fees . . . . . . . . . . . . . . . . . . . 25
Section 12.10 Surrender of Premises; Holding Over . . . . . . . . 25
Section 12.11 Relation of Parties . . . . . . . . . . . . . . . . 25
Section 12.12 Force Majeure . . . . . . . . . . . . . . . . . . . 25
Section 12.13 Non-Merger . . . . . . . . . . . . . . . . . . . . 25
Section 12.14 Entireties . . . . . . . . . . . . . . . . . . . . 25
Section 12.15 Recordation . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 12.16 Successors and Assigns . . . . . . . . . . . . . . 26
Section 12.17 Landlord's Joinder . . . . . . . . . . . . . . . . 26
Section 12.18 No Third Parties Benefitted . . . . . . . . . . . . 26
Section 12.19 Survival . . . . . . . . . . . . . . . . . . . . . 26
Section 12.20 Perpetuities . . . . . . . . . . . . . . . . . . . 26
Section 12.21 Transfer of Landlord's Interest . . . . . . . . . . 26
Section 12.22 Tenant's Right To Assign . . . . . . . . . . . . . 26
Section 12.23 Past Due Amounts . . . . . . . . . . . . . . . . . 27
Section 12.24 Independent Counsel . . . . . . . . . . . . . . . . 27
Section 12.25 Cooperation with Landlord's Lender. . . . . . . . . 27
Section 12.26 Receipt and Acknowledgment of Seminole Lease. . . . 27
Section 12.27 Fulfillment of Lessee's Obligation under the
Seminole Lease. . . . . . . . . . . . . . . . . . . 27
Section 12.28 Certain Rights of Tenant Regarding the Seminole Leas27
ARTICLE 13 OPTION TO PURCHASE LEASEHOLD . . . . . . . . . . . . . . . . 28
Section 13.1 Right of First Refusal . . . . . . . . . . . . . . 28
Section 13.2 Option . . . . . . . . . . . . . . . . . . . . . . 29
Section 13.3 Specific Performance . . . . . . . . . . . . . . . .31
ARTICLE 14 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 14.1 Arbitration Provisions . . . . . . . . . . . . . . 31
ARTICLE 15 SUBORDINATION AND ATTORNMENT . . . . . . . . . . . . . . . . 32
Section 15.1 Subordination . . . . . . . . . . . . . . . . . . . 32
Section 15.2 Attornment . . . . . . . . . . . . . . . . . . . . 32
Section 15.3 Radon Gas Disclosure . . . . . . . . . . . . . . . 32
</TABLE>
iii
<PAGE> 5
EXHIBITS
EXHIBIT A Description of Land
EXHIBIT B Exceptions to Title to Land
iv
<PAGE> 6
AMENDED AND RESTATED SUBLEASE AGREEMENT
This Amended and Restated Sublease Agreement ("LEASE") is entered into
as of the 16th day of March, 1998, between KOONS DEVELOPMENT CO., A FLORIDA
GENERAL PARTNERSHIP as ("LANDLORD"), and KOONS FORD, INC., A FLORIDA CORPORATION
("TENANT").
ARTICLE 1
LEASE OF PROPERTY
SECTION 1.1 PREMISES LEASED. Landlord subleases to Tenant, and
Tenant leases from Landlord the real property and premises described on EXHIBIT
A (the "LAND"), including but not limited to all of the rights, interests,
estates, and appurtenances thereto, all improvements thereon, and all other
rights, titles, interests, and estates, if any, in adjacent streets and roads.
SECTION 1.2 PREMISES DEFINED. All of the Land, properties,
rights, estates, appurtenances, and interests leased to Tenant pursuant to
Section 1.1, together with all improvements now or hereafter constructed
thereon, are hereinafter collectively referred to as the "PREMISES".
SECTION 1.3 HABENDUM. To have and to hold the Premises, together
with all and singular the rights, privileges, and appurtenances thereunto
attaching or in anywise belonging, exclusively unto Tenant, its successors and
assigns, upon the terms and conditions set forth herein and subject to the
matters set forth on EXHIBIT B.
SECTION 1.4 AMENDMENT AND RESTATEMENT OF PRIOR SUB-LEASE. The
Premises was previously subject to a lease agreement by and between Landlord
and Tenant. This agreement shall constitute an Amended and Restated Sublease
Agreement amending and restating the existing sublease.
SECTION 1.5 SUBLEASE AGREEMENT. This is a Sublease Agreement.
The property being subleased herein is subject to a Business Lease in favor of
The Seminole Tribe of Florida dated December 15, 1978 (as supplemented) (the
"SEMINOLE LEASE"). References hereinafter to the Landlord shall refer to Koons
Development Co., a Florida General Partnership. References hereinafter to the
Tenant shall refer to Koons Ford, Inc., a Florida Corporation. The primary
Landlord, The Seminole Tribe of Florida, shall be referred to by name.
ARTICLE 2
TERM OF LEASE
SECTION 2.1 INITIAL TERM AND COMMENCEMENT. The initial term
("INITIAL TERM") of this Lease shall commence on the date hereof ("COMMENCEMENT
DATE") and unless sooner terminated pursuant to the terms of this Lease, the
initial term of this Lease shall expire on the "EXPIRATION DATE" (herein so
called), which shall be (i) the last day of the one hundred twentieth (120th)
Lease Month from and after the first day of the calendar month following the
Commencement Date.
SECTION 2.2 LEASE YEAR. A "LEASE YEAR" shall mean a twelve (12)
Lease Month period commencing with the first day of the calendar month
following the Commencement Date or any anniversary date thereof.
<PAGE> 7
SECTION 2.3 LEASE MONTH. A "LEASE MONTH" shall mean a period of
time during the term of this Lease commencing the first day of the calendar
month and ending on the last day of the calendar month. The first Lease Month
shall begin on the first day of the calendar month following the Commencement
Date.
SECTION 2.4 RENEWAL TERM.
(a) If on the Expiration Date and the date Tenant notifies
Landlord of its intention to renew the term of this Lease (as provided below),
(i) Tenant has not been given notice of default under this Lease based upon a
Default as hereinafter defined, and (ii) this Lease is in full force and
effect, then Tenant, shall have and may exercise an option to renew this Lease
for four (4) additional terms (each, a "RENEWAL TERM") of five (5) years each,
upon the same Rent (hereinafter defined), as adjusted pursuant to the terms of
Section 3.1, and other terms and conditions contained in this Lease. Whenever
used in this Lease, "TERM", unless modified or specifically noted otherwise in
the applicable context, shall mean the Initial Term together with each Renewal
Term to the extent Tenant has exercised any option with respect to any Renewal
Term.
(b) If Tenant desires to renew this Lease, Tenant must notify
Landlord in writing of its intention to renew on or before the date which is at
least six (6) months but no more than twelve (12) months prior to the
Expiration Date or the expiration date of any Renewal Term, as the case may be.
ARTICLE 3
RENT
SECTION 3.1 BASE RENT. Subject to the terms and provisions
contained in this Section 3.1, Tenant shall pay Landlord monthly "BASE RENT"
(herein so called) of Sixty-Two Thousand Five Hundred and no/100 Dollars
($62,500.00), in advance on or before the first day of each Lease Month during
the Term, subject to adjustment as hereafter provided. If the Term commences
on a day other than the first day of a calendar month, or ends on a day other
than the last day of a calendar month, then the Base Rent for such month shall
be prorated on the basis of one thirtieth (1/30th) of the monthly Base Rent for
each day of such month. If the CPI on any Adjustment Date shall be greater
than the CPI for the Commencement Date, monthly Base Rent commencing on the
Adjustment Date shall be adjusted to be the original monthly Base Rent
specified in this Section 3.1 plus an amount equal to one-half (1/2) of the
product obtained by multiplying: (i) the original monthly Base Rent specified
in this Section 3.1 by (ii) the percentage increase in the CPI from the
Commencement Date through the January 1st prior to the Adjustment Date.
"ADJUSTMENT DATE" shall be the first day of the first Lease Month of each
Renewal Term. The term "CPI" shall have the meaning specified therefor in
Section 12.6.
Tenant shall also pay at the same times and places as the
rental installments such Florida State Sales Tax, other such applicable taxes
due on rentals and all other sums due hereunder either city, state, county or
federal as may be in effect from time to time.
SECTION 3.2 ADDITIONAL RENT AND RENT. All amounts required to be
paid by Tenant under the terms of this Lease, other than Base Rent, are herein
from time to time collectively referred to as "ADDITIONAL RENT." Base Rent and
Additional Rent are herein collectively referred to as "RENT."
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SECTION 3.3 PAYMENT OF RENT. Base Rent shall be payable to
Landlord at the original or changed address of Landlord as set forth in Section
12.1 or to such other persons or at such other addresses in the United States
of America as Landlord may designate from time to time in writing to Tenant;
however, if Tenant receives notice of a default under the Landlord's Financing
(defined below), then Tenant shall have the right, but not the obligation, to
pay to Landlord's Financing Lender (defined below) any sums due and owing on
such Landlord's Financing and all such payments by Tenant shall reduce the
amount of Rent owing to Landlord. Additional Rent shall be paid as herein set
forth.
SECTION 3.4 LATE CHARGE. Any rent or other sum which is not paid
within fifteen (15) days after the date due shall bear interest at the Default
Rate from the date when the same is payable under the terms of this Lease until
the same shall be paid.
SECTION 3.5 ADJUSTMENT TO RENT FOR FORD IMPROVEMENTS. Landlord
and Tenant recognize that Ford Leasing or its related entities ("FORD") may
from time to time require that structural improvements to the Premises be made
as a condition to the continuation of a Ford Dealership upon the Premises. In
the event that Ford requires that such structural improvements be made to the
Premises, Landlord shall, at its expense, construct such improvements. The
Base Rent due pursuant to Section 3.1 hereinabove shall be increased by an
amount equal to the costs of the improvements required by Ford, amortized over
a fifteen (15) year period. The new Base Rent shall commence effective the
next monthly period following the completion of the required improvements.
SECTION 3.6 CHANGE OF FACILITY USE. The principals of Landlord
and Tenant are presently pursuing the possible relocation of the dealership
currently operating from the Premises. Should such relocation occur, alternate
operations for the Premises will be required following vacation. In the event
the revenues derived from the new operation are such that the funds available
for payment of Base Rent are less than those resulting from the operation of
the business at the Premises as of the Commencement Date, then, in such event,
the Base Rent shall be reduced proportionately in a manner consistent with the
relationship that the Base Rent paid prior to such relocation bears to the
revenues derived from current operations on the Premises and the revenues
derived following the placement of the new business operation at the Premises.
In no event shall the Base Rent payable by Tenant be less than the debt service
attributable to the Premises, provided the principal amount of any debt so
serviced shall not increase during the term of the Lease.
ARTICLE 4
TAXES; UTILITIES
SECTION 4.1 IMPOSITIONS DEFINED. "IMPOSITIONS" means all real
estate and ad valorem taxes, and associated levies, including penalties levied
for failure of Tenant to pay any of same in a timely manner, which shall or may
during the Term be assessed, levied or imposed by any Governmental Authority
(defined below) upon (a) the Premises or any part thereof, (b) the buildings or
improvements now or hereafter comprising a part thereof, the appurtenances
thereto or the sidewalks, streets, or vaults adjacent thereto. Impositions
shall not include any income tax, capital levy, estate, succession, inheritance
or transfer taxes, or similar tax of Landlord; any franchise tax imposed upon
any owner of the fee of the Premises; or any income, profits, or revenue tax,
assessment, or charge imposed upon the rent or other benefit received by
Landlord under this Lease by any municipality, county, state, the United States
of America, or any other governmental body, subdivision, agency, or authority
(all of such foregoing governmental bodies are collectively referred to herein
as "GOVERNMENTAL AUTHORITIES").
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SECTION 4.2 TENANT'S OBLIGATIONS. During the Term, Tenant will
pay all Impositions before they become delinquent. Impositions that are
payable by Tenant for the tax year in which this Lease commences as well as
during the year in which the Term ends shall be apportioned so that Tenant
shall pay its share of the Impositions payable by Tenant for the portion of
such Taxes allocable to the portion of such year occurring during the Term.
Where any Imposition that Tenant is obligated to pay may be paid pursuant to
law in installments, Tenant may pay such Imposition in installments as and when
such installments become due. Tenant shall, if so requested, deliver to
Landlord evidence of payment of all Impositions Tenant is obligated to pay
hereunder, concurrently with the making of such payment.
SECTION 4.3 TAX CONTEST. Tenant may, at its expense, contest the
validity or amount of any Imposition for which it is responsible, in which
event the payment thereof may be deferred, as permitted by law, during the
pendency of such contest, if diligently prosecuted. Landlord shall cooperate
with Tenant in connection with any such contest but Landlord shall not be
required to spend any sums or incur any liability in cooperating with Tenant.
All taxes must be paid prior to the date they become delinquent. In the event
that the property subject to this Agreement is encumbered by financing, the
Tenant shall pay all taxes within the time frame established by such lender.
SECTION 4.4 EVIDENCE CONCERNING IMPOSITIONS. The certificate,
advice, bill, or statement issued or given by the appropriate officials
authorized by law to issue the same or to receive payment of any Imposition of
the existence, nonpayment, or amount of such Imposition shall be prima facie
evidence for all purposes of the existence, nonpayment, or amount of such
Imposition.
SECTION 4.5 UTILITIES. Tenant shall pay all charges for gas,
electricity, light, heat, air conditioning, power, telephone, and other
communication services, and all other utilities and similar services rendered
or supplied to the Premises, and all water, refuse, sewer service charges, or
other similar charges levied or charged against, or in connection with, the
Premises.
ARTICLE 5
IMPROVEMENTS
SECTION 5.1 ALTERATIONS. At any time and from time to time
during the Term, Tenant may perform such alteration, renovation, repair,
refurbishment, and other work (herein such matters being collectively called
the "ALTERATIONS") with regard to any Improvements as Tenant may elect. All
buildings, structures, and other improvements located at any time on the Land
are herein called the "IMPROVEMENTS." Any and all alterations, renovation,
repair, refurbishment, or other work with regard thereto shall be performed, in
accordance with the following "CONSTRUCTION STANDARDS" herein so referenced):
(i) All such construction or work shall be performed in a good and workmanlike
manner in accordance with good industry practice for the type of work in
question; (ii) All such construction or work shall be done in compliance with
all applicable building codes, ordinances, and other laws or regulations of
Governmental Authorities having jurisdiction; (iii) Tenant shall have obtained
and shall maintain in force and effect the insurance coverage required in
Article 7 with respect to the type of construction or work in question; (iv)
After commencement, such construction or work shall be prosecuted with due
diligence to its completion; and (v) With the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed and shall
be deemed given if a request is not approved or denied within thirty (30) days
after notice, no Alteration shall be made which (x) involves any material
repairs or modifications to the
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structural portions of the Premises, or (y) would impair the market value,
structural integrity or usefulness of the Premises for the purposes for which
the same are presently being used.
SECTION 5.2 MECHANIC'S AND MATERIALMEN'S LIENS. Tenant shall
have no right, authority, or power to bind Landlord or any interest of Landlord
in the Premises for any claim for labor or for material or for any other charge
or expense incurred in construction of any Improvements or performing any
alteration, renovation, repair, refurbishment, or other work with regard
thereto, nor to render Landlord's interest in the Premises liable for any lien
or right of lien for any labor, materials, or other charge or expense incurred
in connection therewith, and Tenant shall in no way be considered as the agent
of Landlord in the construction, erection, or operation of any such
Improvements. If any liens or claims for labor or materials supplied or
claimed to have been supplied to the Premises shall be filed against the
interest of the Landlord, Tenant shall promptly pay or bond such liens to
Landlord's reasonable satisfaction or otherwise obtain the release or discharge
thereof.
SECTION 5.3 OWNERSHIP OF IMPROVEMENTS. During the Term all
currently existing Improvements shall be solely the property of Landlord. All
other Improvements created by Alterations which may be added by Tenant (which
do not constitute replacements of existing Improvements) shall be the property
of Tenant, but at the end of the Term, all then-existing Improvements shall be
the property of Landlord. However, upon expiration or earlier termination of
this Lease, Tenant shall have the right to remove all trade fixtures, movable
equipment, furniture, furnishings and other personal property located in the
Premises and other items not permanently attached to the Premises provided that
Tenant repairs any damages caused by the removal of such items. Nothing
hereinabove withstanding to the contrary, any lifts or hydraulics installed
upon the Premises by Tenant, whether as an original installation or
replacement, shall remain on the Premises and shall become the property of the
Landlord.
SECTION 5.4 ASBESTOS. Landlord shall remain fully liable and
responsible for any asbestos and any other Hazardous Substances as hereinafter
defined present on any portion of the Premises prior to the Commencement Date
of this Lease even if such asbestos is in an unfriable or undisturbed state on
the Commencement Date of this Lease and Tenant thereafter disturbs such
Materials in any manner including, without limitation, in connection with any
Alterations performed by Tenant on the Premises. If Tenant intentionally
disturbs or causes to be disturbed by any contractor or other party any
asbestos presently located on the Premises of which Tenant has actual
knowledge, then any such disturbance of such asbestos shall only be done in
accordance with all laws, regulations, ordinances, or requirements of any
Governmental Authority having jurisdiction in the Premises including, without
limitation, those which govern the disposition of Hazardous Materials. Any
expenses associated with correction of such disturbance caused by the Tenant or
its contractors shall be borne by the Tenant.
ARTICLE 6
USE, ENVIRONMENTAL, MAINTENANCE, AND REPAIRS
SECTION 6.1 USE.
Subject to the terms and provisions hereof, Tenant may use and enjoy
the Premises for the sale, lease, trade, repair or service of motor or other
vehicles and other uses normally associated therewith including, without
limitation, the sale of parts and services. Without limiting the generality of
the foregoing, the provisions relating to use of the Premises shall be broadly
construed to encompass all uses normally associated with premises occupied by
automobile, boat and recreational vehicle dealerships. Tenant shall not use or
occupy, permit the Premises to be used or occupied, nor do or permit anything
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to be done in or on the Premises in a manner which would constitute a public or
private nuisance, or which would violate any laws, regulations, ordinances, or
requirements of any Governmental Authority having jurisdiction in the Premises
including, without limitation, those which relate to Hazardous Materials.
Tenant shall make no use of the Premises which violates the terms of the
Seminole Lease or restrictions imposed by Landlord's Financing Lender, as
hereinafter defined, which are listed on EXHIBIT B hereto. Landlord hereby
represents and warrants to Tenant that the uses set forth in this Section 6.1
do not violate any of the terms or provisions of the Seminole Lease or any
restrictions imposed by Landlord's Financing Lender, and that the Premises, as
currently being used, do not violate any such terms or provisions.
SECTION 6.2 ENVIRONMENT.
(a) For purposes of this Lease, the term "HAZARDOUS MATERIAL"
means (i) any substance, product, waste or other material of any nature
whatsoever which is or becomes listed, regulated, or addressed pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq. ("CERCLA"); the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq. ("RCRA"); the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et
seq.; the Federal Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Federal
Clean Water Act, 33 U.S.C. Section 1151 et seq.; the National Environmental
Policy Act, 42 U.S.C. Section 1857 et seq.; the Regulations of the
Environmental Protection Agency, 33 C.F.R. and 40 C.F.R.; Chapters 373, 376,
380 and 403 of the Florida Statutes and rules related thereto, including
Chapters 17, 27 and 40 of the Florida Administrative Code; and all Broward
County environmental protection ordinances, (the above-cited Florida state
statutes are hereinafter collectively referred to as the "STATE TOXIC
SUBSTANCES LAWS") or any other federal, state or local statute, law, ordinance,
resolution, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic or
dangerous waste, substance or material, as now or at any time hereafter in
effect, (ii) any substance, product, waste or other material of any
nature whatsoever which may give rise to liability under any of the above
statutes or under any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or under any reported
decisions of a state or federal court, (iii) petroleum or crude oil other than
petroleum and petroleum products which are contained within regularly operated
motor vehicles, and (iv) asbestos.
(b) Tenant represents, warrants, acknowledges and agrees that:
(i) Subject to the terms and provisions of this
Lease, Tenant will not undertake, permit,
authorize or suffer, the manufacture,
handling, generation, transportation,
storage, treatment, discharge, release,
burial or disposal on, under or about the
Premises of any Hazardous Material, or the
transportation to or from the Premises of any
Hazardous Material;
(ii) Tenant will not cause, permit, authorize or
suffer any Hazardous Material to be placed,
held, located or disposed of, on, under or
about any other real property all or any
portion of which is legally or beneficially
owned (or any interest or estate therein
which is owned) by the Tenant in any
jurisdiction now or hereafter having in
effect a so-called "Superlien" law or
ordinance or any part thereof the effect of
which law or ordinance would be to create a
lien on the Premises to secure any obligation
in connection with the real property in such
other jurisdiction.
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(c) From and after the Commencement Date, Tenant shall keep and
maintain the Premises in compliance with, and shall not cause or permit the
Premises to be in violation of, any federal, state or local laws, ordinances
or regulations relating to health and safety, industrial hygiene or to the
environmental conditions on, under or about the Premises including, but not
limited to, air, soil and ground water conditions. Tenant hereby covenants and
agrees that neither it nor any agent, servant, employee, or tenant shall
generate, manufacture, handle, store, treat, discharge, release, bury or
dispose of on, under or about the Premises, any Hazardous Material. Without
limiting the generality of the foregoing provisions of this Subsection, Tenant
agrees at all times to comply fully and in a timely manner with, and to cause
all of its employees, agents, contractors, subcontractors, tenants and any
other persons occupying or present on the Premises to so comply with, all
federal, state and local laws, regulations, guidelines, codes, statutes and
ordinances applicable to the generation, manufacture, handling, storage,
treatment, discharge, release, burial or disposal of any Hazardous Material
located or present on, under or about the Premises by, through or under Tenant
after the Commencement Date, or the transportation to or from the Premises of
any Hazardous Material. Any sublease executed after the date hereof concerning
the Premises shall contain a provision prohibiting the lessee, and any agent,
servant, employee or tenant of the lessee, from generating, manufacturing,
storing, treating, discharging, releasing, burying or disposing on, under or
about the Premises, or transporting to or from the Premises, any Hazardous
Material.
(d) If the release, threat of release, placement on, under or
about the Premises, or the use, generation, manufacture, storage, treatment,
discharge, release, burial or disposal on, under or about the Premises, or
transportation to or from the Premises, of any Hazardous Material: (i) gives
rise to liability, costs or damages (including, but not limited to, a response
action, remedial action, or removal action) under RCRA, CERCLA, the State Toxic
Substances Laws, or any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or under any reported
decision of a state or federal court, (ii) causes or threatens to cause a
significant public health effect, or (iii) pollutes or threatens to pollute the
environment, the Tenant shall promptly take any and all response, remedial and
removal action necessary to clean up the Premises and any other effected
property and mitigate exposure to liability arising from the Hazardous
Material, if required by law or by any governmental authority.
(e) Tenant shall indemnify, defend with counsel reasonably
satisfactory to Landlord, protect and hold harmless Landlord, its directors,
officers, employees, agents, assigns and any successor or successors to
Landlord's interest under this Lease from and against all claims, actual
damages (including but not limited to special and consequential damages),
punitive damages, injuries, costs, response costs, losses, demands, debts,
liens, liabilities, causes of action, suits, legal or administrative
proceedings, interest, fines, charges, penalties and expenses (including but
not limited to attorneys' and expert witness fees and costs incurred in
connection with defending against any of the foregoing or in enforcing this
indemnity) of any kind whatsoever paid, incurred or suffered by, or asserted
against, any indemnified party at any time prior to any retaking of the
Premises by Landlord directly or indirectly arising from or attributable to (i)
any breach by Tenant of any of its agreements, warranties or representations
set forth in this Section 6.2, or (ii) any repair, cleanup or detoxification,
or preparation and implementation of any removal, remedial, response, closure
or other plan concerning any Hazardous Material which arises on, under or about
the Premises after the Commencement Date and is attributable to Tenant and not
to Landlord or any other party not under the control, employed by, contracted
with or affiliated with Tenant, regardless of whether undertaken due to
governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Landlord for any liability pursuant to such statute, to
the extent Tenant is liable pursuant to this Section 6.2.
(f) Tenant shall promptly give Landlord (i) a copy of any notice,
correspondence or information it receives from any federal, state or other
governmental authority regarding Hazardous Materials on, under or about the
Premises or Hazardous Materials which affect or may affect the Premises, or
regarding any actions instituted, completed or threatened by any such
governmental authority concerning Hazardous Materials which affect or may
affect the Premises, (ii) written notice of any knowledge or information Tenant
obtains regarding Hazardous Materials on, under or about the Premises or
incurred by Tenant (other than commercially reasonable quantities of
customarily used cleaning compounds and the like and the matters covered
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in subsections (h) and (i) of this Section 6.2), a third party or any
government agency to study, assess, contain or remove any Hazardous Materials
on, under, about or near the Premises for which expense or loss Tenant may be
liable or for which a lien may be imposed on the Premises, (iii) written
notice of any knowledge or information Tenant obtains regarding the release or
discovery of Hazardous Materials on, under or about the Premises or on other
sites owned, occupied or operated by Tenant or by any person for whose conduct
Tenant is or may be responsible, or whose liability may result in a lien on or
otherwise affect the Premises, (iv) written notice of all claims made or
threatened by any third party against Tenant or the Premises relating to
damage, contribution, cost recovery compensation, loss or injury resulting from
any Hazardous Material, and (v) written notice of Tenant's discovery of any
occurrence or condition on any real property adjoining or in the vicinity of
the Premises that could subject the Premises to any restrictions on the
ownership, occupancy, transferability or use of the Premises under any of the
statutes cited in Subsection (a) of this Section or any regulation adopted
pursuant thereto. Notwithstanding anything to the contrary contained herein,
Tenant shall not be under any obligation to provide notice of any contamination
so long as any of the principal(s) of Landlord (currently being James S.
Carroll, William C. Carroll, Janet L. Giles and Ralph S. Kerr) are responsible
for the operation of the dealership at the Premises.
(g) Notwithstanding anything to the contrary contained herein,
the indemnity contained in this Section 6.2 shall continue indefinitely from
the date of Tenant's execution of this Lease and shall survive the termination
of all agreements between Tenant and Landlord. The indemnity contained in this
Section 6.2 in no way limits the scope or enforceability of any other indemnity
contained herein.
(h) Commercially reasonable quantities of customarily used
cleaning compounds and the like, which are stored, used and disposed of in
compliance with applicable environmental laws, shall be excluded from any
obligation of Tenant hereunder this Section 6.2. Commercially reasonable
quantities of products customarily used in Tenant's business and the like,
which are stored, used and disposed of in compliance with applicable
environmental laws, are hereby permitted by Landlord.
(i) Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have no liability or obligation under this Section 6.2 or
elsewhere in this Lease for any matter existing on, under or about the
Premises prior to the Commencement Date, including, without limitation, the
removal or remediation of any Hazardous Materials and Landlord shall maintain
full liability for such pre-Commencement Date contamination. Landlord shall
indemnify, defend with counsel reasonably satisfactory to Tenant, protect and
hold harmless Tenant, its directors, officers, employees, agents, assigns and
any successor or successors to Tenant's interest under this Lease from and
against all claims, actual damages (including but not limited to special and
consequential damages), punitive damages, injuries, costs, response costs,
losses, demands, debts, liens, liabilities, causes of action, suits, legal or
administrative proceedings, interest, fines, charges, penalties and expenses
(including but not limited to attorneys' and expert witness fees and costs
incurred in connection with defending against any of the foregoing or in
enforcing this indemnity) of any kind whatsoever paid, incurred or suffered by,
or asserted against, any indemnified party directly or indirectly arising from
or attributable to (1) any breach by Landlord any of its agreements, warranties
or representations set forth in this Section 6.2(i), or (2) any repair, cleanup
or detoxification, or preparation and implementation of any removal, remedial,
response, closure or other plan concerning any Hazardous Material on, under or
about the Premises prior to the Commencement Date attributable to Landlord or
any other party under the control, employed by, contracted with or otherwise
associated with Landlord in any manner, regardless of whether undertaken due to
governmental action. Without limiting the generality of the foregoing
indemnity, such indemnity is intended to operate as an agreement pursuant to
Section 107 (e) of CERCLA, 42 U.S.C. Section 9607(e), to insure, protect, hold
harmless and indemnify Tenant for any liability pursuant to such statute, to
the extent Landlord is liable pursuant to this Section 6.2(i).
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SECTION 6.3 MAINTENANCE AND REPAIRS. During the Term of this
Lease, in addition to the Rent herein provided, Tenant agrees to pay all costs
and charges for repair and maintenance of the Premises, except as otherwise
provided herein. Tenant agrees to surrender the Premises at the expiration or
earlier termination of this Lease in as good condition as at the commencement
of the term of this Lease except, Tenant shall not be responsible for the
repair or condition of those portions of the premises which Landlord agrees to
maintain nor damage by dry rot, termites, sinking of floors, or ordinary wear
and tear. Landlord agrees to maintain in good repair, at Landlord's cost, the
roof, outer walls (which will include the bulkheads under plate glass windows),
downspouts, underground plumbing, underground and in the wall wiring, support
of floors, and, without limitation, structural portions of the Premises.
Tenant shall keep in good repair the electrical equipment, air conditioning
equipment and heating equipment, and when required, Tenant shall replace such
components with items of at least scope and quality of those being replaced.
In the event Tenant has replaced any of such equipment prior to the end of its
normal useful life and the Term of this Lease terminates or expires in
accordance with the provisions contained in this Lease, then Landlord shall pay
to Tenant on such termination date or expiration date, as the case may be, an
amount equal to the cost of such equipment paid by Tenant times a fraction, the
numerator of which is the number of months in the normal useful life of such
equipment minus the number of months from the date of installation of such
equipment to the date of termination or expiration, as the case may be, of the
Term, and the denominator of which is the number of months in the normal useful
life of such equipment. No such payment shall be required to made by Landlord
if the Term is terminated due to the occurrence and continuation of a Default
by Tenant. Tenant agrees to replace any plate, window or door glass broken in
the Premises with glass of like kind and quality, except Tenant shall not be
required to replace glass broken due to settlement or defective construction of
the building or due to the failure of Landlord to maintain and repair those
portions of the Premises which Landlord agrees herein to maintain and repair or
due to negligent repair of said premises by Landlord. Landlord agrees to
replace glass broken in the Premises when breakage is due to any of the causes
set forth in the next preceding sentence which shall relieve Tenant from
replacing said glass as set forth herein. Landlord and Tenant shall, comply
with all laws, rules, orders, ordinances, directions, regulations and
requirements of federal, state, county and municipal authorities pertaining to
the Premises, including the Americans with Disabilities Act. Any repairs
required to be made by the Landlord and Tenant shall be made in a prompt and
workmanlike manner. All goods and materials used shall be in quality equal to
or better than that being replaced. The Tenant shall supply the Landlord with
copies of all warranties offered as to any replacements and shall supply
Landlord with copies of any invoices for repairs or replacements, the cost of
which exceeds $5,000.00. Tenant's failure to supply such warranties and
invoices shall not be deemed a default under the terms of this Lease. Landlord
and Tenant shall, comply with all laws, rules, orders, ordinances, directions,
regulations and requirements of federal, state, county and municipal
authorities pertaining to the Premises, including the Americans with
Disabilities Act. Any repairs required to be made by the Landlord and Tenant
shall be made in a prompt and workmanlike manner. All goods and materials used
shall be in quality equal to or better than that being replaced. The Tenant
shall supply the Landlord with copies of all warranties offered as to any
replacements and shall supply Landlord with copies of any invoices for repairs
or replacements, the cost of which exceeds $5,000.00. Tenant's failure to
supply such warranties and invoices shall not be deemed a default under the
terms of this Lease.
Subject to the other terms of this Lease, Tenant acknowledges that it
has inspected and that the Premises, including all fixtures, equipment and
furnishings contained therein, are in satisfactory or excellent condition and
accepts the Premises in its "AS IS" condition, without requiring Landlord to
make any repairs or replacements thereof. Tenant hereby waives any objection
to and releases Landlord from
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any liability arising from the condition of the Premises from and after the
Commencement Date, except for matters as herein set forth.
Any Improvements being constructed upon the Land together with all
equipment and hardware, may be warrantied by third party vendors who have
performed labor or rendered materials thereto. The Tenant shall be entitled to
the benefit of all such warranties and the Landlord shall fully cooperate in
securing the services of such third party vendors for warranty work during the
Term of this Lease.
SECTION 6.4 AMERICANS WITH DISABILITIES ACT. Landlord shall be
responsible for compliance with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, attributable to the Premises as of the Commencement Date of
this Lease. In the event the Tenant makes any modifications to the Premises,
all such modifications shall comply with all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to the Premises, including the Americans with
Disabilities Act, including modifications which are required by such
governmental agencies, as a result of such modifications, to remaining
unmodified portions of the Premises.
ARTICLE 7
INSURANCE AND INDEMNITY
SECTION 7.1 BUILDING INSURANCE. Tenant will, at its cost and
expense, keep and maintain in force the following policies of insurance:
(1) Insurance on the Improvements against loss or damage by fire
and against loss or damage by any other risk now and from time to time insured
against by "extended coverage" provisions of policies generally in force on
improvements of like type in the city in which the Premises are located, and in
builder's risk completed value form during construction of improvements by
Tenant, in amounts sufficient to provide coverage for the full insurable value
of the Improvements; the policy for such insurance shall have a replacement
cost endorsement or similar provision. "FULL INSURABLE VALUE," shall mean
actual replacement value (exclusive of cost of excavation, foundations, and
footings below the surface of the ground or below the lowest basement level),
and such full insurable value shall be determined by Tenant's insurer, and
confirmed from time to time at the request of Landlord by one of the insurers.
The Tenant shall maintain all storm and flood insurances which are customarily
maintained for properties similar to the Premises in the County in which the
Premises are located, or which is required by Landlord's Lender (if any), and
only if such coverage is available, to fully insure the Improvements including
all such coverages which might later come into existence as a result of changes
in the insurance coverages available or required in the future.
(2) Worker's Compensation Insurance as to Tenant's employees
involved in the construction, operation, or maintenance of the Premises in
compliance with applicable law.
(3) Such other insurance against other insurable hazards which at
the time are commonly insured against in the case of improvements similarly
situated, due regard being given to the height and type of the Improvements,
their construction, location, use, and occupancy.
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SECTION 7.2 LIABILITY INSURANCE. Tenant shall secure and
maintain in force comprehensive general liability insurance, including
contractual liability specifically applying to the provisions of this Lease and
completed operations liability, with limits of not less than Ten Million
Dollars ($10,000,000) with respect to bodily injury or death to any number of
persons in any one accident or occurrence and with respect to property damage
in any one accident or occurrence, such limits to be increased in the event of
request by Landlord by an amount which may be reasonable at the time.
SECTION 7.3 POLICIES. All insurance maintained in accordance
with the provisions of this Article 7 shall be issued by companies reasonably
satisfactory to Landlord, and shall be carried in the name of both Landlord and
Tenant, as their respective interests may appear, and shall contain a mortgagee
clause acceptable to the Landlord's Financing Lender and the Permitted
Mortgagees. All property policies shall (i) be subject to prior written
approval of Landlord, which shall not be unreasonably withheld or delayed, and
(ii) expressly provide that any loss thereunder may be adjusted with Tenant,
Landlord's Financing Lender and Permitted Mortgagees, but, unless required
otherwise under Landlord's Financing, shall be payable to Tenant and disbursed
as set forth in Section 8.2. All property and liability insurance policies
shall name Landlord as an additional named insured and shall include
contractual liability endorsements. Tenant shall furnish Landlord, Landlord's
Financing Lender and each Permitted Mortgagee with evidence of all insurance
policies required under this Article 7 and shall furnish and maintain with each
of such parties, at all times, a certificate of the insurance carrier
certifying that such insurance shall not be canceled without at least fifteen
(15) days advance written notice to each of such parties.
SECTION 7.4 TENANT'S INDEMNITY. Subject to Section 7.6, Tenant
shall indemnify and hold harmless Landlord, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED LANDLORD PARTIES"), from all claims, suits, actions,
and proceedings whatsoever which may be brought or instituted on account of or
growing out of any Default and any and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the Claims, to the extent, but
only to the extent, such Claims are not attributable to (i) events or
conditions that occurred or existed, in whole or in part, prior to the date
when Tenant first occupied the Premises or (ii) failure of any components of
the Improvements that Landlord is required to maintain ("CLAIMS"), Tenant shall
assume on behalf of the Indemnified Landlord Parties and conduct with due
diligence and in good faith the defense of all such Claims against any of the
Indemnified Landlord Parties. Tenant may contest the validity of any such
Claims, in the name of Landlord or Tenant, as Tenant may deem appropriate,
provided that the expenses thereof shall be paid by Tenant. The foregoing
covenants and agreements of Tenant shall survive the expiration or termination
of this Lease.
SECTION 7.5 LANDLORD'S INDEMNITY. Subject to Section 7.6,
Landlord shall indemnify and hold harmless Tenant, its shareholders, partners,
trustees, members, directors, officers, employees and its successors and
assigns (the "INDEMNIFIED TENANT PARTIES"), from all claims which may be
brought or instituted on account of or growing out of any default by Landlord
of its obligations under this Lease and all injuries or damages, including
death, to persons or property on the Premises and all losses, liabilities,
judgments, settlements, costs, penalties, damages, and expenses relating
thereto, including but not limited to attorneys' fees and other costs of
defending against, investigating, and settling the claims, to the extent, but
only to the extent, any such claims are attributable to or arise out of: (i)
events or conditions that existed or occurred, in whole or in part, prior to
the date when Tenant first occupied the Premises; (ii)
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failure of any components of the Improvements which Landlord is required to
maintain; and (iii) Landlord's representations or warranties or asbestos in any
form which is present on the Premises prior to the date of this Lease.
Landlord shall assume on behalf of the Indemnified Tenant Parties and conduct
with due diligence and in good faith the defense of all Claims against any of
the Indemnified Tenant Parties. Landlord may contest the validity of any
Claims, in the name of Landlord or Tenant, as Landlord may deem appropriate,
provided that the expenses thereof shall be paid by Landlord. The foregoing
covenants and agreements of Landlord shall survive the Term and expiration or
termination of this Lease.
SECTION 7.6 SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each hereby waives any and all rights of
recovery, claims, actions, or causes of action against the other, its agents,
officers, and employees for any loss or damage that may occur to any
improvements located on the Premises, or any part thereof, or any personal
property of such party therein, by reason of fire, the elements, or any other
cause which is insured under standard "all risk of direct loss" insurance
policies available in the state in which the Premises are located, regardless
of cause or origin, including negligence of either party hereto, its agents,
officers, or employees. No insurer of one party shall hold any right of
subrogation against the other party as to any such loss or damage.
ARTICLE 8
CASUALTY; CONDEMNATION
SECTION 8.1 TENANT'S OBLIGATION TO RESTORE. Subject to the other
terms of this Section 8.1, in the event of damage to, or destruction of, any
Improvements by fire or other casualty, Tenant shall promptly repair, replace,
restore, and reconstruct the same, all in compliance with the provisions of
Section 8.2. If insurance proceeds are insufficient to pay for required
replacement, repairs, restoration, etc., then Tenant shall be obligated to
promptly repair, replace, restore, and reconstruct the Improvements, all in
compliance with the provisions of Section 8.2, notwithstanding the
unavailability of insurance proceeds for such purpose. In the event that a
Permitted Mortgagee (as hereinafter defined) or Landlord's Financing Lender (as
hereinafter defined), as the case may be, requires that payment of insurance
proceeds be made to it and not be made available for required replacement,
repairs, restoration, etc., then to the extent that such funds are withheld,
the Tenant shall not be responsible for performing required replacement,
repairs, restoration, or reconstruction of the Improvements. In the event of a
casualty loss wherein the insurance proceeds are not be used for replacement,
repairs, restoration, etc., or the Improvements, as a result of Landlord's
Financing Lender or by consent of the parties, the insurance proceeds shall be
applied as follows:
(1) first, to pay the cost of razing the Improvements and
leveling, cleaning and otherwise putting the Premises in good
order;
(2) second, to Landlord's Financing Lender;
(3) third, to the payment to Tenant for any of its improvements;
and
(4) fourth, to Landlord, to the extent of any remaining proceeds.
Distribution of insurance proceeds is being made in conformity with Section 5.3
of this Lease.
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Notwithstanding the foregoing, in the event of destruction or damage
involving more than seventy-five percent (75%) of the interior floor area of
the Improvements, Tenant shall have no obligation to rebuild unless the
Landlord and Tenant may agree to rebuild the Improvements. In the event the
parties have not agreed to rebuild the Premises then it is recognized between
Landlord and Tenant that it is their intent to relocate the operations to
another location. In the event of such relocation, this Lease shall terminate
effective as to the affected Premises as of the date of such damage or
destruction and the insurance proceeds received by the Landlord and Tenant [as
to Tenant, for Tenant's Improvements, the right to same carrying forward as to
the new location] shall be utilized for the construction of new Improvements at
an alternative location. In the event that the costs of construction of the
Improvements for which the Landlord is responsible exceeds the insurable value
of the operation which was subject to the casualty, the Landlord shall pay the
additional costs for Improvements, and the annual Base Rent due pursuant to
Section 3.1 shall be increased by an amount equal to ten (10%) percent of the
Landlord's additional cost of construction of the new facility. This Lease,
except for the adjustment of Base Rent as described above, shall govern as to
the rights and obligations of the Landlord and Tenant at the substituted
location, however, the Term of the Lease shall be in abeyance during the period
of construction of the alternative Improvements. Tenant's obligation for
payment of Base Rent and other monetary sums under this Lease as applicable to
the new Premises shall commence as of the later to occur of (i) the date the
improvements to be constructed on the new Premises are certified as complete by
the applicable architect for such improvements in accordance with the plans and
specifications agreed to in writing by Landlord and Tenant and (ii) the date a
Certificate of Occupancy is obtained for the operation of such new
improvements. Landlord and Tenant shall, in good faith, fully cooperate with
one another in the selection of the alternative site and relative to
preparation of plans for Improvements and construction thereof. Nothing
hereinabove withstanding to the contrary, if the Tenant failed to maintain
insurance coverage required herein and as a result, proceeds are paid by the
insurance company which are less than the full insurable value of the
Improvements, Tenant shall be solely responsible for any such deficiency.
SECTION 8.2 RESTORATION AND DEPOSIT OF FUNDS.
(a) Prior to Tenant commencing any repair, restoration or
rebuilding pursuant to Section 8.1 involving an estimated cost of more than One
Hundred Thousand Dollars ($100,000), Tenant shall submit to Landlord for its
approval, which will not be unreasonably withheld or delayed: (i) plans and
specifications therefor, prepared by a licensed architect reasonably
satisfactory to Landlord; (ii) copies of appropriate governmental permits;
(iii) an estimate of the cost of the proposed work, certified to by said
architect (iv) a fixed price construction contract in an amount not in excess
of such architect's estimated cost from a reputable and experienced general
contractor; and (v) satisfactory evidence of sufficient contractor's
comprehensive general liability insurance covering Landlord, builder's risk
insurance, and worker's compensation insurance. Upon completion of any such
work by or on behalf of Tenant, Tenant shall provide Landlord with written
evidence, in form and substance reasonably satisfactory to Landlord, showing
that (i) Tenant has paid all contractors for all costs incurred in connection
with such repair, restoration or rebuilding, and (ii) that the Premises is not
encumbered by any mechanic's or materialmen's liens relating to such repair,
restoration or rebuilding. Regarding Tenant's obligations with respect to
mechanic's or materialmen's liens, reference is made herein to all of the terms
and provisions of Section 5.3 in connection with such repair, restoration or
rebuilding.
(b) Provided that a Default does not then exist, then all sums
arising by reason of such loss under insurance policies maintained by Tenant,
shall be deposited with the Depositary (as hereinafter
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defined) to be available to Tenant for the repair, restoration and rebuilding
of the Premises. Tenant shall diligently pursue the repair, restoration and
rebuilding of the improvements in a good and workmanlike manner using only
materials which are of a quality comparable to the quality of the materials
used in the Improvements prior to their destruction or damage. The insurance
proceeds will be disbursed to Tenant by the Depositary after delivery of
evidence reasonably satisfactory to the Depositary that (A) such repairs,
restoration, or rebuilding have been completed and effected in compliance with
the plans and specifications for the restoration or rebuilding, (B) no
mechanic's and materialman's liens against the Premises have been filed, or
that all such liens have been paid or bonded around, and (C) all payments for
work performed and materials purchased as of the date of such disbursement for
which mechanic's and materialman's liens might arise have been paid or will be
paid from such disbursement or that all such potential liens have been paid or
bonded around. At the option of Tenant, such proceeds shall be advanced in
reasonable installments. Each such installment (except the final installment)
shall be advanced in an amount equal to the cost of the construction work
completed since the last prior advance (or since commencement of work as to the
first advance) less statutorily required retainage in respect of mechanic's and
materialman's liens or retainage which may be required by Landlord's Financing
Lender in an amount not to exceed ten percent (10%) of such cost. The amount
of each installment requested shall be certified as being due and owing by
Tenant's architect in charge, and each request shall include all bills for
labor and materials for which reimbursement is requested and reasonably
satisfactory evidence that no lien has been placed against the Premises for any
labor or material furnished for such work. The final disbursement, which shall
be an amount equal to the balance of the insurance proceeds, shall be made upon
receipt of (1) an architect's certificate of substantial completion as to the
work from Tenant's architect, (2) reasonably satisfactory evidence that all
bills incurred in connection with the work have been paid and (3) issuance of a
certificate of occupancy by the applicable governmental agency, if required.
The term "DEPOSITARY", as used herein, shall mean either: (i) Landlord's
Financing Lender, or its designee provided that Landlord's Financing Lender is
an institutional lender, its designee is not an Affiliate of Landlord, and such
entity holds such funds in accordance with the terms of this lease, or related
in any other manner to Landlord), or (ii) such other party that is acceptable
to Landlord and Tenant, if there is no such Landlord's Financing Lender or if
such Landlord's Financing Lender has refused to act as Depositary.
(c) If no Default then exists, any excess of money received from
insurance policies remaining with the Depositary after the repair or rebuilding
of the Improvements shall, to the extent required by any Permitted Mortgagee,
be applied to payment of Tenant's Permitted Mortgage, otherwise any such
proceeds shall be paid to Tenant.
(d) If Tenant shall not commence the repair or rebuilding of the
Improvements within a period of sixty (60) days after damage or destruction by
fire or other casualty and prosecute the same thereafter with such dispatch as
may be necessary to complete the same within a reasonable period after said
damage or destruction occurs; then, in addition to all other remedies Landlord
may have either under this Lease, at law or in equity, the money received by
and remaining in the hands of the Depositary shall be paid to and retained by
Landlord as security for the continued performance and observance by Tenant of
Tenant's covenants and agreements hereunder.
SECTION 8.3 NOTICE OF DAMAGE. Tenant shall immediately notify
Landlord and each Permitted Mortgagee of any destruction or damage to the
Premises.
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SECTION 8.4 TOTAL TAKING. Should the entire Premises be taken
(which term, as used in this Article 8, shall include any conveyance in
avoidance or settlement of eminent domain, condemnation, or other similar
proceedings) by any Governmental Authority, corporation, or other entity under
the right of eminent domain, condemnation, or similar right, then Tenant's
right of possession under this Lease shall terminate as of the date of taking
possession by the condemning authority, and the award therefor will be
distributed as follows: (1) first, to the payment of all reasonable fees and
expenses incurred in collecting the award; (2) second, to Landlord's Financing
Lender; and (3) third, to Landlord and Tenant, to the extent of their interests
in the Premises, as the court having such jurisdiction of such taking shall
determine taking into account certain factors including, without limitation,
the term of the leasehold estate of the Tenant and the ownership interest of
Landlord. After the determination and distribution of the condemnation award
as herein provided, the Lease shall terminate.
SECTION 8.5 PARTIAL TAKING. Should a portion of the Premises be
taken by any Governmental Authority, corporation, or other entity under the
right of eminent domain, condemnation, or similar right, this Lease shall
nevertheless continue in effect as to the remainder of the Premises unless, in
Tenant's reasonable judgment, so much of the Premises shall be so taken as to
make it economically unsound to use the remainder for the uses and purposes
contemplated hereby, whereupon this Lease shall terminate as of the date of
taking of possession by the condemning authority in the same manner as if the
whole of the Premises had thus been taken, and the award therefor shall be
distributed as provided in Section 8.4. In the event of a partial taking where
this Lease is not terminated, all awards payable in respect thereof shall be
payable to Landlord and Tenant, to the extent of their interests in the
Premises, as the applicable condemning authority shall determine taking into
account certain factors including, without limitation, the term of the
leasehold estate of the Tenant and the ownership interest of Landlord.
Following such partial taking, Landlord shall make all necessary repairs or
alterations to the remaining Premises, required to make the remaining portions
of the Premises an architectural whole. The Base Rent payable hereunder during
the unexpired portion of the Lease shall be reduced to the extent fair and
reasonable under the circumstances, effective on the date physical possession
is taken by the condemning authority. Tenant acknowledges that tentative plans
exist for the widening of State Road 441, such road running along the west
boundary of the property. Should the applicable governmental agency effectuate
the taking of land for the widening of State Road 441, the Tenant agrees that
such taking shall not constitute a basis for termination of this lease. As of
the date of the execution of this Lease, to the best of Landlord's knowledge,
the widening of State Road 441 will involve property already within the right-
of-way owned by the applicable governmental agency.
SECTION 8.6 TEMPORARY TAKING. If the whole or any portion of the
Premises shall be taken for temporary use or occupancy, the Term shall not be
reduced or affected. The Base Rent payable hereunder during the unexpired
portion of the Lease shall be reduced to the extent fair and reasonable under
the circumstances and Tenant shall be entitled to receive the entire amount of
any award therefor, less the amount of the reduction in the Base Rent.
SECTION 8.7 NOTICE OF TAKING, COOPERATION. Tenant shall
immediately notify Landlord and each Permitted Mortgagee of the commencement of
any eminent domain, condemnation, or other similar proceedings with regard to
Premises. Landlord and Tenant covenant and agree to fully cooperate in any
condemnation, eminent domain, or similar proceeding in order to maximize the
total award receivable in respect thereof.
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ARTICLE 9
TENANT'S FINANCING
SECTION 9.1 TENANT'S RIGHT TO ENCUMBER. Tenant shall have the
right, from time to time and at any time, without Landlord's consent or
joinder, to encumber its interest in this Lease and the leasehold estate hereby
created with one or more deeds of trust, mortgages, or other lien instruments
to secure any borrowings or obligations of Tenant. Any such mortgages, deeds
of trust, and/or other lien instruments, and the indebtedness secured thereby,
provided that Landlord has been given notice thereof, are herein referred to as
"PERMITTED MORTGAGES," and the holder or other beneficiary thereof are herein
referred to as "PERMITTED MORTGAGEES."
SECTION 9.2 TENANT'S MORTGAGE. If Tenant encumbers its interest
in this Lease and the leasehold estate hereby created with liens as above
provided, then Tenant shall notify Landlord thereof, providing with such notice
the name and mailing address of the Permitted Mortgagee in question, Landlord
shall upon request, acknowledge receipt of such notice, and for so long as the
Permitted Mortgage in question remains in effect the following shall apply:
(a) Landlord shall give to the Permitted Mortgagee a duplicate
copy of any and all notices which Landlord gives to Tenant pursuant to the
terms hereof, including notices of default, and no such notice shall be
effective until such duplicate copy is transmitted to such Permitted Mortgagee,
in the manner provided in Section 12.1.
(b) There shall be no cancellation, surrender, or modification of
this Lease by joint action of Landlord and Tenant without the prior written
consent of the Permitted Mortgagee.
(c) If a Default should occur hereunder, then Landlord
specifically agrees that:
(1) Landlord shall not enforce or seek to enforce any of
its rights, recourses, or remedies, until a notice specifying the event giving
rise to such Default has been transmitted to the Permitted Mortgagee, in the
manner provided in Section 12.1, and if the Permitted Mortgagee proceeds to
cure the Default within a period of thirty (30) days after receipt of such
notice or, as to non-monetary events of Default which by their very nature
cannot be cured within such time period, the Permitted Mortgagee commences
curing such Default within such time period and thereafter diligently pursues
such cure to completion within sixty (60) days thereafter, then any payments
made and all things done by the Permitted Mortgagee to effect such cure shall
be as fully effective to prevent the exercise of any rights, recourses, or
remedies by Landlord as if done by Tenant;
(2) if the Default is a non-monetary default, the
Permitted Mortgagee shall have a period of time in which to cure such Default
equal to the greater of (i) the time period for such curing that is applicable
to Tenant under the terms of this Lease, or (ii) sixty (60) days after the date
that the Permitted Mortgagee has been notified of such Default, provided that
the Permitted Mortgagee cures all defaults relating to the payment of Base Rent
and neither Landlord nor the Premises is or would be liable or subject to any
lien, tax, penalty, expense, liability, or damages because of such Default. If
Landlord or the Premises is or will be liable or subject to any such lien, tax,
penalty, expense, liability or damages because of the Default, then for so long
as the Permitted Mortgagee is diligently and with continuity attempting to
secure possession of the Premises (whether by foreclosure or other procedures),
and provided such delay does not jeopardize the interests of the Landlord,
Landlord shall allow the Permitted Mortgagee such time as may be reasonably
necessary under the circumstances to obtain possession of the
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Premises in order to cure such Default, and during such time Landlord shall not
enforce or seek to enforce any of its rights, remedies or recourses hereunder;
and
(d) No Permitted Mortgagee shall be or become liable to Landlord
as an assignee of this Lease until such time as such Permitted Mortgagee, by
foreclosure or other procedures, shall either acquire the rights and interests
of Tenant under this Lease or shall actually take possession of the Premises,
and upon such Permitted Mortgagee's assigning such rights and interests to
another party or upon relinquishment of such possession, as the case may be,
such Permitted Mortgagee shall have no further such liability.
ARTICLE 10
WARRANTY OF TITLE AND PEACEFUL POSSESSION
AND LANDLORD'S FINANCING
SECTION 10.1 WARRANTY AS TO ENCUMBRANCES. Landlord represents,
warrants and covenants that: (i) the representations and warranties set forth
in Section 10.3 are true and correct; (ii) it owns title to the Land and the
Premises free and clear of all liens, claims and encumbrances except the liens
described in EXHIBIT B hereto securing the financing described therein
("LANDLORD'S FINANCING") and the other encumbrances specifically described in
such EXHIBIT B; (iii) except as otherwise set forth in Section 10.2, Landlord's
Financing shall not be modified in any manner without the prior written consent
of Tenant; and (iv) the lender providing such Landlord's Financing ("LANDLORD'S
FINANCING LENDER") has executed, caused to be acknowledged (notarized in
accordance with applicable law) and delivered to Landlord and Tenant a mutual
recognition and attornment agreement, in form and substance reasonably
satisfactory to Tenant, suitable for recording in the appropriate records to
notify third parties of the existence of such agreement and that the Land and
the Premises are subject thereto. Such agreement shall provide, among other
provisions, that the Tenant's interest under this Lease shall be subordinate to
the Landlord's Financing and that the Landlord's Financing Lender shall (i)
give to Tenant a duplicate copy of any and all notices which Landlord's
Financing Lender gives to Landlord, including notices of default, and no such
notice shall be effective until such duplicate copy is actually received by
Tenant in the manner provided in Section 12.1; (ii) give Tenant the right and
opportunity to cure any defaults under the Landlord's Financing; and (iii)
recognize and consent to Tenant's rights under this Lease in the event of a
foreclosure or deed in lieu thereof so long as Tenant continues to perform its
obligations under this Lease. As used herein, the term (A) "LANDLORD'S
FINANCING LENDER" shall also include any lender that refinances Landlord's
Financing or makes a new loan to Landlord, subject to Section 10.2, and (B)
"LANDLORD'S FINANCING" shall include all financing secured by liens covering
all or any portion of the Premises which are permitted under the terms of this
Lease, including, without limitation, all new loans.
Moreover, Landlord covenants that Tenant shall and may peaceably and
quietly have, hold, occupy, use, and enjoy the Premises during the Term, and
may exercise all of its rights hereunder, subject only to the provisions of
this Lease and applicable governmental laws, rules, and regulations; and
Landlord agrees to warrant and forever defend Tenant's right to such occupancy,
use, and enjoyment and the title to the Premises against the claims of any and
all persons whomsoever lawfully claim the same, or any part thereof, subject
only to provisions of this Lease and all applicable governmental laws, rules,
and regulations.
Landlord's Financing Lender shall not be or become liable to Tenant as
an assignee of Landlord's interest in this Lease until such time as such
Landlord's Financing Lender, by foreclosure or other
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procedures, shall either acquire the rights and interests of Landlord under
this Lease, and upon Landlord's Financing Lender's assigning such rights and
interests to another party, Landlord's Financing Lender shall have no further
such liability.
To the extent that Tenant cures any defaults of Landlord under
Landlord's Financing, Tenant shall receive a credit against the Base Rent due
pursuant to Section 3.1 hereinabove in an amount equal to the amount advanced
by Tenant to cure such defaults, together with interest at the Tenant's parent
company's customary borrowing rate as may be in effect from time to time. Such
credit shall be charged against the monthly Base Rent installments, commencing
as of the first monthly rental payment due after the first of such advances,
until such time as the entire amount of such credit is exhausted. Thereafter,
Base Rent shall commence in amounts required in Section 3.1 hereinabove,
including payment of any partial installment which may be due as a result of a
credit to the final monthly credit which is less than the full monthly Base
Rent due.
SECTION 10.2 LANDLORD'S MORTGAGE. During the Term, none of
Landlord's Financing may be modified or refinanced or any new loan made except
in accordance with the following:
(a) The total mortgage indebtedness and encumbrances of any type
against the Premises after the proposed refinancing or modification or new loan
of Landlord's Financing does not exceed eighty percent (80%) of the fair market
value of the Premises including any improvements being made with financing
obtained for such construction or the loan balance in existence as of the
effective date of this Lease, whichever is greater; and
(b) The effect of any such modification, refinancing or new loan
does not result in an increase in principal and interest payable by Landlord
during any Lease Year which exceeds Base Rent required to be paid by Tenant
during any Lease Year.
SECTION 10.3 REPRESENTATIONS OF LANDLORD. Landlord represents and
warrants to Tenant as of the effective date of this Lease that:
(a) The Premises are not subject to any prior lease, easement,
adverse claim, or claims of parties in possession, whether or not shown by the
public records, except as set forth on EXHIBIT B.
(b) There is no pending or threatened condemnation action or
agreement in lieu thereof which will or may affect the Premises or any part
thereof in any respect whatsoever, except as noted in Section 8.5 hereinabove.
(c) There is no action, suit or proceeding, including
environmental, pending or threatened against or affecting the Premises or any
part thereof.
(d) The execution, delivery and performance of this Lease by
Landlord has been duly authorized and this Lease is valid and enforceable
against Landlord in accordance with its terms.
(e) Landlord has no knowledge of any fact, action or proceeding,
including environmental, whether actual, pending or threatened, which could
result in the modification or termination of the present zoning classification
of the Premises, or the termination of full free and adequate access to and
from the Premises from all adjoining public highways and roads.
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(f) Landlord has not agreed to lease or convey or granted any
rights with respect to or any part of the Premises or any interest therein to
any other person or entity.
(g) The Premises are not subject to any restrictions (recorded or
unrecorded), building and zoning laws or ordinances, or other laws, ordinances,
rules, regulations and requirements of any Governmental Authority having
jurisdiction which do or could prohibit the use of the Premises for the uses
set forth in this Lease.
(h) Landlord has not received any notice from any Governmental
Authority having jurisdiction over the Premises requiring or specifying any
work to be done to the Premises.
(i) Landlord has no knowledge of any existing, threatened or
contemplated action, circumstances or conditions (including but not limited to
subsurface conditions) which would materially interfere with the development or
use of the Premises for an automobile dealership.
(j) As of the date hereof the Premises are, and on the
Commencement Date the Premises will be in compliance in all material respects
with all restrictive covenants and other restrictions applicable to the
Premises and all applicable statutes, ordinances, rules and regulations
(federal, state, county and municipal), including without limitation all
zoning, environmental, building, health, subdivision regulations. Except as to
matters relating to the presence of asbestos contained in the Premises, if any,
the representation and warranty set forth in this Subsection (j) shall not be
applicable to the matters covered under Subsection (m) herein below.
(k) The Premises have legal and physical public access to and from
abutting roadways dedicated to and accepted by the State, City, or County where
the Premises are located.
(l) To the extent zoning regulations are applicable to the
Premises, the Premises are zoned for use as an automobile dealership facility,
for sale, trade, display, service and repair, painting, and other activities
normally associated with a full service automobile dealership.
(m) To the best of Landlord's knowledge, except as may otherwise
be disclosed to Tenant in any written environmental audit report delivered to
Tenant prior to the date of this Lease, no Hazardous Materials, pollutants or
toxic substances have been placed, dumped, deposited or buried upon, in or
under the Premises, there have been no leaks of petroleum, toxic or Hazardous
Materials from any of the underground storage tank facilities and there is no
contaminated soil, as defined by federal, state and/or local laws or
regulations, in, upon or under the Premises by reason of any such wastes,
pollutants, toxins, substances, or facilities. Tenant acknowledges that
certain materials which may be considered Hazardous Materials are used in the
normal course of the business operated on the Premises prior to the
commencement date. Landlord represents that to the best of Landlord's
knowledge, such use complies with all applicable governmental regulations and
that it has no knowledge of any contamination on the Premises.
(n) The Premises have an assured water supply sufficient to permit
the operations now being conducted thereon to be conducted in accordance with
all governmental requirements.
(o) All dimensions in the description to the Premises are net of
existing and proposed rights-of-way, easements and dedications except as set
forth on EXHIBIT B.
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(p) The Premises are not located in a flood plain or a flood
hazard area for which flood insurance would be required or for which flood
insurance is available.
(q) Landlord warrants and guarantees that on the Commencement Date
the wiring, floors, plumbing, underground plumbing, heating, air conditioning
equipment, roofs, outer walls, stairways, doors, windows, plate glass and
sprinkler equipment of the Premises are each and every one in good repair and
are adequate to furnish the proper service for which each was installed and the
heating plant will heat and air conditioning will cool the buildings
constituting part of the Premises in accordance with the generally accepted
design temperatures for the city and state in which the Premises is located.
Landlord further warrants and guaranties that on the Commencement Date, the
Premises and all appurtenances thereto, will comply with the building codes,
fire, sanitary and safety regulations, ordinances and laws of the United States
of America, city, county and state in which the Premises are located. Landlord
further warrants and guarantees that at the commencement of this Lease, the
Premises may be used for the purposes set out in this Lease without violating
any such codes, regulations, ordinances, laws or any restrictive covenants
running with the land.
(r) Landlord has all required occupancy permits and other licenses
or permits required for the use and occupancy of the Premises.
(s) A true and correct copy of the Seminole Lease has been
delivered to Tenant prior to the date hereof, and the Seminole Lease is in full
force and effect and has not been modified except as set forth in Supplemental
Agreement No. 1 dated March 15, 1979 and Supplemental Agreement No. 2 dated
October 30, 1979, true and correct copies of which have been delivered to
Tenant prior to the date hereof.
(t) Landlord is not in default of any its obligations under the
Seminole Lease, and the execution of this Sublease by Landlord and Tenant or
the leasing of the Premises by Tenant will not constitute a default under the
Seminole Lease including, without limitation, the terms and provisions of
Section 7 of the Seminole Lease relating to sublease, assignment or transfer of
this Lease.
(u) None of the other parties to the Seminole Lease is in default
of any of its obligations under the Seminole Lease.
ARTICLE 11
DEFAULT AND REMEDIES
SECTION 11.1 DEFAULT. Each of the following shall be deemed a
"DEFAULT" by Tenant hereunder and a material breach of this Lease:
(a) Whenever Tenant shall fail to pay any sum payable by Tenant to
Landlord or any third party under this Lease on the date upon which the same
is due to be paid, and such default shall continue for ten (10) days after
Tenant shall have been given a written notice specifying such default;
(b) Whenever Tenant shall fail to keep, perform, or observe any of
the covenants, agreements, terms, or provisions contained in this Lease that
are to be kept or performed by Tenant other than with respect to payment of
Rent or other liquidated sums of money, and Tenant shall fail to immediately
commence and take such steps as are necessary to remedy the same within thirty
(30) days after Tenant
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shall have been given a written notice specifying the same, or having so
commenced, shall thereafter fail to proceed diligently and with continuity to
remedy the same;
(c) Whenever an involuntary petition shall be filed against Tenant
under any bankruptcy or insolvency law or under the reorganization provisions
of any law of like import or whenever a receiver of Tenant, or of all or
substantially all of the property of Tenant, shall be appointed without
acquiescence, and such petition or appointment is not discharged or stayed
within sixty (60) days after the happening of such event; or
(d) Whenever Tenant shall make an assignment of its property for
the benefit of creditors or shall file a voluntary petition under any
bankruptcy or insolvency law, or seek relief under any other law for the
benefit of debtors.
(e) Tenant acknowledges that it has received and reviewed the
Seminole Lease and the Supplemental Agreement No. 1 and Supplemental Agreement
No. 2. Tenant shall not take any action which will result in the Landlord's
default under the terms of the Seminole Lease; provided, however, Landlord
represents and warrants that the Tenant's use and occupancy of the Premises as
presently being used will not violate the terms of the Seminole Lease.
SECTION 11.2 REMEDIES. If a Default occurs, then subject to the
rights of any Permitted Mortgagee as provided in Section 9, Landlord may at any
time thereafter prior to the curing thereof and without waiving any other
rights hereunder or available to Landlord at law or in equity (Landlord's
rights being cumulative), do any one or more of the following:
(a) Landlord may terminate this Lease by giving Tenant written
notice thereof, in which event this Lease and the leasehold estate hereby
created and all interest of Tenant and all parties claiming by, through, or
under Tenant shall automatically terminate upon the effective date of such
notice with the same force and effect and to the same extent as if the
effective date of such notice were the day originally fixed in Article 2 hereof
for the expiration of the Term; and Landlord, its agents or representatives,
shall have the right, without further demand or notice, to reenter and take
possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing
breaches hereof. In the event of such termination, Tenant shall be liable to
Landlord for damages in an amount equal to (A) the discounted present value of
the amount by which the Rent reserved hereunder for the remainder of the
existing Term (Initial or Renewal) exceeds the then net fair market rental
value of the Premises for such period of time, plus (B) all expenses incurred
by Landlord enforcing its rights hereunder.
(b) Landlord may terminate Tenant's right to possession of the
Premises and enjoyment of the rents, issues, and profits therefrom without
terminating this Lease or the leasehold estate created hereby, reenter and take
possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing
breaches hereof, and lease, manage, and operate the Premises and collect the
rents, issues, and profits therefrom all for the account of Tenant, and credit
to the satisfaction of Tenant's obligations hereunder the net rental thus
received (after deducting therefrom all reasonable costs and expenses of
repossessing, leasing, managing, and operating the Premises). If the net
rental so received by Landlord exceeds the amounts necessary to satisfy all of
Tenant's obligations
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under this Lease, Landlord shall retain such excess. In no event shall
Landlord be liable for failure to so lease, manage, or operate the Premises or
collect the rentals due under any subleases and any such failure shall not
reduce Tenant's liability hereunder. If Landlord elects to proceed under this
Section 11.2(2), it may at any time thereafter elect to terminate this Lease as
provided in Section 11.2(1).
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 NOTICES. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required by
law shall be in writing and shall be deemed to have been validly given or
served by (a) delivery of the same in person to the intended addressee, (b) by
depositing the same with Federal Express or another reputable private courier
service for next business day delivery to the intended addressee at its address
set forth on the first page of this Agreement or at such other address as may
be designated by such party as herein provided, (c) by facsimile copy
transmission [confirmation sheet indicating transmission to be retained] or (d)
by depositing the same in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the intended
addressee at its address set forth below or at such other address as may be
designated by such party as herein provided. All notices, demands and requests
shall be effective upon such personal delivery upon actual receipt, or one (1)
business day after being deposited with the private courier service, or two (2)
business days after being deposited in the United States mail as required
above. Rejection or other refusal to accept or the inability to deliver because
of changed address of which no notice was given as herein required shall be
deemed to be receipt of the notice, demand or request sent. By giving to the
other party hereto at least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America. For purposes of notice the addresses of the parties hereto shall,
until changed, be as follows:
Landlord: Koons Development Co.
3101 N. State Road 7
Hollywood, FL 33021
Facsimile: (954) 964-4760
Tenant: Koons Ford, Inc.
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, Texas 77024
Attention: John Turner
Facsimile: (713) 627-6468
The parties hereto shall have the right from time to time to change their
respective addresses for purposes of notice hereunder to any other location
within the United States by giving a notice to such effect in accordance with
the provisions of this Section 12.1.
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SECTION 12.2 PERFORMANCE OF OTHER PARTY'S OBLIGATIONS. If either
party hereto fails to perform or observe any of its covenants, agreements, or
obligations hereunder for a period of thirty (30) days after notice of such
failure is given by the other party, then the other party shall have the right,
but not the obligation, at its sole election but not as its exclusive remedy),
to perform or observe the covenants, agreements, or obligations which are
asserted to have not been performed or observed at the expense of the failing
party and to recover all costs or expenses incurred in connection therewith,
together with interest thereon from the date expended until repaid at an annual
rate ("DEFAULT RATE") equal to the lesser of (a) three (3) percent above the
prime rate of interest established from time to time by NationsBank (or a
comparable rate of interest if such rate is not in effect) or (b) the maximum
rate of interest permitted by applicable law. Any performance or observance by
a party pursuant to this Section 12.2 shall not constitute a waiver of the
other party's failure to perform or observe.
SECTION 12.3 MODIFICATION AND NON-WAIVER. No variations,
modifications, or changes herein or hereof shall be binding upon any party
hereto unless set forth in a writing executed by it or by a duly authorized
officer or agent. No waiver by either party of any breach or default of any
term, condition, or provision hereof, including without limitation the
acceptance by Landlord of any Rent at any time or in any manner other than as
herein provided, shall be deemed a waiver of any other or subsequent breaches
or defaults of any kind, character, or description under any circumstance. No
waiver of any breach or default of any term, condition, or provision hereof
shall be implied from any action of any party, and any such waiver, to be
effective, shall be set out in a written instrument signed by the waiving
party.
SECTION 12.4 GOVERNING LAW. This Lease shall be construed and
enforced in accordance with the laws of the state in which the Premises are
located.
SECTION 12.5 NUMBER AND GENDER; CAPTIONS; REFERENCES. Pronouns,
wherever used herein, and of whatever gender, shall include natural persons and
corporations and associations of every kind and character, and the singular
shall include the plural wherever and as often as may be appropriate. Article
and Section headings in this Lease are for convenience of reference and shall
not affect the construction or interpretation of this Lease. Whenever the
terms "hereof," "hereby," "herein," or words of similar import are used in this
Lease, they shall be construed as referring to this Lease in its entirety
rather than to a particular Section or provision, unless the context
specifically indicates to the contrary. Any reference to a particular
"Article" or "Section" shall be construed as referring to the indicated Article
or Section of this Lease.
SECTION 12.6 CPI. "CPI" shall mean the Consumer Price Index for
All Urban Consumers, All Items (Base Year 1982-84 = 100) published by the
United States Department of Labor, Bureau of Labor Statistics. If the 1982-84
Base Year shall no longer be used as an index of 100, the revised index which
would produce results equivalent, as nearly as possible to those which would be
obtained hereunder if the CPI were not so revised.
SECTION 12.7 ESTOPPEL CERTIFICATE. Landlord and Tenant shall
execute and deliver to each other, promptly upon any request therefor by the
other party, a certificate addressed as indicated by the requesting party and
stating: (a) whether or not this Lease is in full force and effect; (b) whether
or not this Lease has been modified or amended in any respect, and submitting
copies of such modifications or amendments; (c) whether or not there are any
existing defaults hereunder known to the party executing
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the certificate, and specifying the nature thereof; (d) whether or not any
particular Article, Section, or provision of this Lease has been complied with;
and (e) such other matters as may be reasonably requested.
SECTION 12.8 SEVERABILITY. If any provision of this Lease or the
application thereof to any person or circumstance shall, at any time or to any
extent, be invalid or unenforceable, and the basis of the bargain between the
parties hereto is not destroyed or rendered ineffective thereby, the remainder
of this Lease, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
SECTION 12.9 ATTORNEY FEES. If litigation is ever instituted by
either party hereto to enforce, or to seek damages for the breach of, any
provision hereof, the prevailing party therein shall be promptly reimbursed by
the other party for all attorneys' fees reasonably incurred by the prevailing
party in connection with such litigation, including all trial and appellate
levels.
SECTION 12.10 SURRENDER OF PREMISES; HOLDING OVER. Upon
termination or the expiration of this Lease, Tenant shall peaceably quit,
deliver up, and surrender the Premises. If Tenant does not surrender
possession of the Premises at the end of the Term, such action shall not extend
the Term, Tenant shall be a tenant at sufferance, and during such time of
occupancy Tenant shall pay to Landlord, as damages, an amount equal to twice
the amount of Rent that was being paid immediately prior to the end of the
Term. Landlord shall not be deemed to have accepted a surrender of the
Premises by Tenant, or to have extended the Term, other than by execution of a
written agreement specifically so stating.
SECTION 12.11 RELATION OF PARTIES. It is the intention of
Landlord and Tenant to hereby create the relationship of landlord and tenant,
and no other relationship whatsoever is hereby created. Nothing in this Lease
shall be construed to make Landlord and Tenant partners or joint venturers or
to render either party hereto liable for any obligation of the other.
SECTION 12.12 FORCE MAJEURE. As used herein "FORCE MAJEURE" means
the occurrence of any event whereby Landlord or Tenant shall be delayed or
prevented from the performance of any act required hereunder by reason of acts
of God, strikes, lockouts, labor troubles, failure or refusal of governmental
authorities or agencies to timely issue permits or approvals or conduct reviews
or inspections, civil disorder, inability to procure materials, restrictive
governmental laws or regulations or other cause without fault and beyond the
control of the party obligated (financial inability excepted). If Tenant or
Landlord shall be delayed, hindered, or prevented from performance of any of
its obligations by reason of Force Majeure, the time for performance of such
obligation shall be extended for the period of such delay. In no event shall
this provision pertain to any monetary obligations set forth in this Lease
including payment of Rent from Tenant to Landlord.
SECTION 12.13 NON-MERGER. Notwithstanding the fact that fee title
to the land and to the leasehold estate hereby created may, at any time, be
held by the same party, there shall be no merger of the leasehold estate hereby
created unless the owner thereof executes and files for record in the
appropriate real property records a document expressly providing for the merger
of such estates.
SECTION 12.14 ENTIRETIES. This Lease constitutes the entire
agreement of the parties hereto with respect to its subject matter, and all
prior agreements with respect thereto are merged herein. Any
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agreements entered into between Landlord and Tenant of even date herewith are
not, however, merged herein.
SECTION 12.15 RECORDATION. Landlord and Tenant will, at the
request of the other, promptly execute an instrument in recordable form
constituting a short form of this Lease, which shall be filed for record in the
appropriate real property records, or at the request of either party this Lease
shall be so filed for record.
SECTION 12.16 SUCCESSORS AND ASSIGNS. This Lease shall constitute
a real right and covenant running with the Premises, and shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Whenever a reference is made herein to either party, such
reference shall include the party's successors and assigns.
SECTION 12.17 LANDLORD'S JOINDER. Landlord agrees to join with
Tenant in the execution of such applications for permits and licenses from any
Governmental Authority as may be reasonably necessary or appropriate to
effectuate the intents and purposes of this Lease, provided that Landlord shall
not incur or become liable for any obligation as a result thereof.
SECTION 12.18 NO THIRD PARTIES BENEFITTED. Except as herein
specifically and expressly otherwise provided with regard to notices and
opportunities to cure defaults and certain enumerated rights granted to
Permitted Mortgagees, the terms and provisions of this Lease are for the sole
benefit of Landlord and Tenant, and no third party whatsoever, is intended to
benefit herefrom.
SECTION 12.19 SURVIVAL. Any terms and provisions of this Lease
pertaining to rights, duties, or liabilities extending beyond the expiration or
termination of this Lease shall survive the end of the Term.
SECTION 12.20 PERPETUITIES. To the extent that the rule against
perpetuities is applicable thereto, but not otherwise, the rights granted to
Tenant in Article 13 hereof shall expire upon the earlier to occur of (a) the
date set forth for expiration of such rights in said Article 13 or (b) the date
which is 21 years after the date of death of the last to die of the following
parties: the last grandchild to survive of the presently living grandchildren
of George Bush, former President of the United States of America.
SECTION 12.21 TRANSFER OF LANDLORD'S INTEREST. Subject to the
terms of the Landlord's Financing, Landlord may freely transfer and/or mortgage
its interest in the Premises and under this Lease from time to time and at any
time, provided that any such transfer or mortgage is expressly made subject to
the terms, provisions, and conditions of this Lease, including specifically but
without limitation Tenant's rights under Article 13, and the transferee or
mortgagee agrees to be bound by the provisions hereof (in the case of a
mortgagee, such agreement being contingent upon the mortgagee actually
succeeding to the Landlord's interest in the Premises and hereunder by virtue
of a foreclosure or conveyance in lieu thereof).
SECTION 12.22 TENANT'S RIGHT TO ASSIGN. Tenant may assign its
rights hereunder or sublease all or a portion of the Premises with Landlord's
prior written approval, which approval will not be unreasonably withheld.
provided that Tenant shall remain liable for all liabilities and obligations
arising under this Lease. An assignment by Tenant to an affiliate under common
control as that of the herein
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Tenant shall be deemed by Landlord to be approved. Tenant acknowledges that
Landlord's approval may require the consent and/or joinder of Landlord's
Financing Lender. Tenant further acknowledges that Landlord's approval may
require the consent and/or joinder of The Seminole Tribe.
SECTION 12.23 PAST DUE AMOUNTS. All amounts required to be paid
by Tenant or Landlord under the terms and provisions of this Lease shall bear
interest at the Default Rate from the date due until paid.
SECTION 12.24 INDEPENDENT COUNSEL. Landlord and Tenant declare
that each has had independent legal advice by counsel of their own selection;
that each fully understands the facts and has been fully informed of all legal
rights or liabilities; that after such advice or knowledge, each believes the
Lease to be fair, just, reasonable and that each signs the Lease freely and
voluntarily.
SECTION 12.25 COOPERATION WITH LANDLORD'S LENDER. Tenant agrees
to cooperate with any Lender utilized by Landlord relative to financing
associated with this Lease and Improvements located upon the Premises, should
such Lender request reasonable modifications to this Lease provided such
modifications do not adversely diminish or otherwise modify the obligations of
Landlord under this Lease or affect the rights of the Tenant granted under this
Lease or create additional liability or obligations for Tenant beyond Tenant's
current liability and obligations under this Lease.
SECTION 12.26 RECEIPT AND ACKNOWLEDGMENT OF SEMINOLE LEASE.
Tenant acknowledges receipt of a copy of the Seminole Lease together with a
copy of Supplemental Agreement No. 1 and Supplement Agreement No. 2 thereto.
Tenant agrees that it will not violate the terms of the Seminole Lease, as
supplemented by Supplemental Agreement No. 1 and Supplement Agreement No. 2,
nor take any action which will, or could result, in a default thereunder
thereby jeopardizing the Landlord's lease rights therein; subject to the terms
and provisions of Section 6.1 and 10.3 of this Lease.
SECTION 12.27 FULFILLMENT OF LESSEE'S OBLIGATION UNDER THE
SEMINOLE LEASE. Landlord agrees that it has not and will not violate any of
the terms of the Seminole Lease, as supplemented, nor take any action which
will, or could result, in a default thereunder thereby jeopardizing the
Landlord's lease rights therein.
SECTION 12.28 CERTAIN RIGHTS OF TENANT REGARDING THE SEMINOLE
LEASE. The following shall be applicable with respect to the Seminole Lease:
(a) Landlord shall deliver to Tenant copies of all notices (i)
received by Landlord from any of the other parties under the Seminole Lease
immediately upon receipt thereof, and (ii) sent by Landlord to any of the other
parties under the Seminole Lease simultaneously with the sending of each such
notice.
(b) Simultaneously with the forwarding of each payment of rent to
the Lessor under the Seminole Lease, Landlord shall deliver to Tenant a copy of
each check covering each rental payment together with a copy of the
correspondence forwarding each such check. Promptly after receipt by Landlord
of each canceled check, Landlord shall forward a copy of same to Tenant.
(c) If Tenant has not received a copy of any check required to be
delivered to Tenant under the terms of clause (b) immediately above on or
before the date the applicable rental payment is required
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to be made by Landlord under the Seminole Lease, Tenant may (but shall have no
obligation) notify Landlord of the failure to receive such copy of such check.
Should Landlord fail to forward same to Tenant within two (2) business days of
receipt of notice from Tenant, Tenant shall be entitled to, but shall not have
the obligation to, pay to Lessor under the Seminole Lease the then applicable
rental payment. The amount of each such payment made by Tenant to Lessor under
the Seminole Lease shall be offset against the immediately next occurring
payments of Base Rent due under this Lease until credit for the entire amount
of each such payment made by Tenant under the Seminole Lease has been credited
to the payment of Base Rent under this Lease.
(d) In addition to the right to make such direct payments to the
Lessor under the Seminole Lease as set forth hereinabove, Tenant shall have the
right, but not the obligation, to cure all defaults of Landlord under the
Seminole Lease. All amounts expended by Tenant in connection with the curing
of each such default shall be credited to the payment of Base Rent in the
manner required in clause (c) immediately above.
(e) Landlord shall not modify, amend, cancel or terminate the
Seminole Lease without the prior written consent of Tenant, which consent shall
not be unreasonably withheld.
ARTICLE 13
OPTION TO PURCHASE LEASEHOLD
SECTION 13.1 RIGHT OF FIRST REFUSAL.
(a) If Landlord shall receive a bona fide offer to purchase the
Premises (as herein defined as the Landlord's leasehold interest in the
Premises and Land) during the Term, then any contract which may be entered into
between Landlord and a third party purchaser shall provide that the sale shall
be subject to Tenant's right of refusal set forth in this Section 13.1. If
Landlord shall receive such offer or execute such contract, Landlord shall send
to Tenant a true and complete copy of the executed contract and the complete
terms of the offer with Landlord's certification that it will accept the offer,
and Tenant shall have the option, to be exercised within thirty (30) days after
receipt thereof, to make a contract with Landlord on the same terms and
conditions set forth in such third party contract or offer. If Tenant, after
receipt of the third party contract or the terms of the offer acceptable to
Landlord, shall fail to exercise its option within the thirty (30) day period,
Landlord shall have the right to conclude the proposed sale on the same terms
as in the offer or contract originally forwarded to Tenant, provided the sale
shall close within the timeframe set forth in the third party contract plus
thirty (30) days. If the sale shall not close within said time frame plus
thirty (30) days, Landlord shall repeat the procedure specified in this Section
13.1 before it can conclude any sale of the Premises.
(b) Notwithstanding Tenant's failure to exercise its option, any
sale of the Premises shall be subject to this Lease and Tenant's option to
purchase the Premises and Tenant's right of first refusal shall remain in force
and be binding on any party to the same extent as if said subsequent owner were
Landlord herein, and said subsequent owner shall be required to do all of the
things required of Landlord in this Lease prior to any such sale of the
Premises.
(c) If any third party contract or offer for the Premises shall
include property other than the Premises, Tenant's right of first refusal
shall, at its election, be either applicable to the entire property
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covered by such contract or offer, or applicable to the Premises only at a
purchase price which shall be that part of the price offered by the third
party, which the value of the Premises shall bear to the value of all the
property included in such third party contract or offer.
(d) Tenant's right to purchase shall not be extinguished, canceled
or waived by Tenant failing to exercise its option as to any offer, contract or
conveyance which is between Landlord and a related party, a nominee and his
principal, or a sole shareholder and his corporation, or a corporation and its
subsidiary or affiliate.
SECTION 13.2 OPTION.
(a) For and in consideration of the execution of this Lease and the
sum of Ten Dollars ($10.00), Tenant shall have the option to purchase the
Landlord's interest in the Seminole Lease at any time during the Term
(including any extensions thereof), without premium or penalty for the Purchase
Price determined pursuant to this Section 13.2 (the "PURCHASE PRICE"), provided
Landlord is given sixty (60) days written notice of Tenant's election to
purchase and provided further that Tenant is not then in default under the
terms of this Lease.
(1) The purchase price of the Premises shall be
determined by an appraisal conducted using an M.A.I. appraiser (or an appraiser
having the same class of certification of an M.A.I. appraiser by the successor
certification organization in the case that the designation of M.A.I. appraiser
is changed or succeeded). The appraisal shall not take into consideration the
Base Rent, terms or conditions of this Lease. The appraised value shall be
reduced by the cost of any leasehold improvements made to the Premises by the
Tenant.
(2) The Tenant, at its sole expense, shall obtain, and
submit to the Landlord, an appraisal of the fair market value of the Premises
(the "FIRST APPRAISAL") from an M.A.I. appraiser (the "FIRST APPRAISER"), and
if Landlord shall accept such appraisal, then such First Appraisal shall be the
Purchase Price.
(3) If Landlord does not accept such First Appraisal,
Landlord, at the Landlord's sole expense shall obtain, and submit to the
Tenant, a second appraisal of the fair market value of the Premises (the
"SECOND APPRAISAL") from an M.A.I. appraiser (the "SECOND APPRAISER"). If the
numerical difference between the value of the First Appraisal and the value of
the Second Appraisal is less than ten percent (10%) of the appraisal with the
lower value, then the two appraisal values shall be averaged and that averaged
value shall be the Purchase Price.
(4) If the numerical difference between the value of the
First Appraisal and the value of the Second Appraisal is equal to or greater
than ten percent (10%) of the appraisal with the lower value, then the First
Appraiser and the Second Appraiser shall choose a third M.A.I. appraiser (the
"THIRD APPRAISER") who shall appraise the fair market value of the Premises
(the "THIRD APPRAISAL"), and the three appraisal values shall be averaged and
that averaged value shall be the Purchase Price. If the Third Appraisal is
requested, the Landlord and Tenant shall each pay one-half (1/2) of the cost of
such Third Appraisal.
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(b) In the event that the option herein granted shall be exercised
as aforesaid, Landlord agrees to sell and Tenant agrees to purchase the
Premises for the Purchase Price aforesaid and upon the following terms and
conditions:
(1) The Premises is to be conveyed at the time full
payment of the Purchase Price is made by Tenant to Landlord (hereinafter called
"CLOSING DATE"), but in no event later than three (3) months from the date of
receipt of Tenant's notice of election, by general warranty deed conveying to
Tenant or Tenant's nominee, title to the same, subject only to (i) the matters
set forth in EXHIBIT B and other matters previously approved in writing by
Tenant, (ii) any matters created by Tenant, and (iii) taxes and other
Impositions assessed against the Premises or any part thereof but not yet due
and payable, which charges, assessments, taxes and other Impositions shall be
paid by Tenant; but free and clear of any mortgages, liens or encumbrances upon
Landlord's interest.
(2) For such assignment and conveyance Tenant is to pay
the Purchase Price in cash or by certified or bank check upon the delivery of
such deed.
(3) Full possession of the Premises is to be delivered to
Tenant at the time of delivery of the deed.
(4) The cost and expense of preparing the deed and any
other documents relating to said conveyance and recording the same including
title insurance premiums, Landlord's reasonable attorney's fees and real estate
transfer taxes (including documentary stamps and sur-tax, if applicable), if
any, shall be paid by Tenant.
(5) The Rent provided for in this Lease shall be
apportioned as of the Closing Date.
(6) The recording of a deed after the expiration of the
Term of this Lease, conveying the Premises to a third party and reciting that
the option in this Article has expired and has not been exercised shall be, as
to all persons other than Tenant, conclusive evidence of such expiration and
nonexercise.
(c) Notwithstanding anything to the contrary contained herein
Landlord may convey the Premises subject to the option herein granted;
provided, however, that the Landlord has complied with the provisions of this
Section 13.2 and the party to whom the Landlord conveys the Premises assumes in
writing all of Landlord's obligations under this Lease. No such conveyance
shall relieve the Landlord for liability for breach of representations as set
forth in Article 10 of this Lease.
(d) It is further understood and agreed that in the event Tenant
gives written notice to Landlord sixty (60) days before the Expiration Date or
the end of any Renewal Term, of Tenant's intention to purchase the Premises,
the Term of this Lease then shall be extended until the payment to Landlord of
the Purchase Price but in no event later than three (3) months therefrom. The
Purchase Price shall be paid no later than the expiration of such three (3)
month extension. In the event Tenant does not consummate the purchase pursuant
to the terms and conditions of this Section 13.2, then the Tenant's options as
set forth in this Section13.2 shall terminate.
29
<PAGE> 35
(e) Landlord will, at the request of Tenant, promptly execute an
instrument in recordable form, reflecting Tenant's option to purchase the
Premises, and may be part of the recorded instrument referred to in Section
12.15, pursuant to this Article 13, which shall be filed for record in the
appropriate real property records.
(f) In the event that such option shall not be exercised as
aforesaid, Tenant shall, within ten (10) days upon demand of Landlord, deliver
to Landlord an instrument in form suitable for recording and executed and
acknowledged by Tenant whereby the option and all rights hereunder shall be
released and discharged.
SECTION 13.3 SPECIFIC PERFORMANCE. It is expressly agreed that
the remedy at law for breach of any of the obligations set forth in this
Article 13 is inadequate in view of the complexities and uncertainties in
measuring the actual damages that would be sustained by reason of the failure
of Landlord or Tenant to comply fully with each of such obligations.
Accordingly, each of the aforesaid obligations shall be, and is hereby
expressly made, enforceable by specific performance.
ARTICLE 14
ARBITRATION
SECTION 14.1 ARBITRATION PROVISIONS. EXCEPT AS TO TENANT'S
EXERCISE OF REASONABLE JUDGMENT PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY
CONTROVERSY OR CLAIM BETWEEN THE PARTES HERETO RELATING TO THIS LEASE,
INCLUDING, WITHOUT LIMITATION, ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED
TORT, SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION SHALL TAKE PLACE IN THE
COUNTY AND STATE WHERE THE PREMISES ARE LOCATED. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. EXCEPT AS TO TENANT'S
EXERCISE OF REASONABLE JUDGMENT PURSUANT TO SECTION 8.5 OF THIS LEASE, ANY
PARTY TO THIS LEASE MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
LEASE APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL
SIXTY (60) DAYS. ALL STATUTES OF LIMITATIONS THAT WOULD OTHERWISE BE
APPLICABLE SHALL) APPLY TO ANY DISPUTES ASSERTED IN ANY ARBITRATION PROCEEDING
HEREOF. THE ARBITRATORS SHALL HAVE THE RIGHT, TO AWARD COUNSEL FEES TO ANY
PARTY, TO GRANT TEMPORARY OR PERMANENT INJUNCTIVE RELIEF, AND TO REQUIRE
SPECIFIC PERFORMANCE. THE PARTIES SPECIFICALLY AGREE THAT THE ARBITRATORS MAY
NOT AWARD AND THE PARTIES WAIVE ANY RIGHT TO ANY EXEMPLARY OR PUNITIVE DAMAGES.
THE DECISION OR AWARD IN THE ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING
UPON EACH OF THE PARTIES AND JUDGMENT ON
30
<PAGE> 36
SUCH AWARD OR DECISION MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION.
THE PARTIES BY EXECUTION OF THE LEASE AND INITIALING THIS PROVISION REPRESENT
THAT THEY WERE GIVEN FULL AND COMPLETE OPPORTUNITY TO REVIEW SAME WITH COUNSEL
OF THEIR CHOOSING AND THEY HAVE READ AND SIGNED SAME AS THEIR FREE AND
VOLUNTARY ACT AND DEED.
ARTICLE 15
SUBORDINATION AND ATTORNMENT
SECTION 15.1 SUBORDINATION. This Lease and all rights of Tenant
hereunder are and shall be subject and subordinate in all respects to all
mortgages encumbering Landlord's interest in the Premises as permitted in the
Lease (the "SUPERIOR MORTGAGE"). The provisions of this Section 15.1 shall be
self-operative and no further instrument of subordination shall be required.
If any Requesting Party shall seek confirmation of such subordination, Tenant
shall promptly execute and deliver, at its own cost and expense, an instrument,
in recordable form, to evidence such subordination; if Tenant fails to execute,
acknowledge or deliver any such instrument within ten (10) days after request
therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge
and deliver any such instruments for and on behalf of Tenant. However, nothing
herein withstanding to the contrary, the foregoing provisions shall not be
effective until the Landlord shall have delivered to Tenant a Non-Disturbance
Agreement, in the form required under Section 10.1, executed by each Landlord's
Financing Lender and each mortgagee and holder of a Superior Mortgage.
SECTION 15.2 ATTORNMENT. If, at any time prior to the termination
of this Lease, the holder of a Superior Mortgage, or its successors or assigns,
(herein collectively called the "SUPERIOR MORTGAGEE") who acquire the interest
of Landlord under this Lease through foreclosure action or a transfer-in-lieu
thereof, whereby the Superior Mortgagee succeeds to the rights of Landlord
under this Lease through possession or foreclosure or delivery of a new lease
or deed or otherwise, Tenant agrees, at the election and upon request of any
such party (hereinafter called the "SUCCESSOR LANDLORD") to attorn fully and
completely from time to time, and to recognize any such Successor Landlord as
Tenant's landlord under this Lease upon the executory terms of this Lease.
Provided Tenant is not in default under the terms of this Lease, such Successor
Landlord shall agree in writing to accept Tenant's attornment. The foregoing
provisions of this Section 15.2 shall inure to the benefit of any such
Successor Landlord and any successor or assign of Tenant. Tenant, upon demand
of any such Successor Landlord, agrees to execute any instruments to evidence
and confirm the foregoing provisions of this Section 15.2, reasonably
satisfactory to any such Successor Landlord, acknowledging such attornment and
setting forth the terms and conditions of its tenancy.
SECTION 15.3 RADON GAS DISCLOSURE. Radon Gas: Radon is a
naturally occurring radioactive gas that, when it has accumulated in a building
in sufficient quantities, may present health risks to persons who are exposed
to it over time. Levels of radon that exceed federal and state guidelines have
been found in the buildings in Florida. Additional information regarding radon
and radon testing may be obtained from your county public health unit.
EXECUTED as of the date and year first above written.
"LANDLORD"
KOONS DEVELOPMENT CO.,
A FLORIDA GENERAL PARTNERSHIP
BY: /s/ JAMES S. CARROLL
------------------------------------------
NAME: JAMES S. CARROLL, TRUSTEE OF
THE J. CARROLL ENTERPRISES TRUST
U/AD/ AUGUST 3, 1993, GENERAL PARTNER
"TENANT"
KOONS FORD, INC.
A FLORIDA CORPORATION
BY: /s/ JAMES S. CARROLL
--------------------------------------
NAME: JAMES S. CARROLL
TITLE: PRESIDENT
31
<PAGE> 37
LEASE AGREEMENT
EXHIBIT A
DESCRIPTION OF LAND
SEE LEGAL DESCRIPTION ATTACHED HERETO.
<PAGE> 38
LEASE AGREEMENT
EXHIBIT B
EXCEPTIONS TO TITLE TO LAND
1. Easement in favor of Florida Power and Light Company recorded in
Official Records Book 8920, page 63, of the Public Records of Broward
County, Florida.
2. Right of Way Grant recorded in Official Records Book 20151, page 650,
of the Public Records of Broward County, Florida.
3. Terms and provisions contained in lease by and between The Seminole
Tribe of Florida as lessor and Koons Ford Inc., a Florida corporation
as evidenced by Memorandum of Lease recorded in Official Records Book
8531, page 821, as assigned to Koons Development Company by Assignment
dated March 15, 1979 and amended by Supplemental Agreement No. 2 dated
October 30, 1979 and as sub-leased to Koons Ford, Inc. by instrument
to be recorded in the Public Records of Broward County, Florida.
<PAGE> 1
EXHIBIT 10.46
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
Merger Date (as defined herein), by and among the following parties:
I. KC PARTNERSHIP, a Florida general partnership
("Owner").
II. FORD LEASING DEVELOPMENT COMPANY, a Delaware
corporation ("Ford Leasing").
III. PERIMETER FORD, INC., a Delaware corporation ("Old
Perimeter").
IV. PF MERGER, INC., a Delaware corporation
("Perimeter").
V. COMERICA BANK, a Michigan banking corporation
("Comerica").
RECITALS
1. Reference is made to that certain real property more
particularly described in Exhibit "A" attached hereto and by this reference
incorporated herein (the "Premises").
2. In December, 1986, the following transactions and instruments
were entered into:
(a) By Deed recorded January 7, 1987, at Book 10561, Page
432 (the "Ford Leasing Deed") (unless otherwise specifically indicated to the
contrary, all references in this Agreement to instruments recorded shall mean
to the public records of the Clerk of the Superior Court of Fulton County,
Georgia), Ford Leasing conveyed the Premises to Owner.
(b) By instrument entitled "Lease Agreement" Owner leased
the Premises to Ford Leasing (the "Main Lease"). A "Short Form Lease"
regarding the Main Lease was recorded at Book 10561, Page 435 (the "Main Lease
Notice").
(c) By instrument entitled "Dealership Sublease" Ford
Leasing subleased the Premises to Old Perimeter (the "Perimeter Sublease"). No
"Memorandum of Lease" or "Short Form Lease" or similar instrument was recorded
in the public records regarding the Perimeter Sublease.
(d) Ford Motor Credit Company, a Delaware corporation
("FMCC") made various loans (the "FMCC Loans") to either Owner or affiliates of
Owner that were secured by various mortgages, mortgage modifications, and other
instruments, all encumbering the Premises (collectively the "FMCC Mortgages").
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<PAGE> 2
(e) Owner, Ford Leasing and FMCC entered into an
Agreement (the "Old Agreement"), as recorded at Book 10570, page 494. The
purpose of the Old Agreement was to provide public notice of certain conditions
regarding the Ford Leasing Deed, the Main Lease and the FMCC Mortgages. The
purpose of this Agreement is to replace and supersede the Old Agreement.
3. Simultaneously as of the Merger Date, the following
transactions shall occur:
(a) Old Perimeter is merging into Perimeter, with
Perimeter being the surviving corporation. The effective date of such merger
shall be referred to as the "Merger Date."
(b) Comerica is providing new mortgage financing to Owner
(the "Loan"), the purposes of which are to payoff the FMCC Loans and to provide
additional funds to Owner. The Loan shall be secured by a first priority Deed
to Secure Debt on the Premises (the "Mortgage").
(c) Effective as of the Merger Date, the Main Lease and
the Perimeter Sublease are being modified, as set forth herein.
4. Effective as of the Merger Date, Owner and Perimeter are
entering into an agreement setting forth certain rights and obligations
pertaining to the use and occupancy of the Premises (the "Operations / Lease
Agreement").
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the receipt and adequacy of which is acknowledged by the parties, the
parties agree as follows:
1. Recitals. The parties agree that the Recitals are true and
correct and are hereby made a part of this Agreement. All instruments and
documents referenced in the Recitals are hereby incorporated into and made a
part hereof.
2. Definitions. The following terms as used herein shall have
the meanings hereinafter specified, unless the context otherwise requires:
(1) Main Lease shall mean the Main Lease, as defined in
the Recitals, the leasehold estate created thereby, and all rights of the
tenant created thereunder; however, amended as follows:
(1) Article 2. Basic Rent shall be as set forth
in Exhibit "B" attached hereto. The Basic
Rent will be subject to adjustment as a
result of the construction of anticipated
improvements upon the Premises. Such
adjustment will be effective provided a like
adjustment is imposed upon Perimeter under
the Perimeter Sublease.
(2) Section 8.03, last paragraph is modified by
the addition of the following:
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<PAGE> 3
In addition, Control Period shall relate to a
period of time during which Perimeter (as
defined in this Agreement) is the subtenant
under the Sublease.
(2) Perimeter Sublease shall mean the Perimeter Sublease,
as defined in the Recitals, the leasehold estate created thereby, and all
rights of the tenant created thereunder; however, amended as follows:
(1) Article 2. Basic Rent shall be as set forth
in Exhibit "B" attached hereto. The Basic
Rent will be subject to adjustment as a
result of the construction of anticipated
improvements upon the Premises.
(2) As of the Merger date, (i) all right, title
and interest of Old Perimeter in and to the
Perimeter Sublease is assigned from Old
Perimeter to Perimeter, and (ii) Old
Perimeter shall have no further obligations
under the Perimeter Sublease. As of the
Merger Date, Perimeter hereby agrees to
assume all obligations of Old Perimeter under
the Perimeter Sublease. Ford Leasing hereby
consents to such assignment and assumption.
(3) Note shall mean any promissory note executed and
delivered by Owner in favor of Comerica to evidence a loan by Comerica to
Owner, and which promissory note is secured by a Mortgage. It is agreed that
there may be more than one Note.
(4) Owner Guaranty shall mean any guaranty given by Owner
in favor of Comerica whereby Owner guarantees any obligations owed by
affiliates of Owner to Comerica.
(5) Mortgage shall mean any Deed to Secure Debt, or other
form of mortgage encumbrance instrument, whereby Owner grants in favor of
Comerica a lien upon the Premises to secure the Note and the Owner Guaranty.
It is agreed that there may be more than one Mortgage. Comerica agrees that
the Mortgage(s) shall not secure a total aggregate indebtedness in excess of
Five Million Dollars ($5,000,000.00), plus any amounts advanced by Comerica to
protect its rights under the Mortgage, and plus interest thereon.
(6) Comerica shall mean Comerica Bank, a Michigan banking
corporation, and after any assignment of the Note and the Mortgage to another
holder, shall mean the then holder of the Note and the Mortgage.
(7) Foreclosure Proceedings shall mean the foreclosure by
any means provided for in the Mortgage or at law or in equity, including,
without limitation, the taking possession of the Premises pursuant to the
Mortgage.
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<PAGE> 4
(8) Operations / Lease Agreement shall mean the
Operations / Lease Agreement entered into between Owner and Perimeter.
3. Ford Leasing Subordination. Ford Leasing agrees that the Main
Lease is and shall continue to be subject and subordinate to the Mortgage and
to all extensions, renewals and amendments to the Mortgage, provided that any
such extensions, renewals or amendments shall not have the effect of (a)
increasing the principal of or the interest on the Note or otherwise increasing
the indebtedness secured by the Mortgage beyond the amount provided for in this
Agreement, and/or (b) changing any term or provision of the Note or the
Mortgage so as to make the same inconsistent or in conflict with the terms and
provisions of this Agreement.
4. Attornment. Ford Leasing agrees for the benefit of Comerica
and Perimeter as follows:
(a) Foreclosure Proceedings shall not terminate the Main
Lease, the Operations/Lease Agreement or the Perimeter Sublease. In the event
Comerica takes possession of the Premises pursuant to any Foreclosure
Proceeding, Ford Leasing agrees to attorn to Comerica; and in the event of any
foreclosure sale conducted pursuant to any Foreclosure Proceedings, Ford
Leasing agrees to attorn to the purchaser at such foreclosure sale (the
"Purchaser"). Said attornment is to be effective and self-operative without
the execution of any other instrument immediately upon Comerica or any
successor or assignee of Comerica succeeding to the rights of Owner under the
Main Lease, and the Main Lease shall continue in accordance with its terms
between Ford Leasing, as tenant, and Comerica or any successor or assignee of
Comerica, as landlord; provided, however, that Comerica or any successor or
assignee of Comerica shall not: (i) be bound by any prepayment of rent or
additional rent, deposit, rental security or any other sums paid to any prior
landlord under the Main Lease including, without limitation, by Ford Leasing
unless received and receipted for by Comerica or its successor or assignee;
(ii) be bound by any amendment or modification of the Main Lease made without
the consent of Comerica or its successor or assignee; (iii) be personally
liable under the Main Lease, and Comerica's or its successor's or assignee's
liability under the Main Lease shall be limited solely to the interest of
Comerica or its successor or assignee in the Premises; (iv) be liable for any
act or omission of any prior landlord under the Main Lease including, without
limitation, Owner, that results in a default under the Main Lease that
continues after Comerica or its successors or assigns becomes Landlord, except
to the extent that Comerica was given notice of such act or omission and an
opportunity to cure; and (v) be subject to any offsets, defenses, claims or
counterclaims which Ford Leasing might have against any prior landlord under
the Main Lease including, without limitation, Owner except to the extent that
Comerica was given notice of default giving rise to the offset, defense, claim
or counterclaim and an opportunity to cure.
(b) The provisions of Section 8.03 of the Main Lease
shall not be in force and effect to relieve Ford Leasing of its obligations to
perform or observe the terms and provisions of the Main Lease:
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<PAGE> 5
(i) from and after the commencement of any
Foreclosure Proceedings, and so long as such Foreclosure Proceeding is
conducted by Comerica, and
(ii) from and after such time as Comerica or any
Purchaser (other than a person or entity controlled by or under common control
with Owner named herein and the subtenant under the Sublease, as defined in the
Main Lease, which terms "controlled by" or "under common control with", as used
with respect to any person or entity, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such person or entity, whether through the ownership of voting
securities or by contract or otherwise) shall become the owner of the Premises
pursuant to any Foreclosure Proceeding;
provided, however, the terms and conditions of Section 8.03 of the Main Lease
shall be deemed to be in force and effect with respect to obligations of Ford
Leasing which accrued, or derived from a state of facts or conditions which
occurred or existed, prior to the date of the commencement of any such
Foreclosure Proceeding.
The provisions of this Subparagraph (b) shall not constitute a waiver by Ford
Leasing of any provisions of the subtenant under the Sublease, as defined in
the Main Lease, or Owner under the Main Lease, or otherwise relieve such
subtenant or Owner of its obligations under the Sublease, as defined in the
Main Lease, and the Main Lease, respectively.
In the event a foreclosure action (judicial or non-judicial) is commenced by
Comerica and the Premises are placed for sale by the Court through such
proceedings, Ford Leasing shall have the right to purchase the Premises within
a fifteen (15) day period prior to the date of the sale for an amount equal to
the sum set forth in the foreclosure final judgment together with accrued
interest. Owner retains the right to satisfy the obligations due Comerica as
pertaining to the Premises prior to the commencement of such fifteen (15) day
period. Ford Leasing's right to purchase shall prevail over any Option to
Purchase granted Perimeter under the Operations / Lease Agreement. Ford
Leasing's right to purchase as provided in this paragraph shall terminate
effective 6:00 PM the day prior to the Court ordered foreclosure sale.
5. Proceeds; Non-Disturbance. Comerica hereby agrees for the
benefit of Ford Leasing and Perimeter as follows:
(a) Proceeds. Notwithstanding anything to the contrary
contained in the Mortgage, the fire and extended coverage insurance on the
Premises required by the Main Lease shall name Ford Leasing as sole loss payee.
Ford Leasing, in accordance with the terms of the Main Lease will make
available any insurance or condemnation proceeds for the restoration of the
buildings and other improvements that are part of the Premises that are damaged
or destroyed or taken in any condemnation proceedings, all in accordance with
the terms of the Main Lease.
(b) Non-Disturbance. So long as no default by Ford
Leasing under the Main Lease shall have occurred and be continuing so that
Owner would be entitled to enter into and upon
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<PAGE> 6
the Premises and repossess the same and evict Ford Leasing and thereby
terminate the Main Lease, the Main Lease shall continue in full force and
effect, and the Main Lease shall not be terminated, cut off or otherwise
disturbed as a result of a Foreclosure Proceeding or otherwise except in
accordance with the terms and provisions of the Main Lease. In the event of a
Foreclosure Proceeding, Comerica will not name Ford Leasing as a party
defendant so as to terminate or disturb the Main Lease or to obtain a judgment
against Ford Leasing in any Foreclosure Proceeding. Any sale conducted
pursuant to any Foreclosure Proceeding shall be expressly subject to the Main
Lease; and any Purchaser shall assume all duties and obligations of Owner under
the Main Lease.
(c) Non-Disturbance. So long as no default by Perimeter
under the Perimeter Sublease or Operations / Lease Agreement shall have
occurred and be continuing that would permit Owner to terminate the Operations
/ Lease Agreement or which would permit Ford Leasing to terminate the Perimeter
Sublease, then the Operations / Lease Agreement, Main Lease and Perimeter
Sublease shall continue in full force and effect, and the Perimeter Sublease,
the Operations / Lease Agreement, Main Lease and Perimeter Sublease shall not
be terminated, cut off or otherwise disturbed as a result of a Foreclosure
Proceeding or otherwise except in accordance with the terms and provisions of
the Perimeter Sublease, the Operations / Lease Agreement, Main Lease and
Perimeter Sublease. In the event of a Foreclosure Proceeding, Comerica will
not name Perimeter as a party defendant so as to terminate or disturb the
Perimeter Sublease, the Operations / Lease Agreement, Main Lease or Perimeter
Sublease or to obtain a judgment against Ford Leasing or Perimeter in any
Foreclosure Proceeding. Any sale conducted pursuant to any Foreclosure
Proceeding shall be expressly subject to the Perimeter Sublease, the Operations
/ Lease Agreement, Main Lease and Perimeter Sublease; and any Purchaser shall
assume all duties and obligations of Owner under the Main Lease, Perimeter
Sublease and Operations / Lease Agreement.
(d) Notice of Default. Comerica agrees to deliver to
Ford Leasing and Perimeter a copy of each notice of default under the Note or
the Mortgage that Comerica delivers to Owner; and no notice of default under
the Note or Mortgage shall be deemed to be effective as against Owner unless
and until a copy of such notice shall have been delivered to Ford Leasing and
Perimeter, and Ford Leasing and Perimeter shall have the right (but not the
obligation) to cure such default within 30 days after the giving of such notice
to Ford Leasing and Perimeter for curing any default in the payment of any
installment of principal and/or interest and within 90 days after the giving of
such notice for curing any other default.
6. Severability. If any provision of this Agreement or the
application thereof to any person, entity or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to any person, entity or circumstance other than
that as to which it is held invalid or unenforceable, as the case may be, shall
not be affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
7. Notices. All notices, consents and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been properly given if
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<PAGE> 7
hand delivered, delivered by a nationally recognized overnight delivery service
(such as Federal Express), or sent by United States registered or certified
mail, postage paid
(a) if to Owner, at 3101 North State Road 7, Hollywood,
Florida 33021.
(b) if to Ford Leasing, at One Parklane Blvd., Suite 1500
East, Dearborn, MI 48126-2477, attn: Global Real Estate Services; and
(c) if to Comerica, at 411 W. Lafayette Street, P. O. Box
75000, National Dealer Services - 3517, Detroit, Michigan 48275-3517.
(d) if to Perimeter or Old Perimeter, attn: B.B.
Hollingsworth, Jr., Group 1 Automotive, Inc., 950 Echo Lane, Suite 350,
Houston, TX 77024.
Any notice by certified or registered mail shall be deemed to
have been given on the date of certification or registration thereof. Any
notice by overnight delivery shall be deemed given the next business day
following receipt of same by such carrier. Any party hereto may at any time
designate a different address to which such notices, consents or other
communications shall be sent by giving notice to the other parties hereto in
the manner aforesaid for the giving of notices.
8. Successors and Assigns. The rights and obligations hereunder
shall be binding upon and shall inure to the parties hereto and their
respective personal representatives and successors and assigns.
9. Governing Law. This Agreement shall be governed by the laws
of the State of Georgia.
10. Notice Recording. This Agreement shall not be recorded. The
Notice of Lease and Purchase Options attached hereto as Exhibit "D" and by this
reference incorporated herein shall be recorded in the public records where the
Premises are located.
11. Release Price of Premises. Comerica agrees to release the
lien of the Mortgage upon payment to Comerica of cash in the amount of Four
Million Dollars ($4,000,000.00) plus any unpaid accrued interest under the
Note, and this amount shall first be used to pay all amounts owing to Comerica,
whether unpaid principal, accrued interest, or other costs, under the Note, and
with the balance going to pay amounts owing to Comerica under obligations
guaranteed by the Owner Guaranty.
12. Representations of Ford Leasing - Ford Lease. Ford Leasing
hereby certifies that, to its knowledge: (i) there are no defaults on the part
of Owner under the Main Lease, (ii) the Main Lease is a complete statement of
the agreement of the parties thereto with respect to the letting of the
Premises, (iii) the Main Lease is in full force and effect, (iv) all conditions
to the effectiveness or continuing effectiveness of the Main Lease required to
be satisfied as of the date hereof have been
Page -7-
<PAGE> 8
satisfied, and (v) Ford Leasing has not paid, and shall not pay, rent for more
than one (1) month in advance.
13. Representations of Owner. Owner hereby certifies and
covenants that: (i) there are no defaults on the part of Ford Leasing under the
Main Lease, (ii) the Main Lease is a complete statement of the agreement of the
parties thereto with respect to the letting of the Premises, (iii) the Main
Lease is in full force and effect, (iv) all conditions to the effectiveness or
continuing effectiveness of the Main Lease required to be satisfied as of the
date hereof have been satisfied, and (v) Owner has not received, and shall not
accept, rent for more than one (1) month in advance, whether under the Main
Lease or the Operations / Lease Agreement.
14. Ford Leasing's Notification of Comerica - Main Lease. Ford
Leasing will notify Comerica of any default by the Owner which would entitle
Ford Leasing to cancel the Main Lease or abate the rent payable thereunder, and
Ford Leasing agrees that notwithstanding any provision of the Main Lease, no
notice of cancellation thereof and no abatement of rent thereunder shall be
effective unless Comerica has received notice and has failed within sixty (60)
days of the date thereof to cure such default which gave rise to such right of
cancellation or abatement; however, it is understood that Comerica is not
obligated to take any actions whatsoever with regard to the cure of such
default.
15. Ford Leasing's Notification of Comerica - Perimeter Lease.
Ford Leasing will notify Comerica of any default by Perimeter which would
entitle Ford Leasing to cancel the Perimeter Lease, and Ford Leasing agrees
that notwithstanding any provision of the Perimeter Lease, no notice of
cancellation thereof shall be effective unless Comerica has received notice and
has failed within sixty (60) days of the date thereof to cure such default
which gave rise to such right of cancellation; however, it is understood that
Comerica is not obligated to take any actions whatsoever with regard to the
cure of such default.
16. Operations / Lease Agreement Between Owner and Perimeter.
Owner and Perimeter are entering into a separate Operations / Lease Agreement
concurrently herewith. To the extent that there is any conflict between
Operations / Lease Agreement and the Perimeter Lease, as between Perimeter and
Ford Leasing, the Perimeter Lease shall prevail and Perimeter and Ford Leasing
shall comply with the terms therewith. As between Owner and Perimeter, Owner
and Perimeter each shall be obligated to perform its obligations under the
Operations / Lease Agreement as set forth therein. To the extent that
Perimeter may required by Ford Leasing to perform any obligation under the
Perimeter Sublease that Owner is required to perform under the Operations /
Lease Agreement, Owner shall reimburse Perimeter for any amounts expended
pursuant as if same was an obligation of Owner under the Operations / Lease
Agreement.
Perimeter shall not be required to make any payments to Ford
Leasing under the Sublease so long as (i) the provisions of Section 8.03 of the
Main Lease are in effect and relieves Ford Leasing of its obligation to perform
or observe the terms and provisions of the Main Lease and (ii) Perimeter makes
the payments required under the terms of the Operations / Lease Agreement.
Page -8-
<PAGE> 9
A true and correct copy of the Operations / Lease Agreement is attached hereto
as Exhibit "D" and has been provided to Ford Leasing. Owner and Perimeter
shall not modify any provisions of such Operations / Lease Agreement without
the prior consent of Ford Leasing.
Ford Leasing shall not be required to make any payment to
Owner under the Main Lease so long as Perimeter makes the payments required
under the terms of the Operations / Lease Agreement.
Perimeter and Owner acknowledge that Perimeter's right to
exercise any upcoming Option to Renew as set forth in Section 2.4 of the
Operations / Lease Agreement are contingent upon the continuation of a Ford
dealership upon the Premises.
In the event Ford Leasing shall exercise its Option to
Purchase the property either pursuant to its Option to Purchase or Right of
First Refusal, then in such event, the Operations / Lease Agreement shall
terminate and the rights of the parties shall be governed by the Main Lease and
Dealership Sublease. However, the rent increase as provided for in this
Agreement shall terminate and rent shall be due as provided for in the Main
Lease and Dealership Sublease.
The parties hereto agree that a Memorandum of such Operations
/ Lease Agreement may be recorded in the Public Records in the County where the
Premises are located.
17. Ford Motor Company Site Improvements. Owner and Perimeter
acknowledge that Ford Motor Company has required site improvements as set forth
in Exhibit "E" attached hereto. Owner shall complete the improvements required
by Ford Motor Company in such agreement within the time frame set forth
therein. In the event that the improvements are not so completed, then the
parties hereto agree that the rent set forth in this Agreement shall revert to
the rent due pursuant to the Main Lease and Dealership Sublease immediately
prior to the execution hereof.
18. Execution. It is not necessary for all parties to sign the
same original of this Agreement, and instead this Agreement may be signed in
multiple counterparts and collectively the multiple counterparts shall
constitute the Agreement. Further, the parties hereto may execute multiple
originals of this Agreement, and each original shall be effective. Any of the
parties hereto may execute a counterpart of this Agreement, and then transmit
via facsimile the executed counterpart of this Agreement to any person, and
such receiving person shall be entitled to rely upon such copy received via
facsimile as if it were an original document.
Exhibits
Exhibit "A" - Description of Premises
Exhibit "B" - Basic Rent
Exhibit "C" - Notice of Lease and Purchase Options
Exhibit "D" - Operations / Lease Agreement
Exhibit "E" - Site Improvements
Page -9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PERIMETER FORD, INC., a Delaware corporation
By: /s/ JAMES S. CARROLL
----------------------------------------
James S. Carroll, as its President
(CORPORATE SEAL)
Date executed: March 19, 1998
COMERICA BANK, a Michigan banking corporation
By: /s/ DAVID M. GARBARZ
-------------------------------------
David M. Garbarz, as its _______ Vice
President
(CORPORATE SEAL)
Date executed: March 19, 1998
KC PARTNERSHIP, a Florida general partnership,
by an authorized general partner:
/s/ JAMES S. CARROLL
---------------------------------------------
JAMES S. CARROLL, as Trustee of the J. Carroll
Enterprises Trust under agreement dated August
3, 1993, on behalf of the trust as general
partner of KC PARTNERSHIP, a Florida general
partnership, on behalf of the partnership
Date executed: March 19, 1998
FORD LEASING DEVELOPMENT COMPANY,
a Delaware Corporation
By: /s/ EXECUTED
------------------------------------------
------------------------------------------
Its --------------------------------------
Date executed: March 19, 1998
Page -10-
<PAGE> 11
EXHIBIT "A" - LEGAL DESCRIPTION
All that tract or parcel of land lying and being in Land Lot 35 of the 17th
District of Fulton County, Georgia and being more particularly described as
follows:
BEGINNING at a 1/2" rebar iron pin found at the intersection of the Westerly
right-of-way of Georgia Highway No. 400 with the Northerly right-of-way of
Mount Vernon Highway (80' R/W); thence running South 68 degrees 39 minutes West
along the Northwesterly right-of-way of Mount Vernon Highway a distance of
381.4 feet to a 1/2" rebar iron pin found at the intersection of the
Northwesterly right-of-way of Mount Vernon Highway with the Northeasterly
right-of-way of Barfield Road Extension (80' R/W); thence running North 59
degrees 36 minutes West a distance of 37.1 feet to a 1/2" rebar iron pin found
on the Northeasterly right-of-way of Barfield Road Extension; thence running
North 19 degrees 22 minutes 30 seconds West along said right-of-way an arc
distance of 231.36 feet (Cord = 229.62') to a point; thence running North 31
degrees 13 minutes West along said right-of-way a distance of 414.3 feet to a
1/2" rebar iron pin found; thence running North 25 degrees 22 minutes West
along said right-of-way a distance of 54.0 feet to an 1/2" rebar iron pin
found; thence running North 30 degrees 57 minutes 33 seconds West along said
right-of-way a distance of 270.2 feet to a 1/2" rebar iron pin found; thence
running North 89 degrees 30 minutes East a distance of 409.3 feet to a 1/2"
rebar iron pin found; thence running South 00 degrees 14 minutes West a
distance of 161.7 feet to a 1/2" rebar iron pin found; thence running North 89
degrees 40 minutes East a distance of 383.25 feet to a marker found on the
Westerly right-of-way of Georgia Highway No. 400; thence running South 09
degrees 47 minutes East along said right-of-way a distance of 257.0 feet to a
concrete monument found; thence running South 01 degrees 41 minutes East along
said right-of-way a distance of 81.1 feet to a concrete monument found; thence
running South 01 degrees 21 minutes East along said right-of-way a distance of
239.54 feet to a concrete monument found at the intersection of the said
Westerly right-of-way of Georgia Highway No. 400 with the Northwesterly right-
of-way of Mount Vernon Highway and the true point of beginning.
<PAGE> 12
EXHIBIT "B" - BASIC RENT
Capitalized terms used in this Exhibit which are not defined herein shall have
the meanings ascribed to such terms in the Operations / Lease Agreement.
Tenant shall pay Landlord monthly "BASIC RENT" (herein so called) of Fifty
Seven Thousand Two Hundred Fifty and no/100 Dollars ($57,250.00), in advance on
or before the first day of each Lease Month during the Lease Term, subject to
adjustment as hereafter provided. If the Term commences on a day other than
the first day of a calendar month, or ends on a day other than the last day of
a calendar month, then the Basic Rent for such month shall be prorated on the
basis of one thirtieth (1/30th) of the monthly Basic Rent for each day of such
month. If the CPI on any Adjustment Date shall be greater than the CPI for the
Commencement Date, monthly Basic Rent commencing on the Adjustment Date shall
be adjusted to be the original monthly Basic Rent specified herein an amount
equal to one-half (1/2) of the product obtained by multiplying: (i) the
original monthly Basic Rent specified in herein by (ii) the percentage increase
in the CPI from the Commencement Date through the January 1st prior to the
Adjustment Date. "ADJUSTMENT DATE" shall be the first day of the first Lease
Month of each five (5) year Renewal Term following the initial ten (10) year
lease term. "CPI" shall mean the Consumer Price Index for All Urban Consumers,
All Items (Base Year 1982-84 = 100) published by the United States Department
of Labor, Bureau of Labor Statistics. If the 1982-84 Base Year shall no longer
be used as an index of 100, the revised index which would produce results
equivalent, as nearly as possible to those which would be obtained hereunder if
the CPI were not so revised.
<PAGE> 13
EXHIBIT "C" - NOTICE OF LEASE AND PURCHASE OPTIONS
<PAGE> 14
EXHIBIT "D" - OPERATIONS / LEASE AGREEMENT
<PAGE> 15
EXHIBIT "E" - SITE IMPROVEMENTS
<PAGE> 1
EXHIBIT 10.47
PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
MSAP MERGER CORP.,
A WHOLLY-OWNED SUBSIDIARY OF
GROUP 1 AUTOMOTIVE, INC.,
THE LIMITED PARTNERS OF
PRESTIGE CHRYSLER PLYMOUTH SOUTH, LTD.
AND
THE STOCKHOLDERS OF
PRESTIGE CHRYSLER PLYMOUTH, INC.
DATED AS OF
DECEMBER 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE ACQUISITION
2.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE OWNERS
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.15 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.18 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.20 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE OWNERS
4.1 Capital Stock and Limited Partnership Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
COVENANTS OF THE OWNERS
6.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Conduct of Business by the Company Pending the Acquisition . . . . . . . . . . . . . . . . . . . . . 18
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Owners' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.14 Tax Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.15 Employment Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 Tax Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . . 24
8.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 24
8.3 Additional Conditions Precedent to Obligations of the Owners. . . . . . . . . . . . . . . . . . . 25
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Owners to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Agreement by Group 1 to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.3 Conditions of indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.7 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.8 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.15 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
-iii-
<PAGE> 5
GROUP 1 AUTOMOTIVE, INC.
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement"), dated as of the 18th day
of December, 1997, is among Group 1 Automotive, Inc., a Delaware corporation
("Group 1"), MSAP Merger Corp., a Texas corporation and a wholly-owned
subsidiary of Group 1 ("Acquisition Sub"), the stockholders ("Stockholders")
of Prestige Chrysler Plymouth, Inc., a Texas corporation (the "General
Partner"), and the limited partners ("Limited Partners") of Prestige Chrysler
Plymouth South, LTD., a Texas limited partnership (the "Company"). The
Stockholders and the Limited Partners are collectively referred to herein as
the "Owners" and are listed on the signature pages hereof under the caption
"Owners."
RECITALS:
WHEREAS, the Owners are the holders of all of the issued and
outstanding capital stock of the General Partner;
WHEREAS, the General Partner is the sole general partner of the
Company;
WHEREAS, the Owners are the holders of all of the limited partnership
interests in the Company;
WHEREAS, Acquisition Sub proposes to acquire all of the capital stock
of the General Partner and all of the limited partnership interests in the
Company from the Owners (the "Acquisition") on the terms and conditions set
forth herein;
WHEREAS, Group 1, through certain of its wholly owned subsidiaries,
also proposes to acquire (i) the outstanding capital stock of Maxwell Chrysler,
Plymouth, Dodge, Inc. and the limited partnership interests of Maxwell
Chrysler, Plymouth, Dodge, LTD. and (ii) the outstanding capital stock of MMK
Interests, Inc. and the limited partnership interests of Prestige Chrysler,
Plymouth Northwest, LTD., pursuant to agreements (the "Other Agreements") that
are similar to this Agreement; and
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which Acquisition Sub shall
purchase, and the Owners shall sell, all of the capital stock of the General
Partner and all of the limited partnership interests in the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
<PAGE> 6
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (c) "or" is not exclusive; (d) "including" means
"including, without limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one
gender shall be construed to apply to each gender; (h) the terms "hereof,"
"herein," "hereby," "hereto" and derivative or similar words refer to this
entire Agreement; (i) the terms "Article" or "Section" shall refer to the
specified Article or Section of this Agreement; and (j) section and paragraph
headings in this Agreement are for convenience only and shall not affect the
construction of this Agreement.
ARTICLE II
THE ACQUISITION
2.1 The Acquisition. At the Closing, each Owner shall sell to
Acquisition Sub and Acquisition Sub shall purchase from each Owner that number
of shares of Common Stock of the General Partner and the limited partnership
interests in the Company as set forth opposite their respective names in
Exhibit A hereto in exchange for the consideration set forth opposite their
respective names in Exhibit A hereto.
2.2 Closing Date. The Closing of the Acquisition as contemplated
by this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
2300 First City Tower, Houston, Texas 77002, as soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII or at such
other time and place and on such other date as Group 1 and the Owners shall
agree; provided, that the conditions set forth in Article VIII shall have been
satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date," and shall be effective as
of the first day of the month in which the Closing Date occurs.
2.3 Transfer of Shares. At the Closing, and subject to the
satisfaction or waiver of the conditions set forth in Article VIII, the Owners
will sell, transfer and deliver that number of shares of Common Stock of the
General Partner and the limited partnership interests in the Company as set
forth opposite their respective names in Exhibit A hereto to Acquisition Sub
(in proper form and duly endorsed for transfer) and Acquisition Sub will
purchase such shares of Common Stock of the General Partner and the limited
partnership interests in the Company and will deliver to the Owners the
consideration (in proper form) set forth opposite their respective names in
Exhibit A hereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE OWNERS
The Owners hereby represent and warrant to Group 1 as follows:
3.1 Organization.
(a) The Company is a limited partnership duly organized,
validly existing and in good standing under the laws of the state of Texas with
all requisite power and authority to own or lease its properties and conduct
its business as now owned, leased or conducted. A true and complete copy of
the limited partnership agreement of the Company is included in Schedule 3.1.
The minute books of the Company previously made available to Group 1 are
complete and accurately reflect all action taken prior to the date of this
Agreement by its partners.
(b) The General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas with
all requisite corporate power and authority to own or lease its properties and
conduct its business as now owned, leased or conducted. The General Partner
has conducted no business other than as General Partner of the Company, owns no
property or assets other than its general partner interest in the Company and
has no liabilities or obligations other than as related to its capacity as
general partner of the Company. True and complete copies of the articles of
incorporation and bylaws of the General Partner are included in Schedule 3.1.
The minute books of the General Partner previously made available to Group 1
are complete and accurately reflect all action taken prior to the date of this
Agreement by its board of directors and stockholders in their capacities as
such.
3.2 Qualification. Each of the Company and the General Partner is
duly qualified to do business as a foreign entity and is in good standing in
each jurisdiction in which the nature of the business as now conducted or the
character of the property owned or leased by it makes such qualification
necessary. Schedule 3.2 sets forth a list of the jurisdictions in which each
of the Company and the General Partner is qualified to do business, if any.
3.3 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.3, neither the execution and delivery by the Owners of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by them at, or prior to, the Closing, nor the
performance by the Owners of their obligations under this Agreement or any such
instrument, document or agreement will (assuming receipt of all consents,
approvals, authorizations, permits, certificates and orders disclosed as
requisite in Schedule 4.3) (a) violate or breach the terms of or cause a
default under (i) any applicable Order or any applicable rule or regulation of
any Court or Governmental Authority with respect to the Company or the General
Partner, (ii) any applicable permits received from any Governmental Authority
with respect to the Company or the General Partner, (iii) the limited
partnership agreement of the Company or the articles of incorporation or bylaws
of the General Partner or (iv) any contract or agreement to which the Company
or the General Partner is a party or by which they, or any of their properties,
is bound, or (b) result in the creation or imposition of any Lien on any of the
properties or assets of the Company or the General Partner, or (c) result in
the cancellation, forfeiture, revocation, suspension or adverse modification of
any
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<PAGE> 8
existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority with respect to the Company or the
General Partner, or (d) with the passage of time or the giving of notice or the
taking of any action of any third party have any of the effects set forth in
clause (a), (b) or (c) of this Section.
3.4 Equity Investments. The General Partner owns no equity
securities, interests or other investments other than its general partner
interest in the Company. The Company owns no equity securities, interests or
other investments in any Person.
3.5 Capitalization.
(a) The authorized capital stock of the General Partner
consists of ____ shares of Common Stock of the General Partner, of
which ____ shares are issued and outstanding (___ shares being held in
treasury). Each outstanding share of the Common Stock of the General
Partner has been duly authorized, is validly issued, fully paid and
nonassessable and was not issued in violation of any preemptive rights
of any stockholder. Set forth in Schedule 3.5(a) are the names,
social security or I.R.S. identification numbers and addresses (as
reflected in the corporate records of the General Partner) of each
record holder of the Common Stock of the General Partner, together
with the number of shares held by each such Person. Except as set
forth above, there are no shares of capital stock of, or other equity
interests in, the General Partner authorized, issued or outstanding.
There is not outstanding any ownership interest or other security,
including without limitation any option, warrant or right, entitling
the holder thereof to purchase or otherwise acquire any ownership
interest of the General Partner. There are no contracts, agreements,
commitments or arrangements obligating the General Partner (i) to
issue, sell, pledge, dispose of or encumber any ownership interest of,
or any options, warrants or rights of any kind to acquire, or any
securities that are convertible into or exercisable or exchangeable
for, any ownership interest of, any class of ownership interest of the
General Partner or (ii) to redeem, purchase or acquire or offer to
acquire any ownership interest of, or any outstanding option, warrant
or right to acquire, or any securities that are convertible into or
exercisable or exchangeable for, any ownership interest of, any class
of ownership interest of the General Partner.
(b) The limited partner interest of the Company consists
of the following: [__________]. Each outstanding limited partner
interest of the Company has been duly authorized and validly issued in
accordance with the limited partnership agreement of the Company.
Set forth in Schedule 3.5(b) are the names and addresses of each
limited partner of the Company together with the limited partner
interest held by each limited partner. Except as set forth above and
except for the general partner interest of the General Partner, there
are no other partnership interests authorized or outstanding of the
Company. There are no contracts, agreements, commitments,
arrangements, rights or options of any kind to acquire any interest in
the Company.
3.6 Financial Statements. Included in Schedule 3.6 are true and
complete copies of the financial statements of the Company consisting of (i) an
unaudited balance sheet of the Company as of October 31, 1997 (the "Interim
Balance Sheet") and the related unaudited statement of income for the ten month
period then ended (the "Company Interim Financial Statements") and (ii) an
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<PAGE> 9
audited balance sheet of the Company as of December 31, 1996 (the "Company 1996
Balance Sheet") and the related audited statements of income, changes in
stockholders' equity and cash flows for the year then ended (including the
notes thereto) (the "Company 1996 Financial Statements") and (collectively with
the Company Interim Financial Statements, the "Company Financial Statements").
The Company Financial Statements present fairly the financial position of the
Company and the results of its operations and changes in financial position as
of the dates and for the periods indicated therein in conformity with GAAP.
The Company Financial Statements do not omit to state any liabilities, absolute
or contingent, required to be stated therein in accordance with GAAP. All
accounts receivable of the Company reflected in the Company Financial
Statements and as incurred since October 31, 1997 represent sales made in the
ordinary course of business, are collectible (net of any reserves for doubtful
accounts shown in the Company Interim Financial Statements) in the ordinary
course of business and, except as set forth in Schedule 3.6, are not in dispute
or subject to counterclaim, set-off or renegotiation. Schedule 3.6 contains an
aged schedule of accounts receivable included in the Interim Balance Sheet.
3.7 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet or
as set forth in Schedule 3.7, the Company does not have any liabilities or
obligations of any nature whether absolute, accrued, contingent or otherwise,
and whether due or to become due. The reserves reflected in the Interim
Balance Sheet are adequate, appropriate and reasonable in accordance with GAAP.
3.8 Certain Agreements. Except as set forth in Schedule 3.8,
neither the Company nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a non-competition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
3.9 Contracts and Commitments. Schedule 3.9 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of their officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.10 Absence of Changes. Except as set forth in Schedule 3.10,
there has not been, since December 31, 1996, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.10, since
October 31, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement.
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<PAGE> 10
Notwithstanding the preceding sentence, the Company makes no representation
regarding, and need not disclose, increases in compensation (of the type
contemplated in Section 6.3(f)) since December 31, 1996, for any employee who
after such increase would receive annual compensation of less than $50,000.
3.11 Tax Matters.
(a) Except as set forth in Schedule 3.11 (and except for
filings and payments of assessments the failure of which to file or
pay will not materially adversely affect the Company or the General
Partner), (i) all Tax Returns which are required to be filed on or
before the Closing Date by or with respect to the Company or the
General Partner have been or will be duly and timely filed, (ii) all
items of income, gain, loss, deduction and credit or other items
required to be included in each such Tax Return have been or will be
so included and all information provided in each such Tax Return is
true, correct and complete, (iii) all Taxes which have become or will
become due with respect to the period covered by each such Tax Return
have been or will be timely paid in full, (iv) all withholding Tax
requirements imposed on or with respect to the Company or the General
Partner have been or will be satisfied in full, and (v) no penalty,
interest or other charge is or will become due with respect to the
late filing of any such Tax Return or late payment of any such Tax.
(b) All Tax Returns of, or with respect to, the Company
or the General Partner have been audited by the applicable
governmental authority, or the applicable statute of limitations has
expired, for all periods up to and including December 31, 1996 except
as included on Schedule 3.11(b).
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to the
Company or the General Partner, other than those disclosed (and to
which are attached true and complete copies of all audit or similar
reports) in Schedule 3.11(c).
(d) Except as set forth in Schedule 3.11(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company or the
General Partner, or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of or with respect to the
Company or the General Partner.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes, whether or not assessed or disputed,
which are, or are hereafter found to be, or to have been, due by or
with respect to the Company or the General Partner up to and through
the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company or the General Partner shall be terminated prior to the
Closing Date and no payments shall be due or will become due by the
Company or the General Partner on or after the Closing Date pursuant
to any such agreement or arrangement.
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<PAGE> 11
(g) Except as set forth in Schedule 3.11(g), the Company
or the General Partner will not be required to include any amount in
income for any taxable period as a result of a change in accounting
method for any taxable period pursuant to any agreement with any Tax
authority with respect to any such taxable period.
(h) The General Partner has not consented to have the
provisions of section 341(f)(2) of the Code apply with respect to a
sale of its stock.
(i) From the end of its most recent tax year through the
Closing Date, (a) the General Partner continuously has been and will
be an S Corporation within the meaning of section 1361 of the Code,
and (b) each holder of the stock of the General Partner has been an
individual resident of the United States or an estate or trust
described in section 1361(c)(2) that is permitted to hold the stock of
an S Corporation.
3.12 Litigation.
(a) Except as set forth in Schedule 3.12(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Owners, threatened against or
specifically affecting the Company or the General Partner before or by
any Court or Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.12(b), each of the Company and
the General Partner has performed all obligations required to be
performed by it to date and is not in default under, and, to the
knowledge of the Owners, no event has occurred which, with the lapse
of time or action by a third party could result in a default under any
contract or other agreement to which the Company or the General
Partner is a party or by which they or any of their properties is
bound or under any applicable Order of any Court or Governmental
Authority.
3.13 Compliance with Law. Except as set forth in Schedule 3.13,
each of the Company and the General Partner in compliance with all applicable
statutes and other applicable laws and all applicable rules and regulations of
all federal, state, foreign and local governmental agencies and authorities.
3.14 Permits. Except as set forth in Schedule 3.14, the Company or
the General Partner owns or holds all franchises, licenses, permits, consents,
approvals and authorizations of all Governmental Authorities necessary for the
conduct of their business. Each franchise, license, permit, consent, approval
and authorization so owned or held is in full force and effect, and each of the
Company and the General Partner is in compliance with all of its obligations
with respect thereto, and no event has occurred which allows, or upon the
giving of notice or the lapse of time or otherwise would allow, revocation or
termination of any franchise, license, permit, consent, approval or
authorization so owned or held.
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<PAGE> 12
3.15 Employee Benefit Plans and Policies.
(a) Schedule 3.15(a) provides a description of each of
the following which is sponsored, maintained or contributed to by the
Company for the benefit of its employees, or has been so sponsored,
maintained or contributed to within six years prior to the Closing
Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not described in Section 2.17(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) The Company does not contribute to or have an
obligation to contribute to, and have not at any time contributed to
or had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in Schedule 3.15(c),
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable
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<PAGE> 13
determination letter from the Internal Revenue Service
regarding such qualified status and has not, since receipt of
the most recent favorable determination letter, been amended
or operated in a way which would adversely affect such
qualified status;
(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan or Benefit Program
or Agreement than it otherwise would or (B) create or give
rise to any additional vested rights or service credits under
any Plan or Benefit Program or Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
(e) Termination of employment of any employee of the
Company after consummation of the transactions contemplated by this
Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) Schedule 3.15(g) sets forth by name and job
description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.16 Properties.
(a) The Company does not own any real property or any
interest therein. Schedule 3.16(b) (the "Leased Properties") sets
forth the location and size of, principal improvements and buildings
on, and Liens on all parcels of real estate leased by the Company
(individually, a "Leased Property" and collectively, the "Leased
Properties"). True and correct copies of all such Liens are attached
to Schedule 3.16(a). Except as set forth in Schedule 3.18(a), with
respect to each Leased Property:
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(i) the Company has good and valid leasehold
interests in each parcel of its Leased Property, free and
clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
the Company or the Stockholders, threatened condemnation
proceedings, suits or administrative actions relating to the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) except as set forth in Schedule 3.16(a), the
legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as set forth in Schedule
3.16(a);
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Leased Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.16(a) who are
in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used; and
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<PAGE> 15
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.16(a).
(b) Except as set forth in Schedule 3.16(b), each of the Company
has good and marketable title to all of its Assets, free and clear of any Liens
or restrictions on use. The Fixed Assets currently in use for the business and
operations of the Company are in good operating condition, normal wear and tear
excepted and have been maintained in accordance with sound industry practices.
3.17 Insurance. Schedule 3.17 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.17, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. The Company has not
received any notice or other communication from any such insurer canceling or
materially amending any of such insurance policies, and no such cancellation is
pending or threatened. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.18 Affiliate Interests. Except as set forth in Schedule 3.18, no
employee, officer or director, or former employee, officer or director, of the
Company or the General Partner has any interest in any property, tangible or
intangible, including without limitation, patents, trade secrets, other
confidential business information, trademarks, service marks or trade names,
used in or pertaining to the business of the Company, except for the normal
rights of employees, partners, and stockholders.
3.19 Environmental Matters. Except as set forth in Schedule 3.19,
to the best of Owners' knowledge:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. The Company is
currently not liable for any penalties, fines or forfeitures for
failure to comply with any Environmental Laws. The Company is in
compliance with all required notice, record keeping and reporting
requirements of all Environmental Laws, and has complied with all
informational requests or demands arising under the Environmental
Laws.
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<PAGE> 16
(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of its business as presently conducted, including, without limitation,
all air emission, water discharge, water use and solid waste,
hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses (a listing of such items being
included in Schedule 3.19(b), and the Company is in compliance with
all the terms, conditions and requirements of such Licenses, and
copies of such Licenses have been made available to Group 1. There
are no administrative or judicial investigations, notices, claims or
other proceedings pending or threatened by any Governmental Authority
or third parties against the Company or its business, operations,
properties, or assets, which question the validity or entitlement of
the Company to any License required by the Environmental Laws for the
ownership of each of the respective properties and assets of the
Company and the operation of its business.
(c) The Company has not received or is aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of their business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leases Premises.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle, treat,
spill, leak, dump, discharge, release or dispose of, any material
quantities of Hazardous Substances or other waste upon property
currently or previously owned or leased by it, except in compliance
with Environmental Laws.
(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the
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Leased Properties or to any properties adjacent thereto except in
compliance with the Environmental laws. There has not occurred, nor
is there presently occurring, a Release or Discharge, or threatened
Release or Discharge, of any Hazardous Substance on, into or beneath
the surface of the Owned Properties or the Leases Premises or to any
properties adjacent thereto.
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor has it allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Owners have received notice or have knowledge of any
facts which could give rise to any notice, that the Company is a
potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA, RCRA or any other
applicable Environmental Laws. The Company has not submitted nor was
required to submit any notice pursuant to Section 103(c) of CERCLA
with respect to any properties owned by, or used in the business of,
the Company. The Company has not received any written or, to the
knowledge of the Company or the Owners, oral request for information
in connection with any federal or state environmental cleanup site, or
in connection with any of the real property or premises where the
Company has transported, transferred or disposed of other Wastes. The
Company has not been required to nor has undertaken any response or
remedial actions or clean-up actions at the request of any
Governmental Authorities or at the request of any other third party.
The Company has no liability under any Environmental Laws for personal
injury, property damage, natural resource damage, or clean up
obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.19(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which the Company or the
Owners are aware undertaken by the Company or their agents, or by the
Owners, or by any Governmental Authority, or by any third party,
relating to the Company, or any of the Owned Properties or the Leased
Properties; (ii) the results of which the Company or the Owners are
aware of any ground, water, soil, air or asbestos monitoring
undertaken by the Company or its agents, or by the Owners, or by any
Governmental Authority, or by any third party, relating to the
Company, or any of the Owned Properties or the Leased Properties;
(iii) all written communications between the Company and any
Governmental Authority arising under or related to Environmental,
Laws; and (iv) all citations issued under OSHA, or similar state or
local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings, or decrees, relating to or affecting the Company, or any of
the Owned Properties or the Leased Properties.
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<PAGE> 18
(j) Schedule 3.19(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.19(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule
3.19(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, or threatened against or directly affecting the
Company or any of its assets or operations relating to the use,
handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
(k) Any references in this Section 3.19 to the "Owned
Properties" and "Leased Properties" are deemed to also refer to any
properties previously owned or leases by the Company.
3.20 Intellectual Property. Except as set forth in Schedule 3.20,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that is necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Company and the Owners, (a) the use of the Intellectual Property by the Company
does not infringe on the rights of any Person, and (b) no Person is infringing
on any right of the Company with respect to any Intellectual Property. No
claims are pending or, to the knowledge of the Company and the Owners
threatened that the Company is infringing or otherwise adversely affecting the
rights of any Person with regard to any Intellectual Property. To the
knowledge of the Company and the Owners, no Person is infringing the rights of
the Company with respect to any Intellectual Property. All of the Intellectual
Property that is owned by the Company is owned free and clear of all
encumbrances and was not misappropriated from any Person. All of the
Intellectual Property that is licensed by the Company is licensed pursuant to
valid and existing license agreements. The consummation of the transactions
contemplated by this Agreement will not result in the loss of any Intellectual
Property.
3.21 Bank Accounts. Schedule 3.21 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.22 Brokers. Except as disclosed in Schedule 3.22, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.23 Disclosure. The Company has disclosed in writing, or pursuant
to this Agreement and the Schedules attached hereto, all facts material to the
business, assets, prospects and condition (financial or otherwise) of the
Company. No representation or warranty to Group 1 by the Owners contained in
this Agreement, and no statement contained in the Schedules attached hereto,
any certificate, list or other writing furnished to Group 1 by the Owners
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein or
therein not misleading. All statements contained in this Agreement, the
Schedules attached hereto,
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and any certificate, list, document or other writing delivered pursuant hereto
or in connection with the transactions contemplated hereby shall be deemed a
representation and warranty of the Owners for all purposes of this Agreement.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE OWNERS
Each Owner hereby, severally and not jointly, represents and warrants
to Group 1 that:
4.1 Capital Stock and Limited Partnership Interests. Such Owner
is the beneficial and record owner of the number of shares of Common Stock of
the General Partner and limited partnership interests in the Company as set
forth in Exhibit A, free and clear of any lien, claim, pledge, encumbrance or
other adverse claim. Except for such shares of Common Stock of the General
Partner and limited partnership interests in the Company set forth in Exhibit A
hereto, such Owner does not own, beneficially or of record, any capital stock
or other security, including without limitation any option, warrant or right
entitling the holder thereof to purchase or otherwise acquire any shares of
capital stock of the General Partner or any partnership interest of the
Company.
4.2 Authorization of Agreement.
(a) Such Owner has full legal right, power, capacity and
authority to execute, deliver and perform its obligations pursuant to
this Agreement and to execute, deliver and perform its obligations
under each instrument, document or agreement required hereby to be
executed and delivered by such Owner at, or prior to, the Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
such Owner at, or prior to, the Closing will then be, duly executed
and delivered by such Owner, and this Agreement constitutes and, to
the extent it purports to obligate such Owner, each such instrument,
document or agreement will constitute (assuming due authorization,
execution and delivery by each other party thereto), the legal, valid
and binding obligation of such Owner enforceable against it in
accordance with its terms.
4.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Governmental
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
such Owner to execute, deliver or perform this Agreement or any instrument
required hereby to be executed and delivered by it at the Closing.
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by such Owner of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by such Owner of its obligations under this Agreement or any such instrument
will (a) violate or
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<PAGE> 20
breach the terms of or cause a default under (i) any applicable Law, (ii) any
applicable Order or any applicable rule or regulation of any Court or
Governmental Authority, (iii) the organizational documents of such Owner, if
applicable, or (iv) any contract or agreement to which such Owner is a party or
by which it, or any of its properties, is bound, or (b) result in the creation
or imposition of any Lien on any of the properties or assets of such Owner, or
(c) result in the cancellation, forfeiture, revocation, suspension or adverse
modification of any existing consent, approval, authorization, license, permit,
certificate or order of any Court or Governmental Authority, or (d) with the
passage of time or the giving of notice or the taking of any action of any
third party have any of the effects set forth in clause (a), (b) or (c) of this
Section.
4.5 Investment Intent. Each Owner makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Owner will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Acquisition to such Owner solely for such Owner's
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution; (ii) such Owner is not a party to any agreement or other
arrangement for the disposition of any shares of Group 1 Common Stock; (iii)
such Owner is an "accredited investor" as defined in Securities Act Rule
501(a); (iv) such Owner (A) is able to bear the economic risk of an investment
in the Group 1 Common Stock acquired pursuant to this Agreement, (B) can afford
to sustain a total loss of that investment, (C) has such knowledge and
experience in financial and business matters, and such past participation in
investments, that he or she is capable of evaluating the merits and risks of
the proposed investment in the Group 1 Common Stock, (D) has received and
reviewed the SEC Documents, (E) has had an adequate opportunity to ask
questions and receive answers from the officers of Group 1 concerning any and
all matters relating to the transactions contemplated hereby, including the
background and experience of the current officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of Group 1 and any plans of Group 1 for additional
acquisitions, and (F) has asked all questions of the nature described in the
preceding clause (E), and all those questions have been answered to his or her
satisfaction; (v) such Owner acknowledges that the shares of Group 1 Common
Stock to be delivered to such Owner pursuant to the Acquisition have not been
and will not be registered under the Securities Act or qualified under
applicable blue sky laws and therefore may not be resold by such Owner without
compliance with Rule 144 of the Securities Act; (vi) such Owner acknowledges
that he or she has agreed, pursuant to Section 10.6 herein, not to sell the
shares of Group 1 Common Stock to be delivered to such Owner pursuant to the
Acquisition for a period of one year from the Closing Date; (vii) such Owner,
if a corporation, partnership, trust or other entity, acknowledges that it was
not formed for the specific purpose of acquiring the Group 1 Common Stock; and
(viii) without limiting any of the foregoing, such Owner agrees not to dispose
of any portion of Group 1 Common Stock unless either (1) a registration
statement under the Securities Act is in effect as to the applicable shares and
the disposition is made in accordance with that registration statement, or (2)
the Owner has notified Group 1 of the proposed disposition, such disposition is
made through a national brokerage firm selected by Group 1 and the Owner to
offer disposition services for Group 1 Common Stock subject to SEC Rule 144 and
such disposition is made in compliance with any other requirements of the
Securities Act. Additionally, for the three- year period following the Closing
Date a disposition pursuant to (viii)(2) above may be made only if the
Stockholder has notified Group 1 of the proposed disposition and the
disposition is made through a national brokerage firm selected by Group 1 and
the Stockholder to offer disposition services for Group 1
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<PAGE> 21
Common Stock (in the absence of agreement between Group 1 and the Stockholder
seeking to make a disposition, Goldman, Sachs & Co., Inc. will be the firm to
handle such disposition).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
Group 1 hereby represents and warrants to the Owners that:
5.1 Corporate Organization. Group 1 and Acquisition Sub are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions of their incorporation with all requisite corporate
power and authority to execute, deliver and perform this Agreement and each
instrument required hereby to be executed and delivered by them at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Acquisition Sub of this Agreement, the performance by Group 1 and Acquisition
Sub of their obligations pursuant to this Agreement, and the execution,
delivery and performance of each instrument required hereby to be executed and
delivered by Group 1 and Acquisition Sub at the Closing have been duly and
validly authorized by all requisite corporate action on the part of Group 1 and
Acquisition Sub. This Agreement has been, and each instrument, document or
agreement required hereby to be executed and delivered by Group 1 and
Acquisition Sub at, or prior to, the Closing will then be, duly executed and
delivered by Group 1 and Acquisition Sub. This Agreement constitutes, and, to
the extent it purports to obligate Group 1 and Acquisition Sub, each such
instrument, document or agreement will constitute (assuming due authorization,
execution and delivery by each other party thereto), the legal, valid and
binding obligation of Group 1 and Acquisition Sub, enforceable against them in
accordance with its terms.
5.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Group 1 and Acquisition Sub, to execute, deliver or consummate the transactions
contemplated by this Agreement or any instrument required hereby to be executed
and delivered by Group 1 and Acquisition Sub at or prior to the Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 and Acquisition Sub of this Agreement or any instrument required hereby
to be executed by them at or prior to the Closing nor the performance by Group
1 and Acquisition Sub of their obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Order or any applicable rule or regulation of any Court or
Governmental Authority, (ii) the organizational documents of Group 1 and
Acquisition Sub or (iii) any contract or agreement to which Group 1 and
Acquisition Sub are parties or by which they or any of their property is bound,
or (b) result in the creation or imposition of any Liens on any of the
properties or assets of Group 1 and Acquisition Sub (other than any Lien
created by the Company), or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit certificate or order of any Court or
Governmental Authority or (d) with
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<PAGE> 22
the passage of time or the giving of notice or the taking of any action by any
third party have any of the effects set forth in clause (a), (b) or (c) of this
Section, except, with respect to clauses (a), (b), (c) or (d) of this Section,
where such matter would not have a material adverse effect on the business,
assets, prospects or condition (financial or otherwise) of Group 1 and its
subsidiaries, taken as a whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Acquisition are duly authorized and will,
when issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any Owner of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1933 and 1934
and the rules and regulations of the Commission promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Group 1 included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, have been prepared in accordance with GAAP
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of Group 1 and its
consolidated subsidiaries as of the dates thereto and the consolidated results
of their operations and cash flows for the periods then ended (except in the
case of interim period financial information, for normal year-end adjustments).
ARTICLE VI
COVENANTS OF THE OWNERS
6.1 Acquisition Proposals. Prior to the Closing Date, neither the
Company or the General Partner, any of their officers, directors, employees or
agents nor any Owner shall agree to, solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition, business
combination or purchase of all or a substantial portion of the assets of, or a
substantial equity interest in, the Company or the General Partner, other than
the transactions with Group 1 contemplated by this Agreement.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Owners pursuant to this Agreement.
6.3 Conduct of Business by the Company Pending the Acquisition.
The Owners covenant and agree that, from the date of this Agreement until the
Closing Date, unless Group 1 shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement:
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<PAGE> 23
(a) The business of the Company and the General Partner
shall be conducted only in, and the Company and the General Partner
shall not take any action except in, the ordinary course of business
and consistent with past practice. In connection therewith, the
parties agree that the Company may dealer trade vehicles for similar
models, but the Company shall not liquidate or otherwise dispose of
any of its new vehicles other than in the ordinary course of business
to retail buyers. The Company shall maintain its advertising
expenditures and activities commensurate with prior business
practices. The Company shall not advertise a "Going Out of Business"
sale;
(b) The Company and the General Partner shall not,
directly or indirectly do any of the following: (i) issue, sell,
pledge, dispose of or encumber, (A) any capital stock (or securities
convertible into capital stock) of the General Partner or partnership
interests of the Company or (B) other than in the ordinary course of
business and consistent with past practice and not relating to the
borrowing of money, any assets of the Company, (ii) amend or propose
to amend the articles of incorporation or bylaws (or other
organizational documents) of the General Partner or the limited
partnership agreement of the Company, (iii) split, combine or
reclassify any outstanding capital stock of the General Partner or
declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to the capital stock of the General
Partner whether now or hereafter outstanding, (iv) redeem, purchase or
acquire or offer to acquire any of the capital stock of the General
Partner or any partnership interests of the Company, (v) create,
incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money (other than floor plan
indebtedness incurred in the ordinary course of business), or (vi)
except in the ordinary course of business and consistent with past
practice, enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this
Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
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<PAGE> 24
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than normal, annual compensation
increases consistent with the Company's past practices; and shall not
grant, to any individual, severance or termination pay that exceeds
the lesser of (i) such individual's compensation for the calendar
month immediately preceding such individual's grant of severance or
termination pay, or (ii) $5,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Acquisition set forth in
Article VIII not being satisfied; provided, however, that no such
notification shall affect the representations or warranties or
covenants or agreements of the parties or the conditions to the
obligations of the parties hereunder;
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement, program, practice or understanding (other than
the Plans and the Benefit Programs or Agreements);
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement; and
(j) The Owners shall be entitled to a distribution, in
cash, in amounts required to cause the net book value of the Company
at the end of the month prior to the Closing Date to equal the net
book value as reflected on the May 31, 1997 manufacturer statements.
6.4 Confidentiality. The Company and the Owners shall, and the
Company shall cause its officers, directors, employees, representatives and
consultants, to hold in confidence, and not to disclose to others for any
reason whatsoever, any non-public information received by them or their
representatives in connection with the transactions contemplated hereby,
including but not limited to all terms, conditions and agreements related to
this transaction, except (i) as required by law; (ii) for disclosure to
officers, directors, employees and representatives of the Company as necessary
in connection with the transactions contemplated hereby; and (iii) for
information which becomes publicly available other than through the actions of
the Company or an Owner. In the event the Acquisition is not consummated, the
Company and the Owners will return all non-public documents and other material
obtained from Group 1 or its representatives in connection with the
transactions contemplated hereby or certify to Group 1 that all such
information has been destroyed.
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6.5 Notification of Certain Matters. The Company shall give
prompt notice to Group 1, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date hereof to the Closing, (ii) any failure
of the Company, or any officer, director, employee or agent thereof, or any
Owner to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, or (iii) any litigation, or any
claim or controversy or contingent liability of which the Company or any Owner
has knowledge of that might reasonably be expected to become the subject of
litigation, against the Company or affecting any of their assets, in each case
in an amount in controversy in excess of $50,000, or that is seeking to
prohibit or restrict the transactions contemplated hereby.
6.6 Consents. Subject to the terms and conditions of this
Agreement, the Company shall (i) obtain all consents, waivers, approvals
(including all applicable automobile manufacturers approvals, and such
approvals shall not contain any unreasonably burdensome restrictions on the
Company or Group 1), authorizations and orders required in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Acquisition; and (ii) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary or proper to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, the Company and
the Owners shall cooperate and use reasonable efforts to cooperate in the
defense against and response thereto. Costs, including attorneys' fees,
associated with any such defense will be borne by Group 1.
6.8 Owners' Agreements Not to Sell. Each of the Owners hereby
covenants and agrees not to sell, pledge, transfer or dispose of or encumber
any shares of Common Stock of the General Partner or limited partnership
interests of the Company currently owned, either beneficially or of record, by
such Owner.
6.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
6.10 Removal of Related Party Guarantees. The Owners agree to
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to terminate, waive or release
all Company guarantees (such guarantees shall be referred to herein as "Related
Guarantees", as described in Schedule 6.10 pursuant to Section 3.9 of this
Agreement) of indebtedness or other obligations of any of the Company's
officers, directors, shareholders or employees or their affiliates.
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6.11 Termination of Related Party Agreements. The Owners agree to
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to terminate the Related Party
Agreements except those Related Party Agreements that are disclosed in Schedule
6.11 as agreements that shall not be subject to this Section 6.11.
6.12 Related Party Agreements. The Owners agree to cause the
Company not to enter into any Related Party Agreements or engage in any
transactions with the Owners or their affiliates; except for those Related
Party Agreements or transactions with affiliates that are disclosed in Schedule
6.12 as agreements or transactions that shall not be subject to this Section
6.12.
6.13 Release.
(a) AS OF THE CLOSING, EACH OF THE OWNERS DOES HEREBY FOR HIMSELF
OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES REMISE,
RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY AND THE GENERAL PARTNER OF
AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES,
CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR
UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT,
WHICH EACH OF SUCH OWNERS NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY
HAD, OWNED OR HELD AGAINST THE COMPANY OR THE GENERAL PARTNER INCLUDING WITHOUT
LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE NEGLIGENCE, GROSS
NEGLIGENCE AND WILLFUL ACTS OF THE COMPANY OR THE GENERAL PARTNER AND THEIR
EMPLOYEES AND AGENTS, EXISTING AS OF THE CLOSING OR RELATING TO ANY MATTER THAT
OCCURRED ON OR PRIOR TO THE CLOSING; PROVIDED, HOWEVER, THAT ANY CLAIMS,
LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION WITH THE
FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR OBLIGATIONS
HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS
OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS SHALL
NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT; AND PROVIDED FURTHER
ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS OR AGREEMENTS LISTED ON THE
SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) EACH OF THE OWNERS REPRESENTS AND WARRANTS THAT HE HAS NOT
PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO ANY
PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS,
LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS
RELEASED HEREIN. EACH OF THE OWNERS COVENANTS AND AGREES THAT HE WILL NOT
ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE
CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR
OBLIGATIONS TO BE RELEASED HEREIN. EACH OF THE OWNERS REPRESENTS AND WARRANTS
THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION 6.13 AND
THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN CONNECTION
WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Tax Valuation. The Owners agree to use the amounts reflected
on Exhibit A hereto for purposes of preparation of their Tax Returns. With
respect to the shares of Group 1 Common Stock received by the Owners, $14.00
per share will be used for purposes of determining the value of the stock
portion of the purchase price.
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6.15 Employment Agreement. Thomas Nyle Maxwell, Jr. agrees to
enter into, on or prior to the Closing Date, an employment agreement with Group
1 in form and substance substantially similar to Exhibit B attached hereto.
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Acquisition is not consummated, Group 1 will return all
non-public documents and other material obtained from the Company or its
representatives in connection with the transactions contemplated hereby or
certify to the Company that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Acquisition.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
Acquisition; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Group 1 agrees to
cooperate and use reasonable efforts to cooperate in the defense against and
response thereto. Costs, including attorneys' fees, associated with any such
defense will be borne by Group 1.
7.5 Tax Valuation. Group 1 agrees to use the amounts reflected on
Exhibit A hereto for purposes of preparation of its Tax Returns. With respect
to the shares of Group 1 Common Stock received by the Owners, $14.00 per share
will be used for purposes of determining the value of the stock portion of the
purchase price.
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ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the
Acquisition;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Acquisition;
(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Owners
contained in Article III and Article IV, respectively, shall be true
and correct in all respects as of the date when made and as of the
Closing Date as though such representations and warranties had been
made at and as of the Closing Date; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by the
Company and the Owners on or before the Closing Date shall have been
duly complied with and performed in all respects, and a certificate to
the foregoing effect dated the Closing Date and signed by the chief
executive officer of the Company and each of the Owners shall have
been delivered to Group 1.
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Acquisition and the transactions
contemplated thereby will be in compliance with applicable laws.
(c) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.10 and 6.11 hereto.
(d) Group 1 shall have received executed representations
from each Owner stating that such Owner (with respect to shares owned
beneficially or of record by him or her) has no current plan or
intention to sell or otherwise dispose of the Group 1 Common Stock to
be received by him or her in the Acquisition, except in compliance
with Rule 144.
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(e) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have occurred, and the
Company shall not have suffered any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting
the properties or business of the Company and Group 1 shall have
received a certificate signed by the chief executive officer of the
Company and the Owners dated the Closing Date to such effect.
(f) Receipt by Group 1 of Phase I Environmental Surveys,
to be paid for by the Company and reimbursed by Group 1 upon execution
of this Agreement, prepared by a firm approved in writing by Group 1,
showing no environmental problems or recommended actions, which will
be performed at the discretion of Group 1;
(g) Receipt by Group 1, at Owners' expense, of a Policy
of Title Insurance, issued by a title company, approved by Group 1,
subject only to the exceptions described in Schedule 8.2(g)
("Permitted Title Exceptions");
(h) Receipt by Group 1 of an employment agreement
executed by Thomas Nyle Maxwell, Jr., in form and substance
substantially similar to Exhibit B hereto;
(i) Receipt by Group 1 of the consent of Chrysler
Corporation, as lessor to the Company under that certain lease
agreement dated [ ], to this Agreement and the
transactions contemplated hereby; and
(j) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements.
8.3 Additional Conditions Precedent to Obligations of the Owners.
The obligation of the Owners to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date; all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Group 1 shall have
been delivered to the Owners.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Owners to indemnify. Each of the Owners
agrees to severally indemnify, defend and hold Group 1 harmless (subject to the
limitations set forth in Section 9.1(e) below) from and against the aggregate
of all Indemnifiable Damages (as defined below).
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(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all actual
expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and
expenses) incurred or suffered by Group 1, on a pre-tax consolidated
basis to the extent (i) resulting from any breach of a representation
or warranty made by the Company or the Owners in or pursuant to this
Agreement, (ii) resulting from any breach of the covenants or
agreements made by the Company or the Owners pursuant to this
Agreement, or (iii) resulting from any inaccuracy in any certificate
or environmental report delivered by the Company or any of the Owners
pursuant to this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Group 1
shall have the right to be put in the same pre-tax consolidated
financial position as Group 1 would have been in had each of the
representations and warranties of the Owners hereunder been true and
correct and had the covenants and agreements of the Company and the
Owners hereunder been performed in full.
(c) Each of the representations and warranties made by
the Owners in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date except the
representations and warranties of the Owners contained in Section 3.11
which shall survive for the period of the statute of limitations,
Section 3.19 which shall survive for a period of five years after the
Closing Date and Sections 3.1, 3.2, 3.3, 3.4, 3.5, 4.1, 4.2, 4.3 and
4.4, which shall not terminate, but shall continue indefinitely. No
claim for the recovery of Indemnifiable Damages may be asserted by
Group 1 against the Owners after such representations and warranties
shall expire, provided, however, that claims for Indemnifiable Damages
first asserted within the applicable period shall not thereafter be
barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the
right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Group 1 believes it is entitled to a claim for any
Indemnifiable Damages hereunder, Group 1 shall promptly give written
notice to the Owners of such claim and the amount or the estimated
amount of such claim, and the basis for such claim. If the Owners do
not pay the amount of the claim for Indemnifiable Damages to Group 1
within 10 days, then Group 1 may exercise its respective rights under
Section 9.4 and/or take any action or exercise any remedy available to
it by appropriate legal proceedings to collect the Indemnifiable
Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, the Owners' liability for Indemnifiable Damages
shall be limited as follows:
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(1) Group 1 shall have no claim for Indemnifiable
Damages unless and until all Indemnifiable
Damages incurred by Group 1 exceed an
aggregate of $110,000.00 (the "Basket
Amount"), in which event the Stockholders
shall be liable for only such Indemnifiable
Damages in excess of the Basket Amount;
provided, however, that the Basket Amount
shall be reduced by any liabilities
attributable to (i) any matter set forth in
the Schedules or resulting from Group 1's
general due diligence or (ii) any breach of
representation or warranty arising from any
matter set forth in the Schedules or
resulting from Group 1's general due
diligence. For example, and assuming all
conditions in Sections 8.1 and 8.2 (except
Section 8.2(a)) have been satisfied or waived
by Group 1, (x) if the aggregate amount of
such liabilities were $50,000, Group 1 would
be obligated to close the Acquisition and the
Basket Amount after Closing would be $60,000,
and (y) if the aggregate amount of such
liabilities were $150,000, Group 1 would not
be obligated to close the Acquisition, but if
it chooses to do so, the Basket Amount after
Closing would be $0 and the Stockholders
would have an indemnification obligation to
Group 1 with respect to $40,000 of such
liabilities; and
(2) the total amount of Indemnifiable Damages for
which each Owner shall be liable to Group 1
shall not exceed the value of the
consideration by such Owner received in the
Acquisition as provided on Exhibit A, of
which the stock portion shall be valued at
$14.00 per share.
9.2 Agreement by Group 1 to indemnify. Group 1 agrees to
indemnify, defend and hold the Owners harmless from and against the aggregate
of all Owners Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Owners Indemnifiable
Damages" means, without duplication, the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable related counsel and paralegal fees and
expenses) incurred or suffered by the Owners, on a pre-tax
consolidated basis, to the extent (i) resulting from any breach of a
representation or warranty made by Group 1 in or pursuant to this
Agreement, (ii) resulting from any breach of the covenants or
agreements made by Group 1 in or pursuant to this Agreement, or (iii)
resulting from any inaccuracy in any certificate delivered by Group 1
pursuant to this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Owners Indemnifiable Damages, the
Owners have the right to be put in the same pre-tax consolidated
financial position as he, she or it would have been in had each of the
representations and warranties of Group 1 hereunder been true and
correct and had the covenants and agreements of Group 1 hereunder been
performed in full.
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(c) Each of the representations and warranties made by
Group 1 in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date. No claim for the
recovery of Owners Indemnifiable Damages may be asserted by the Owners
against Group 1 after such representations and warranties shall thus
expire, provided, however, that claims for Owners Indemnifiable
Damages first asserted within the applicable period shall not
thereafter be barred. Notwithstanding any knowledge of facts
determined or determinable by any party by investigation, each party
shall have the right to fully rely on the representations, warranties,
covenants and agreements of the other parties contained in this
Agreement or in any other documents or papers delivered in connection
herewith. Each representation, warranty, covenant and agreement of
the parties contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) In the event that the Owners believe they are
entitled to a claim for any Owners Indemnifiable Damages hereunder,
the Owners shall promptly give written notice to Group 1 of such claim
and the amount or the estimated amount of such claim, and the basis
for such claim.
(e) Notwithstanding anything to the contrary contained in
this Section 9.2, the Owners shall have no claim for Owners
Indemnifiable Damages unless and until all Owners Indemnifiable
Damages incurred by the Owners shall exceed an aggregate of
$110,000.00, in which event Group 1 shall be liable for only such
Owners Indemnifiable Damages in excess of $110,000.00.
9.3 Conditions of indemnification. The obligations and
liabilities of the Owners and Group 1 hereunder with respect to their
respective indemnities pursuant to this Article IX resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such Indemnifying Party is
harmed by the failure of the Indemnified Party to provide timely
notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Group 1, then Group 1 shall have the right to control the
defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
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<PAGE> 33
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. The Schedules to this Agreement,
contain all disclosure required to be made by the Owners under the various
terms and provisions of this Agreement.
10.2 Non-Competition Obligations.
(a) As part of the consideration for the Acquisition, and
as an additional incentive for Group 1 to enter into this Agreement,
Thomas Nyle Maxwell, Jr. (the "Designated Owner") and Group 1 agree to
the non- competition provisions of this Section 10.2. The Designated
Owner agrees that during the period of the Designated Owner's
non-competition obligations hereunder, the Designated Owner will not,
directly or indirectly for the Designated Owner or for others, within
twelve miles of, in the county of or in any manufacturers' designated
primary market area adjacent to the location of the operations sold to
Group 1 pursuant to this Agreement or operations subsequently managed
by the Designated Owner as of the date in question or during the
previous twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates;
(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or affiliates, or hire
or assist in the hiring of any such employee by person,
association, or entity not affiliated with Group 1 or any of
its subsidiaries or affiliates.
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These non-competition obligations shall apply until the later
of (i) five years after the Closing or (ii) the period specified in
any employment agreement entered into by such Designated Owner with
Group 1 or its subsidiaries. During this non-competition period the
Designated Owner will not engage in these restricted activities nor
assist in the industry consolidation efforts on behalf of any publicly
held entity in the automotive retailing industry (nor any entity with
the ultimate intention of becoming a publicly held entity or being
acquired in any manner by a publicly held entity), regardless of the
geographic area or market.
If Group 1 or any of its subsidiaries or affiliates abandons a
particular aspect of its business, that is, ceases such aspect of its
business with the intention to permanently refrain from such aspect of
its business, then this non-competition covenant shall not apply to
such former aspect of that business.
(b) The Designated Owner understands that the foregoing
restrictions may limit their ability to engage in certain businesses
anywhere in the world during the period provided for above, but
acknowledges that the Designated Owner will receive sufficiently high
remuneration and other benefits under this Agreement to justify such
restriction. The Designated Owner acknowledges that money damages
would not be sufficient remedy for any breach of this Section 10.2 by
the Designated Owner, and Group 1 or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Section
10.2 by terminating any payments then owing to the Designated Owner
under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach, without
any requirement for the securing or posting of any bond in connection
with such remedies. Such remedies shall not be deemed the exclusive
remedies for a breach of this Section 10.2, but shall be in addition
to all remedies available at law or in equity to Group 1 or any of its
subsidiaries or affiliates, including, without limitation, the
recovery of damages from Group 1 and the Designated Owner's agents
involved in such breach.
(c) It is expressly understood and agreed that Group 1
and the Designated Owner consider the restrictions contained in this
Section 10.2 to be reasonable and necessary to protect the
confidential and proprietary information and trade secrets of Group 1
and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions
therein set forth to be modified by such courts so as to be reasonable
and enforceable and, as so modified by the court, to be fully
enforced.
10.3 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Group 1 and the Owners;
(b) by either Group 1 or the Owners if the Acquisition
has not been effected on or before February 28, 1998;
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<PAGE> 35
(c) by Group 1 if the information disclosed on the
Schedules or the results of Group 1's general due diligence
investigation are not satisfactory to Group 1 in its sole discretion;
provided, however, that Group 1's right to terminate under this
Section 10.3(c) shall expire at midnight on January 31, 1998;
(d) by either Group 1 or the Owners if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of the Company; (ii) there has been a material
breach of any representation, warranty, covenant or other agreement
set forth in this Agreement by the Company or the Owners which breach
has not been cured within ten business days following receipt by the
Company of notice of such breach (or if such breach cannot be cured
within such time, reasonable efforts have begun to cure such breach
and such breach is then cured within 30 days after notice) or (iii)
there is a material adverse change in the pre-tax income expected for
the Company, on which the purchase price of the acquisition was based;
or
(f) by the Owners if there has been a material breach of
any representation or warranty set forth in this Agreement by Group 1
which breach has not been cured within ten business days following
receipt by Group 1 of notice of such breach (or if such breach cannot
be cured within such time, reasonable efforts have begun to cure such
breach and such breach is then cured within 30 days after notice).
10.4 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.3, the Owners and Group 1 shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.5 survive any such termination.
10.5 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by Group 1 shall be paid by Group 1
and all such costs and expenses incurred by the Owners shall be paid by the
Owners except as specifically provided in Sections 8.2. The Owners and Group 1
each represent and warrant to each other that there is no broker or finder
involved in the transactions contemplated hereby.
10.6 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period"), no Owner voluntarily will: (i) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (A) any
shares of Group 1 Common Stock received by any Owner in the Acquisition or (B)
any interest in (including any option to buy or sell) any of those shares of
Group 1 Common Stock, in whole or in part, and Group 1 will have no obligation
to, and shall not, treat any such attempted transfer as effective for any
purpose; or (ii) engage in any transaction, whether or not with respect to any
shares of Group 1 Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning the shares of Group 1 Common Stock
acquired pursuant to this Agreement (including for
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example engaging in put, call, short-sale, straddle or similar market
transactions). Notwithstanding the foregoing, each Owner may (i) pledge shares
of Group 1 Common Stock, provided that the pledgee of such shares shall agree
not to sell or otherwise dispose of any such shares for the Restricted Period;
(ii) transfer shares to immediate family members or the estate of any such
individual (including, without limitation, any transfer by such Owner to or
among any family limited partnership, trust, custodial or other similar
accounts, arrangements, transfers or funds that are for the benefit of his or
her immediate family members), provided that such person or entity shall agree
not to sell or otherwise dispose of any such shares for the Restricted Period;
and (iii) transfer shares by will or the laws of descent and distribution or
otherwise by reason of such Owner's death. The certificates evidencing the
Group 1 Common Stock delivered to each Owner pursuant to this Agreement will
bear a legend substantially in the form set forth below and containing such
other information as Group 1 may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE STOCK PURCHASE AGREEMENT AMONG THE
ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES THERETO,
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
ONE-YEAR PERIOD ENDING ON ______________ [DATE THAT IS THE ANNIVERSARY
OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) AFTER THE DATE SPECIFIED ABOVE.
(b) Each Owner, severally and not jointly with any other Person,
(i) acknowledges that the shares of Group 1 Common Stock to be delivered to
that Owner pursuant to this Agreement have not been and, if applicable, will
not be registered under the Securities Act and therefore may not be resold by
that Owner without compliance with the Securities Act and (ii) covenants that
none of the shares of Group 1 Common Stock issued to that Owner pursuant to
this Agreement will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all the
applicable provisions of the Securities Act and the rules and regulations of
the Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Group 1 Common Stock issued pursuant to this
Agreement will bear the following legend in addition to the legend prescribed
by Section 10.6(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT,
-32-
<PAGE> 37
OR SUCH STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Acquisition to each Owner will bear any legend required by the
securities or blue sky laws of the state in which that Owner resides.
10.7 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose Owners are, entitled to the
benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf of each party hereto.
The waiver by any party hereto of any condition or of a breach of another
provision of this Agreement shall not operate or be construed as a waiver of
any other condition or subsequent breach. The waiver by any party hereto of
any of the conditions precedent to its obligations under this Agreement shall
not preclude it from seeking redress for breach of this Agreement other than
with respect to the condition so waived.
10.8 Public Statements. The Owners and Group 1 agree to consult
with each other prior to issuing any press release or otherwise making any
public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
10.9 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
10.10 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to the Owners: Thomas Nyle Maxwell, Jr.
________________________
Austin, Texas 787__
Telecopy: (512) 219-3618
with a copy to: ________________________
________________________
Telecopy: (___) ________
Attention: ____________
-33-
<PAGE> 38
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.10. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor. Delivery to the Owners' representative, if any, of any
notice to Owners hereunder shall constitute delivery to all Owners and any
notice given by such Owners' representative shall be deemed to be notice given
by all Owners.
10.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
10.12 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.13 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.14 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.15 Third Party Beneficiaries. Neither this agreement nor any
document delivered in connection with this Agreement, confers upon any Person
not a party hereto any rights or remedies hereunder.
-34-
<PAGE> 39
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B.B. HOLLINGSWORTH, JR.
-------------------------------------
Name: B.B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
[ACQUISITION SUB]
By: /s/ B.B. HOLLINGSWORTH, JR.
-------------------------------------
Name: B. B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
OWNERS
/s/ THOMAS NYLE MAXWELL, JR.
-----------------------------------------
THOMAS NYLE MAXWELL, JR.
/s/ THOMAS NYLE MAXWELL, SR.
-----------------------------------------
THOMAS NYLE MAXWELL, SR.
/s/ CLARENCE J. KELLERMAN
-----------------------------------------
CLARENCE J. KELLERMAN
-35-
<PAGE> 40
EXHIBIT A
<TABLE>
<CAPTION>
CONSIDERATION
SHARES OF -----------------------------------
COMMON STOCK LIMITED
OF THE PARTNERSHIP
GENERAL INTERESTS OF SHARES OF GROUP 1
OWNERS PARTNER THE COMPANY COMMON STOCK(1) CASH
- ------------------------ ------------ ------------ ----------------- ----------
<S> <C> <C> <C> <C>
Thomas Nyle Maxwell, Jr. 49.50% 200,000 $3,020,966
Thomas Nyle Maxwell, Sr. 19.80% 48,000 $1,596,753
Clarence J. Kellerman 29.70% 72,000 $2,395,130
</TABLE>
- ----------
(1) As may be appropriately adjusted for stock splits and/or stock
dividends.
-1-
<PAGE> 41
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Purchase Agreement made and entered into as
of December ___, 1997 by and among Group 1, Acquisition Sub and the Owners,
including any amendments thereto and each Annex (including this Annex A),
Exhibit and schedule thereto (including the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Owned Properties and the Leased Properties, whether
personal or mixed, tangible or intangible, wherever located.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.15.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Prestige Chrysler Plymouth South, LTD, a Texas
limited partnership, all predecessor entities of the Company and its successors
from time to time.
"Common Stock of the General Partner" shall mean the common stock, par
value $___ per share, of the General Partner.
-1-
<PAGE> 42
"Company 1996 Balance Sheet" shall have the meaning set forth in
Section 3.6 herein.
"Company 1996 Financial Statements" shall have the meaning set forth
in Section 3.6 herein.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Designated Owner" shall have the meaning set forth in Section 10.2
herein.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the Interim Balance Sheet or acquired by the Company since the
date of the Interim Balance Sheet.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"General Partner" shall mean Prestige Chrysler Plymouth, Inc., a Texas
corporation.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
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<PAGE> 43
"Guarantees" shall have the meaning set forth in Section 3.9 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental Authority to be a
hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" have the meaning set forth
in Section 3.16 herein.
-3-
<PAGE> 44
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
"Material Contract" has the meaning set forth in Section 3.9 herein.
"Material Leases" shall have the meaning set forth in Section 3.9
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Owned Properties" shall have the meaning set forth in Section 3.16
herein.
"Owners Indemnifiable Damages" shall have the meaning set forth in
Section 9.2 herein.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
-4-
<PAGE> 45
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Phase I Environmental Surveys" shall mean the Entrix reports dated
October, 1997.
"Plan" shall have the meaning set forth in Section 3.15.
"Related Party Agreements" shall have the meaning set forth in Section
3.19 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority.
"Restricted Period" shall have the meaning set forth in Section 10.6
herein.
"SEC Documents" shall mean the Group 1 Prospectus dated October 29,
1997 and the Form 10-Q for the third quarter ended September 30, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person or any of its
Subsidiaries within six years prior to the date of the Agreement but which have
been terminated prior to the date of the Agreement.
-5-
<PAGE> 46
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
-6-
<PAGE> 1
EXHIBIT 10.48
PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
ST MERGER CORP.,
A WHOLLY-OWNED SUBSIDIARY OF
GROUP 1 AUTOMOTIVE, INC.,
THE LIMITED PARTNERS OF
MAXWELL CHRYSLER PLYMOUTH DODGE JEEP EAGLE, LTD.
AND
THE STOCKHOLDERS OF
MAXWELL CHRYSLER PLYMOUTH DODGE, INC.
DATED AS OF
DECEMBER 18, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
<S> <C> <C>
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE ACQUISITION
2.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE OWNERS
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.15 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.18 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.20 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
-i-
<PAGE> 3
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE OWNERS
<TABLE>
<S> <C> <C>
4.1 Capital Stock and Limited Partnership Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
COVENANTS OF THE OWNERS
6.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Conduct of Business by the Company Pending the Acquisition . . . . . . . . . . . . . . . . . . . . . 19
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Owners' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.14 Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.17 Employment Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<PAGE> 4
ARTICLE VII
COVENANTS OF GROUP 1
<TABLE>
<S> <C> <C>
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Tax Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . . 25
8.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 26
8.3 Additional Conditions Precedent to Obligations of the Owners. . . . . . . . . . . . . . . . . . . 27
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Owners to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Agreement by Group 1 to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.6 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.7 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.8 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.15 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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<PAGE> 5
GROUP 1 AUTOMOTIVE, INC.
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement"), dated as of the 18th day
of December, 1997, is among Group 1 Automotive, Inc., a Delaware corporation
("Group 1"), ST Merger Corp., a Texas corporation and a wholly-owned subsidiary
of Group 1 ("Acquisition Sub"), the stockholders ("Stockholders") of Maxwell
Chrysler Plymouth Dodge, Inc., a Texas corporation (the "General Partner"), and
the limited partners ("Limited Partners") of Maxwell Chrysler Plymouth Dodge
Jeep Eagle, LTD., a Texas limited partnership (the "Company"). The
Stockholders and the Limited Partners are collectively referred to herein as
the "Owners" and are listed on the signature pages hereof under the caption
"Owners."
RECITALS:
WHEREAS, the Owners are the holders of all of the issued and
outstanding capital stock of the General Partner;
WHEREAS, the General Partner is the sole general partner of the
Company;
WHEREAS, the Owners are the holders of all of the limited partnership
interests in the Company;
WHEREAS, Acquisition Sub proposes to acquire all of the capital stock
of the General Partner and all of the limited partnership interests in the
Company from the Owners (the "Acquisition") on the terms and conditions set
forth herein;
WHEREAS, Group 1, through certain of its wholly owned subsidiaries,
also proposes to acquire (i) the outstanding capital stock of Prestige Chrysler
Plymouth, Inc. and the limited partnership interests of Prestige Chrysler
Plymouth South, LTD. and (ii) the outstanding capital stock of MMK Interests,
Inc. and the limited partnership interests of Prestige Chrysler Plymouth
Northwest, LTD., pursuant to agreements (the "Other Agreements") that are
similar to this Agreement; and
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which Acquisition Sub shall
purchase, and the Owners shall sell, all of the capital stock of the General
Partner and all of the limited partnership interests in the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
<PAGE> 6
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (c) "or" is not exclusive; (d) "including" means
"including, without limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one
gender shall be construed to apply to each gender; (h) the terms "hereof,"
"herein," "hereby," "hereto" and derivative or similar words refer to this
entire Agreement; (i) the terms "Article" or "Section" shall refer to the
specified Article or Section of this Agreement; and (j) section and paragraph
headings in this Agreement are for convenience only and shall not affect the
construction of this Agreement.
ARTICLE II
THE ACQUISITION
2.1 The Acquisition. At the Closing, each Owner shall sell to
Acquisition Sub and Acquisition Sub shall purchase from each Owner that number
of shares of Common Stock of the General Partner and the limited partnership
interests in the Company as set forth opposite their respective names in
Exhibit A hereto in exchange for the consideration set forth opposite their
respective names in Exhibit A hereto.
2.2 Closing Date. The Closing of the Acquisition as contemplated
by this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
2300 First City Tower, Houston, Texas 77002, as soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII or at such
other time and place and on such other date as Group 1 and the Owners shall
agree; provided, that the conditions set forth in Article VIII shall have been
satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date," and shall be effective as
of the first day of the month in which the Closing Date occurs.
2.3 Transfer of Shares. At the Closing, and subject to the
satisfaction or waiver of the conditions set forth in Article VIII, the Owners
will sell, transfer and deliver that number of shares of Common Stock of the
General Partner and the limited partnership interests in the Company as set
forth opposite their respective names in Exhibit A hereto to Acquisition Sub
(in proper form and duly endorsed for transfer) and Acquisition Sub will
purchase such shares of Common Stock of the General Partner and the limited
partnership interests in the Company and will deliver to the Owners the
consideration (in proper form) set forth opposite their respective names in
Exhibit A hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE OWNERS
The Owners hereby represent and warrant to Group 1 as follows:
3.1 Organization.
(a) The Company is a limited partnership duly organized,
validly existing and in good standing under the laws of the state of Texas with
all requisite power and authority to own or
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<PAGE> 7
lease its properties and conduct its business as now owned, leased or
conducted. A true and complete copy of the limited partnership agreement,
together with all amendments thereto, of the Company is included in Schedule
3.1. The minute books of the Company previously made available to Group 1 are
complete and accurately reflect all action taken prior to the date of this
Agreement by its partners.
(b) The General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas with
all requisite corporate power and authority to own or lease its properties and
conduct its business as now owned, leased or conducted. The General Partner
has conducted no business other than as General Partner of the Company, owns no
property or assets other than its general partner interest in the Company and
has no liabilities or obligations other than as related to its capacity as
general partner of the Company. True and complete copies of the articles of
incorporation and bylaws of the General Partner are included in Schedule 3.1.
The minute books of the General Partner previously made available to Group 1
are complete and accurately reflect all action taken prior to the date of this
Agreement by its board of directors and stockholders in their capacities as
such.
3.2 Qualification. Each of the Company and the General Partner is
duly qualified to do business as a foreign entity and is in good standing in
each jurisdiction in which the nature of the business as now conducted or the
character of the property owned or leased by it makes such qualification
necessary. Schedule 3.2 sets forth a list of the jurisdictions in which each
of the Company and the General Partner is qualified to do business, if any.
3.3 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.3, neither the execution and delivery by the Owners of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by them at, or prior to, the Closing, nor the
performance by the Owners of their obligations under this Agreement or any such
instrument, document or agreement will (assuming receipt of all consents,
approvals, authorizations, permits, certificates and orders disclosed as
requisite in Schedule 3.3) (a) violate or breach the terms of or cause a
default under (i) any applicable Order or any applicable rule or regulation of
any Court or Governmental Authority with respect to the Company or the General
Partner, (ii) any applicable permits received from any Governmental Authority
with respect to the Company or the General Partner, (iii) the limited
partnership agreement of the Company or the articles of incorporation or bylaws
of the General Partner or (iv) any contract or agreement to which the Company
or the General Partner is a party or by which they, or any of their properties,
is bound, or (b) result in the creation or imposition of any Lien on any of the
properties or assets of the Company or the General Partner, or (c) result in
the cancellation, forfeiture, revocation, suspension or adverse modification of
any existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority with respect to the Company or the
General Partner, or (d) with the passage of time or the giving of notice or the
taking of any action of any third party have any of the effects set forth in
clause (a), (b) or (c) of this Section.
3.4 Equity Investments. The General Partner owns no equity
securities, interests or other investments other than its general partner
interest in the Company. The Company owns no equity securities, interests or
other investments in any Person.
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<PAGE> 8
3.5 Capitalization.
(a) The authorized capital stock of the General Partner
consists of 100,000 shares of Common Stock, no par value, of which
100,000 shares are issued and outstanding (with no shares being held
in treasury). Each outstanding share of the Common Stock of the
General Partner has been duly authorized, is validly issued, fully
paid and nonassessable and was not issued in violation of any
preemptive rights of any stockholder. Set forth in Schedule 3.5(a)
are the names, social security or I.R.S. identification numbers and
addresses (as reflected in the corporate records of the General
Partner) of each record holder of the Common Stock of the General
Partner, together with the number of shares held by each such Person.
Except as set forth above, there are no shares of capital stock of, or
other equity interests in, the General Partner authorized, issued or
outstanding. There is not outstanding any ownership interest or other
security, including without limitation any option, warrant or right,
entitling the holder thereof to purchase or otherwise acquire any
ownership interest of the General Partner. There are no contracts,
agreements, commitments or arrangements obligating the General Partner
(i) to issue, sell, pledge, dispose of or encumber any ownership
interest of, or any options, warrants or rights of any kind to
acquire, or any securities that are convertible into or exercisable or
exchangeable for, any ownership interest of, any class of ownership
interest of the General Partner or (ii) to redeem, purchase or acquire
or offer to acquire any ownership interest of, or any outstanding
option, warrant or right to acquire, or any securities that are
convertible into or exercisable or exchangeable for, any ownership
interest of, any class of ownership interest of the General Partner.
(b) The limited partner interest of the Company consists
of the limited partner interests described in Exhibit A attached
hereto. Each outstanding limited partner interest of the Company has
been duly authorized and validly issued in accordance with the limited
partnership agreement of the Company. Set forth in Schedule 3.5(b)
are the names and addresses of each limited partner of the Company
together with the limited partner interest held by each limited
partner. Except as set forth above and except for the general partner
interest of the General Partner, there are no other partnership
interests authorized or outstanding of the Company. There are no
contracts, agreements, commitments, arrangements, rights or options of
any kind to acquire any interest in the Company.
3.6 Financial Statements. Included in Schedule 3.6 are true and
complete copies of the financial statements of the Company consisting of (i) an
unaudited balance sheet of the Company as of November 30, 1997 (the "Interim
Balance Sheet") and the related unaudited statement of income for the eleven
month period then ended (the "Company Interim Financial Statements") and (ii)
an audited balance sheet of the Company as of December 31, 1996 (the "Company
1996 Balance Sheet") and the related audited statements of income, changes in
stockholders' equity and cash flows for the year then ended (including the
notes thereto) (the "Company 1996 Financial Statements") and (collectively with
the Company Interim Financial Statements, the "Company Financial Statements").
The Company Financial Statements present fairly the financial position of the
Company and the results of its operations and changes in financial position as
of the dates and for the periods indicated therein in conformity with GAAP.
The Company Financial Statements do not omit to state any liabilities, absolute
or contingent, required to be stated therein in accordance with GAAP. All
accounts receivable of the Company reflected in the Company Financial
Statements and as incurred
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<PAGE> 9
since November 30, 1997 represent sales made in the ordinary course of
business, are collectible (net of any reserves for doubtful accounts shown in
the Company Interim Financial Statements) in the ordinary course of business
and, except as set forth in Schedule 3.6, are not in dispute or subject to
counterclaim, set-off or renegotiation. Schedule 3.6 contains an aged schedule
of accounts receivable included in the Interim Balance Sheet.
3.7 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet or
as set forth in Schedule 3.7, the Company does not have any liabilities or
obligations of any nature whether absolute, accrued, contingent or otherwise,
and whether due or to become due. The reserves reflected in the Interim
Balance Sheet are adequate, appropriate and reasonable in accordance with GAAP.
3.8 Certain Agreements. Except as set forth in Schedule 3.8,
neither the Company nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a non-competition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
3.9 Contracts and Commitments. Schedule 3.9 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of their officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.10 Absence of Changes. Except as set forth in Schedule 3.10,
there has not been, since December 31, 1996, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.10, since
November 30, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, the
Company makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since December 31,
1996, for any employee who after such increase would receive annual
compensation of less than $50,000.
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<PAGE> 10
3.11 Tax Matters.
(a) Except as set forth in Schedule 3.11, (i) all Tax
Returns which are required to be filed on or before the Closing Date
by or with respect to the Company or the General Partner have been or
will be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each
such Tax Return have been or will be so included and all information
provided in each such Tax Return is true, correct and complete, (iii)
all Taxes which have become or will become due with respect to the
period covered by each such Tax Return have been or will be timely
paid in full, (iv) all withholding Tax requirements imposed on or with
respect to the Company or the General Partner have been or will be
satisfied in full, and (v) no penalty, interest or other charge is or
will become due with respect to the late filing of any such Tax Return
or late payment of any such Tax.
(b) All Tax Returns of, or with respect to, the Company
or the General Partner have been audited by the applicable
governmental authority, or the applicable statute of limitations has
expired, for all periods up to and including December 31, 1996 except
as included on Schedule 3.11(b).
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to the
Company or the General Partner, other than those disclosed (and to
which are attached true and complete copies of all audit or similar
reports) in Schedule 3.11(c).
(d) Except as set forth in Schedule 3.11(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company or the
General Partner, or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of or with respect to the
Company or the General Partner.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes, whether or not assessed or disputed,
which are, or are hereafter found to be, or to have been, due by or
with respect to the Company or the General Partner up to and through
the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company or the General Partner shall be terminated prior to the
Closing Date and no payments shall be due or will become due by the
Company or the General Partner on or after the Closing Date pursuant
to any such agreement or arrangement.
(g) Except as set forth in Schedule 3.11(g), the Company
or the General Partner will not be required to include any amount in
income for any taxable period as a result of a change in accounting
method for any taxable period pursuant to any agreement with any Tax
authority with respect to any such taxable period.
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<PAGE> 11
(h) The General Partner has not consented to have the
provisions of section 341(f)(2) of the Code apply with respect to a
sale of its stock.
(i) Except as set forth in Schedule 3.11(i), the General
Partner has been a validly electing S corporation within the meaning
of sections 1361 and 1362 of the Code at all times since its
incorporation and the General Partner will be an S corporation up to
and including the Closing Date. From the end of its most recent tax
year through the Closing Date, each holder of the stock of the General
Partner has been an individual resident of the United States or an
estate or trust described in section 1361(c)(2) of the Code that is
permitted to hold the stock of an S corporation. The General Partner
will not be liable for any tax under section 1374 of the Code in
connection with the deemed sale of the General Partner's assets caused
by the Section 338(h)(10) Elections. In the past 10 years, the
General Partner has not (a) acquired assets from another corporation
in a transaction in which the General Partner's federal income tax
basis in the acquired assets was determined, in whole or in part, by
reference to the federal income tax basis of the acquired assets (or
any other property) in the hands of the transferor or (b) acquired the
stock of any corporation which is a qualified subchapter S subsidiary,
as defined in section 1361(b)(3)(B) of the Code.
(j) The Company has been a partnership within the meaning
of section 7701(a)(2) of the Code, taxable under Subchapter K of the
Code, at all times since its formation and the Company will be a
partnership up to an including the Closing Date.
3.12 Litigation.
(a) Except as set forth in Schedule 3.12(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Owners, threatened against or
specifically affecting the Company or the General Partner before or by
any Court or Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.12(b), each of the Company and
the General Partner has performed all obligations required to be
performed by it to date and is not in default under, and, to the
knowledge of the Owners, no event has occurred which, with the lapse
of time or action by a third party could result in a default under any
contract or other agreement to which the Company or the General
Partner is a party or by which they or any of their properties is
bound or under any applicable Order of any Court or Governmental
Authority.
3.13 Compliance with Law. Except as set forth in Schedule 3.13,
each of the Company and the General Partner in compliance with all applicable
statutes and other applicable laws and all applicable rules and regulations of
all federal, state, foreign and local governmental agencies and authorities.
3.14 Permits. Except as set forth in Schedule 3.14, the Company or
the General Partner owns or holds all franchises, licenses, permits, consents,
approvals and authorizations of all Governmental Authorities necessary for the
conduct of their business. Each franchise, license, permit, consent, approval
and authorization so owned or held is in full force and effect, and each of
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<PAGE> 12
the Company and the General Partner is in compliance with all of its
obligations with respect thereto, and no event has occurred which allows, or
upon the giving of notice or the lapse of time or otherwise would allow,
revocation or termination of any franchise, license, permit, consent, approval
or authorization so owned or held.
3.15 Employee Benefit Plans and Policies.
(a) Schedule 3.15(a) provides a description of each of
the following which is sponsored, maintained or contributed to by the
Company for the benefit of its employees, or has been so sponsored,
maintained or contributed to within six years prior to the Closing
Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not described in Section 2.17(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) The Company does not contribute to or have an
obligation to contribute to, and have not at any time contributed to
or had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in Schedule 3.15(c),
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or
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<PAGE> 13
(l) of Section 502 of ERISA or (C) a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would adversely affect such qualified status;
(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan or Benefit Program
or Agreement than it otherwise would or (B) create or give
rise to any additional vested rights or service credits under
any Plan or Benefit Program or Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
(e) Termination of employment of any employee of the
Company after consummation of the transactions contemplated by this
Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) Schedule 3.15(g) sets forth by name and job
description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.16 Properties.
(a) The Company does not own any real property or any
interest therein except as set forth in Schedule 3.16(a)
(individually, an "Owned Property" and collectively, the "Owned
Properties"), which sets forth the location and size of, principal
improvements and buildings on, and Liens on the Owned Properties.
True and correct copies of all Liens are attached to Schedule 3.16(a).
Schedule 3.16(a) also sets forth the location and size of,
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principal improvements and buildings on all parcels of real estate
leased by the Company (individually, a "Leased Property" and
collectively, the "Leased Properties"). Except as set forth in
Schedule 3.16(a), with respect to each Owned Property and Leased
Property:
(i) the Company has good and valid leasehold
interests in each parcel of its Owned Property and Leased
Property, free and clear of any Lien other than Permitted
Encumbrances;
(ii) there are no pending or, to the knowledge of
the Owners, threatened condemnation proceedings, suits or
administrative actions relating to the Owned Properties or the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) except as set forth in Schedule 3.16(a), the
legal descriptions for the parcels of Owned Property and
Leased Property contained in the deeds thereof describe such
parcels fully and adequately; the buildings and improvements
are located within the boundary lines of the described parcels
of land, are not in violation of applicable setback
requirements, local comprehensive plan provisions, zoning laws
and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications),
building code requirements, permits, licenses or other forms
of approval by any Governmental Authority, and do not encroach
on any easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Owned Property and Leased Property, except as set
forth in Schedule 3.16(a);
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Owned Property or
Leased Property, or any portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Owned Property or Leased
Property, other than tenants under any leases disclosed in
Schedule 3.16(a) who are in possession of space to which they
are entitled;
(viii) all facilities located on the parcels of
Owned Property and Leased Property are supplied with utilities
and other services necessary for the operation of such
facilities;
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<PAGE> 15
(ix) each parcel of Owned Property and Leased
Property abuts on and has direct vehicular access to a public
road, or has access to a public road;
(x) all improvements and buildings on the Owned
Property and Leased Property are in good repair and adequate
for the use of such Owned Property and Leased Property in the
manner in which presently used; and
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Owned Property or Leased Property, except as set
forth in Schedule 3.16(a).
(b) Except as set forth in Schedule 3.16(b), each of the Company
has good and marketable title to all of its Assets, free and clear of any Liens
or restrictions on use. The Fixed Assets currently in use for the business and
operations of the Company are in good operating condition, normal wear and tear
excepted and have been maintained in accordance with sound industry practices.
3.17 Insurance. Schedule 3.17 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.17, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. The Company has not
received any notice or other communication from any such insurer canceling or
materially amending any of such insurance policies, and no such cancellation is
pending or threatened. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.18 Affiliate Interests. Except as set forth in Schedule 3.18, no
employee, officer or director, or former employee, officer or director, of the
Company or the General Partner has any interest in any property, tangible or
intangible, including without limitation, patents, trade secrets, other
confidential business information, trademarks, service marks or trade names,
used in or pertaining to the business of the Company, except for the normal
rights of employees, partners, and stockholders.
3.19 Environmental Matters. Except as set forth in Schedule 3.19,
to the best of Owners' knowledge:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking,
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<PAGE> 16
dumping, discharging, release or disposal of Hazardous Substances, or
other Waste. The Company is currently not liable for any penalties,
fines or forfeitures for failure to comply with any Environmental
Laws. The Company is in compliance with all required notice, record
keeping and reporting requirements of all Environmental Laws, and has
complied with all informational requests or demands arising under the
Environmental Laws.
(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of its business as presently conducted, including, without limitation,
all air emission, water discharge, water use and solid waste,
hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses (a listing of such items being
included in Schedule 3.19(b), and the Company is in compliance with
all the terms, conditions and requirements of such Licenses, and
copies of such Licenses have been made available to Group 1. There
are no administrative or judicial investigations, notices, claims or
other proceedings pending or threatened by any Governmental Authority
or third parties against the Company or its business, operations,
properties, or assets, which question the validity or entitlement of
the Company to any License required by the Environmental Laws for the
ownership of each of the respective properties and assets of the
Company and the operation of its business.
(c) The Company has not received or is aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of their business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leased Properties.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle,
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<PAGE> 17
treat, spill, leak, dump, discharge, release or dispose of, any
material quantities of Hazardous Substances or other waste upon
property currently or previously owned or leased by it, except in
compliance with Environmental Laws.
(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the Leased Properties or to any
properties adjacent thereto except in compliance with the
Environmental laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge,
of any Hazardous Substance on, into or beneath the surface of the
Owned Properties or the Leased Properties or to any properties
adjacent thereto.
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor has it allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Owners have received notice or have knowledge of any
facts which could give rise to any notice, that the Company is a
potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA, RCRA or any other
applicable Environmental Laws. The Company has not submitted nor was
required to submit any notice pursuant to Section 103(c) of CERCLA
with respect to any properties owned by, or used in the business of,
the Company. The Company has not received any written or, to the
knowledge of the Owners, oral request for information in connection
with any federal or state environmental cleanup site, or in connection
with any of the real property or premises where the Company has
transported, transferred or disposed of other Wastes. The Company has
not been required to nor has undertaken any response or remedial
actions or clean-up actions at the request of any Governmental
Authorities or at the request of any other third party. The Company
has no liability under any Environmental Laws for personal injury,
property damage, natural resource damage, or clean up obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.19(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which the Company or the
Owners are aware undertaken by the Company or their agents, or by the
Owners, or by any Governmental Authority, or by any third party,
relating to the Company, or any of the Owned Properties or the Leased
Properties; (ii) the results of which the Company or the Owners are
aware of any ground, water, soil, air or asbestos monitoring
undertaken by the Company or its agents, or by the Owners, or by any
Governmental Authority, or by any third party, relating to the
Company, or any of the Owned Properties or the Leased Properties;
(iii) all written communications between the Company and any
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<PAGE> 18
Governmental Authority arising under or related to Environmental,
Laws; and (iv) all citations issued under OSHA, or similar state or
local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings, or decrees, relating to or affecting the Company, or any of
the Owned Properties or the Leased Properties.
(j) Schedule 3.19(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.19(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule
3.19(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, or threatened against or directly affecting the
Company or any of its assets or operations relating to the use,
handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
(k) Any references in this Section 3.19 to the "Owned
Properties" and the "Leased Properties" are deemed to also refer to
any properties previously owned or leased by the Company.
3.20 Intellectual Property. Except as set forth in Schedule 3.20,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that is necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Owners, (a) the use of the Intellectual Property by the Company does not
infringe on the rights of any Person, and (b) no Person is infringing on any
right of the Company with respect to any Intellectual Property. No claims are
pending or, to the knowledge of the Owners threatened, that the Company is
infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the knowledge of the Owners, no Person
is infringing the rights of the Company with respect to any Intellectual
Property. All of the Intellectual Property that is owned by the Company is
owned free and clear of all encumbrances and was not misappropriated from any
Person. All of the Intellectual Property that is licensed by the Company is
licensed pursuant to valid and existing license agreements. The consummation
of the transactions contemplated by this Agreement will not result in the loss
of any Intellectual Property.
3.21 Bank Accounts. Schedule 3.21 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.22 Brokers. Except as disclosed in Schedule 3.22, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.23 Disclosure. The Company has disclosed in writing, or pursuant
to this Agreement and the Schedules attached hereto, all facts material to the
business, assets, prospects and condition (financial or otherwise) of the
Company. No representation or warranty to Group 1 by the Owners
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<PAGE> 19
contained in this Agreement, and no statement contained in the Schedules
attached hereto, any certificate, list or other writing furnished to Group 1 by
the Owners pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any certificate, list, document
or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed a representation and warranty
of the Owners for all purposes of this Agreement.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE OWNERS
Each Owner hereby, severally and not jointly, represents and warrants
to Group 1 that:
4.1 Capital Stock and Limited Partnership Interests. Such Owner
is the beneficial and record owner of the number of shares of Common Stock of
the General Partner and limited partnership interests in the Company as set
forth in Exhibit A, free and clear of any lien, claim, pledge, encumbrance or
other adverse claim. Except for such shares of Common Stock of the General
Partner and limited partnership interests in the Company set forth in Exhibit A
hereto, such Owner does not own, beneficially or of record, any capital stock
or other security, including without limitation any option, warrant or right
entitling the holder thereof to purchase or otherwise acquire any shares of
capital stock of the General Partner or any partnership interest of the
Company.
4.2 Authorization of Agreement.
(a) Such Owner has full legal right, power, capacity and
authority to execute, deliver and perform its obligations pursuant to
this Agreement and to execute, deliver and perform its obligations
under each instrument, document or agreement required hereby to be
executed and delivered by such Owner at, or prior to, the Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
such Owner at, or prior to, the Closing will then be, duly executed
and delivered by such Owner, and this Agreement constitutes and, to
the extent it purports to obligate such Owner, each such instrument,
document or agreement will constitute (assuming due authorization,
execution and delivery by each other party thereto), the legal, valid
and binding obligation of such Owner enforceable against it in
accordance with its terms.
4.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Governmental
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
such Owner to execute, deliver or perform this Agreement or any instrument
required hereby to be executed and delivered by it at the Closing.
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<PAGE> 20
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by such Owner of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by it at, or prior to, the Closing, nor the performance
by such Owner of its obligations under this Agreement or any such instrument
will (a) violate or breach the terms of or cause a default under (i) any
applicable Law, (ii) any applicable Order or any applicable rule or regulation
of any Court or Governmental Authority, (iii) the organizational documents of
such Owner, if applicable, or (iv) any contract or agreement to which such
Owner is a party or by which it, or any of its properties, is bound, or (b)
result in the creation or imposition of any Lien on any of the properties or
assets of such Owner, or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit, certificate or order of any Court or
Governmental Authority, or (d) with the passage of time or the giving of notice
or the taking of any action of any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section.
4.5 Investment Intent. Each Owner makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Owner will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Acquisition to such Owner solely for such Owner's
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution; (ii) such Owner is not a party to any agreement or other
arrangement for the disposition of any shares of Group 1 Common Stock; (iii)
such Owner is an "accredited investor" as defined in Securities Act Rule
501(a); (iv) such Owner (A) is able to bear the economic risk of an investment
in the Group 1 Common Stock acquired pursuant to this Agreement, (B) can afford
to sustain a total loss of that investment, (C) has such knowledge and
experience in financial and business matters, and such past participation in
investments, that he or she is capable of evaluating the merits and risks of
the proposed investment in the Group 1 Common Stock, (D) has received and
reviewed the SEC Documents, (E) has had an adequate opportunity to ask
questions and receive answers from the officers of Group 1 concerning any and
all matters relating to the transactions contemplated hereby, including the
background and experience of the current officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of Group 1 and any plans of Group 1 for additional
acquisitions, and (F) has asked all questions of the nature described in the
preceding clause (E), and all those questions have been answered to his or her
satisfaction; (v) such Owner acknowledges that the shares of Group 1 Common
Stock to be delivered to such Owner pursuant to the Acquisition have not been
and will not be registered under the Securities Act or qualified under
applicable blue sky laws and therefore may not be resold by such Owner without
compliance with Rule 144 of the Securities Act; (vi) such Owner acknowledges
that he or she has agreed, pursuant to Section 10.6 herein, not to sell the
shares of Group 1 Common Stock to be delivered to such Owner pursuant to the
Acquisition for a period of one year from the Closing Date; (vii) such Owner,
if a corporation, partnership, trust or other entity, acknowledges that it was
not formed for the specific purpose of acquiring the Group 1 Common Stock; and
(viii) without limiting any of the foregoing, such Owner agrees not to dispose
of any portion of Group 1 Common Stock unless either (1) a registration
statement under the Securities Act is in effect as to the applicable shares and
the disposition is made in accordance with that registration statement, or (2)
the Owner has notified Group 1 of the proposed disposition, such disposition is
made through a national brokerage firm selected by Group 1 and the Owner to
offer disposition services for Group 1 Common Stock subject to SEC Rule 144 and
such disposition is made in compliance with any
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other requirements of the Securities Act. Additionally, for the three-year
period following the Closing Date a disposition pursuant to (viii)(2) above may
be made only if the Owner has notified Group 1 of the proposed disposition and
the disposition is made through a national brokerage firm selected by Group 1
and the Owner to offer disposition services for Group 1 Common Stock (in the
absence of agreement between Group 1 and the Owner seeking to make a
disposition, Goldman, Sachs & Co., Inc. will be the firm to handle such
disposition).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
Group 1 hereby represents and warrants to the Owners that:
5.1 Corporate Organization. Group 1 and Acquisition Sub are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions of their incorporation with all requisite corporate
power and authority to execute, deliver and perform this Agreement and each
instrument required hereby to be executed and delivered by them at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Acquisition Sub of this Agreement, the performance by Group 1 and Acquisition
Sub of their obligations pursuant to this Agreement, and the execution,
delivery and performance of each instrument required hereby to be executed and
delivered by Group 1 and Acquisition Sub at the Closing have been duly and
validly authorized by all requisite corporate action on the part of Group 1 and
Acquisition Sub. This Agreement has been, and each instrument, document or
agreement required hereby to be executed and delivered by Group 1 and
Acquisition Sub at, or prior to, the Closing will then be, duly executed and
delivered by Group 1 and Acquisition Sub. This Agreement constitutes, and, to
the extent it purports to obligate Group 1 and Acquisition Sub, each such
instrument, document or agreement will constitute (assuming due authorization,
execution and delivery by each other party thereto), the legal, valid and
binding obligation of Group 1 and Acquisition Sub, enforceable against them in
accordance with its terms.
5.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Group 1 and Acquisition Sub, to execute, deliver or consummate the transactions
contemplated by this Agreement or any instrument required hereby to be executed
and delivered by Group 1 and Acquisition Sub at or prior to the Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 and Acquisition Sub of this Agreement or any instrument required hereby
to be executed by them at or prior to the Closing nor the performance by Group
1 and Acquisition Sub of their obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Order or any applicable rule or regulation of any Court or
Governmental Authority, (ii) the organizational documents of Group 1 and
Acquisition Sub or (iii) any contract or agreement to which Group 1 and
Acquisition Sub are parties or by which they or any of their property is bound,
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or (b) result in the creation or imposition of any Liens on any of the
properties or assets of Group 1 and Acquisition Sub (other than any Lien
created by the Company), or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit certificate or order of any Court or
Governmental Authority or (d) with the passage of time or the giving of notice
or the taking of any action by any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section, except, with respect to
clauses (a), (b), (c) or (d) of this Section, where such matter would not have
a material adverse effect on the business, assets, prospects or condition
(financial or otherwise) of Group 1 and its subsidiaries, taken as a whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Acquisition are duly authorized and will,
when issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1933 and 1934
and the rules and regulations of the Commission promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Group 1 included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, have been prepared in accordance with GAAP
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of Group 1 and its
consolidated subsidiaries as of the dates thereto and the consolidated results
of their operations and cash flows for the periods then ended (except in the
case of interim period financial information, for normal year-end adjustments).
ARTICLE VI
COVENANTS OF THE OWNERS
6.1 Acquisition Proposals. Prior to the Closing Date, neither the
Company or the General Partner, any of their officers, directors, employees or
agents nor any Owner shall agree to, solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition, business
combination or purchase of all or a substantial portion of the assets of, or a
substantial equity interest in, the Company or the General Partner, other than
the transactions with Group 1 contemplated by this Agreement.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Owners pursuant to this Agreement.
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<PAGE> 23
6.3 Conduct of Business by the Company Pending the Acquisition.
The Owners covenant and agree that, from the date of this Agreement until the
Closing Date, unless Group 1 shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement:
(a) The business of the Company and the General Partner
shall be conducted only in, and the Company and the General Partner
shall not take any action except in, the ordinary course of business
and consistent with past practice. In connection therewith, the
parties agree that the Company may dealer trade vehicles for similar
models, but the Company shall not liquidate or otherwise dispose of
any of its new vehicles other than in the ordinary course of business
to retail buyers. The Company shall maintain its advertising
expenditures and activities commensurate with prior business
practices. The Company shall not advertise a "Going Out of Business"
sale;
(b) The Company and the General Partner shall not,
directly or indirectly do any of the following: (i) issue, sell,
pledge, dispose of or encumber, (A) any capital stock (or securities
convertible into capital stock) of the General Partner or partnership
interests of the Company or (B) other than in the ordinary course of
business and consistent with past practice and not relating to the
borrowing of money, any assets of the Company, (ii) amend or propose
to amend the articles of incorporation or bylaws (or other
organizational documents) of the General Partner or the limited
partnership agreement of the Company, (iii) split, combine or
reclassify any outstanding capital stock of the General Partner or
declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to the capital stock of the General
Partner whether now or hereafter outstanding, (iv) redeem, purchase or
acquire or offer to acquire any of the capital stock of the General
Partner or any partnership interests of the Company, (v) create,
incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money (other than floor plan
indebtedness incurred in the ordinary course of business) after
November 30,1997 in excess of the cash consideration to be paid to the
Owners at Closing for their limited partnership interests as set forth
in Exhibit A attached hereto, or (vi) except in the ordinary course of
business and consistent with past practice, enter into any contract,
agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
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(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than normal, annual compensation
increases consistent with the Company's past practices; and shall not
grant, to any individual, severance or termination pay that exceeds
the lesser of (i) such individual's compensation for the calendar
month immediately preceding such individual's grant of severance or
termination pay, or (ii) $5,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Acquisition set forth in
Article VIII not being satisfied; provided, however, that no such
notification shall affect the representations or warranties or
covenants or agreements of the parties or the conditions to the
obligations of the parties hereunder;
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement, program, practice or understanding (other than
the Plans and the Benefit Programs or Agreements);
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement; and
(j) The Owners shall be entitled to a distribution, in
cash, in amounts required to cause the net book values on a tax
accounting basis of the Company and the General Partner at the end of
the month prior to the Closing Date to equal zero.
(k) The Owners will not revoke the Company's election to
be taxed as an S corporation within the meaning of sections 1361 and
1362 of the Code.
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(l) Kellmax Investments Partnership will convey the
Leased Properties to the Company at the Closing pursuant to the
Earnest Money Contract attached hereto as Exhibit D.
6.4 Confidentiality. The Owners shall, and the Owners shall cause
the Company's and the General Partner's officers, directors, employees,
representatives and consultants, to hold in confidence, and not to disclose to
others for any reason whatsoever, any non-public information received by them
or their representatives in connection with the transactions contemplated
hereby, including but not limited to all terms, conditions and agreements
related to this transaction, except (i) as required by law; (ii) for disclosure
to officers, directors, employees and representatives of the Company and the
General Partner as necessary in connection with the transactions contemplated
hereby; and (iii) for information which becomes publicly available other than
through the actions of the Company, the General Partner or an Owner. In the
event the Acquisition is not consummated, the Company, the General Partner and
the Owners will return all non-public documents and other material obtained
from Group 1 or its representatives in connection with the transactions
contemplated hereby or certify to Group 1 that all such information has been
destroyed.
6.5 Notification of Certain Matters. The Owners shall give prompt
notice to Group 1, orally and in writing, of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Closing, (ii) any failure of
the Company, or any officer, director, employee or agent thereof, or any Owner
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder, or (iii) any litigation, or any claim or
controversy or contingent liability of which the Company or any Owner has
knowledge of that might reasonably be expected to become the subject of
litigation, against the Company or the General Partner or affecting any of
their assets, in each case in an amount in controversy in excess of $50,000, or
that is seeking to prohibit or restrict the transactions contemplated hereby.
6.6 Consents. Subject to the terms and conditions of this
Agreement, the Company and the General Partner shall (i) obtain all consents,
waivers, approvals (including all applicable automobile manufacturers
approvals, and such approvals shall not contain any unreasonably burdensome
restrictions on the Company, the General Partner or Group 1), authorizations
and orders required in connection with the authorization, execution and
delivery of this Agreement and the consummation of the Acquisition; and (ii)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary or proper to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, the Company and
the Owners shall cooperate and use reasonable efforts to cooperate in the
defense against and response thereto. Costs, including attorneys' fees,
associated with any such defense will be borne by Group 1.
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6.8 Owners' Agreements Not to Sell. Each of the Owners hereby
covenants and agrees not to sell, pledge, transfer or dispose of or encumber
any shares of Common Stock of the General Partner or limited partnership
interests of the Company currently owned, either beneficially or of record, by
such Owner, except under this Agreement.
6.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
6.10 Removal of Related Party Guarantees. The Owners agree to
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to terminate, waive or release
all Company guarantees (such guarantees shall be referred to herein as "Related
Guarantees", as described in Schedule 6.10 pursuant to Section 3.9 of this
Agreement) of indebtedness or other obligations of any of the Company's or the
General Partner's officers, directors, shareholders or employees or their
affiliates.
6.11 Termination of Related Party Agreements. The Owners agree to
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to terminate the Related Party
Agreements except those Related Party Agreements that are disclosed in Schedule
6.11 as agreements that shall not be subject to this Section 6.11.
6.12 Related Party Agreements. The Owners agree to cause the
Company and the General Partner not to enter into any Related Party Agreements
or engage in any transactions with the Owners or their affiliates; except for
those Related Party Agreements or transactions with affiliates that are
disclosed in Schedule 6.12 as agreements or transactions that shall not be
subject to this Section 6.12.
6.13 Release.
(a) AS OF THE CLOSING, EACH OF THE OWNERS DOES HEREBY FOR HIMSELF
OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES REMISE,
RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY AND THE GENERAL PARTNER OF
AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES,
CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR
UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT,
WHICH EACH OF SUCH OWNERS NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY
HAD, OWNED OR HELD AGAINST THE COMPANY OR THE GENERAL PARTNER INCLUDING WITHOUT
LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE NEGLIGENCE, GROSS
NEGLIGENCE AND WILLFUL ACTS OF THE COMPANY OR THE GENERAL PARTNER AND THEIR
EMPLOYEES AND AGENTS, EXISTING AS OF THE CLOSING OR RELATING TO ANY MATTER THAT
OCCURRED ON OR PRIOR TO THE CLOSING; PROVIDED, HOWEVER, THAT ANY CLAIMS,
LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION WITH THE
FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR OBLIGATIONS
HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS
OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER
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<PAGE> 27
AGREEMENTS SHALL NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT; AND
PROVIDED FURTHER ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS OR AGREEMENTS
LISTED ON THE SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) EACH OF THE OWNERS REPRESENTS AND WARRANTS THAT HE HAS NOT
PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO ANY
PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS,
LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS
RELEASED HEREIN. EACH OF THE OWNERS COVENANTS AND AGREES THAT HE WILL NOT
ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE
CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR
OBLIGATIONS TO BE RELEASED HEREIN. EACH OF THE OWNERS REPRESENTS AND WARRANTS
THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION 6.13 AND
THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN CONNECTION
WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Certain Tax Matters.
(a) The Owners agree to use the amounts reflected on
Exhibit A hereto for purposes of preparation of their Tax Returns.
With respect to the shares of Group 1 Common Stock received by the
Owners, $14.00 per share will be used for purposes of determining the
value of the stock portion of the purchase price.
(b) The Owners shall (i) file all required 1998 federal
income tax returns relating to their ownership of the General Partner
and the Company within seventy-five (75) days after the Closing Date;
(ii) use an interim closing of the books of the General Partner and
the Company effective as of the Closing Date for the purposes of
preparing such returns; and (iii) deliver such returns to Group 1 for
its review at least five (5) days prior to the filing of such returns.
6.15 Section 338(h)(10) Elections.
(a) The Owners and Group 1 shall join in making a timely,
irrevocable and effective election under section 338(h)(10) of the
Code and a similar election under any applicable state income tax law
(collectively the "Section 338(h)(10) Elections") with respect to
Group 1's purchase of the Common Stock of the General Partner. To
facilitate such election, at the Closing the Owners shall deliver to
Group 1 an Internal Revenue Service Form 8023 and any similar forms
under applicable state income tax law (the "Forms") with respect to
Group 1's purchase of the Common Stock of the General Partner, which
Forms shall have been duly executed by an authorized person for the
Owners. Group 1 shall cause the Forms to be duly executed by an
authorized person for Group 1, shall complete the schedules required
to be attached thereto, shall provide a copy of the executed Form and
schedules to the Owners, and shall duly and timely file the Forms as
prescribed by Treasury Regulation 1.338(h)(10)-1 or the corresponding
provisions of applicable state income Tax law. None of the Owners or
Group 1 shall take any action to rescind, revoke or modify the Section
338(h)(10) Election without the prior written approval of the other
party. Group 1 shall be responsible for any Texas franchise Tax on
the deemed gain triggered by the Section 338(h)(10) Elections.
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(b) The Owners and Group 1 shall jointly determine the
liabilities of the General Partner and allocate the purchase price,
such liabilities, and other relevant items in accordance with the Code
and the Treasury Regulations promulgated thereunder. The Owners and
Group 1 shall jointly prepare all schedules required to be attached to
the Forms (the "Form Schedules"). The Owners and Group 1 shall
prepare all relevant Tax Returns in a manner consistent with the Form
Schedules. With respect to any items included in the Form Schedules
as to which Group 1 and the Owners are unable to jointly agree, the
allocation proposed by Group 1 shall be reflected on the Form
Schedules. The parties have previously reviewed and examined the
tangible personal property and other assets of the Company, and agree
that the fair market value of such assets at the Closing Date will be
equal to each such asset's adjusted tax basis, net of depreciation for
the Company's tax period ending on the Closing Date. The balance of
the purchase price will be attributed to the goodwill of the Company.
6.16 Section 754 Election. If requested in writing to do so by
Group 1, the Owners and the Company will elect under section 754 of the Code
and Treasury Regulations Section 1.754-1(b)(1) to apply the provisions of
section 734(b) of the Code and section 743(b) of the Code.
6.17 Employment Agreement. Thomas Nyle Maxwell, Jr. agrees to
enter into, on or prior to the Closing Date, an employment agreement with Group
1 in form and substance substantially similar to Exhibit B attached hereto.
6.18 Consulting Agreements. Thomas Nyle Maxwell, Sr. and Clarence
J.Kellerman agree to enter into, on or prior to the Closing Date, a consulting
agreement with Group 1 in form and substance substantially similar to Exhibit C
attached hereto.
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Acquisition is not consummated, Group 1 will return all
non-public documents and other material obtained from the Company or its
representatives in connection with the transactions contemplated hereby or
certify to the Company that all such information has been destroyed.
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7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Acquisition.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
Acquisition; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Group 1 agrees to
cooperate and use reasonable efforts to cooperate in the defense against and
response thereto. Costs, including attorneys' fees, associated with any such
defense will be borne by Group 1.
7.5 Tax Valuation. Group 1 agrees to use the amounts reflected on
Exhibit A hereto for purposes of preparation of its Tax Returns. With respect
to the shares of Group 1 Common Stock received by the Owners, $14.00 per share
will be used for purposes of determining the value of the stock portion of the
purchase price.
7.6 Guaranteed Price. If an Owner sells any of the Group 1
Common Stock received by such Owner pursuant to this Agreement for a per share
price of less than fourteen dollars ($14.00), subject to adjustment for stock
splits and stock dividends, Group 1 shall pay in cash the difference between
the purchase price for shares sold and the price such Owner would have received
if the shares were sold at $14.00 per share, subject to adjustment for stock
splits and stock dividends; provided, that this Section 7.6 shall only apply to
sales (i) occurring after the expiration of the Restricted Period and (ii) made
in the public market; and provided, further that this Section 7.6 shall
terminate on the date six years after the expiration of the Restricted Period.
7.7 Removal of Personal Guarantees. Group 1 will use commercially
reasonable efforts to have all personal guarantees of any of the Company's or
the General Partner's officers, directors, shareholders or partners of any
obligation of the Company or the General Partner terminated, waived or
released.
7.8 Provision of Certain Funds. Group 1 shall provide to the
Company sufficient funds to enable the Company to purchase the Leased
Properties pursuant to the Earnest Money Contract attached hereto as Exhibit D.
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ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the
Acquisition;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Acquisition;
(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated; and
(d) Chrysler Corporation shall have approved the
Acquisition and the transactions contemplated thereby.
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Owners
contained in Article III and Article IV, respectively, shall be true
and correct in all respects as of the date when made and as of the
Closing Date as though such representations and warranties had been
made at and as of the Closing Date; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by the
Company and the Owners on or before the Closing Date shall have been
duly complied with and performed in all respects, and a certificate to
the foregoing effect dated the Closing Date and signed by the chief
executive officer of the Company and each of the Owners shall have
been delivered to Group 1.
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Acquisition and the transactions
contemplated thereby will be in compliance with applicable laws.
(c) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.10 and 6.11 hereto.
(d) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have
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occurred, and the Company shall not have suffered any damage,
destruction or loss (whether or not covered by insurance) materially
adversely affecting the properties or business of the Company and
Group 1 shall have received a certificate signed by the chief
executive officer of the Company and the Owners dated the Closing Date
to such effect.
(e) Receipt by Group 1 of an employment agreement
executed by Thomas Nyle Maxwell, Jr., in form and substance
substantially similar to Exhibit B hereto;
(f) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements.
(g) Receipt by Group 1 of consulting agreements executed
by each of Thomas Nyle Maxwell, Sr. and Clarence J. Kellerman in form
and substance substantially similar to Exhibit C hereto.
(h) Kellmax Investments Partnership shall have conveyed
the Leased Properties to the Company pursuant to the Earnest Money
Contract attached hereto as Exhibit D.
(i) Group 1 shall have received, at the Owners' expense,
a Policy of Title Insurance issued by a title company approved by
Group 1 with respect to the Leased Property to be conveyed to the
Company by Kellmax Investments Partnership, subject only to the
exceptions described in Schedule 3.16(a).
(j) Group 1 shall have received, at Group 1's expense, a
current survey of the Owned Properties and the Leased Properties
showing the location of any improvements, prepared by a licensed
surveyor approved by Group 1.
8.3 Additional Conditions Precedent to Obligations of the Owners.
The obligation of the Owners to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date; all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Group 1 shall have
been delivered to the Owners.
(b) Receipt by Thomas Nyle Maxwell, Jr. of an employment
agreement executed by Group 1, in form and substance substantially
similar to Exhibit B hereto.
(c) Receipt by Thomas Nyle Maxwell, Sr. and Clarence J.
Kellerman of consulting agreements executed by Group 1 in form and
substance substantially similar to Exhibit C hereto.
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<PAGE> 32
(d) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Owners to indemnify. Each of the Owners
agrees to severally indemnify, defend and hold Group 1 harmless (subject to the
limitations set forth in Section 9.1(e) below) from and against the aggregate
of all Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all actual
expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and
expenses) incurred or suffered by Group 1, on a pre-tax consolidated
basis to the extent (i) resulting from any breach of a representation
or warranty made by the Owners in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by the
Owners pursuant to this Agreement, or (iii) resulting from any
inaccuracy in any certificate delivered by the Company or any of the
Owners pursuant to this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Group 1
shall have the right to be put in the same pre-tax consolidated
financial position as Group 1 would have been in had each of the
representations and warranties of the Owners hereunder been true and
correct and had the covenants and agreements of the Company and the
Owners hereunder been performed in full.
(c) Each of the representations and warranties made by
the Owners in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date except the
representations and warranties of the Owners contained in Section 3.11
which shall survive for the period of the statute of limitations and
Sections 3.1, 3.2, 3.3, 3.4, 3.5, 4.1, 4.2, 4.3 and 4.4, which shall
not terminate, but shall continue indefinitely. No claim for the
recovery of Indemnifiable Damages may be asserted by Group 1 against
the Owners after such representations and warranties shall expire,
provided, however, that claims for Indemnifiable Damages first
asserted within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Group 1 believes it is entitled to a claim for any
Indemnifiable Damages hereunder, Group 1 shall promptly give written
notice to the Owners of such claim and the amount or the estimated
amount of such claim, and the basis for such claim. If the Owners do
not pay the amount of the claim for Indemnifiable Damages to Group 1
within 10 days, then Group 1 may exercise its respective rights under
Section 9.4 and/or take any action or
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<PAGE> 33
exercise any remedy available to it by appropriate legal proceedings
to collect the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, the Owners' liability for Indemnifiable Damages shall
be limited as follows:
(1) Group 1 shall have no claim for Indemnifiable Damages
unless and until all Indemnifiable Damages incurred by
Group 1 exceed an aggregate of $270,000.00 with respect
to this Agreement and the Other Agreements (the "Basket
Amount"), in which event the Owners shall be liable for
only such Indemnifiable Damages in excess of the Basket
Amount; and
(2) the total amount of Indemnifiable Damages for which
each Owner shall be liable to Group 1 shall not exceed
the value of the consideration by such Owner received
in the Acquisition as provided on Exhibit A, of which
the stock portion shall be valued at $14.00 per share.
The Owners acknowledge and agree that for purposes of the
Basket Amount, Indemnifiable Damages under the Other Agreements will
affect their obligation to indemnify Group 1 under this Agreement,
even though the Owners may own differing percentages of the
dealerships being acquired by Group 1 pursuant to the Other
Agreements. For example, if claims for Indemnifiable Damages under
one of the Other Agreements equal or exceed $270,000, then the Owners
under this Agreement will be obligated to indemnify Group 1 for claims
for all amounts without the benefit of any Basket Amount.
9.2 Agreement by Group 1 to indemnify. Group 1 agrees to
indemnify, defend and hold the Owners harmless from and against the aggregate
of all Owners Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Owners Indemnifiable
Damages" means, without duplication, the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable related counsel and paralegal fees and
expenses) incurred or suffered by the Owners, on a pre-tax
consolidated basis, to the extent (i) resulting from any breach of a
representation or warranty made by Group 1 in or pursuant to this
Agreement, (ii) resulting from any breach of the covenants or
agreements made by Group 1 in or pursuant to this Agreement, or (iii)
resulting from any inaccuracy in any certificate delivered by Group 1
pursuant to this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Owners Indemnifiable Damages, the
Owners have the right to be put in the same pre-tax consolidated
financial position as he, she or it would have been in had each of the
representations and warranties of Group 1 hereunder been true and
correct and had the covenants and agreements of Group 1 hereunder been
performed in full.
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(c) Each of the representations and warranties made by
Group 1 in this Agreement or pursuant hereto shall survive
indefinitely after the Closing Date, except for the representation and
warranty of Group 1 contained in Section 5.6 hereof which shall
survive for a period of three years after the Closing Date, after
which date it shall terminate. No claim for the recovery of Owners
Indemnifiable Damages may be asserted by the Owners against Group 1
after such representations and warranties shall thus expire, provided,
however, that claims for Owners Indemnifiable Damages first asserted
within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) In the event that the Owners believe they are
entitled to a claim for any Owners Indemnifiable Damages hereunder,
the Owners shall promptly give written notice to Group 1 of such claim
and the amount or the estimated amount of such claim, and the basis
for such claim.
9.3 Conditions of Indemnification. The obligations and
liabilities of the Owners and Group 1 hereunder with respect to their
respective indemnities pursuant to this Article IX resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such Indemnifying Party is
harmed by the failure of the Indemnified Party to provide timely
notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Group 1, then Group 1 shall have the right to control the
defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof);
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(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. The Schedules to this Agreement,
contain all disclosure required to be made by the Owners under the various
terms and provisions of this Agreement.
10.2 Non-Competition Obligations.
(a) As part of the consideration for the Acquisition, and
as an additional incentive for Group 1 to enter into this Agreement,
Thomas Nyle Maxwell, Jr. (the "Designated Owner") and Group 1 agree to
the non- competition provisions of this Section 10.2. The Designated
Owner agrees that during the period of the Designated Owner's
non-competition obligations hereunder, the Designated Owner will not,
directly or indirectly for the Designated Owner or for others, within
twelve miles of, in the county of or in any manufacturers' designated
primary market area adjacent to the location of the operations sold to
Group 1 pursuant to this Agreement or operations subsequently managed
by the Designated Owner as of the date in question or during the
previous twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates;
(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or affiliates, or hire
or assist in the hiring of any such employee by person,
association, or entity not affiliated with Group 1 or any of
its subsidiaries or affiliates.
These non-competition obligations shall apply until the later
of (i) five years after the Closing or (ii) the period specified in
any employment agreement entered into by such Designated Owner with
Group 1 or its subsidiaries. During this non-competition period the
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<PAGE> 36
Designated Owner will not engage in these restricted activities as
provided above, or with respect to the industry consolidation efforts
of any publicly held entity in the automotive retailing industry (or
any entity with the ultimate intention of becoming a publicly held
entity or being acquired in any manner by a publicly held entity)
assist in any such efforts, regardless of the geographic area or
market.
If Group 1 or any of its subsidiaries or affiliates abandons a
particular aspect of its business, that is, ceases such aspect of its
business with the intention to permanently refrain from such aspect of
its business, then this non-competition covenant shall not apply to
such former aspect of that business.
(b) The Designated Owner understands that the foregoing
restrictions may limit their ability to engage in certain businesses
anywhere in the world during the period provided for above, but
acknowledges that the Designated Owner will receive sufficiently high
remuneration and other benefits under this Agreement to justify such
restriction. The Designated Owner acknowledges that money damages
would not be sufficient remedy for any breach of this Section 10.2 by
the Designated Owner, and Group 1 or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Section
10.2 by terminating any payments then owing to the Designated Owner
under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach, without
any requirement for the securing or posting of any bond in connection
with such remedies. Such remedies shall not be deemed the exclusive
remedies for a breach of this Section 10.2, but shall be in addition
to all remedies available at law or in equity to Group 1 or any of its
subsidiaries or affiliates, including, without limitation, the
recovery of damages from Group 1 and the Designated Owner's agents
involved in such breach.
(c) It is expressly understood and agreed that Group 1
and the Designated Owner consider the restrictions contained in this
Section 10.2 to be reasonable and necessary to protect the
confidential and proprietary information and trade secrets of Group 1
and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions
therein set forth to be modified by such courts so as to be reasonable
and enforceable and, as so modified by the court, to be fully
enforced.
10.3 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Group 1 and the Owners;
(b) by either Group 1 or the Owners if the Acquisition
has not been effected on or before February 28, 1998;
(c) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate under
this Section 10.3(c) shall expire at midnight on January 31, 1998;
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<PAGE> 37
(d) by either Group 1 or the Owners if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of the Company; (ii) there has been a material
breach of any representation, warranty, covenant or other agreement
set forth in this Agreement by the Company or the Owners which breach
has not been cured within ten business days following receipt by the
Company of notice of such breach (or if such breach cannot be cured
within such time, reasonable efforts have begun to cure such breach
and such breach is then cured within 30 days after notice) or (iii)
there is a material adverse change in the pre-tax income expected for
the Company, on which the purchase price of the acquisition was based;
or
(f) by the Owners if there has been a material breach of
any representation or warranty set forth in this Agreement by Group 1
which breach has not been cured within ten business days following
receipt by Group 1 of notice of such breach (or if such breach cannot
be cured within such time, reasonable efforts have begun to cure such
breach and such breach is then cured within 30 days after notice).
10.4 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.3, the Owners and Group 1 shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.5 survive any such termination.
10.5 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by Group 1 shall be paid by Group 1
and all such costs and expenses incurred by the Owners shall be paid by the
Owners except that all audit, appraisal and Phase I Environmental Surveys costs
and expenses shall be reimbursed by Group 1 upon execution of this Agreement;
provided, however,that the Owners shall reimburse Group 1 for the amount of
audit fees and audit expenses reimbursed to them if the Acquisition is not
completed and the audited financial statements or the audit workpapers created
in the performance of the audits are used by the Owners, directly or
indirectly, in any financing transaction, merger or acquisition involving the
Company or any of the parties to the Other Agreements. The Owners and Group 1
each represent and warrant to each other that there is no broker or finder
involved in the transactions contemplated hereby.
10.6 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period"), no Owner voluntarily will: (i) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (A) any
shares of Group 1 Common Stock received by any Owner in the Acquisition or (B)
any interest in (including any option to buy or sell) any of those shares of
Group 1 Common Stock, in whole or in part, and Group 1 will have no obligation
to, and shall not, treat any such attempted transfer as effective for any
purpose; or (ii) engage in any transaction, whether or not with respect to any
shares of Group 1 Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning the shares of Group 1 Common Stock
acquired pursuant to this Agreement (including for
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<PAGE> 38
example engaging in put, call, short-sale, straddle or similar market
transactions). Notwithstanding the foregoing, each Owner may (i) pledge shares
of Group 1 Common Stock, provided that the pledgee of such shares shall agree
not to sell or otherwise dispose of any such shares for the Restricted Period;
(ii) transfer shares to immediate family members or the estate of any such
individual (including, without limitation, any transfer by such Owner to or
among any family limited partnership, trust, custodial or other similar
accounts, arrangements, transfers or funds that are for the benefit of his or
her immediate family members), provided that such person or entity shall agree
not to sell or otherwise dispose of any such shares for the Restricted Period;
and (iii) transfer shares by will or the laws of descent and distribution or
otherwise by reason of such Owner's death. The certificates evidencing the
Group 1 Common Stock delivered to each Owner pursuant to this Agreement will
bear a legend substantially in the form set forth below and containing such
other information as Group 1 may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE STOCK PURCHASE AGREEMENT AMONG THE
ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES THERETO,
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
ONE-YEAR PERIOD ENDING ON ______________ [DATE THAT IS THE ANNIVERSARY
OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) AFTER THE DATE SPECIFIED ABOVE.
(b) Each Owner, severally and not jointly with any other Person,
(i) acknowledges that the shares of Group 1 Common Stock to be delivered to
that Owner pursuant to this Agreement have not been and, if applicable, will
not be registered under the Securities Act and therefore may not be resold by
that Owner without compliance with the Securities Act and (ii) covenants that
none of the shares of Group 1 Common Stock issued to that Owner pursuant to
this Agreement will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all the
applicable provisions of the Securities Act and the rules and regulations of
the Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Group 1 Common Stock issued pursuant to this
Agreement will bear the following legend in addition to the legend prescribed
by Section 10.6(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT,
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<PAGE> 39
OR SUCH STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Acquisition to each Owner will bear any legend required by the
securities or blue sky laws of the state in which that Owner resides.
10.7 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose Owners are, entitled to the
benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf of each party hereto.
The waiver by any party hereto of any condition or of a breach of another
provision of this Agreement shall not operate or be construed as a waiver of
any other condition or subsequent breach. The waiver by any party hereto of
any of the conditions precedent to its obligations under this Agreement shall
not preclude it from seeking redress for breach of this Agreement other than
with respect to the condition so waived.
10.8 Public Statements. The Owners and Group 1 agree to consult
with each other prior to issuing any press release or otherwise making any
public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
10.9 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto; provided, however that Group 1 and Acquisition Sub may assign
their rights and obligations hereunder to one or more of their affiliates
(except that no such assignment shall relieve Group 1 or Acquisition Sub of its
obligations hereunder and Group 1 and Acquisition Sub shall remain liable for
the performance of their obligations hereunder.
10.10 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to the Owners: Thomas Nyle Maxwell, Jr.
P.O. Box 203605
Austin, Texas 78720
Telecopy: (512) 219-3618
with a copy to: Porter & Hedges, L.L.P.
111 Congress, Suite 1055
Austin, Texas 78701
Telecopy: (512) 479-7504
Attention: James L. Montgomery
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<PAGE> 40
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and
Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.10. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor. Delivery to the Owners' representative, if any, of any
notice to Owners hereunder shall constitute delivery to all Owners and any
notice given by such Owners' representative shall be deemed to be notice given
by all Owners.
10.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
10.12 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.13 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.14 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.15 Third Party Beneficiaries. Neither this agreement nor any
document delivered in connection with this Agreement, confers upon any Person
not a party hereto any rights or remedies hereunder.
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<PAGE> 41
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ JOHN T. TURNER
-------------------------------------------
Name: John T. Turner
Title: Senior Vice President
ST MERGER CORP.
By: /s/ JOHN T. TURNER
-------------------------------------------
Name: John T. Turner
Title: Senior Vice President
OWNERS
/s/ THOMAS NYLE MAXWELL, JR.
-----------------------------------------------
THOMAS NYLE MAXWELL, JR.
/s/ THOMAS NYLE MAXWELL, SR.
-----------------------------------------------
THOMAS NYLE MAXWELL, SR.
/s/ CLARENCE J. KELLERMAN
-----------------------------------------------
CLARENCE J. KELLERMAN
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<PAGE> 42
EXHIBIT A
<TABLE>
<CAPTION>
Consideration
for Stock of
General Consideration for Limited
Partner Partnership Interests
------------ -------------------------
Shares of
Common Limited
Stock of Partnership Shares of
the Interests Group 1
General of the Common
Owners Partner Cash Company Stock(1) Cash
- ------------------------ ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Thomas Nyle Maxwell, Jr. 50,000 $47,297 49.50% 162,504 $2,407,302
Thomas Nyle Maxwell, Sr. 20,000 $18,434 19.80% 39,001 $1,278,962
Clarence J. Kellerman 30,000 $27,651 29.70% 58,502 $1,918,443
</TABLE>
_____________
(1) As may be appropriately adjusted for stock splits and/or stock
dividends.
To the extent distributions made pursuant to Section 6.3(j) reduce the
net book value of the Company and the General Partner at the end of the month
prior to the Closing Date to amounts less than the net book values reflected on
the May 31, 1997 manufacturer statements and the General Partner statement, the
cash consideration for the limited partnership interests and General Partner
stock set forth above shall be reduced proportionately.
Group 1 shall provide at its expense at Closing an opinion of a
nationally recognized firm, chosen by Group 1, that is experienced in valuation
of entities and securities as to whether the shares of Group 1 Common Stock
issued to the Owners at Closing have a value of more than $14.00 per share, and
if the value is more than $14.00 per share, the value in excess of $14.00 per
share. If the opinion values the Group 1 Common Stock received at Closing by
the Owners in excess of $14.00 per share, Group 1 will pay to the Owners
interest at the rate of 10% on the "Incremental Tax Liability" for a period
of six months beginning April 15, 1999. "Incremental Tax Liability" means the
amount by which the Owners' federal income tax liability with respect to the
shares of Group 1 Common Stock received at Closing exceeds the amount of any
such tax liability had the shares of Group 1 Common Stock been valued at $14.00
per share at Closing.
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ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Purchase Agreement made and entered into as
of December ___, 1997 by and among Group 1, Acquisition Sub and the Owners,
including any amendments thereto and each Annex (including this Annex A),
Exhibit and schedule thereto (including the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Owned Properties and the Leased Properties, whether
personal or mixed, tangible or intangible, wherever located.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.15.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Maxwell Chrysler Plymouth Dodge Jeep Eagle, LTD,
a Texas limited partnership, all predecessor entities of the Company and its
successors from time to time.
"Common Stock of the General Partner" shall mean the common stock, no
par value, of the General Partner.
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"Company 1996 Balance Sheet" shall have the meaning set forth in
Section 3.6 herein.
"Company 1996 Financial Statements" shall have the meaning set forth
in Section 3.6 herein.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Designated Owner" shall have the meaning set forth in Section 10.2
herein.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the Interim Balance Sheet or acquired by the Company since the
date of the Interim Balance Sheet.
"Forms" shall have the meaning set forth in Section 6.15 herein.
"Form Schedules" shall have the meaning set forth in Section 6.15
herein.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"General Partner" shall mean Maxwell Chrysler Plymouth Dodge, Inc., a
Texas corporation.
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<PAGE> 45
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Guarantees" shall have the meaning set forth in Section 3.9 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental Authority to be a
hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
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<PAGE> 46
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" have the meaning set forth
in Section 3.16 herein.
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
"Material Contract" has the meaning set forth in Section 3.9 herein.
"Material Leases" shall have the meaning set forth in Section 3.9
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Owned Property" and "Owned Properties" have the meaning set forth in
Section 3.16 herein.
"Owners Indemnifiable Damages" shall have the meaning set forth in
Section 9.2 herein.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
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<PAGE> 47
(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Phase I Environmental Surveys" shall mean the Entrix reports dated
October, 1997.
"Plan" shall have the meaning set forth in Section 3.15.
"Related Party Agreements" shall have the meaning set forth in
Section 3.19 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority.
"Restricted Period" shall have the meaning set forth in Section 10.6
herein.
"SEC Documents" shall mean the Group 1 Prospectus dated October 29,
1997 and the Form 10-Q for the third quarter ended September 30, 1997.
"Section 338(h)(10) Election" shall have the meaning set forth in
Section 6.15 herein.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments
-5-
<PAGE> 48
or additions to tax resulting from, attributable to or incurred in connection
with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person or any of its
Subsidiaries within six years prior to the date of the Agreement but which have
been terminated prior to the date of the Agreement.
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
-6-
<PAGE> 1
EXHIBIT 10.49
PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
RRN MERGER CORP.,
A WHOLLY-OWNED SUBSIDIARY OF
GROUP 1 AUTOMOTIVE, INC.,
THE LIMITED PARTNERS OF
PRESTIGE CHRYSLER PLYMOUTH NORTHWEST, LTD.
AND
THE STOCKHOLDERS OF
MMK INTERESTS, INC.
DATED AS OF
DECEMBER 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE ACQUISITION
2.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE OWNERS
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.15 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.18 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.20 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE OWNERS
<S> <C> <C>
4.1 Capital Stock and Limited Partnership Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
COVENANTS OF THE OWNERS
6.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Conduct of Business by the Company Pending the Acquisition . . . . . . . . . . . . . . . . . . . . . 19
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Owners' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.14 Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.17 Employment Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE VII
COVENANTS OF GROUP 1
<S> <C> <C>
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Tax Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . . 25
8.2 Additional Conditions Precedent to Obligations of Group 1 . . . . . . . . . . . . . . . . . . . . . 26
8.3 Additional Conditions Precedent to Obligations of the Owners. . . . . . . . . . . . . . . . . . . 27
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Owners to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Agreement by Group 1 to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.6 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.7 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.8 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.15 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-iii-
<PAGE> 5
GROUP 1 AUTOMOTIVE, INC.
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement"), dated as of the 18th day
of December, 1997, is among Group 1 Automotive, Inc., a Delaware corporation
("Group 1"), RRN Merger Corp., a Texas corporation and a wholly-owned
subsidiary of Group 1 ("Acquisition Sub"), the stockholders ("Stockholders")
of MMK Interests, Inc., a Texas corporation (the "General Partner"), and the
limited partners ("Limited Partners") of Prestige Chrysler Plymouth Northwest,
LTD., a Texas limited partnership (the "Company"). The Stockholders and the
Limited Partners are collectively referred to herein as the "Owners" and are
listed on the signature pages hereof under the caption "Owners."
RECITALS:
WHEREAS, the Owners are the holders of all of the issued and
outstanding capital stock of the General Partner;
WHEREAS, the General Partner is the sole general partner of the
Company;
WHEREAS, the Owners are the holders of all of the limited partnership
interests in the Company;
WHEREAS, Acquisition Sub proposes to acquire all of the capital stock
of the General Partner and all of the limited partnership interests in the
Company from the Owners (the "Acquisition") on the terms and conditions set
forth herein;
WHEREAS, Group 1, through certain of its wholly owned subsidiaries,
also proposes to acquire (i) the outstanding capital stock of Maxwell Chrysler
Plymouth Dodge, Inc. and the limited partnership interests of Maxwell Chrysler
Plymouth Dodge Jeep Eagle LTD. and (ii) the outstanding capital stock of
Prestige Chrysler Plymouth, Inc. and the limited partnership interests of
Prestige Chrysler Plymouth South, LTD., pursuant to agreements (the "Other
Agreements") that are similar to this Agreement; and
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which Acquisition Sub shall
purchase, and the Owners shall sell, all of the capital stock of the General
Partner and all of the limited partnership interests in the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
<PAGE> 6
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (c) "or" is not exclusive; (d) "including" means
"including, without limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one
gender shall be construed to apply to each gender; (h) the terms "hereof,"
"herein," "hereby," "hereto" and derivative or similar words refer to this
entire Agreement; (i) the terms "Article" or "Section" shall refer to the
specified Article or Section of this Agreement; and (j) section and paragraph
headings in this Agreement are for convenience only and shall not affect the
construction of this Agreement.
ARTICLE II
THE ACQUISITION
2.1 The Acquisition. At the Closing, each Owner shall sell to
Acquisition Sub and Acquisition Sub shall purchase from each Owner that number
of shares of Common Stock of the General Partner and the limited partnership
interests in the Company as set forth opposite their respective names in
Exhibit A hereto in exchange for the consideration set forth opposite their
respective names in Exhibit A hereto.
2.2 Closing Date. The Closing of the Acquisition as contemplated
by this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
2300 First City Tower, Houston, Texas 77002, as soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII or at such
other time and place and on such other date as Group 1 and the Owners shall
agree; provided, that the conditions set forth in Article VIII shall have been
satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date," and shall be effective as
of the first day of the month in which the Closing Date occurs.
2.3 Transfer of Shares. At the Closing, and subject to the
satisfaction or waiver of the conditions set forth in Article VIII, the Owners
will sell, transfer and deliver that number of shares of Common Stock of the
General Partner and the limited partnership interests in the Company as set
forth opposite their respective names in Exhibit A hereto to Acquisition Sub
(in proper form and duly endorsed for transfer) and Acquisition Sub will
purchase such shares of Common Stock of the General Partner and the limited
partnership interests in the Company and will deliver to the Owners the
consideration (in proper form) set forth opposite their respective names in
Exhibit A hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE OWNERS
The Owners hereby represent and warrant to Group 1 as follows:
3.1 Organization.
(a) The Company is a limited partnership duly organized,
validly existing and in good standing under the laws of the state of Texas with
all requisite power and authority to own or
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<PAGE> 7
lease its properties and conduct its business as now owned, leased or
conducted. A true and complete copy of the limited partnership agreement,
together with all amendments thereto, of the Company is included in Schedule
3.1. The minute books of the Company previously made available to Group 1 are
complete and accurately reflect all action taken prior to the date of this
Agreement by its partners.
(b) The General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas with
all requisite corporate power and authority to own or lease its properties and
conduct its business as now owned, leased or conducted. The General Partner
has conducted no business other than as General Partner of the Company, owns no
property or assets other than its general partner interest in the Company and
has no liabilities or obligations other than as related to its capacity as
general partner of the Company. True and complete copies of the articles of
incorporation and bylaws of the General Partner are included in Schedule 3.1.
The minute books of the General Partner previously made available to Group 1
are complete and accurately reflect all action taken prior to the date of this
Agreement by its board of directors and stockholders in their capacities as
such.
3.2 Qualification. Each of the Company and the General Partner is
duly qualified to do business as a foreign entity and is in good standing in
each jurisdiction in which the nature of the business as now conducted or the
character of the property owned or leased by it makes such qualification
necessary. Schedule 3.2 sets forth a list of the jurisdictions in which each
of the Company and the General Partner is qualified to do business, if any.
3.3 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.3, neither the execution and delivery by the Owners of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by them at, or prior to, the Closing, nor the
performance by the Owners of their obligations under this Agreement or any such
instrument, document or agreement will (assuming receipt of all consents,
approvals, authorizations, permits, certificates and orders disclosed as
requisite in Schedule 3.3) (a) violate or breach the terms of or cause a
default under (i) any applicable Order or any applicable rule or regulation of
any Court or Governmental Authority with respect to the Company or the General
Partner, (ii) any applicable permits received from any Governmental Authority
with respect to the Company or the General Partner, (iii) the limited
partnership agreement of the Company or the articles of incorporation or bylaws
of the General Partner or (iv) any contract or agreement to which the Company
or the General Partner is a party or by which they, or any of their properties,
is bound, or (b) result in the creation or imposition of any Lien on any of the
properties or assets of the Company or the General Partner, or (c) result in
the cancellation, forfeiture, revocation, suspension or adverse modification of
any existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority with respect to the Company or the
General Partner, or (d) with the passage of time or the giving of notice or the
taking of any action of any third party have any of the effects set forth in
clause (a), (b) or (c) of this Section.
3.4 Equity Investments. The General Partner owns no equity
securities, interests or other investments other than its general partner
interest in the Company. The Company owns no equity securities, interests or
other investments in any Person.
-3-
<PAGE> 8
3.5 Capitalization.
(a) The authorized capital stock of the General Partner
consists of 100,000 shares of Common Stock, no par value, of which
10,000 shares are issued and outstanding (with no shares being held in
treasury). Each outstanding share of the Common Stock of the General
Partner has been duly authorized, is validly issued, fully paid and
nonassessable and was not issued in violation of any preemptive rights
of any stockholder. Set forth in Schedule 3.5(a) are the names,
social security or I.R.S. identification numbers and addresses (as
reflected in the corporate records of the General Partner) of each
record holder of the Common Stock of the General Partner, together
with the number of shares held by each such Person. Except as set
forth above, there are no shares of capital stock of, or other equity
interests in, the General Partner authorized, issued or outstanding.
There is not outstanding any ownership interest or other security,
including without limitation any option, warrant or right, entitling
the holder thereof to purchase or otherwise acquire any ownership
interest of the General Partner. There are no contracts, agreements,
commitments or arrangements obligating the General Partner (i) to
issue, sell, pledge, dispose of or encumber any ownership interest of,
or any options, warrants or rights of any kind to acquire, or any
securities that are convertible into or exercisable or exchangeable
for, any ownership interest of, any class of ownership interest of the
General Partner or (ii) to redeem, purchase or acquire or offer to
acquire any ownership interest of, or any outstanding option, warrant
or right to acquire, or any securities that are convertible into or
exercisable or exchangeable for, any ownership interest of, any class
of ownership interest of the General Partner.
(b) The limited partner interest of the Company consists
of the limited partner interests described in Exhibit A attached
hereto. Each outstanding limited partner interest of the Company has
been duly authorized and validly issued in accordance with the limited
partnership agreement of the Company. Set forth in Schedule 3.5(b)
are the names and addresses of each limited partner of the Company
together with the limited partner interest held by each limited
partner. Except as set forth above and except for the general partner
interest of the General Partner, there are no other partnership
interests authorized or outstanding of the Company. There are no
contracts, agreements, commitments, arrangements, rights or options of
any kind to acquire any interest in the Company.
3.6 Financial Statements. Included in Schedule 3.6 are true and
complete copies of the financial statements of the Company consisting of (i) an
unaudited balance sheet of the Company as of November 30, 1997 (the "Interim
Balance Sheet") and the related unaudited statement of income for the eleven
month period then ended (the "Company Interim Financial Statements") and (ii)
an audited balance sheet of the Company as of December 31, 1996 (the "Company
1996 Balance Sheet") and the related audited statements of income, changes in
stockholders' equity and cash flows for the year then ended (including the
notes thereto) (the "Company 1996 Financial Statements") and (collectively with
the Company Interim Financial Statements, the "Company Financial Statements").
The Company Financial Statements present fairly the financial position of the
Company and the results of its operations and changes in financial position as
of the dates and for the periods indicated therein in conformity with GAAP.
The Company Financial Statements do not omit to state any liabilities, absolute
or contingent, required to be stated therein in accordance with GAAP. All
accounts receivable of the Company reflected in the Company Financial
Statements and as incurred
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<PAGE> 9
since November 30, 1997 represent sales made in the ordinary course of
business, are collectible (net of any reserves for doubtful accounts shown in
the Company Interim Financial Statements) in the ordinary course of business
and, except as set forth in Schedule 3.6, are not in dispute or subject to
counterclaim, set-off or renegotiation. Schedule 3.6 contains an aged schedule
of accounts receivable included in the Interim Balance Sheet.
3.7 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet or
as set forth in Schedule 3.7, the Company does not have any liabilities or
obligations of any nature whether absolute, accrued, contingent or otherwise,
and whether due or to become due. The reserves reflected in the Interim
Balance Sheet are adequate, appropriate and reasonable in accordance with GAAP.
3.8 Certain Agreements. Except as set forth in Schedule 3.8,
neither the Company nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a non-competition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
3.9 Contracts and Commitments. Schedule 3.9 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of their officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.10 Absence of Changes. Except as set forth in Schedule 3.10,
there has not been, since December 31, 1996, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.10, since
November 30, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, the
Company makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since December 31,
1996, for any employee who after such increase would receive annual
compensation of less than $50,000.
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<PAGE> 10
3.11 Tax Matters.
(a) Except as set forth in Schedule 3.11, (i) all Tax
Returns which are required to be filed on or before the Closing Date
by or with respect to the Company or the General Partner have been or
will be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each
such Tax Return have been or will be so included and all information
provided in each such Tax Return is true, correct and complete, (iii)
all Taxes which have become or will become due with respect to the
period covered by each such Tax Return have been or will be timely
paid in full, (iv) all withholding Tax requirements imposed on or with
respect to the Company or the General Partner have been or will be
satisfied in full, and (v) no penalty, interest or other charge is or
will become due with respect to the late filing of any such Tax Return
or late payment of any such Tax.
(b) All Tax Returns of, or with respect to, the Company
or the General Partner have been audited by the applicable
governmental authority, or the applicable statute of limitations has
expired, for all periods up to and including December 31, 1996 except
as included on Schedule 3.11(b).
(c) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to the
Company or the General Partner, other than those disclosed (and to
which are attached true and complete copies of all audit or similar
reports) in Schedule 3.11(c).
(d) Except as set forth in Schedule 3.11(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company or the
General Partner, or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of or with respect to the
Company or the General Partner.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes, whether or not assessed or disputed,
which are, or are hereafter found to be, or to have been, due by or
with respect to the Company or the General Partner up to and through
the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
the Company or the General Partner shall be terminated prior to the
Closing Date and no payments shall be due or will become due by the
Company or the General Partner on or after the Closing Date pursuant
to any such agreement or arrangement.
(g) Except as set forth in Schedule 3.11(g), the Company
or the General Partner will not be required to include any amount in
income for any taxable period as a result of a change in accounting
method for any taxable period pursuant to any agreement with any Tax
authority with respect to any such taxable period.
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<PAGE> 11
(h) The General Partner has not consented to have the
provisions of section 341(f)(2) of the Code apply with respect to a
sale of its stock.
(i) Except as set forth in Schedule 3.11(i), the General
Partner has been a validly electing S corporation within the meaning
of sections 1361 and 1362 of the Code at all times since its
incorporation and the General Partner will be an S corporation up to
and including the Closing Date. From the end of its most recent tax
year through the Closing Date, each holder of the stock of the General
Partner has been an individual resident of the United States or an
estate or trust described in section 1361(c)(2) of the Code that is
permitted to hold the stock of an S corporation. The General Partner
will not be liable for any tax under section 1374 of the Code in
connection with the deemed sale of the General Partner's assets caused
by the Section 338(h)(10) Elections. In the past 10 years, the
General Partner has not (a) acquired assets from another corporation
in a transaction in which the General Partner's federal income tax
basis in the acquired assets was determined, in whole or in part, by
reference to the federal income tax basis of the acquired assets (or
any other property) in the hands of the transferor or (b) acquired the
stock of any corporation which is a qualified subchapter S subsidiary,
as defined in section 1361(b)(3)(B) of the Code.
(j) The Company has been a partnership within the meaning
of section 7701(a)(2) of the Code, taxable under Subchapter K of the
Code, at all times since its formation and the Company will be a
partnership up to an including the Closing Date.
3.12 Litigation.
(a) Except as set forth in Schedule 3.12(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Owners, threatened against or
specifically affecting the Company or the General Partner before or by
any Court or Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.12(b), each of the Company and
the General Partner has performed all obligations required to be
performed by it to date and is not in default under, and, to the
knowledge of the Owners, no event has occurred which, with the lapse
of time or action by a third party could result in a default under any
contract or other agreement to which the Company or the General
Partner is a party or by which they or any of their properties is
bound or under any applicable Order of any Court or Governmental
Authority.
3.13 Compliance with Law. Except as set forth in Schedule 3.13,
each of the Company and the General Partner in compliance with all applicable
statutes and other applicable laws and all applicable rules and regulations of
all federal, state, foreign and local governmental agencies and authorities.
3.14 Permits. Except as set forth in Schedule 3.14, the Company or
the General Partner owns or holds all franchises, licenses, permits, consents,
approvals and authorizations of all Governmental Authorities necessary for the
conduct of their business. Each franchise, license, permit, consent, approval
and authorization so owned or held is in full force and effect, and each of
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<PAGE> 12
the Company and the General Partner is in compliance with all of its
obligations with respect thereto, and no event has occurred which allows, or
upon the giving of notice or the lapse of time or otherwise would allow,
revocation or termination of any franchise, license, permit, consent, approval
or authorization so owned or held.
3.15 Employee Benefit Plans and Policies.
(a) Schedule 3.15(a) provides a description of each of
the following which is sponsored, maintained or contributed to by the
Company for the benefit of its employees, or has been so sponsored,
maintained or contributed to within six years prior to the Closing
Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not described in Section 2.17(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) The Company does not contribute to or have an
obligation to contribute to, and have not at any time contributed to
or had an obligation to contribute to, a plan subject to Title IV of
ERISA, including, without limitation, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(c) Except as otherwise set forth in Schedule 3.15(c),
(i) Each Plan and each Benefit Program or
Agreement has been administered, maintained and operated in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where
applicable, ERISA and the Code);
(ii) There is no matter pending with respect to
any of the Plans before any governmental agency, and there are
no actions, suits or claims pending (other than routine claims
for benefits) or threatened against, or with respect to, any
of the Plans or Benefit Programs or Agreements or their
assets;
(iii) No act, omission or transaction has occurred
which would result in imposition on the Company of (A) breach
of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or
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<PAGE> 13
(l) of Section 502 of ERISA or (C) a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code;
(iv) Each of the Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section, has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which
would adversely affect such qualified status;
(v) As to any Plan intended to be qualified under
Section 401 of the Code, there has been no termination or
partial termination of the Plan within the meaning of Section
411(d)(3) of the Code; and
(vi) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
will not (A) require the Company to make a larger contribution
to, or pay greater benefits under, any Plan or Benefit Program
or Agreement than it otherwise would or (B) create or give
rise to any additional vested rights or service credits under
any Plan or Benefit Program or Agreement.
(d) There does not currently exist, and there has not at
any time existed, any corporation, trade, business or entity under
common control with the Company, within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
(e) Termination of employment of any employee of the
Company after consummation of the transactions contemplated by this
Agreement would not result in payments under the Plans or Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of
the Code.
(f) Each Plan which is an "employee welfare benefit
plan", as such term is defined in Section 3(1) of ERISA, may be
unilaterally amended or terminated in its entirety without liability
except as to benefits accrued thereunder prior to such amendment or
termination.
(g) Schedule 3.15(g) sets forth by name and job
description of the employees of the Company as of the date of this
Agreement (the "Company Employees"). None of said employees are
subject to union or collective bargaining agreements. The Company has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.16 Properties.
(a) The Company does not own any real property or any
interest therein except as set forth in Schedule 3.16(a)
(individually, an "Owned Property" and collectively, the "Owned
Properties"), which sets forth the location and size of, principal
improvements and buildings on, and Liens on the Owned Properties.
True and correct copies of all Liens are attached to Schedule 3.16(a).
Schedule 3.16(a) also sets forth the location and size of,
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<PAGE> 14
principal improvements and buildings on all parcels of real estate
leased by the Company (individually, a "Leased Property" and
collectively, the "Leased Properties"). Except as set forth in
Schedule 3.16(a), with respect to each Owned Property and Leased
Property:
(i) the Company has good and valid leasehold
interests in each parcel of its Owned Property and Leased
Property, free and clear of any Lien other than Permitted
Encumbrances;
(ii) there are no pending or, to the knowledge of
the Owners, threatened condemnation proceedings, suits or
administrative actions relating to the Owned Properties or the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) except as set forth in Schedule 3.16(a), to
the knowledge of the Owners, the legal descriptions for the
parcels of Owned Property and Leased Property contained in the
deeds thereof describe such parcels fully and adequately; the
buildings and improvements are located within the boundary
lines of the described parcels of land, are not in violation
of applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances (and none of the
properties or buildings or improvements thereon are subject to
"permitted non-conforming use" or "permitted non-conforming
structure" classifications), building code requirements,
permits, licenses or other forms of approval by any
Governmental Authority, and do not encroach on any easement
which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Owned Property and Leased Property, except as set
forth in Schedule 3.16(a);
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Owned Property or, to
the knowledge of the Owners, the Leased Property, or any
portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Owned Property or Leased
Property, other than tenants under any leases disclosed in
Schedule 3.16(a) who are in possession of space to which they
are entitled;
(viii) all facilities located on the parcels of
Owned Property and Leased Property are supplied with utilities
and other services necessary for the operation of such
facilities;
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<PAGE> 15
(ix) each parcel of Owned Property and Leased
Property abuts on and has direct vehicular access to a public
road, or has access to a public road;
(x) all improvements and buildings on the Owned
Property and Leased Property are in good repair and adequate
for the use of such Owned Property and Leased Property in the
manner in which presently used; and
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Owned Property or Leased Property, except as set
forth in Schedule 3.16(a).
(b) Except as set forth in Schedule 3.16(b), each of the Company
has good and marketable title to all of its Assets, free and clear of any Liens
or restrictions on use. The Fixed Assets currently in use for the business and
operations of the Company are in good operating condition, normal wear and tear
excepted and have been maintained in accordance with sound industry practices.
3.17 Insurance. Schedule 3.17 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.17, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. The Company has not
received any notice or other communication from any such insurer canceling or
materially amending any of such insurance policies, and no such cancellation is
pending or threatened. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.18 Affiliate Interests. Except as set forth in Schedule 3.18, no
employee, officer or director, or former employee, officer or director, of the
Company or the General Partner has any interest in any property, tangible or
intangible, including without limitation, patents, trade secrets, other
confidential business information, trademarks, service marks or trade names,
used in or pertaining to the business of the Company, except for the normal
rights of employees, partners, and stockholders.
3.19 Environmental Matters. Except as set forth in Schedule 3.19,
to the best of Owners' knowledge:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking,
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<PAGE> 16
dumping, discharging, release or disposal of Hazardous Substances, or
other Waste. The Company is currently not liable for any penalties,
fines or forfeitures for failure to comply with any Environmental
Laws. The Company is in compliance with all required notice, record
keeping and reporting requirements of all Environmental Laws, and has
complied with all informational requests or demands arising under the
Environmental Laws.
(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of its business as presently conducted, including, without limitation,
all air emission, water discharge, water use and solid waste,
hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses (a listing of such items being
included in Schedule 3.19(b), and the Company is in compliance with
all the terms, conditions and requirements of such Licenses, and
copies of such Licenses have been made available to Group 1. There
are no administrative or judicial investigations, notices, claims or
other proceedings pending or threatened by any Governmental Authority
or third parties against the Company or its business, operations,
properties, or assets, which question the validity or entitlement of
the Company to any License required by the Environmental Laws for the
ownership of each of the respective properties and assets of the
Company and the operation of its business.
(c) The Company has not received or is aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of their business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle, treat,
spill, leak, dump, discharge, release or dispose of, any material
quantities of Hazardous
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<PAGE> 17
Substances or other waste upon property currently or previously owned
or leased by it, except in compliance with Environmental Laws.
(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or to any properties adjacent thereto
except in compliance with the Environmental laws. There has not
occurred, nor is there presently occurring, a Release or Discharge, or
threatened Release or Discharge, of any Hazardous Substance on, into
or beneath the surface of the Owned Properties or to any properties
adjacent thereto.
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor has it allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Owners have received notice or have knowledge of any
facts which could give rise to any notice, that the Company is a
potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA, RCRA or any other
applicable Environmental Laws. The Company has not submitted nor was
required to submit any notice pursuant to Section 103(c) of CERCLA
with respect to any properties owned by, or used in the business of,
the Company. The Company has not received any written or, to the
knowledge of the Owners, oral request for information in connection
with any federal or state environmental cleanup site, or in connection
with any of the real property or premises where the Company has
transported, transferred or disposed of other Wastes. The Company has
not been required to nor has undertaken any response or remedial
actions or clean-up actions at the request of any Governmental
Authorities or at the request of any other third party. The Company
has no liability under any Environmental Laws for personal injury,
property damage, natural resource damage, or clean up obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.19(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which the Company or the
Owners are aware undertaken by the Company or their agents, or by the
Owners, or by any Governmental Authority, or by any third party,
relating to the Company, or any of the Leased Properties; (ii) the
results of which the Company or the Owners are aware of any ground,
water, soil, air or asbestos monitoring undertaken by the Company or
its agents, or by the Owners, or by any Governmental Authority, or by
any third party, relating to the Company, or any of the Owned
Properties; (iii) all written communications between the Company and
any Governmental Authority arising under or related to Environmental,
Laws; and (iv) all citations issued under OSHA, or similar state or
local
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<PAGE> 18
statutes, laws, ordinances, codes, rules, regulations, orders,
rulings, or decrees, relating to or affecting the Company, or any of
the Owned Properties.
(j) Schedule 3.19(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.19(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule
3.19(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, or threatened against or directly affecting the
Company or any of its assets or operations relating to the use,
handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
(k) Any references in this Section 3.19 to the "Owned
Properties" are deemed to also refer to any properties previously
owned by the Company.
3.20 Intellectual Property. Except as set forth in Schedule 3.20,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that is necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Owners, (a) the use of the Intellectual Property by the Company does not
infringe on the rights of any Person, and (b) no Person is infringing on any
right of the Company with respect to any Intellectual Property. No claims are
pending or, to the knowledge of the Owners threatened, that the Company is
infringing or otherwise adversely affecting the rights of any Person with
regard to any Intellectual Property. To the knowledge of the Owners, no Person
is infringing the rights of the Company with respect to any Intellectual
Property. All of the Intellectual Property that is owned by the Company is
owned free and clear of all encumbrances and was not misappropriated from any
Person. All of the Intellectual Property that is licensed by the Company is
licensed pursuant to valid and existing license agreements. The consummation
of the transactions contemplated by this Agreement will not result in the loss
of any Intellectual Property.
3.21 Bank Accounts. Schedule 3.21 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.22 Brokers. Except as disclosed in Schedule 3.22, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
3.23 Disclosure. The Company has disclosed in writing, or pursuant
to this Agreement and the Schedules attached hereto, all facts material to the
business, assets, prospects and condition (financial or otherwise) of the
Company. No representation or warranty to Group 1 by the Owners contained in
this Agreement, and no statement contained in the Schedules attached hereto,
any certificate, list or other writing furnished to Group 1 by the Owners
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, contains any untrue statement of a
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material fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any certificate, list, document
or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed a representation and warranty
of the Owners for all purposes of this Agreement.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE OWNERS
Each Owner hereby, severally and not jointly, represents and warrants
to Group 1 that:
4.1 Capital Stock and Limited Partnership Interests. Such Owner
is the beneficial and record owner of the number of shares of Common Stock of
the General Partner and limited partnership interests in the Company as set
forth in Exhibit A, free and clear of any lien, claim, pledge, encumbrance or
other adverse claim. Except for such shares of Common Stock of the General
Partner and limited partnership interests in the Company set forth in Exhibit A
hereto, such Owner does not own, beneficially or of record, any capital stock
or other security, including without limitation any option, warrant or right
entitling the holder thereof to purchase or otherwise acquire any shares of
capital stock of the General Partner or any partnership interest of the
Company.
4.2 Authorization of Agreement.
(a) Such Owner has full legal right, power, capacity and
authority to execute, deliver and perform its obligations pursuant to
this Agreement and to execute, deliver and perform its obligations
under each instrument, document or agreement required hereby to be
executed and delivered by such Owner at, or prior to, the Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
such Owner at, or prior to, the Closing will then be, duly executed
and delivered by such Owner, and this Agreement constitutes and, to
the extent it purports to obligate such Owner, each such instrument,
document or agreement will constitute (assuming due authorization,
execution and delivery by each other party thereto), the legal, valid
and binding obligation of such Owner enforceable against it in
accordance with its terms.
4.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Governmental
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
such Owner to execute, deliver or perform this Agreement or any instrument
required hereby to be executed and delivered by it at the Closing.
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by such Owner of this
Agreement or any instrument, document or agreement
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required hereby to be executed and delivered by it at, or prior to, the
Closing, nor the performance by such Owner of its obligations under this
Agreement or any such instrument will (a) violate or breach the terms of or
cause a default under (i) any applicable Law, (ii) any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority, (iii)
the organizational documents of such Owner, if applicable, or (iv) any contract
or agreement to which such Owner is a party or by which it, or any of its
properties, is bound, or (b) result in the creation or imposition of any Lien
on any of the properties or assets of such Owner, or (c) result in the
cancellation, forfeiture, revocation, suspension or adverse modification of any
existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority, or (d) with the passage of time
or the giving of notice or the taking of any action of any third party have any
of the effects set forth in clause (a), (b) or (c) of this Section.
4.5 Investment Intent. Each Owner makes the following
representations relating to its acquisition of shares of Group 1 Common Stock:
(i) such Owner will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Acquisition to such Owner solely for such Owner's
account, for investment purposes only and with no current intention or plan to
distribute, sell or otherwise dispose of any of those shares in connection with
any distribution; (ii) such Owner is not a party to any agreement or other
arrangement for the disposition of any shares of Group 1 Common Stock; (iii)
such Owner is an "accredited investor" as defined in Securities Act Rule
501(a); (iv) such Owner (A) is able to bear the economic risk of an investment
in the Group 1 Common Stock acquired pursuant to this Agreement, (B) can afford
to sustain a total loss of that investment, (C) has such knowledge and
experience in financial and business matters, and such past participation in
investments, that he or she is capable of evaluating the merits and risks of
the proposed investment in the Group 1 Common Stock, (D) has received and
reviewed the SEC Documents, (E) has had an adequate opportunity to ask
questions and receive answers from the officers of Group 1 concerning any and
all matters relating to the transactions contemplated hereby, including the
background and experience of the current officers and directors of Group 1, the
plans for the operations of the business of Group 1, the business, operations
and financial condition of Group 1 and any plans of Group 1 for additional
acquisitions, and (F) has asked all questions of the nature described in the
preceding clause (E), and all those questions have been answered to his or her
satisfaction; (v) such Owner acknowledges that the shares of Group 1 Common
Stock to be delivered to such Owner pursuant to the Acquisition have not been
and will not be registered under the Securities Act or qualified under
applicable blue sky laws and therefore may not be resold by such Owner without
compliance with Rule 144 of the Securities Act; (vi) such Owner acknowledges
that he or she has agreed, pursuant to Section 10.6 herein, not to sell the
shares of Group 1 Common Stock to be delivered to such Owner pursuant to the
Acquisition for a period of one year from the Closing Date; (vii) such Owner,
if a corporation, partnership, trust or other entity, acknowledges that it was
not formed for the specific purpose of acquiring the Group 1 Common Stock; and
(viii) without limiting any of the foregoing, such Owner agrees not to dispose
of any portion of Group 1 Common Stock unless either (1) a registration
statement under the Securities Act is in effect as to the applicable shares and
the disposition is made in accordance with that registration statement, or (2)
the Owner has notified Group 1 of the proposed disposition, such disposition is
made through a national brokerage firm selected by Group 1 and the Owner to
offer disposition services for Group 1 Common Stock subject to SEC Rule 144 and
such disposition is made in compliance with any other requirements of the
Securities Act. Additionally, for the three- year period following the Closing
Date a disposition pursuant to (viii)(2) above may be made only if the Owner
has notified
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Group 1 of the proposed disposition and the disposition is made through a
national brokerage firm selected by Group 1 and the Owner to offer disposition
services for Group 1 Common Stock (in the absence of agreement between Group 1
and the Owner seeking to make a disposition, Goldman, Sachs & Co., Inc. will be
the firm to handle such disposition).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
Group 1 hereby represents and warrants to the Owners that:
5.1 Corporate Organization. Group 1 and Acquisition Sub are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions of their incorporation with all requisite corporate
power and authority to execute, deliver and perform this Agreement and each
instrument required hereby to be executed and delivered by them at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Acquisition Sub of this Agreement, the performance by Group 1 and Acquisition
Sub of their obligations pursuant to this Agreement, and the execution,
delivery and performance of each instrument required hereby to be executed and
delivered by Group 1 and Acquisition Sub at the Closing have been duly and
validly authorized by all requisite corporate action on the part of Group 1 and
Acquisition Sub. This Agreement has been, and each instrument, document or
agreement required hereby to be executed and delivered by Group 1 and
Acquisition Sub at, or prior to, the Closing will then be, duly executed and
delivered by Group 1 and Acquisition Sub. This Agreement constitutes, and, to
the extent it purports to obligate Group 1 and Acquisition Sub, each such
instrument, document or agreement will constitute (assuming due authorization,
execution and delivery by each other party thereto), the legal, valid and
binding obligation of Group 1 and Acquisition Sub, enforceable against them in
accordance with its terms.
5.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Group 1 and Acquisition Sub, to execute, deliver or consummate the transactions
contemplated by this Agreement or any instrument required hereby to be executed
and delivered by Group 1 and Acquisition Sub at or prior to the Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 and Acquisition Sub of this Agreement or any instrument required hereby
to be executed by them at or prior to the Closing nor the performance by Group
1 and Acquisition Sub of their obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Order or any applicable rule or regulation of any Court or
Governmental Authority, (ii) the organizational documents of Group 1 and
Acquisition Sub or (iii) any contract or agreement to which Group 1 and
Acquisition Sub are parties or by which they or any of their property is bound,
or (b) result in the creation or imposition of any Liens on any of the
properties or assets of Group 1 and Acquisition Sub (other than any Lien
created by the Company), or (c) result in the cancellation,
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forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit certificate or order of any
Court or Governmental Authority or (d) with the passage of time or the giving
of notice or the taking of any action by any third party have any of the
effects set forth in clause (a), (b) or (c) of this Section, except, with
respect to clauses (a), (b), (c) or (d) of this Section, where such matter
would not have a material adverse effect on the business, assets, prospects or
condition (financial or otherwise) of Group 1 and its subsidiaries, taken as a
whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Acquisition are duly authorized and will,
when issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1933 and 1934
and the rules and regulations of the Commission promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Group 1 included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, have been prepared in accordance with GAAP
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of Group 1 and its
consolidated subsidiaries as of the dates thereto and the consolidated results
of their operations and cash flows for the periods then ended (except in the
case of interim period financial information, for normal year-end adjustments).
ARTICLE VI
COVENANTS OF THE OWNERS
6.1 Acquisition Proposals. Prior to the Closing Date, neither the
Company or the General Partner, any of their officers, directors, employees or
agents nor any Owner shall agree to, solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition, business
combination or purchase of all or a substantial portion of the assets of, or a
substantial equity interest in, the Company or the General Partner, other than
the transactions with Group 1 contemplated by this Agreement.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Owners pursuant to this Agreement.
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6.3 Conduct of Business by the Company Pending the Acquisition.
The Owners covenant and agree that, from the date of this Agreement until the
Closing Date, unless Group 1 shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement:
(a) The business of the Company and the General Partner
shall be conducted only in, and the Company and the General Partner
shall not take any action except in, the ordinary course of business
and consistent with past practice. In connection therewith, the
parties agree that the Company may dealer trade vehicles for similar
models, but the Company shall not liquidate or otherwise dispose of
any of its new vehicles other than in the ordinary course of business
to retail buyers. The Company shall maintain its advertising
expenditures and activities commensurate with prior business
practices. The Company shall not advertise a "Going Out of Business"
sale;
(b) The Company and the General Partner shall not,
directly or indirectly do any of the following: (i) issue, sell,
pledge, dispose of or encumber, (A) any capital stock (or securities
convertible into capital stock) of the General Partner or partnership
interests of the Company or (B) other than in the ordinary course of
business and consistent with past practice and not relating to the
borrowing of money, any assets of the Company, (ii) amend or propose
to amend the articles of incorporation or bylaws (or other
organizational documents) of the General Partner or the limited
partnership agreement of the Company, (iii) split, combine or
reclassify any outstanding capital stock of the General Partner or
declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to the capital stock of the General
Partner whether now or hereafter outstanding, (iv) redeem, purchase or
acquire or offer to acquire any of the capital stock of the General
Partner or any partnership interests of the Company, (v) create,
incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money (other than floor plan
indebtedness incurred in the ordinary course of business) after
November 30,1997 in excess of the cash consideration to be paid to the
Owners at Closing for their limited partnership interests as set forth
in Exhibit A attached hereto, or (vi) except in the ordinary course of
business and consistent with past practice, enter into any contract,
agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
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(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than normal, annual compensation
increases consistent with the Company's past practices; and shall not
grant, to any individual, severance or termination pay that exceeds
the lesser of (i) such individual's compensation for the calendar
month immediately preceding such individual's grant of severance or
termination pay, or (ii) $5,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Acquisition set forth in
Article VIII not being satisfied; provided, however, that no such
notification shall affect the representations or warranties or
covenants or agreements of the parties or the conditions to the
obligations of the parties hereunder;
(h) The Company shall not (i) amend or terminate any Plan
or Benefit Program or Agreement except as may be required by
applicable law, (ii) increase or accelerate the payment or vesting of
the amounts payable under any Plan or Benefit Program or Agreement, or
(iii) adopt or enter into any personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting
agreement, employment agreement or any other employee benefit plan,
agreement, arrangement, program, practice or understanding (other than
the Plans and the Benefit Programs or Agreements);
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement; and
(j) The Owners shall be entitled to a distribution, in
cash, in amounts required to cause the net book values on a tax
accounting basis of the Company and the General Partner at the end of
the month prior to the Closing Date to equal zero.
(k) The Owners will not revoke the Company's election to
be taxed as an S corporation within the meaning of sections 1361 and
1362 of the Code.
6.4 Confidentiality. The Owners shall, and the Owners shall cause
the Company's and the General Partner's officers, directors, employees,
representatives and consultants, to hold in confidence, and not to disclose to
others for any reason whatsoever, any non-public information
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received by them or their representatives in connection with the transactions
contemplated hereby, including but not limited to all terms, conditions and
agreements related to this transaction, except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of the Company
and the General Partner as necessary in connection with the transactions
contemplated hereby; and (iii) for information which becomes publicly available
other than through the actions of the Company, the General Partner or an Owner.
In the event the Acquisition is not consummated, the Company, the General
Partner and the Owners will return all non-public documents and other material
obtained from Group 1 or its representatives in connection with the
transactions contemplated hereby or certify to Group 1 that all such
information has been destroyed.
6.5 Notification of Certain Matters. The Owners shall give prompt
notice to Group 1, orally and in writing, of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Closing, (ii) any failure of
the Company, or any officer, director, employee or agent thereof, or any Owner
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder, or (iii) any litigation, or any claim or
controversy or contingent liability of which the Company or any Owner has
knowledge of that might reasonably be expected to become the subject of
litigation, against the Company or the General Partner or affecting any of
their assets, in each case in an amount in controversy in excess of $50,000, or
that is seeking to prohibit or restrict the transactions contemplated hereby.
6.6 Consents. Subject to the terms and conditions of this
Agreement, the Company and the General Partner shall (i) obtain all consents,
waivers, approvals (including all applicable automobile manufacturers
approvals, and such approvals shall not contain any unreasonably burdensome
restrictions on the Company, the General Partner or Group 1), authorizations
and orders required in connection with the authorization, execution and
delivery of this Agreement and the consummation of the Acquisition; and (ii)
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary or proper to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, the Company and
the Owners shall cooperate and use reasonable efforts to cooperate in the
defense against and response thereto. Costs, including attorneys' fees,
associated with any such defense will be borne by Group 1.
6.8 Owners' Agreements Not to Sell. Each of the Owners hereby
covenants and agrees not to sell, pledge, transfer or dispose of or encumber
any shares of Common Stock of the General Partner or limited partnership
interests of the Company currently owned, either beneficially or of record, by
such Owner, except under this Agreement.
6.9 Intellectual Property Matters. The Company shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
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domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
6.10 Removal of Related Party Guarantees. The Owners agree to
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to terminate, waive or release
all Company guarantees (such guarantees shall be referred to herein as "Related
Guarantees", as described in Schedule 6.10 pursuant to Section 3.9 of this
Agreement) of indebtedness or other obligations of any of the Company's or the
General Partner's officers, directors, shareholders or employees or their
affiliates.
6.11 Termination of Related Party Agreements. The Owners agree to
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to terminate the Related Party
Agreements except those Related Party Agreements that are disclosed in Schedule
6.11 as agreements that shall not be subject to this Section 6.11.
6.12 Related Party Agreements. The Owners agree to cause the
Company and the General Partner not to enter into any Related Party Agreements
or engage in any transactions with the Owners or their affiliates; except for
those Related Party Agreements or transactions with affiliates that are
disclosed in Schedule 6.12 as agreements or transactions that shall not be
subject to this Section 6.12.
6.13 Release.
(a) AS OF THE CLOSING, EACH OF THE OWNERS DOES HEREBY FOR HIMSELF
OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES REMISE,
RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY AND THE GENERAL PARTNER OF
AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES,
CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE WHATSOEVER, LIQUIDATED OR
UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED, FIXED OR CONTINGENT,
WHICH EACH OF SUCH OWNERS NOW HAS, OWNS OR HOLDS OR HAS AT ANY TIME PREVIOUSLY
HAD, OWNED OR HELD AGAINST THE COMPANY OR THE GENERAL PARTNER INCLUDING WITHOUT
LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE NEGLIGENCE, GROSS
NEGLIGENCE AND WILLFUL ACTS OF THE COMPANY OR THE GENERAL PARTNER AND THEIR
EMPLOYEES AND AGENTS, EXISTING AS OF THE CLOSING OR RELATING TO ANY MATTER THAT
OCCURRED ON OR PRIOR TO THE CLOSING; PROVIDED, HOWEVER, THAT ANY CLAIMS,
LIABILITIES, DEBTS OR CAUSES OF ACTION THAT MAY ARISE IN CONNECTION WITH THE
FAILURE OF ANY OF THE PARTIES HERETO TO PERFORM ANY OF THEIR OBLIGATIONS
HEREUNDER OR UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS
OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS SHALL
NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT; AND PROVIDED FURTHER
ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS OR AGREEMENTS LISTED ON THE
SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) EACH OF THE OWNERS REPRESENTS AND WARRANTS THAT HE HAS NOT
PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO ANY
PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS,
LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS
RELEASED HEREIN. EACH OF THE OWNERS COVENANTS AND AGREES THAT HE WILL NOT
ASSIGN
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OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS,
DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR
OBLIGATIONS TO BE RELEASED HEREIN. EACH OF THE OWNERS REPRESENTS AND WARRANTS
THAT HE HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION 6.13 AND
THAT HE HAS BEEN REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN CONNECTION
WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Certain Tax Matters.
(a) The Owners agree to use the amounts reflected on
Exhibit A hereto for purposes of preparation of their Tax Returns.
With respect to the shares of Group 1 Common Stock received by the
Owners, $14.00 per share will be used for purposes of determining the
value of the stock portion of the purchase price.
(b) The Owners shall (i) file all required 1998 federal
income tax returns relating to their ownership of the General Partner
and the Company within seventy-five (75) days after the Closing Date;
(ii) use an interim closing of the books of the General Partner and
the Company effective as of the Closing Date for the purposes of
preparing such returns; and (iii) deliver such returns to Group 1 for
its review at least five (5) days prior to the filing of such returns.
6.15 Section 338(h)(10) Elections.
(a) The Owners and Group 1 shall join in making a timely,
irrevocable and effective election under section 338(h)(10) of the
Code and a similar election under any applicable state income tax law
(collectively the "Section 338(h)(10) Elections") with respect to
Group 1's purchase of the Common Stock of the General Partner. To
facilitate such election, at the Closing the Owners shall deliver to
Group 1 an Internal Revenue Service Form 8023 and any similar forms
under applicable state income tax law (the "Forms") with respect to
Group 1's purchase of the Common Stock of the General Partner, which
Forms shall have been duly executed by an authorized person for the
Owners. Group 1 shall cause the Forms to be duly executed by an
authorized person for Group 1, shall complete the schedules required
to be attached thereto, shall provide a copy of the executed Form and
schedules to the Owners, and shall duly and timely file the Forms as
prescribed by Treasury Regulation 1.338(h)(10)-1 or the corresponding
provisions of applicable state income Tax law. None of the Owners or
Group 1 shall take any action to rescind, revoke or modify the Section
338(h)(10) Election without the prior written approval of the other
party. Group 1 shall be responsible for any Texas franchise Tax on
the deemed gain triggered by the Section 338(h)(10) Elections.
(b) The Owners and Group 1 shall jointly determine the
liabilities of the General Partner and allocate the purchase price,
such liabilities, and other relevant items in accordance with the Code
and the Treasury Regulations promulgated thereunder. The Owners and
Group 1 shall jointly prepare all schedules required to be attached to
the Forms (the "Form Schedules"). The Owners and Group 1 shall
prepare all relevant Tax Returns in a manner consistent with the Form
Schedules. With respect to any items included in the Form Schedules
as to which Group 1 and the Owners are unable to jointly agree, the
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allocation proposed by Group 1 shall be reflected on the Form
Schedules. The parties have previously reviewed and examined the
tangible personal property and other assets of the Company, and agree
that the fair market value of such assets at the Closing Date will be
equal to each such asset's adjusted tax basis, net of depreciation for
the Company's tax period ending on the Closing Date. The balance of
the purchase price will be attributed to the goodwill of the Company.
6.16 Section 754 Election. If requested in writing to do so by
Group 1, the Owners and the Company will elect under section 754 of the Code
and Treasury Regulations Section 1.754-1(b)(1) to apply the provisions of
section 734(b) of the Code and section 743(b) of the Code.
6.17 Employment Agreement. Thomas Nyle Maxwell, Jr. agrees to
enter into, on or prior to the Closing Date, an employment agreement with Group
1 in form and substance substantially similar to Exhibit B attached hereto.
6.18 Consulting Agreements. Thomas Nyle Maxwell, Sr. and Clarence
J.Kellerman agree to enter into, on or prior to the Closing Date, a consulting
agreement with Group 1 in form and substance substantially similar to Exhibit C
attached hereto.
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Confidentiality. Group 1 agrees, and Group 1 agrees to cause
its officers, directors, employees, representatives and consultants, to hold in
confidence all, and not to disclose to others for any reason whatsoever, any
non-public information received by it or its representatives in connection with
the transactions contemplated hereby except (i) as required by law; (ii) for
disclosure to officers, directors, employees and representatives of Group 1 as
necessary in connection with the transactions contemplated hereby or as
necessary to the operation of Group 1's business; and (iii) for information
which becomes publicly available other than through the actions of Group 1. In
the event the Acquisition is not consummated, Group 1 will return all
non-public documents and other material obtained from the Company or its
representatives in connection with the transactions contemplated hereby or
certify to the Company that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Acquisition.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
Acquisition; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
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7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Group 1 agrees to
cooperate and use reasonable efforts to cooperate in the defense against and
response thereto. Costs, including attorneys' fees, associated with any such
defense will be borne by Group 1.
7.5 Tax Valuation. Group 1 agrees to use the amounts reflected on
Exhibit A hereto for purposes of preparation of its Tax Returns. With respect
to the shares of Group 1 Common Stock received by the Owners, $14.00 per share
will be used for purposes of determining the value of the stock portion of the
purchase price.
7.6 Guaranteed Price. If an Owner sells any of the Group 1
Common Stock received by such Owner pursuant to this Agreement for a per share
price of less than fourteen dollars ($14.00), subject to adjustment for stock
splits and stock dividends, Group 1 shall pay in cash the difference between
the purchase price for shares sold and the price such Owner would have received
if the shares were sold at $14.00 per share, subject to adjustment for stock
splits and stock dividends; provided, that this Section 7.6 shall only apply to
sales (i) occurring after the expiration of the Restricted Period and (ii) made
in the public market; and provided, further that this Section 7.6 shall
terminate on the date six years after the expiration of the Restricted Period.
7.7 Removal of Personal Guarantees. Group 1 will use commercially
reasonable efforts to have all personal guarantees of any of the Company's or
the General Partner's officers, directors, shareholders or partners of any
obligation of the Company or the General Partner terminated, waived or
released.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the
Acquisition;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Acquisition;
(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated; and
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(d) Chrysler Corporation shall have approved the
Acquisition and the transactions contemplated thereby.
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Owners
contained in Article III and Article IV, respectively, shall be true
and correct in all respects as of the date when made and as of the
Closing Date as though such representations and warranties had been
made at and as of the Closing Date; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by the
Company and the Owners on or before the Closing Date shall have been
duly complied with and performed in all respects, and a certificate to
the foregoing effect dated the Closing Date and signed by the chief
executive officer of the Company and each of the Owners shall have
been delivered to Group 1.
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Acquisition and the transactions
contemplated thereby will be in compliance with applicable laws.
(c) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.10 and 6.11 hereto.
(d) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have occurred, and the
Company shall not have suffered any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting
the properties or business of the Company and Group 1 shall have
received a certificate signed by the chief executive officer of the
Company and the Owners dated the Closing Date to such effect.
(e) Receipt by Group 1 of an employment agreement
executed by Thomas Nyle Maxwell, Jr., in form and substance
substantially similar to Exhibit B hereto;
(f) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements.
(g) Receipt by Group 1 of consulting agreements executed
by each of Thomas Nyle Maxwell, Sr. and Clarence J. Kellerman in form
and substance substantially similar to Exhibit C hereto.
(i) Group 1 shall have received, at Group 1's expense, a
current survey of the Owned Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1.
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(j) Receipt by Group 1 of the consent of Chrysler Realty
Corporation, as lessor to the Company, under that certain Dealer Lease
Agreement dated August 19, 1993, to this Agreement and the
transactions contemplated hereby; and
8.3 Additional Conditions Precedent to Obligations of the Owners.
The obligation of the Owners to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date; all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Group 1 shall have
been delivered to the Owners.
(b) Receipt by Thomas Nyle Maxwell, Jr. of an employment
agreement executed by Group 1, in form and substance substantially
similar to Exhibit B hereto.
(c) Receipt by Thomas Nyle Maxwell, Sr. and Clarence J.
Kellerman of consulting agreements executed by Group 1 in form and
substance substantially similar to Exhibit C hereto.
(d) Satisfaction or waiver of the conditions set forth in
Article VIII of each of the Other Agreements.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by the Owners to indemnify. Each of the Owners
agrees to severally indemnify, defend and hold Group 1 harmless (subject to the
limitations set forth in Section 9.1(e) below) from and against the aggregate
of all Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all actual
expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and
expenses) incurred or suffered by Group 1, on a pre-tax consolidated
basis to the extent (i) resulting from any breach of a representation
or warranty made by the Owners in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by the
Owners pursuant to this Agreement, or (iii) resulting from any
inaccuracy in any certificate delivered by the Company or any of the
Owners pursuant to this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Group 1
shall have the right to be put in the same pre-tax consolidated
financial position as Group 1 would have been in had each of the
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representations and warranties of the Owners hereunder been true and
correct and had the covenants and agreements of the Company and the
Owners hereunder been performed in full.
(c) Each of the representations and warranties made by
the Owners in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date except the
representations and warranties of the Owners contained in Section 3.11
which shall survive for the period of the statute of limitations and
Sections 3.1, 3.2, 3.3, 3.4, 3.5, 4.1, 4.2, 4.3 and 4.4, which shall
not terminate, but shall continue indefinitely. No claim for the
recovery of Indemnifiable Damages may be asserted by Group 1 against
the Owners after such representations and warranties shall expire,
provided, however, that claims for Indemnifiable Damages first
asserted within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Group 1 believes it is entitled to a claim for any
Indemnifiable Damages hereunder, Group 1 shall promptly give written
notice to the Owners of such claim and the amount or the estimated
amount of such claim, and the basis for such claim. If the Owners do
not pay the amount of the claim for Indemnifiable Damages to Group 1
within 10 days, then Group 1 may exercise its respective rights under
Section 9.4 and/or take any action or exercise any remedy available to
it by appropriate legal proceedings to collect the Indemnifiable
Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, the Owners' liability for Indemnifiable Damages
shall be limited as follows:
(1) Group 1 shall have no claim for Indemnifiable
Damages unless and until all Indemnifiable
Damages incurred by Group 1 exceed an
aggregate of $270,000.00 with respect to this
Agreement and the Other Agreements (the
"Basket Amount"), in which event the Owners
shall be liable for only such Indemnifiable
Damages in excess of the Basket Amount; and
(2) the total amount of Indemnifiable Damages for
which each Owner shall be liable to Group 1
shall not exceed the value of the
consideration by such Owner received in the
Acquisition as provided on Exhibit A, of
which the stock portion shall be valued at
$14.00 per share.
The Owners acknowledge and agree that for purposes of the
Basket Amount, Indemnifiable Damages under the Other Agreements will
affect their obligation to indemnify Group 1 under this Agreement,
even though the Owners may own differing percentages of the
dealerships being acquired by Group 1 pursuant to the Other
Agreements. For example,
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if claims for Indemnifiable Damages under one of the Other Agreements
equal or exceed $270,000, then the Owners under this Agreement will be
obligated to indemnify Group 1 for claims for all amounts without the
benefit of any Basket Amount.
9.2 Agreement by Group 1 to indemnify. Group 1 agrees to
indemnify, defend and hold the Owners harmless from and against the aggregate
of all Owners Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Owners Indemnifiable
Damages" means, without duplication, the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable related counsel and paralegal fees and
expenses) incurred or suffered by the Owners, on a pre-tax
consolidated basis, to the extent (i) resulting from any breach of a
representation or warranty made by Group 1 in or pursuant to this
Agreement, (ii) resulting from any breach of the covenants or
agreements made by Group 1 in or pursuant to this Agreement, or (iii)
resulting from any inaccuracy in any certificate delivered by Group 1
pursuant to this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Owners Indemnifiable Damages, the
Owners have the right to be put in the same pre-tax consolidated
financial position as he, she or it would have been in had each of the
representations and warranties of Group 1 hereunder been true and
correct and had the covenants and agreements of Group 1 hereunder been
performed in full.
(c) Each of the representations and warranties made by
Group 1 in this Agreement or pursuant hereto shall survive
indefinitely after the Closing Date, except for the representation and
warranty of Group 1 contained in Section 5.6 hereof which shall
survive for a period of three years after the Closing Date, after
which date it shall terminate. No claim for the recovery of Owners
Indemnifiable Damages may be asserted by the Owners against Group 1
after such representations and warranties shall thus expire, provided,
however, that claims for Owners Indemnifiable Damages first asserted
within the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) In the event that the Owners believe they are
entitled to a claim for any Owners Indemnifiable Damages hereunder,
the Owners shall promptly give written notice to Group 1 of such claim
and the amount or the estimated amount of such claim, and the basis
for such claim.
9.3 Conditions of Indemnification. The obligations and
liabilities of the Owners and Group 1 hereunder with respect to their
respective indemnities pursuant to this Article IX resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
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(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such Indemnifying Party is
harmed by the failure of the Indemnified Party to provide timely
notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Group 1, then Group 1 shall have the right to control the
defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. The Schedules to this Agreement,
contain all disclosure required to be made by the Owners under the various
terms and provisions of this Agreement.
10.2 Non-Competition Obligations.
(a) As part of the consideration for the Acquisition, and
as an additional incentive for Group 1 to enter into this Agreement,
Thomas Nyle Maxwell, Jr. (the "Designated Owner") and Group 1 agree to
the non- competition provisions of this Section 10.2. The Designated
Owner agrees that during the period of the Designated Owner's
non-competition obligations hereunder, the Designated Owner will not,
directly or indirectly for the
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Designated Owner or for others, within twelve miles of, in the county
of or in any manufacturers' designated primary market area adjacent to
the location of the operations sold to Group 1 pursuant to this
Agreement or operations subsequently managed by the Designated Owner
as of the date in question or during the previous twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates;
(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or affiliates, or hire
or assist in the hiring of any such employee by person,
association, or entity not affiliated with Group 1 or any of
its subsidiaries or affiliates.
These non-competition obligations shall apply until the later
of (i) five years after the Closing or (ii) the period specified in
any employment agreement entered into by such Designated Owner with
Group 1 or its subsidiaries. During this non-competition period the
Designated Owner will not engage in these restricted activities as
provided above, or with respect to the industry consolidation efforts
of any publicly held entity in the automotive retailing industry (or
any entity with the ultimate intention of becoming a publicly held
entity or being acquired in any manner by a publicly held entity)
assist in any such efforts, regardless of the geographic area or
market.
If Group 1 or any of its subsidiaries or affiliates abandons a
particular aspect of its business, that is, ceases such aspect of its
business with the intention to permanently refrain from such aspect of
its business, then this non-competition covenant shall not apply to
such former aspect of that business.
(b) The Designated Owner understands that the foregoing
restrictions may limit their ability to engage in certain businesses
anywhere in the world during the period provided for above, but
acknowledges that the Designated Owner will receive sufficiently high
remuneration and other benefits under this Agreement to justify such
restriction. The Designated Owner acknowledges that money damages
would not be sufficient remedy for any breach of this Section 10.2 by
the Designated Owner, and Group 1 or any of its subsidiaries or
affiliates shall be entitled to enforce the provisions of this Section
10.2 by terminating any payments then owing to the Designated Owner
under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach, without
any requirement for the securing or posting of any bond in connection
with such remedies. Such remedies shall not be deemed the exclusive
remedies for a breach of this Section 10.2, but shall be in addition
to all remedies available at law or in equity to Group 1 or any of its
subsidiaries or affiliates, including, without limitation, the
recovery of damages from Group 1 and the Designated Owner's agents
involved in such breach.
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(c) It is expressly understood and agreed that Group 1
and the Designated Owner consider the restrictions contained in this
Section 10.2 to be reasonable and necessary to protect the
confidential and proprietary information and trade secrets of Group 1
and its subsidiaries and affiliates. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions
therein set forth to be modified by such courts so as to be reasonable
and enforceable and, as so modified by the court, to be fully
enforced.
10.3 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Group 1 and the Owners;
(b) by either Group 1 or the Owners if the Acquisition
has not been effected on or before February 28, 1998;
(c) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate under
this Section 10.3(c) shall expire at midnight on January 31, 1998;
(d) by either Group 1 or the Owners if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of the Company; (ii) there has been a material
breach of any representation, warranty, covenant or other agreement
set forth in this Agreement by the Company or the Owners which breach
has not been cured within ten business days following receipt by the
Company of notice of such breach (or if such breach cannot be cured
within such time, reasonable efforts have begun to cure such breach
and such breach is then cured within 30 days after notice) or (iii)
there is a material adverse change in the pre-tax income expected for
the Company, on which the purchase price of the acquisition was based;
or
(f) by the Owners if there has been a material breach of
any representation or warranty set forth in this Agreement by Group 1
which breach has not been cured within ten business days following
receipt by Group 1 of notice of such breach (or if such breach cannot
be cured within such time, reasonable efforts have begun to cure such
breach and such breach is then cured within 30 days after notice).
10.4 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.3, the Owners and Group 1 shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.5 survive any such termination.
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10.5 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by Group 1 shall be paid by Group 1
and all such costs and expenses incurred by the Owners shall be paid by the
Owners except that all audit, appraisal and Phase I Environmental Surveys costs
and expenses shall be reimbursed by Group 1 upon execution of this Agreement;
provided, however,that the Owners shall reimburse Group 1 for the amount of
audit fees and audit expenses reimbursed to them if the Acquisition is not
completed and the audited financial statements or the audit workpapers created
in the performance of the audits are used by the Owners, directly or
indirectly, in any financing transaction, merger or acquisition involving the
Company or any of the parties to the Other Agreements. The Owners and Group 1
each represent and warrant to each other that there is no broker or finder
involved in the transactions contemplated hereby.
10.6 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period"), no Owner voluntarily will: (i) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (A) any
shares of Group 1 Common Stock received by any Owner in the Acquisition or (B)
any interest in (including any option to buy or sell) any of those shares of
Group 1 Common Stock, in whole or in part, and Group 1 will have no obligation
to, and shall not, treat any such attempted transfer as effective for any
purpose; or (ii) engage in any transaction, whether or not with respect to any
shares of Group 1 Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning the shares of Group 1 Common Stock
acquired pursuant to this Agreement (including for example engaging in put,
call, short-sale, straddle or similar market transactions). Notwithstanding
the foregoing, each Owner may (i) pledge shares of Group 1 Common Stock,
provided that the pledgee of such shares shall agree not to sell or otherwise
dispose of any such shares for the Restricted Period; (ii) transfer shares to
immediate family members or the estate of any such individual (including,
without limitation, any transfer by such Owner to or among any family limited
partnership, trust, custodial or other similar accounts, arrangements,
transfers or funds that are for the benefit of his or her immediate family
members), provided that such person or entity shall agree not to sell or
otherwise dispose of any such shares for the Restricted Period; and (iii)
transfer shares by will or the laws of descent and distribution or otherwise by
reason of such Owner's death. The certificates evidencing the Group 1 Common
Stock delivered to each Owner pursuant to this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as Group 1 may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE STOCK PURCHASE AGREEMENT AMONG THE
ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES THERETO,
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
ONE-YEAR PERIOD ENDING ON ______________ [DATE THAT IS THE ANNIVERSARY
OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF
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THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE DATE SPECIFIED ABOVE.
(b) Each Owner, severally and not jointly with any other Person,
(i) acknowledges that the shares of Group 1 Common Stock to be delivered to
that Owner pursuant to this Agreement have not been and, if applicable, will
not be registered under the Securities Act and therefore may not be resold by
that Owner without compliance with the Securities Act and (ii) covenants that
none of the shares of Group 1 Common Stock issued to that Owner pursuant to
this Agreement will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all the
applicable provisions of the Securities Act and the rules and regulations of
the Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Group 1 Common Stock issued pursuant to this
Agreement will bear the following legend in addition to the legend prescribed
by Section 10.6(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Acquisition to each Owner will bear any legend required by the
securities or blue sky laws of the state in which that Owner resides.
10.7 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose Owners are, entitled to the
benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf of each party hereto.
The waiver by any party hereto of any condition or of a breach of another
provision of this Agreement shall not operate or be construed as a waiver of
any other condition or subsequent breach. The waiver by any party hereto of
any of the conditions precedent to its obligations under this Agreement shall
not preclude it from seeking redress for breach of this Agreement other than
with respect to the condition so waived.
10.8 Public Statements. The Owners and Group 1 agree to consult
with each other prior to issuing any press release or otherwise making any
public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law.
10.9 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
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parties hereto; provided, however that Group 1 and Acquisition Sub may assign
their rights and obligations hereunder to one or more of their affiliates
(except that no such assignment shall relieve Group 1 or Acquisition Sub of its
obligations hereunder and Group 1 and Acquisition Sub shall remain liable for
the performance of their obligations hereunder.
10.10 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to the Owners: Thomas Nyle Maxwell, Jr.
P.O. Box 203605
Austin, Texas 78720
Telecopy: (512) 219-3618
with a copy to: Porter & Hedges, L.L.P.
111 Congress, Suite 1055
Austin, Texas 78701
Telecopy: (512) 479-7504
Attention: James L. Montgomery
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and
Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.10. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor. Delivery to the Owners' representative, if any, of any
notice to Owners hereunder shall constitute delivery to all Owners and any
notice given by such Owners' representative shall be deemed to be notice given
by all Owners.
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<PAGE> 40
10.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
10.12 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.13 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.14 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.15 Third Party Beneficiaries. Neither this agreement nor any
document delivered in connection with this Agreement, confers upon any Person
not a party hereto any rights or remedies hereunder.
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<PAGE> 41
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ JOHN T. TURNER
----------------------------------------
Name: John T. Turner
Title: Senior Vice President
RRN MERGER CORP.
By: /s/ JOHN T. TURNER
----------------------------------------
Name: John T. Turner
Title: Senior Vice President
OWNERS
/s/ THOMAS NYLE MAXWELL, JR.
--------------------------------------------
THOMAS NYLE MAXWELL, JR.
/s/ THOMAS NYLE MAXWELL, SR.
--------------------------------------------
THOMAS NYLE MAXWELL, SR.
/s/ CLARENCE J. KELLERMAN, TRUSTEE
--------------------------------------------
CLARENCE J. AND BERNADETTE M.
KELLERMAN TRUST
/s/ ALBERT G. MAXWELL
--------------------------------------------
ALBERT G. MAXWELL
-37-
<PAGE> 42
EXHIBIT A
<TABLE>
<CAPTION>
Consideration for
Stock of General Consideration for Limited
Partner Partnership Interests
----------------- --------------------------
Shares of
Common Limited Shares of
Stock of the Partnership Group 1
General Interests of the Common
Owners Partner Cash Company Stock(1) Cash
- ------------------------- --------- ---------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Thomas Nyle Maxwell, Jr. 5,000 $25,070 39.60% 86,137 $1,276,020
Thomas Nyle Maxwell, Sr. 2,500 $12,214 19.80% 25,841 $ 847,411
Clarence J. & Bernadette
M. Kellerman Trust 2,500 $12,214 19.80% 25,841 $ 847,411
Albert G. Maxwell -0- -0- 19.80% 42,532 $ 642,433
</TABLE>
______________
(1) As may be appropriately adjusted for stock splits and/or stock
dividends.
To the extent distributions made pursuant to Section 6.3(j) reduce the
net book value of the Company and the General Partner at the end of the month
prior to the Closing Date to amounts less than the net book values reflected on
the May 31, 1997 manufacturer statements and the General Partner statement, the
cash consideration for the limited partnership interests and General Partner
stock set forth above shall be reduced proportionately.
Group 1 shall provide at its expense at Closing an opinion of a
nationally recognized firm, chosen by Group 1, that is experienced in valuation
of entities and securities as to whether the shares of Group 1 Common Stock
issued to the Owners at Closing have a value of more than $14.00 per share, and
if the value is more than $14.00 per share, the value in excess of $14.00 per
share. If the opinion values the Group 1 Common Stock received at Closing by
the Owners in excess of $14.00 per share, Group 1 will pay to the Owners
interest at the rate of 10% on the "Incremental Tax Liability" for a period
of six months beginning April 15, 1999. "Incremental Tax Liability" means the
amount by which the Owners' federal income tax liability with respect to the
shares of Group 1 Common Stock received at Closing exceeds the amount of any
such tax liability had the shares of Group 1 Common Stock been valued at $14.00
per share at Closing.
-1-
<PAGE> 43
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Purchase Agreement made and entered into as
of December ___, 1997 by and among Group 1, Acquisition Sub and the Owners,
including any amendments thereto and each Annex (including this Annex A),
Exhibit and schedule thereto (including the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Owned Properties, whether personal or mixed, tangible
or intangible, wherever located.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.15.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Prestige Chrysler Plymouth Northwest, LTD, a
Texas limited partnership, all predecessor entities of the Company and its
successors from time to time.
"Common Stock of the General Partner" shall mean the common stock, no
par value, of the General Partner.
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<PAGE> 44
"Company 1996 Balance Sheet" shall have the meaning set forth in
Section 3.6 herein.
"Company 1996 Financial Statements" shall have the meaning set forth
in Section 3.6 herein.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Designated Owner" shall have the meaning set forth in Section 10.2
herein.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the Interim Balance Sheet or acquired by the Company since the
date of the Interim Balance Sheet.
"Forms" shall have the meaning set forth in Section 6.15 herein.
"Form Schedules" shall have the meaning set forth in Section 6.15
herein.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"General Partner" shall mean MMK Interests, Inc., a Texas corporation.
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<PAGE> 45
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Guarantees" shall have the meaning set forth in Section 3.9 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental Authority to be a
hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
-3-
<PAGE> 46
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" have the meaning set forth
in Section 3.16 herein.
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
"Material Contract" has the meaning set forth in Section 3.9 herein.
"Material Leases" shall have the meaning set forth in Section 3.9
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Owned Property" and "Owned Properties" have the meaning set forth in
Section 3.16 herein.
"Owners Indemnifiable Damages" shall have the meaning set forth in
Section 9.2 herein.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
-4-
<PAGE> 47
(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Phase I Environmental Surveys" shall mean the Entrix reports dated
October, 1997.
"Plan" shall have the meaning set forth in Section 3.15.
"Related Party Agreements" shall have the meaning set forth in Section
3.19 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority.
"Restricted Period" shall have the meaning set forth in Section 10.6
herein.
"SEC Documents" shall mean the Group 1 Prospectus dated October 29,
1997 and the Form 10-Q for the third quarter ended September 30, 1997.
"Section 338(h)(10) Election" shall have the meaning set forth in
Section 6.15 herein.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments
-5-
<PAGE> 48
or additions to tax resulting from, attributable to or incurred in connection
with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person or any of its
Subsidiaries within six years prior to the date of the Agreement but which have
been terminated prior to the date of the Agreement.
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
-6-
<PAGE> 1
EXHIBIT 10.50
ASSET PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
CASA CHEVROLET INC.,
A WHOLLY OWNED SUBSIDIARY OF GROUP 1 AUTOMOTIVE, INC.,
UNITED MANAGEMENT, INC.,
AND
THE STOCKHOLDERS OF
UNITED MANAGEMENT, INC.
DATED AS OF
February 25, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE ACQUISITION
2.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Working Capital Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Group 1 Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
3.1 Approval and Authority; Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Authorization of Agreement - No Violation - No Consents . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.14 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.16 Affiliate Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.17 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.18 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.21 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.22 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.23 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.24 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE STOCKHOLDERS
4.1 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI
COVENANTS OF THE SELLER AND THE STOCKHOLDERS
6.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Conduct of Business by Seller Pending the Acquisition . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.14 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.15 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.16 Audit of Seller Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.17 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.18 Record Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VII
COVENANTS OF PURCHASER
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 New Limited Partnership Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.7 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.8 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.9 Security for Newco Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . . 26
8.2 Additional Conditions Precedent to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . 26
8.3 Additional Conditions Precedent to Obligations of Seller and the Stockholders . . . . . . . . . . . 27
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by Seller and the Stockholders to Indemnify . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Agreement by Purchaser to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.4 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 Statutory Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Certain Post-Closing Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.3 Certain Repurchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.4 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.6 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.8 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.9 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.10 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.11 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<PAGE> 5
GROUP 1 AUTOMOTIVE, INC.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of the 25th
day of February, 1998, is among GROUP 1 AUTOMOTIVE, INC., a Delaware
corporation ("Group 1"), CASA CHEVROLET INC. a New Mexico corporation and a
wholly owned subsidiary of Group 1 ("Newco," and together with Group 1,
"Purchaser"), UNITED MANAGEMENT, INC., a New Mexico corporation ("Seller"), and
THE STOCKHOLDERS OF SELLER (each a "Stockholder" and collectively the
"Stockholders") set forth on the signature page hereof.
RECITALS:
WHEREAS, Seller is presently a party to a Sales and Service Agreement
with General Motors Corporation (the "Manufacturer"), which provides for the
sale and service of Chevrolet vehicles ("Acquired Dealership") at 7201 Lomas
NE, Albuquerque, New Mexico (the "Acquired Dealership Location");
WHEREAS, Purchaser wishes to acquire the Assets (as hereinafter
defined) of the Acquired Dealership for the purpose of succeeding Seller as the
authorized Chevrolet dealer at the Acquired Dealership Location (the
"Acquisition");
WHEREAS, Group 1 has formed Newco to acquire the Assets;
WHEREAS, the parties hereto have executed an agreement substantially
similar to this Agreement (the "Other Agreement") dated as of the date hereof
by and among Group 1, Casa Chrysler Plymouth Jeep Inc., a wholly-owned
subsidiary of Group 1 ("Other Newco"), Seller and the Stockholders providing
for Group 1's acquisition (the "Other Acquisition") of all assets related to
Seller's sale and service of Chrysler, Plymouth and Jeep vehicles (the "Other
Dealership") at 9733 Coors Blvd. NW, Albuquerque, New Mexico. For the purposes
of this Agreement, the Acquired Dealership and the Other Dealership shall be
referred to collectively as the "Acquired Dealerships."
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which Purchaser shall purchase, and
Seller shall sell, all of the Assets; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex I hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning
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ascribed to it in accordance with GAAP; (c) "or" is not exclusive; (d)
"including" means "including, without limitation;" (e) words in the singular
include the plural; (f) words in the plural include the singular; (g) words
applicable to one gender shall be construed to apply to each gender; (h) the
terms "hereof," "herein," "hereby," "hereto" and derivative or similar words
refer to this entire Agreement; (i) the terms "Article" or "Section" shall
refer to the specified Article or Section of this Agreement; and (j) section
and paragraph headings in this Agreement are for convenience only and shall not
affect the construction of this Agreement.
ARTICLE II
THE ACQUISITION
2.1 The Acquisition.
(a) Assets to be Sold.
(i) Subject to the terms and conditions of this
Agreement, at the closing provided for in Section 2.5 hereof
(the "Closing"), Seller will, sell, convey, assign, transfer
and deliver to Newco all of Seller's right, title and interest
at the time of the Closing in and to the Assets free and clear
of any mortgage, pledge, lien, charge, encumbrance or other
adverse claim (whether absolute, accrued, contingent or
otherwise), except as otherwise disclosed in Schedule 3.1.
(ii) Such sale, conveyance, assignment, transfer
and delivery will be effected by delivery by Seller to Newco
of (A) a duly executed bill of sale ("Bill of Sale") in the
form of Exhibit A annexed hereto, (B) instruments of
assignment (collectively the "Instruments of Assignment"), and
(C) such other good and sufficient instruments of conveyance
and transfer as shall be necessary to vest in Newco (subject
to the terms of this Agreement) good and marketable title to
the Assets (collectively the "Other Instruments"), free and
clear of all mortgages, pledges, liens, charges, encumbrances
and other adverse claims (whether absolute, accrued,
contingent or otherwise), except as otherwise disclosed in
Schedule 3.1.
(b) Closing Payment. At the Closing, Seller will sell,
transfer, convey and deliver to Newco the Assets, in exchange for (a)
(i) $8,830,250 in cash, by a certified or bank cashier's check,
subject to adjustment as set forth in Section 2.2, and (ii) 481,250
shares of common stock, par value $.01 per share of Group 1 ("Group 1
Common Stock") as set forth in Section 2.3, (clauses (i) and (ii) are
collectively referred to as the "Closing Payment") and (b) the
assumption or discharge by Newco of the Assumed Liabilities, all of
which are listed on Annex IV attached hereto. Except for the Assumed
Liabilities, Purchaser shall not assume or otherwise be liable for,
and shall be indemnified with respect to, in accordance with the
provisions of Section 9.1 hereof, all other liabilities and
obligations of Seller.
(c) Assumption of Liabilities. Newco shall at Closing
execute and deliver to Seller an undertaking, in the form attached
hereto as Exhibit B (the "Undertaking"), whereby Newco will, as
specified therein, assume and agree to pay and discharge the Assumed
Liabilities of Seller.
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<PAGE> 7
2.2 Working Capital Adjustment.
(a) Adjustment. The cash portion of the Closing Payment
set forth in Section 2.1(a)(i) shall be adjusted based on the product
of (i) the difference of (x) the amount of Working Capital (as defined
below) on the Closing Date, less (y) $5,163,000, times (ii) 0.55 (the
"Working Capital Adjustment"). If the Working Capital Adjustment is
positive, then the cash portion of the Closing Payment shall be
increased by the amount of the Working Capital Adjustment. If the
Working Capital Adjustment is negative, then the cash portion of the
Closing Payment shall be reduced by the amount of the Working Capital
Adjustment.
(b) Procedure. As promptly as possible, but in any event
within sixty (60) days after the Closing, Purchaser will deliver to
Seller a schedule setting forth the calculation of the Working Capital
Adjustment (the "Adjustment Schedule"). Seller and its independent
certified public accountant shall have the right to observe and
comment upon the preparation of such schedule, including the taking of
a physical inventory of the new and used automobiles of the Acquired
Dealership, which physical inventory shall be taken at Purchaser's
expense on the Closing Date. Within thirty (30) days after receipt of
the Adjustment Schedule by Seller, Seller may notify Purchaser in
writing that such schedule does not fairly state the Working Capital
Adjustment in accordance with the provisions of this Agreement,
setting forth in full the respects in which it fails to do so and the
reasons for reaching that conclusion. In the event that Purchaser and
Seller are unable to resolve any dispute so raised within sixty (60)
days after receipt of the Adjustment Schedule by Seller, they shall
appoint an independent, nationwide accounting firm acceptable to both
of them, whose expenses will be shared equally by Seller, on the one
hand, and Purchaser, on the other hand. Such accounting firm shall as
promptly as possible determine whether the Adjustment Schedule fairly
states, in accordance with the provisions of this Agreement, the
values of the items as to which Seller has taken issue and, if such
firm concludes that it does not do so with respect to any of such
items, the value which in such firm's opinion does so shall be final
and dispositive. The determination of the Working Capital Adjustment
by such independent firm shall be conclusive and binding on the
parties hereto.
(c) Payment. Within five (5) days after receipt of the
report by such accounting firm or the settlement of any dispute, or
within thirty-five (35) days following receipt of the Adjustment
Schedule by Seller if no dispute exists, payment shall be made of the
Working Capital Adjustment, if any. If the Working Capital Adjustment
is positive, such amount shall be paid in cash by a certified or bank
cashier's check by Purchaser to Seller. If the Working Capital
Adjustment is negative, such amount shall be paid in cash by a
certified or bank cashier's check by Seller to Purchaser.
(d) Working Capital. For purposes of calculating the
Working Capital Adjustment, the term "Working Capital" shall mean, as
of the Closing Date, the Seller's current assets less current
liabilities as of such date with respect to the Acquired Dealerships,
all calculated in accordance with GAAP, on a basis consistent with the
preparation of the Seller 1997 Balance Sheet, with inventory being
valued at the lower of cost, determined by the first-in, first-out
method ("FIFO"), or market; provided, however, that Seller's current
assets or liabilities with respect to the Acquired Dealership for the
purposes of this calculation shall not give effect to (i) any
charge-back reserve resulting from the audit of the Seller 1997
Balance Sheet, and (ii) any expenditures of working capital, made in
accordance with Section 6.3 hereof, to acquire equipment and other
Fixed Assets sold to Purchaser pursuant to this Agreement.
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<PAGE> 8
2.3 Group 1 Common Stock. The number of shares of Group 1 Common
Stock to be issued to Seller at Closing shall be appropriately adjusted to give
effect to any stock split or stock dividend of Group 1 Common Stock effected
prior to the Closing Date. The "Designated Value of Group 1 Common Stock"
shall mean the average closing price of Group 1 Common Stock on the New York
Stock Exchange for the five full trading days immediately preceding the date
specified. No fractional shares of Group 1 Common Stock shall be issued, but
in lieu thereof, Seller shall receive cash for any fractional shares at the
Designated Value of Group 1 Common Stock.
2.4 Employees.
(a) Continued Employment. Except as Newco has otherwise
heretofore disclosed to Seller, Newco will offer to employ, beginning
on the Closing Date, all of those persons who are employed by Seller
on a full-time basis with respect to the Acquired Dealership on the
Closing Date, upon total compensation and benefit terms substantially
commensurate with the total compensation and benefit terms of the
employee's employment with Seller. Newco further agrees that with
respect to any such employee who presently is employed by Seller
pursuant to a written employment contract, Newco's offer of employment
to such employee shall be expressly conditioned upon the execution and
delivery by such employee of a written release relieving and
discharging Seller from any obligation or liability following the
Closing Date under such employment contract and Newco shall deliver a
written copy of any such offer to Seller. Seller agrees to cooperate
with Newco by permitting Newco throughout the period prior to the
Closing Date (i) to inspect such employees' medical and other
employment records maintained by Seller, (ii) to meet with the
employees of Seller at such times as shall be approved by a
representative of Seller (which approval will not be unreasonably
withheld) and (iii) to distribute to such employees such forms and
other documents relating to employment by Newco after the Closing as
Newco shall reasonably request.
(b) Benefits, Workers' Compensation. Seller agrees that,
with respect to claims for workers' compensation and all claims under
Seller's employee benefit programs by persons working for Seller with
respect to the Acquired Dealership arising out of events occurring
prior to the Closing Date, whether insured or otherwise (including,
but not limited to, workers' compensation, life insurance, medical and
disability programs), Seller will, at its own expense, honor or cause
its insurance carriers to honor such claims in accordance with the
terms and conditions of such programs or applicable workers'
compensation statutes without interruption as a result of the
employment by Newco of any such employees on or after the Closing
Date.
(c) 401(k) Matters. Newco shall assume at Closing the Ken
and Cindy Johns Automotive Group 401(k) Profit Sharing Plan (the
"Seller's 401(k) Plan").
(d) Vacation Pay. Seller shall accrue in the Seller 1997
Balance Sheet a liability for the amount due for vacation pay with
respect to employees of Seller for vacation due but not taken. Newco
will thereafter assume responsibility under Newco's vacation program
for such vacation due but not taken.
(e) Severance Pay. Seller will promptly reimburse Newco
and otherwise hold Newco harmless from and against all direct and
indirect costs, expenses and liabilities of any sort whatsoever
arising from or relating to any claims by or on behalf of present or
former
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<PAGE> 9
employees of Seller in respect of severance pay and similar
obligations relating to the termination of such employee's employment
on or prior to the Closing Date.
(f) Purchaser's Plans. Effective as of the Closing Date
until January 1, 1999 Purchaser shall continue the same health plans
currently provided by Seller to its employees with respect to each
employee of Seller who is hired by Newco pursuant to Section 2.4(a)
("Transferring Employees"), and after January 1, 1999, Purchaser shall
cause each Transferring Employee to be provided with benefits on a
basis substantially similar to Purchaser's normal practice.
Purchaser shall cause each Transferring Employee to be covered under a
group health plan that (i) provides medical and dental benefits to the
Transferring Employee, (ii) credits such Transferring Employee, for
the year during which such coverage under such group health plan
begins, with any deductibles and copayments already incurred during
such year under the group health plan maintained by Seller listed on
Schedule 3.13(a), and (iii) waives any preexisting condition
restrictions to the extent necessary to provide immediate coverage and
to the extent such restrictions did not apply under the group health
plan maintained by Seller. Purchaser shall cause the employee benefit
plans and programs maintained after the Closing by Purchaser to
recognize each Transferring Employee's years of service and level of
seniority prior to the Closing Date with Seller and its affiliates for
purposes of terms of employment and eligibility, vesting and benefit
determination under such plans and programs (other than benefit
accruals under any defined benefit pension plan).
2.5 Closing. The Closing of the purchase and sale of the Assets
as contemplated by this Agreement shall take place at the offices of Sutin
Thayer & Browne, Two Park Square, 6565 Americas Parkway, Albuquerque, New
Mexico 87110, on a date mutually established by the parties following the
satisfaction or waiver of the conditions set forth in Article VIII or at such
other time and place and on such other date as Purchaser and Seller shall
agree; provided, that the conditions set forth in Article VIII shall have been
satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date."
(a) Delivery by Seller. At the Closing, Seller will
deliver to Newco (unless delivered previously), the following:
(i) a duly executed Bill of Sale substantially in
the form of Exhibit A hereto;
(ii) the Instruments of Assignment and Other
Instruments, in form and substance satisfactory to
Newco, pursuant to Section 2.1(a)(ii);
(iii) true copies of any consents referred to in
Section 3.2 hereof;
(iv) the opinion of counsel referred to in Section
8.2(l) hereof;
(v) all the books and records of Seller pertaining
to the Assets;
(vi) executed copies of the Leases referred to in
Sections 6.14 and 7.6 hereto;
(vii) executed copies of the Employment Agreements;
and
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<PAGE> 10
(viii) all other documents, instruments and writings
required to be delivered by Seller at or prior to the
Closing pursuant to this Agreement or otherwise
required in connection herewith.
(b) Delivery by Newco. At the Closing, Newco will
deliver to Seller (unless previously delivered), the following:
(i) the certified or bank cashier's check referred
to in Section 2.1(b) hereof;
(ii) the certificates representing Group 1 Common
Stock pursuant to Section 2.1(b) hereof;
(iii) the Undertaking referred to in Section 2.1(c)
hereof;
(iv) the opinion referred to in Section 8.3(b)
hereof;
(v) executed copies of the Leases referred to in
Sections 6.14 and 7.6 hereto;
(vi) executed copies of the Employment Agreements;
and
(vii) all other documents, instruments and writings
required to be delivered by Newco at or prior to the
Closing pursuant to this Agreement or otherwise
required in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
The Seller and the Stockholders, jointly and severally, represent and
warrant to Group 1 as follows:
3.1 Approval and Authority; Title to Assets. The Seller has the
full right, power and authority to enter into this Agreement and to perform all
of its obligations under this Agreement, and the execution and delivery of this
Agreement and the performance by Seller of its obligations under this Agreement
require no further action or approval of any other person in order to
constitute this Agreement as a binding and enforceable obligation of Seller.
Except as disclosed in Schedule 3.1, Seller has good and indefeasible title to
the Assets, free and clear of any claim, pledge, lien, charge, encumbrance,
mortgage or other adverse claim.
3.2 Authorization of Agreement - No Violation - No Consents. The
Seller has full power and authority to enter into this Agreement and the other
documents delivered pursuant to this Agreement (collectively, the "Documents").
Except as disclosed in Schedule 3.2, neither the execution and delivery by
Seller and the Stockholders of the Documents, nor the performance by Seller and
the Stockholders of their obligations under the Documents will (assuming
receipt of all consents, approvals, authorizations, permits, certificates and
orders disclosed as requisite in Schedule 3.2) (a) violate or breach the terms
of or cause a default under (i) any applicable Law, (ii) any applicable Order
or any
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<PAGE> 11
applicable rule or regulation of any Court or Governmental Authority, (iii) any
applicable permits received from any Governmental Authority (iv) the articles
of incorporation or bylaws or other organizational documents of Seller or (v)
any contract or agreement to which Seller or the Stockholders are a party or by
which they, or any of the Assets, are bound; or (b) result in the creation or
imposition of any Lien on any of the Assets; or (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit, certificate or order of any
Court or Governmental Authority; or (d) with the passage of time or the giving
of notice or the taking of any action of any third party have any of the
effects set forth in clause (a), (b) or (c) of this Section. Except for the
applicable requirements, if any, of the HSR Act and as expressly contemplated
by the Documents, no consent, action, approval or authorization of, or
registration, declaration or filing with, any Court, Governmental Authority or
any other person or entity is required to authorize, or is otherwise required
in connection with, the execution and delivery of the Documents by any Seller,
performance of the terms of the Documents or the validity or enforceability of
the Documents. This Agreement and each Document delivered pursuant hereto
constitutes the legal, valid and binding obligation of Seller and the
Stockholders enforceable against each such Person in accordance with its terms.
3.3 Subsidiaries; Equity Investments. Seller has not controlled
directly or indirectly, or had any direct or indirect equity participation in
any corporation during the five-year period preceding the date hereof.
3.4 Financial Statements. Included in Schedule 3.4 are true and
complete copies of the financial statements of Seller consisting of an
unaudited balance sheet of Seller as of December 31, 1997 (the "Interim Balance
Sheet") and the related unaudited statement of income for the twelve-month
period then ended (collectively, the "Seller Interim Financial Statements").
Except as provided in Schedule 3.4, the Seller Interim Financial Statements
present fairly the financial position of Seller and the results of its
operations and changes in financial position as of the dates and for the
periods indicated therein in conformity with GAAP. Except as provided in
Schedule 3.4, the Seller Interim Financial Statements do not omit to state any
liabilities, absolute or contingent, required to be stated therein in
accordance with GAAP. All accounts receivable of Seller reflected in the
Seller Interim Financial Statements and as incurred since December 31, 1997
represent sales made in the ordinary course of business, are collectible (net
of any reserves for doubtful accounts or applicable chargebacks shown in the
Seller Interim Financial Statements) in the ordinary course of business and,
except as disclosed in Schedule 3.4, are not in dispute or subject to
counterclaim, set-off or renegotiation. Schedule 3.4 contains an aged schedule
of accounts receivable included in the Interim Balance Sheet.
3.5 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet or
as disclosed in Schedule 3.5, Seller does not have any material liabilities or
obligations of any nature whether absolute, accrued, contingent or otherwise,
and whether due or to become due. The reserves reflected in the Interim
Balance Sheet are adequate, appropriate and reasonable in accordance with GAAP.
3.6 Certain Agreements. Except as disclosed in Schedule 3.6,
neither Seller nor any of its officers or directors, is a party to, or bound
by, any contract, agreement or organizational document which purports to
restrict, by virtue of a noncompetition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against Seller or any of its officers or directors, the scope of the business
or operations of Seller or any of its officers or directors, geographically or
otherwise.
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3.7 Contracts and Commitments. Seller has delivered to Purchaser
a report which includes (i) a list of all contracts to which Seller is a party
or by which its property is bound that involve consideration or other
expenditure in excess of $50,000 or performance over a period of more than six
months or that is otherwise material to the business or operations of Seller,
taken as a whole ("Material Contracts"); (ii) a list of all real or personal
property leases to which Seller is a lessee involving consideration or other
expenditure in excess of $50,000 over the term of the lease ("Material
Leases"); (iii) a list of all guarantees of, or agreements to indemnify or be
contingently liable for, the payment or performance by any Person to which
Seller is a party ("Guarantees") and (iv) a list of all contracts or other
formal or informal understandings between Seller and any of their officers,
directors, employees, agents or stockholders or their affiliates ("Related
Party Agreements"). True and complete copies of each Material Contract,
Material Lease, Guarantee and Related Party Agreement have been furnished to
Group 1. All of the Material Contracts, Material Leases, Guarantees and
Related Party Agreements are valid, binding and in full force and effect and
are enforceable by the Seller in accordance with their terms. The Seller has
performed all material obligations required to be performed by it to date under
the Material Contracts, Material Leases, Guarantees and Related Party
Agreements and Seller is not (with or without the lapse of time or the giving
of notice, or both) in breach or default in any material respect thereunder
and, to the knowledge of Seller or Stockholders, no other party to any of the
Material Contracts, Material Leases, Guarantees or Related Party Agreements
(with or without the lapse of time or the giving of notice, or both) is in
breach or default in any material respect thereunder.
3.8 Absence of Changes. Except as disclosed in Schedule 3.8,
there has not been, since December 31, 1997, any material adverse change with
respect to the business, assets, results of operations, prospects or condition
(financial or otherwise) of Seller. Except as disclosed in Schedule 3.8, since
December 31, 1997, Seller has not engaged in any transaction or conduct of any
kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, Seller
makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since December 31,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
3.9 Tax Matters.
(a) Except for filings and payments of assessments the
failure of which to file or pay will not materially adversely affect
the Assets, (i) all Tax Returns which are required to be filed on or
before the Closing Date by or with respect to Seller have been or will
be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each
such Tax Return have been or will be so included and all information
provided in each such Tax Return is true, correct and complete, (iii)
all Taxes which have become or will become due with respect to the
period covered by each such Tax Return have been or will be timely
paid in full, (iv) all withholding Tax requirements imposed on or with
respect to Seller have been or will be satisfied in full, and (v) no
penalty, interest or other charge is or will become due with respect
to the late filing of any such Tax Return or late payment of any such
Tax.
(b) No Tax Returns of or with respect to Seller for tax
years subsequent to 1992 (other than a luxury tax audit) have been
audited by the applicable Governmental Authority. The applicable
statute of limitations has expired for all periods up to and including
the periods set forth in Schedule 3.9(b).
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(c) There is no claim against Seller for any Taxes, and
no assessment, deficiency or adjustment has been asserted or proposed
with respect to any Tax Return of or with respect to Seller other than
those disclosed (and to which are attached true and complete copies of
all audit or similar reports) in Schedule 3.9(c).
(d) There is not in force any extension of time with
respect to the due date for the filing of any Tax Return of or with
respect to Seller or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of or with respect to Seller.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes, whether or not assessed or disputed,
which are, or are hereafter found to be, or to have been, due by or
with respect to Seller up to and through the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
Seller shall be terminated prior to the Closing Date and no payments
shall be due or will become due by Seller on or after the Closing Date
pursuant to any such agreement or arrangement.
(g) Seller will not be required to include any amount in
income for any taxable period as a result of a change in accounting
method for any taxable period pursuant to any agreement with any Tax
authority with respect to any such taxable period.
(h) Seller has not consented to have the provisions of
section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(i) From the end of its most recent tax year through the
Closing Date, (a) Seller continuously has been and will be an S
Corporation within the meaning of section 1361 of the Code, and (b)
each holder of Seller common stock has been an individual resident of
the United States or an estate or trust described in section
1361(c)(2) that is permitted to hold the stock of an S Corporation.
3.10 Litigation.
(a) Except as disclosed in Schedule 3.10(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of Seller or Stockholders, threatened
against or specifically affecting the Assets, Seller before or by any
Court or Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent disclosed in Schedule 3.10(b), Seller has performed all
obligations required to be performed by it to date and is not in
default under, and, to the knowledge of Seller and the Stockholders,
no event has occurred which, with the lapse of time or action by a
third party could result in a default under any contract or other
agreement to which Seller is a party or by which it or any of the
Assets are bound or under any applicable Order of any Court or
Governmental Authority.
3.11 Compliance with Law. Except as disclosed in Schedule 3.11,
Seller is in compliance with all applicable statutes and other applicable laws
and all applicable rules and regulations of all federal, state, foreign and
local governmental agencies and authorities.
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3.12 Permits. Except as disclosed in Schedule 3.12, Seller owns or
holds all franchises, licenses, permits, consents, approvals and authorizations
of all Governmental Authorities necessary for the operation of the Acquired
Dealership. A listing of all such items owned or held by Seller, with their
expiration dates, is included in Schedule 3.12. Each franchise, license,
permit, consent, approval and authorization so owned or held is in full force
and effect, and Seller is in compliance with all of its obligations with
respect thereto, and no event has occurred which allows, or upon the giving of
notice or the lapse of time or otherwise would allow, revocation or termination
of any franchise, license, permit, consent, approval or authorization so owned
or held.
3.13 Employee Benefit Plans and Policies.
(a) Schedule 3.13(a) provides a description of each of
the following which is sponsored, maintained or contributed to by
Seller for the benefit of its employees, or has been so sponsored,
maintained or contributed to within six years prior to the Closing
Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not disclosed in Section 3.13(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) Seller's 401(k) Plan satisfies in form the
requirements of Section 401 of the Code, except to the extent
amendments are not required by law to be made until a date after the
Closing Date, and has not been operated in a way that would adversely
affect its qualified status.
(c) There has been no termination or partial termination
of Seller's 401(k) Plan within the meaning of Section 411(d)(3) of the
Code.
(d) There are no actions, suits or claims pending (other
than routine claims for benefits) or threatened against, or with
respect to, Seller's 401(k) Plan or its assets.
(e) There is no matter pending with respect to Seller's
401(k) Plan before the IRS, the Department of Labor or other
Governmental Authority.
(f) All contributions required to be made to Seller's
401(k) Plan pursuant to its terms and the provisions of ERISA, the
Code, or any other applicable Law have been timely made."
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(g) Schedule 3.13(g) sets forth by name and job
description of the employees of Seller with respect to the Acquired
Dealership as of the date of this Agreement. None of said employees
are subject to union or collective bargaining agreements. Seller has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.14 Properties.
(a) Seller owns, and will retain as Excluded Assets, the
real properties described in Schedule 3.14(a)(1) (the "Owned
Properties"). Seller does not lease any real property or any interest
therein except as disclosed in Schedule 3.14(a)(2) (the "Leased
Properties"), which sets forth the location and size of, principal
improvements and buildings on, and Liens on the Leased Properties.
True and correct copies of all Liens are attached to Schedule
3.14(a)(2) or have been delivered to Purchaser. Except as disclosed
in Schedule 3.14(a)(2), with respect to each such parcel of Leased
Property:
(i) Seller has a good, valid and enforceable
leasehold interest in each parcel of its Leased Property, free
and clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
Seller or Stockholders, threatened condemnation proceedings,
suits or administrative actions relating to the Leased
Properties or other matters affecting adversely the current
use, occupancy or value thereof;
(iii) except as disclosed in Schedule 3.14(a)(iii),
the legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the ownership or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as disclosed in Schedule
3.14(a)(v);
(vi) there are no outstanding options or rights of
first refusal to purchase the Owned Properties or any
leasehold interest in the Leased Properties, or any portion
thereof or interest therein;
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<PAGE> 16
(vii) there are no parties (other than Seller) in
possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.14(a)(vii)
who are in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used;
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.14(a)(xi);
(xii) the affiliates of Seller or any Stockholder
which have leased real property to Seller as part of the
Leased Properties have good and valid title to such
properties, free and clear of any Lien other than Permitted
Encumbrances; and
(xiii) Seller has good and valid title to the Owned
Properties, free and clear of any Lien other than Permitted
Encumbrances.
(b) Except as disclosed in Schedule 3.14(b), Seller has
good and marketable title to all of the Assets, free and clear of any
Liens or restrictions on use. The Fixed Assets currently in use for
the business and operations of Seller are in good operating condition,
normal wear and tear excepted and have been maintained in accordance
with sound industry practices.
3.15 Insurance. Schedule 3.15 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Acquired Dealership (true and complete copies of which have been furnished to
Group 1). Such insurance policies are in full force and effect. Seller is
presently insured, and since the inception of operations by Seller has been
insured, against such risks as companies engaged in the same or substantially
similar business would, in accordance with good business practice, customarily
be insured. Seller has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as disclosed in Schedule 3.15, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. Seller has not received
any notice or other communication from any such insurer canceling or materially
amending any of such insurance policies, and no such cancellation is pending or
threatened.
3.16 Affiliate Interests. Except as disclosed in Schedule 3.16, no
employee, officer or director, or former employee, officer or director, of
Seller has any interest in any property, tangible or intangible, including
without limitation, patents, trade secrets, other confidential business
information, trademarks, service marks or trade names, used in or pertaining to
the business of Seller, except for the normal rights of employees and
stockholders.
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3.17 Environmental Matters. Except as disclosed in Schedule 3.17,
to the best knowledge of Seller and the Stockholders:
(a) Seller is in compliance with all Environmental Laws,
including, without limitation, Environmental Laws with respect to
discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. Seller is not
currently liable for any penalties, fines or forfeitures for failure
to comply with any Environmental Laws. Seller is in compliance with
all required notice, record keeping and reporting requirements of all
Environmental Laws, and has complied with all informational requests
or demands arising under the Environmental Laws.
(b) Seller has obtained, or caused to be obtained, and is
in compliance with, all Licenses required by the Environmental Laws
for the ownership of its properties and assets and the operation of
its business as presently conducted, including, without limitation,
all air emission, water discharge, water use and solid waste,
hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses (a listing of such items being
included in Schedule 3.17(b)), and Seller is in compliance with all
the terms, conditions and requirements of such Licenses, and copies of
such Licenses have been made available to Group 1. There are no
administrative or judicial investigations, notices, claims or other
proceedings pending or, to the knowledge of Seller or Stockholders,
threatened by any Governmental Authority or third parties against
Seller or its business, operations, properties, or assets, which
question the validity or entitlement of Seller to any License required
by the Environmental Laws for the ownership of each of the respective
properties and assets of Seller and the operation of its business.
(c) Seller has not received nor is aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving Seller
or its business, operations, properties, or assets, issued by any
Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of their business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) Seller is in compliance with, and is not in breach of
or default under any applicable writ, order, judgment, injunction,
governmental communication or decree issued pursuant to the
Environmental Laws and no event has occurred or is continuing which,
with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leased Properties.
(e) Seller has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
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<PAGE> 18
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. Seller has not generated,
manufactured, used, stored, handled, treated, spilled, leaked, dumped,
discharged, released or disposed of, or arranged for any third parties
to generate, manufacture, use, store, handle, treat, spill, leak,
dump, discharge, release or dispose of, any material quantities of
Hazardous Substances or other waste upon property currently or
previously owned or leased by it, except in compliance with
Environmental Laws.
(f) Seller has not caused a Release or Discharge of any
material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the Leased Properties or to any
properties adjacent thereto except in compliance with the
Environmental laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge,
of any Hazardous Substance on, into or beneath the surface of the
Owned Properties or the Leased Properties or to any properties
adjacent thereto.
(g) Seller has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor has it allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified Seller that it has proposed or is proposing to place on
the National Priorities List or its state equivalent. Seller has not
received notice or have knowledge of any facts which could give rise
to any notice, that Seller is a potentially responsible party for a
federal or state environmental cleanup site or for corrective action
under CERCLA, RCRA or any other applicable Environmental Laws. Seller
has not submitted nor was required to submit any notice pursuant to
Section 103(c) of CERCLA with respect to any properties owned by, or
used in the business of, Seller. Seller has not received any written
nor, to the knowledge of Seller or Stockholders, oral request for
information in connection with any federal or state environmental
cleanup site, or in connection with any of the real property or
premises where Seller has transported, transferred or disposed of
other Wastes. Seller has no been required to nor has undertaken any
response or remedial actions or clean-up actions at the request of any
Governmental Authorities or at the request of any other third party.
Seller has no liability under any Environmental Laws for personal
injury, property damage, natural resource damage, or clean up
obligations.
(h) Seller has no Aboveground Storage Tanks or
Underground Storage Tanks, except as disclosed in Schedule 3.17(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which Seller or
Stockholders are aware undertaken by Seller or Stockholders, or by any
Governmental Authority, or by any third party, relating to Seller or
any of the Owned Properties or the Leased Properties; (ii) the results
of which Seller or Stockholders are aware of any ground, water, soil,
air or asbestos monitoring undertaken by Seller, or by any
Governmental Authority, or by any third party, relating to Seller, or
any of the Owned Properties or the Leased Properties; (iii) all
written communications between Seller and any Governmental Authority
arising under or related to Environmental, Laws; and (iv) all
citations issued under OSHA, or similar state or
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local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings, or decrees, relating to or affecting Seller or any of the
Owned Properties or the Leased Properties.
(j) Schedule 3.17(j) contains a list of the assets of
Seller which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
disclosed in Schedule 3.17(j), Seller has operated and continues to
operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as disclosed in Schedule
3.17(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, directly affecting or, to the knowledge of Seller
or Stockholders, threatened against Seller or any of its assets or
operations relating to the use, handling or exposure to and disposal
of asbestos or asbestos-containing materials in connection with its
assets and operations.
(k) Any references in this Section 3.17 to the "Owned
Properties" or the "Leased Properties" are deemed to also refer to any
properties previously owned or leased by Seller.
3.18 Intellectual Property. Except with respect to the Excluded
Assets and as set forth in Schedule 3.18, Seller owns, or is licensed or
otherwise has the right to use all Intellectual Property that are necessary for
the conduct of the business and operations of Seller as currently conducted.
To the knowledge of Seller or Stockholders, (a) the use of the Intellectual
Property by Seller does not infringe on the rights of any Person, and (b) no
Person is infringing on any right of Seller with respect to any Intellectual
Property. No claims are pending or, to the knowledge of Seller or
Stockholders, threatened that Seller is infringing or otherwise adversely
affecting the rights of any Person with regard to any Intellectual Property.
To the knowledge of the Seller, no Person is infringing the rights of Seller
with respect to any Intellectual Property. All of the Intellectual Property
that is owned by Seller is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by Seller is licensed pursuant to valid and existing license
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss of any Intellectual Property.
3.19 Bank Accounts. Schedule 3.19 includes the names and locations
of all banks in which Seller has an account or safe deposit box and the names
of all Persons authorized to draw thereon or to have access thereto.
3.20 Brokers. Except as disclosed in Schedule 3.20, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller.
3.21 Disclosure. Seller has disclosed in writing, or pursuant to
this Agreement and the Schedules attached hereto, all facts material to the
business, assets, prospects and condition (financial or otherwise) of Seller.
No representation or warranty to Group 1 by Seller or Stockholders contained in
this Agreement, and no statement contained in the Schedules attached hereto,
any certificate, list or other writing furnished to Group 1 by Seller or
Stockholders pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any
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certificate, list, document or other writing delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed a
representation and warranty of Seller for all purposes of this Agreement.
3.22 Assumed Liabilities. There are no Assumed Liabilities except
as described in Annex IV. Except as disclosed on Schedule 3.22, Seller is not,
and but for a requirement that notice be given or a period of time elapse or
both would not be, in default under any agreements, or documents delivered in
connection therewith, relating to the Assumed Liabilities, including any
mortgages or security interests securing the debt created thereunder. Except
as disclosed on Schedule 3.22, since December 31, 1997, neither Seller's funds
nor any Assumed Liability has been directly or indirectly used or incurred, as
the case may be, in connection with any Excluded Asset or to reduce any
liability that is not an Assumed Liability. Without limiting the generality of
the foregoing, except as disclosed on Schedule 3.22, since December 31, 1997,
Seller's funds and Assumed Liabilities have been used or incurred, as the case
may be, solely in the conduct, and for the benefit, of the Acquired Dealership.
3.23 Accounts Receivable. All accounts and notes receivable of
Seller in excess of $5,000 arose in the ordinary and usual course of its
business, represent valid obligations due, and either have been collected or
there is no legal impediment to their collection (subject only to bankruptcy
stays sought by account debtors) in the ordinary and usual course of business
in the net aggregate recorded amounts as reflected in the books of account of
Seller in accordance with their terms.
3.24 Inventory. The inventories of Seller included in the Assets
consist in all respects of items of a quality, condition and a quantity usable
or saleable in the normal course of the business of Seller, other than for
normal obsolescence; and the amount at which all such items are carried or
reflected in the Interim Financial Statements does not exceed the market or
realizable value thereof.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE STOCKHOLDERS
The Seller and each Stockholder hereby, severally and not jointly,
represent and warrant to Group 1 that:
4.1 Investment Intent. The Seller intends to distribute some or
all of the Closing Payment to its stockholders on or shortly after the Closing
Date. The Seller and each Stockholder makes the following representations
relating to his, her or its acquisition of shares of Group 1 Common Stock: (i)
such Stockholder will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Acquisition to such Stockholder solely for such
Stockholder's account, for investment purposes only and with no current
intention or plan to distribute, sell or otherwise dispose of any of those
shares in connection with any distribution (except by way of gift to a
charitable foundation, provided that such foundation executes a customary
investor representation letter with respect to exemptions from the Securities
Act and any applicable state blue sky laws); (ii) such Stockholder is not a
party to any agreement or other arrangement for the disposition of any shares
of Group 1 Common Stock; (iii) such Stockholder is an "accredited investor" as
defined in Securities Act Rule 501(a); (iv) such Stockholder (A) is able to
bear the economic risk of an investment in the Group 1 Common Stock acquired
pursuant to this Agreement, (B) can afford to sustain a total loss of that
investment, (C) has such knowledge and experience in financial and business
matters, and such past participation in investments, that he or she is capable
of evaluating the merits and risks of the proposed investment in the Group 1
Common Stock,
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(D) has received and reviewed the SEC Documents, (E) has had an adequate
opportunity to ask questions and receive answers from the officers of Group 1
concerning any and all matters relating to the transactions contemplated
hereby, including the background and experience of the current officers and
directors of Group 1, the plans for the operations of the business of Group 1,
the business, operations and financial condition of Group 1 and any plans of
Group 1 for additional acquisitions, and (F) has asked all questions of the
nature described in the preceding clause (E), and all those questions have been
answered to his or her satisfaction; (v) such Stockholder acknowledges that the
shares of Group 1 Common Stock to be delivered to such Stockholder pursuant to
the Acquisition have not been and will not be registered under the Securities
Act or qualified under applicable blue sky laws and therefore may not be resold
by such Stockholder without compliance with Rule 144 of the Securities Act;
(vi) such Stockholder acknowledges that he or she has agreed, pursuant to
Section 10.8 herein, not to sell the shares of Group 1 Common Stock to be
delivered to such Stockholder pursuant to the Acquisition for a period of one
year from the Closing Date; (vii) such Stockholder, if a corporation,
partnership, trust or other entity, acknowledges that it was not formed for the
specific purpose of acquiring the Group 1 Common Stock; and (viii) without
limiting any of the foregoing, such Stockholder agrees not to dispose of any
portion of Group 1 Common Stock unless (1) a registration statement under the
Securities Act is in effect as to the applicable shares and the disposition is
made in accordance with that registration statement, (2) the Stockholder has
notified Group 1 of the proposed disposition, disposition is made through
Merrill, Lynch, Pierce, Fenner & Smith Incorporated or Goldman, Sachs & Co.,
Inc., or any of their successors or affiliates, subject to SEC Rule 144 and
such disposition is made in compliance with any other requirements of the
Securities Act, or (3) such disposition is made by gift to a charitable
foundation in compliance with any applicable requirements of the Securities Act
and any applicable state blue sky laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Each of Group 1 and Newco hereby represent and warrant, severally and
not jointly, to Seller that:
5.1 Corporate Organization. Each of Group 1 and Newco is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation with all requisite corporate power and
authority to execute, deliver and perform this Agreement and each instrument
required hereby to be executed and delivered by it at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Newco of this Agreement, the performance by Purchaser of its obligations
pursuant to this Agreement, and the execution, delivery and performance of each
instrument required hereby to be executed and delivered by Purchaser at the
Closing have been duly and validly authorized by all requisite corporate action
on the part of Purchaser. This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by Purchaser
at, or prior to, the Closing will then be, duly executed and delivered by
Purchaser. This Agreement constitutes, and, to the extent it purports to
obligate Purchaser, each such instrument, document or agreement will constitute
(assuming due authorization, execution and delivery by each other party
thereto), the legal, valid and binding obligation of Purchaser, enforceable
against it in accordance with its terms.
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5.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Purchaser, to execute, deliver or consummate the transactions contemplated by
this Agreement or any instrument required hereby to be executed and delivered
by Purchaser at or prior to the Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Purchaser of this Agreement or any instrument required hereby to be executed by
it at or prior to the Closing nor the performance by Purchaser of its
obligations under this Agreement or any such instrument will (a) violate or
breach the terms of or cause a default under (i) any applicable Law, (ii) any
applicable Order or any applicable rule or regulation of any Court or
Governmental Authority, (iii) the organizational documents of Purchaser or (iv)
any contract or agreement to which Purchaser is a party or by which it or any
of its property is bound, or (b) result in the creation or imposition of any
Liens on any of the properties or assets of Purchaser or any of its
subsidiaries (other than any Lien created by Seller or any of its
Subsidiaries), or (c) result in the cancellation, forfeiture, revocation,
suspension or adverse modification of any existing consent, approval,
authorization, license, permit certificate or order of any Court or
Governmental Authority or (d) with the passage of time or the giving of notice
or the taking of any action by any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section, except, with respect to
clauses (a), (b), (c) or (d) of this Section, where such matter would not have
a material adverse effect on the business, assets, prospects or condition
(financial or otherwise) of Purchaser and its subsidiaries, taken as a whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Acquisition are duly authorized and will,
when issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations of the Commission promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Group 1 included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with GAAP during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Group 1 and its consolidated
subsidiaries as of the dates thereto and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information, for normal year-end adjustments).
ARTICLE VI
COVENANTS OF THE SELLER AND THE STOCKHOLDERS
6.1 Acquisition Proposals. Prior to the Closing Date, neither
Seller, any of its officers, directors, employees or agents nor any Stockholder
shall agree to, solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, business combination or purchase of
all or a substantial portion
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of the assets of, or a substantial equity interest in, Seller, other than the
transactions with Group 1 contemplated by this Agreement.
6.2 Access. The Seller and the Stockholders shall afford Group
1's officers, employees, counsel, accountants and other authorized
representatives access, during normal business hours throughout the period
prior to the Closing Date, to all their properties, books, contracts,
commitments and records related to the Dealerships and, during such period,
Seller and the Stockholders shall furnish promptly to Group 1 any information
concerning their business, properties and personnel related to the Acquired
Dealership as Group 1 may reasonably request; provided, however, that no
investigation pursuant to this Section or otherwise shall affect or be deemed
to modify any representation or warranty made by Seller or the Stockholders
pursuant to this Agreement.
6.3 Conduct of Business by Seller Pending the Acquisition. Seller
and the Stockholders covenant and agree that, from the date of this Agreement
until the Closing Date, unless Group 1 shall otherwise agree in writing or as
otherwise expressly contemplated by this Agreement:
(a) The business of Seller shall be conducted only in,
and Seller shall not take any action except in, the ordinary course of
business and consistent with past practice. In connection therewith,
the parties agree that Seller may dealer trade vehicles for similar
models, but Seller shall not liquidate or otherwise dispose of any of
its new vehicles other than in the ordinary course of business to
retail buyers. Seller agrees to maintain its advertising expenditures
and activities commensurate with prior business practices. Seller
shall not advertise a "Going Out of Business" sale;
(b) Seller shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber, (A) any
capital stock (or securities convertible into capital stock) of Seller
or (B) other than in the ordinary course of business and consistent
with past practice and not relating to the borrowing of money, any
Assets, (ii) amend or propose to amend the articles of incorporation
or bylaws (or other organizational documents) of Seller, (iii) split,
combine or reclassify any outstanding capital stock of Seller, or
declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to the capital stock of Seller
whether now or hereafter outstanding, (iv) redeem, purchase or acquire
or offer to acquire any of the capital stock of Seller, (v) create,
incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money (other than floor plan
indebtedness incurred in the ordinary course of business), or (vi)
except in the ordinary course of business and consistent with past
practice, enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this
Section 6.3(b);
(c) Seller shall use its best efforts (i) to preserve
intact the business organization of Seller, (ii) to maintain in effect
any franchises, authorizations or similar rights of Seller, (iii) to
keep available the services of its current officers and key employees,
(iv) to preserve the goodwill of those having business relationships
with it, (v) to maintain and keep its properties in as good a repair
and condition as presently exists, except for deterioration due to
ordinary wear and tear, (vi) to maintain in full force and effect
insurance comparable in amount and scope of coverage to that currently
maintained by it, (vii) to collect its accounts receivable, (viii) to
preserve in full force and effect all leases, operating agreements,
easements, rights-of-way, permits, licenses, contracts and other
agreements which relate to its assets (other than those
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expiring by their terms), and (ix) to perform or cause to be performed
all of its obligations in or under any of such leases, agreements and
contracts.
(d) Seller shall not make or agree to make any single
capital expenditure or enter into any purchase commitments in excess
of $150,000, provided, however, that expenditures related to new and
used vehicle inventory made consistent with past practice and in the
ordinary course of business shall not be deemed a violation of this
Section 6.3(d);
(e) Seller shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as Seller in good faith may
dispute;
(f) Seller shall not increase the salary, benefits, stock
options, bonus or other compensation of any officer, director or
employee of Seller or its Subsidiaries, except in the ordinary course
of business consistent with past practice; and shall not grant, to any
individual, severance or termination pay that exceeds the lesser of
(i) such individual's compensation for the calendar month immediately
preceding such individual's grant of severance or termination pay, or
(ii) $50,000;
(g) Seller shall not take any action that would, or that
reasonably could be expected to, result in any of the representations
and warranties set forth in this Agreement becoming untrue or any of
the conditions to the Acquisition set forth in Article VIII not being
satisfied;
(h) Seller shall not (i) amend or terminate any Plan or
Benefit Program or Agreement except as may be required by applicable
law, (ii) increase or accelerate the payment or vesting of the amounts
payable under any Plan or Benefit Program or Agreement, or (iii) adopt
or enter into any personnel policy, stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay plan, policy or
agreement, deferred compensation agreement or arrangement, executive
compensation or supplemental income arrangement, consulting agreement,
employment agreement or any other employee benefit plan, agreement,
arrangement, program, practice or understanding (other than the Plans
and the Benefit Programs or Agreements);
(i) Seller shall not enter into any agreement or incur
any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement;
(j) Seller shall not directly or indirectly use Seller's
funds or incur any Assumed Liability in connection with any Excluded
Asset or to reduce any liability that is not an Assumed Liability.
Without limiting the generality of the foregoing, Seller's funds and
Assumed Liabilities will be used or incurred, as the case may be,
solely for the benefit of the Acquired Dealership; and
(k) Notwithstanding anything to the contrary, no
dividends or other form of distribution to the Stockholders shall be
made after the date of the Interim Balance Sheet which will cause
Seller to be in violation of manufacturer working capital or equity
guidelines or requirements.
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6.4 Confidentiality. Seller agrees to cause its officers,
directors, employees, representatives and consultants, to hold in confidence,
and not to disclose, and the Stockholders shall hold and not disclose, to
others for any reason whatsoever, any non-public information received by them
or their representatives in connection with the transactions contemplated
hereby, including but not limited to all terms, conditions and agreements
related to this transaction, except (i) as required by law; (ii) for disclosure
to officers, directors, employees and representatives of Seller as necessary in
connection with the transactions contemplated hereby; and (iii) for information
which becomes publicly available other than through the actions of Seller or
the Stockholders. In the event the Acquisition is not consummated, Seller and
the Stockholders will return all non-public documents and other material
obtained from Group 1 or its representatives in connection with the
transactions contemplated hereby or certify to Group 1 that all such
information has been destroyed.
6.5 Supplemental Disclosure. Seller shall have the continuing
obligation until the Closing promptly to supplement or amend the Schedules
hereto with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in such Schedules; provided, however, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended Schedule shall not be deemed to have been disclosed as
of the date of this Agreement for purposes of determining whether any Closing
conditions have been satisfied, unless so agreed in writing by Purchaser.
6.6 Consents. Subject to the terms and conditions of this
Agreement, Seller shall (i) cooperate with Purchaser in obtaining all consents,
waivers, approvals (including all applicable automobile manufacturers
approvals, and such approvals shall not contain any unreasonably burdensome
restrictions on Purchaser), authorizations and orders required in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Acquisition; and (ii) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary or proper
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Seller and the
Stockholders agree to cooperate and use reasonable efforts to defend against
and respond thereto.
6.8 Stockholders' Agreements Not to Sell. Except as otherwise
contemplated by this Agreement, each of the Stockholders hereby covenants and
agrees not to sell, pledge, transfer or dispose of or encumber any shares of
Seller common stock currently owned, either beneficially or of record, by such
Stockholder.
6.9 Intellectual Property Matters. Seller shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
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6.10 Removal of Related Party Guarantees. Seller and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
terminate, waive or release all guarantees by Seller ("Related Guarantees") of
indebtedness or other obligations of any of Seller's officers, directors,
shareholders or employees or their affiliates; except for those Related
Guarantees that are disclosed in Schedule 6.10 as guarantees that shall not be
subject to this Section 6.10. All Related Guarantees are disclosed in Schedule
6.10.
6.11 Termination of Related Party Agreements. Seller and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to terminate
the Related Party Agreements except those Related Party Agreements that are
disclosed in Schedule 6.11 as agreements that shall not be subject to this
Section 6.11.
6.12 Related Party Agreements. Seller and the Stockholders agree
not to enter into any Related Party Agreements or engage in any transactions
with the Stockholders or their affiliates; except for those Related Party
Agreements or transactions with affiliates that are disclosed in Schedule 6.12
as agreements or transactions that shall not be subject to this Section 6.12.
6.13 Release.
(a) AS OF THE CLOSING, SELLER AND EACH OF THE STOCKHOLDERS DOES
HEREBY FOR HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL
REPRESENTATIVES REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE PURCHASER AND THE
ACQUIRED DEALERSHIP OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES,
RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE
WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED,
FIXED OR CONTINGENT, WHICH EACH OF SUCH INDIVIDUALS NOW HAS, OWNS OR HOLDS OR
HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST PURCHASER OR THE ACQUIRED
DEALERSHIP INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF
THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF SELLER OR THE ACQUIRED
DEALERSHIP OR THEIR AFFILIATES, EMPLOYEES AND AGENTS, EXISTING AS OF THE
CLOSING OR RELATING TO ANY MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING;
PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT
MAY ARISE IN CONNECTION WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO
PERFORM ANY OF THEIR OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF
THEM OF ANY REPRESENTATIONS OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF
SUCH OTHER AGREEMENTS SHALL NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS
AGREEMENT; AND PROVIDED FURTHER ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS
OR AGREEMENTS LISTED ON THE SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) SELLER AND EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS
THAT HE HAS NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR
TRANSFER, TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS,
DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR
OBLIGATIONS RELEASED HEREIN. SELLER AND EACH OF THE STOCKHOLDERS COVENANTS AND
AGREES THAT HE WILL NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER
ALL OR ANY PART OF THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES,
DISPUTES, CAUSES OF ACTION OR OBLIGATIONS TO BE RELEASED HEREIN. SELLER AND
EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS THAT HE HAS READ AND
UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION 6.13 AND THAT HE HAS BEEN
REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN CONNECTION WITH THE
NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Leases. Seller and the Stockholders agree to cause Seller,
United Constructors Limited Company and United Properties Limited Company to
enter into lease agreements with Newco on the
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basic terms, and covering the real properties and improvements, described on
Exhibit C and to enter into subleases with Newco with respect to leases from
other parties on the same terms as the leases entered into by Seller.
Furthermore, Group 1 will use commercially reasonable efforts within the
parameters of such lease agreements to structure a lease with Seller, United
Constructors Limited Company and United Properties Limited Company that will
not prevent the transfer of the related real estate to a real estate investment
trust should the applicable landlord so request.
6.15 Employment Agreements. Mr. Kenneth E. Johns and Mrs. Cynthia
C. Johns agree to enter into employment agreements (the "Employment
Agreements") with Group 1 and Newco in form and substance substantially similar
to Exhibit D attached hereto.
6.16 Audit of Seller Operations. Seller agrees to cause Peltier,
Gustafson & Miller, P.A. to conduct an audit of the operations of Seller for
its year ended December 31, 1997, and to cooperate with Arthur Andersen &
Company to produce an audited balance sheet of Seller as of December 31, 1997
(the "Seller 1997 Balance Sheet") and the related audited statements of income,
changes in stockholders' equity and cash flows for the year then ended
(including the notes thereto) prepared in accordance with GAAP (collectively,
the "Seller 1997 Financial Statements," and together with the Seller Interim
Financial Statements, the "Seller Financial Statements"). Seller further
agrees to complete and provide to Group 1 the Seller 1997 Financial Statements
as soon as reasonably practicable. Seller covenants that the financial
position and results of operations of Seller set forth in the Seller 1997
Financial Statements will not be materially different from the financial
position and results of operations of Seller set forth in the Interim Financial
Statements, except for the amount required to record the charge back reserve
liability. Fees incurred by Peltier, Gustafson & Miller, P.A. will be paid by
Seller, and fees incurred by Arthur Andersen & Company will be paid by Group 1.
6.17 Allocation of Purchase Price. The parties hereto agree that
the Purchase Price is allocated for the purposes of Section 1060 of the Code,
in accordance with the value set forth for each class of Asset, listed on the
attached Annex V ("Allocation of Purchase Price"). Prior to Closing the
parties will agree on the value of the Group 1 Common Stock as part of the
Closing Payment for purposes of determining the purchase price of the Assets.
The parties hereto agree that each of them will timely file with the Internal
Revenue Service Form 8594 and that all tax returns or other tax information any
party hereto files or cause to be filed with any governmental agency including
the Internal Revenue Service, will be prepared in a manner that is consistent
with this Section 6.17.
6.18 Record Retention. For a period of six years after the
Closing, Seller and the Stockholders agree that prior to the destruction or
disposition of any such books or records pertaining to Seller's business which
relate to the Assets, Seller and the Stockholders shall provide not less than
60 days prior written notice to Purchaser of any such proposed destruction or
disposal. If Purchaser desires to obtain any of such documents, it may do so
by notifying Seller in writing at any time prior to the scheduled date for such
destruction or disposal. Such notice must specify the documents which the
Purchaser wishes to obtain. The parties shall then promptly arrange for the
delivery of such documents. All out-of-pocket costs associated with the
delivery of the requested documents shall be paid by Purchaser.
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ARTICLE VII
COVENANTS OF PURCHASER
7.1 Confidentiality. Purchaser agrees, and Purchaser agrees to
cause its officers, directors, employees, representatives and consultants, to
hold in confidence all, and not to disclose to others for any reason
whatsoever, any non-public information received by it or its representatives in
connection with the transactions contemplated hereby except (i) as required by
law; (ii) for disclosure to officers, directors, employees and representatives
of Purchaser as necessary in connection with the transactions contemplated
hereby or as necessary to the operation of Purchaser's business; and (iii) for
information which becomes publicly available other than through the actions of
Purchaser. In the event the Acquisition is not consummated, Purchaser will
return all non-public documents and other material obtained from Seller or its
representatives in connection with the transactions contemplated hereby or
certify to Seller that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Acquisition.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Purchaser shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
Acquisition; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Purchaser agrees
to cooperate and use reasonable efforts to defend against and respond thereto.
7.5 New Limited Partnership Relationship.
(a) Newco shall form a limited partnership relationship
with Premier Auto Finance L.P. ("Premier") similar to the current
relationship among Seller, Premier and Fiesta Family Partners, Ltd.
("Fiesta"). Benefits flowing from business written with Premier
through Fiesta prior to the formation of the new partnership will
constitute Excluded Assets. Benefits from the new partnership will
accrue to the benefit of Newco.
(b) All benefits from sales of credit life, accident,
health and service contract products consummated by the Acquired
Dealership will accrue to the benefit of Newco. Until December 31,
1998, Newco will conduct business with parties mutually acceptable to
Seller and Newco.
7.6 Leases. Newco agrees, and Group 1 agrees to cause Newco, to
enter into lease agreements with United Constructors Limited Company, United
Properties Limited Company and Holiday Bowl, Inc. on the basic terms, and
covering the real properties and improvements, described on Exhibit C.
Furthermore, Group 1 and Newco will use commercially reasonable efforts within
the
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parameters of such lease agreements to structure a lease that will not prevent
the transfer of the related real estate to a real estate investment trust
should the applicable landlord so request.
7.7 Employment Agreements. Group 1 and Newco agree to enter into
Employment Agreements with Mr. Kenneth E. Johns and Mrs. Cynthia C. Johns in
form and substance substantially similar to Exhibit D attached hereto.
7.8 Allocation of Purchase Price. Purchaser and Seller agree that
the Purchase Price is allocated for the purposes of Section 1060 of the Code,
in accordance with the value set forth for each class of Asset, as listed on
the attached Annex V ("Allocation of Purchase Price"). Prior to Closing the
parties will agree on the value of the Group 1 Common Stock as part of the
Closing Payment for purposes of determining the purchase price of the Assets.
The parties hereto agree that each of them will timely file with the Internal
Revenue Service Form 8594 and that all tax returns or other tax information any
party hereto files or cause to be filed with any governmental agency including
the Internal Revenue Service, will be prepared in a manner that is consistent
with this Section 7.8.
7.9 Security for Newco Loans. Purchaser shall not require Seller
or any Stockholder to serve as obligors under any floor plan or credit
facilities to which Newco is a party.
7.10 Guaranteed Price. If Seller or a Stockholder, or any family
foundation to which a Stockholder or Seller has transferred shares of Group 1
Common Stock, sells any of the Group 1 Common Stock received by such Stockholder
or Seller pursuant to this Agreement at the Closing as part of the Closing
Payment for a per share price of less than twelve dollars ($12.00), subject to
adjustment for stock splits and stock dividends, Group 1 shall pay, within 30
days after such sale, in cash the difference between the purchase price for
shares sold and the price such Stockholder, Seller or family foundation, as the
case may be, would have received if the shares were sold at $12.00 per share,
subject to adjustment for stock splits and stock dividends; provided, that this
Section 7.10 shall only apply to sales (i) occurring after the expiration of the
Restricted Period and (ii) made in the public market; and provided, further that
this Section 7.10 shall terminate on the date 10 years after the Closing Date.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the
Acquisition;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Acquisition; and
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(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
8.2 Additional Conditions Precedent to Obligations of Purchaser.
The obligation of Purchaser to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Seller
contained in Article III and Article IV, respectively, shall be true
and correct in all respects as of the date when made and as of the
Closing Date as though such representations and warranties had been
made at and as of the Closing Date, and all of the terms, covenants
and conditions of this Agreement to be complied with and performed by
Seller and Stockholders on or before the Closing Date shall have been
duly complied with and performed in all respects, in each case except
for breaches as to matters that, in the aggregate, are not reasonably
likely to result in Indemnifiable Damages (as defined in Section
9.1(a) below) in excess of $100,000. A certificate to the foregoing
effect dated the Closing Date and signed by the chief executive
officer of Seller and each of the Stockholders shall have been
delivered to Group 1;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Acquisition and the transactions
contemplated thereby will be in compliance with applicable laws;
(c) Purchaser shall have received all requisite
manufacturer's approvals of the Acquisition and the transactions
contemplated thereby;
(d) Purchaser shall have received evidence, satisfactory
to Purchaser, that all Related Party Agreements shall have been
terminated and all Related Guarantees shall have been terminated,
waived or released pursuant to Sections 6.10 and 6.11 hereto;
(e) Purchaser shall have received executed
representations from Seller and each Stockholder stating that such
Seller or Stockholder (with respect to shares owned beneficially or of
record by him, her or it) has no current plan or intention to sell or
otherwise dispose of the Group 1 Common Stock to be received by him,
her or it in the Acquisition, except as provided in Section 4.1
herein;
(f) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of Seller shall have occurred, and Seller
shall not have suffered any damage, destruction or loss (whether or
not covered by insurance) materially adversely affecting the
properties or business of Seller, and Group 1 shall have received a
certificate signed by the chief executive officer of Seller dated the
Closing Date to such effect;
(g) Receipt by Group 1 of current or updated Phase I
Environmental Surveys, at Seller's expense, prepared by a firm
approved in writing by Group 1, showing no environmental problems or
recommended actions, which will be performed at the discretion of
Group 1;
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(h) Receipt by Group 1, at Sellers's expense, of a title
commitment, issued by a title company, approved by Group 1, subject
only to the exceptions described in Schedule 8.2(h) ("Permitted Title
Exceptions");
(i) Receipt by Group 1, at Seller's expense, of a current
ALTA survey of the Leased Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1;
(j) Receipt by Group 1 of the Lease Agreements executed
by United Constructors Limited Company, United Properties Limited
Company and Holiday Bowl, Inc. in accordance with Section 6.14 herein;
(k) Receipt by Group 1 of Employment Agreements executed
by the Stockholders in accordance with Section 6.15 herein;
(l) Group 1 and Newco shall have received a favorable
opinion of Sutin Thayer & Browne A Professional Corporation, counsel
to Seller, dated the Closing Date, with respect to the matters set
forth in Exhibit E hereto;
(m) Receipt by Group 1 of the Seller 1997 Financial
Statements, provided further, that the Seller 1997 Financial
Statements shall not reflect any material adverse change from the
Seller Interim Financial Statements;
(n) Satisfaction or waiver of the conditions set forth in
Article VIII of the Other Agreement and the simultaneous closing of
the Other Acquisition; and
(o) The Board of Directors of Group 1 shall have approved
the Acquisition.
8.3 Additional Conditions Precedent to Obligations of Seller and
the Stockholders. The obligation of the Stockholders to effect the Acquisition
is also subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date; all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Group 1 shall have
been delivered to Seller.
(b) Seller shall have received a favorable opinion of
Vinson & Elkins L.L.P., Counsel to Purchaser, dated the Closing Date,
with respect to the matters set forth in Exhibit F hereto.
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(c) Seller shall have received from Purchaser a
Non-Taxable Transaction Certificate relating to Newco's acquisition of
Seller's parts inventory for resale.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by Seller and the Stockholders to Indemnify. Seller
and each Stockholder agree jointly and severally to indemnify, defend and hold
Purchaser harmless (subject to the limitations set forth in Section 9.1(e)
below) from and against the aggregate of all Indemnifiable Damages (as defined
below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all losses
incurred or suffered by Purchaser, on a pre-tax consolidated basis to
the extent (i) resulting from any breach of a representation or
warranty made by Seller or the Stockholders in or pursuant to this
Agreement (provided, however, that for purposes of this
indemnification, the representation and warranty contained in Section
3.17 of this Agreement shall be deemed to have been made without the
qualification of knowledge), (ii) resulting from any breach of the
covenants or agreements made by Seller or the Stockholders pursuant to
this Agreement, or (iii) resulting from any inaccuracy in any
certificate or environmental report delivered by Seller or the
Stockholders pursuant to this Agreement. For purposes of this
Agreement, the term "loss" shall mean any and all direct or indirect
payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred, or
diminutions in value of any kind or character (whether known or
unknown, conditional or unconditional, choate or inchoate, liquidated
or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise) that have occurred, including without limitation
penalties, interest on any amount payable to a third party as a result
of the foregoing and any legal or other expenses reasonably incurred
in connection with investigating or defending any demands, claims,
actions or causes of action that, if adversely determined, would
likely result in losses, and all amounts paid in settlement of claims
or actions.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Purchaser
shall have the right to be put in the same pre-tax consolidated
financial position as Purchaser would have been in had each of the
representations and warranties of Seller and the Stockholders
hereunder been true and correct and had the covenants and agreements
of Seller and the Stockholders hereunder been performed in full.
(c) Each of the representations and warranties made by
Seller and the Stockholders in this Agreement or pursuant hereto shall
survive for a period of three years after the Closing Date except (i)
the representations and warranties of Seller and the Stockholders
contained in Section 2.4(c)(i), Section 3.13 and Section 3.17 shall
survive for five years, (ii) the representations and warranties of
Seller and the Stockholders contained in Section 3.9 shall survive
until all applicable limitations periods have expired and (iii) the
representations and warranties of Seller and the Stockholders
contained in Sections 3.1, 3.2, 3.3, 3.14(a)(i), 3.14(a)(xii) and 4.1
shall not expire, but shall continue indefinitely. No claim for the
recovery of Indemnifiable Damages may be asserted by Purchaser against
Seller or the Stockholders after such representations and warranties
shall expire, provided, however, that claims for Indemnifiable Damages
first asserted within the applicable period shall not thereafter be
barred. Notwithstanding any knowledge of facts determined or
determinable by any party by
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investigation (and whether or not such party was negligent in
connection with any such investigation), each party shall have the
right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Purchaser believes it is entitled to a claim for
any Indemnifiable Damages hereunder, Purchaser shall promptly give
written notice to Seller and to the Stockholders of such claim and do
the amount or the estimated amount of such claim, and the basis for
such claim. If Seller or the Stockholders do not pay the amount of
the claim for Indemnifiable Damages to Purchaser within 10 days, then
Purchaser may exercise its respective rights under Section 9.3 and/or
take any action or exercise any remedy available to it by appropriate
legal proceedings to collect the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, Seller's and the Stockholders' liability for
Indemnifiable Damages shall be limited as follows:
(1) Purchaser shall have no claim for
Indemnifiable Damages unless and until all
Indemnifiable Damages incurred by Purchaser
exceed an aggregate of $55,000 (the "Basket
Amount"), in which event Seller and the
Stockholders shall be liable for only such
Indemnifiable Damages in excess of the Basket
Amount; provided, however, that (A) the
Basket Amount shall be reduced by the amount
of any Indemnifiable Damages attributable to
any matter set forth in any supplement or
amendment to any Schedule, any breach of
representation or warranty or any failure to
comply with or perform any covenant, and (B)
Purchaser shall have no obligation to close
the transaction if such Indemnifiable Damages
exceed $55,000. For example, (x) if the
aggregate amount of such Indemnifiable
Damages set forth in any supplement or
amendment, or attributable to any breach of
representation or warranty or failure to
comply with or perform any covenant were
$50,000, Purchaser would be obligated to
close the transaction (assuming all closing
conditions of Purchaser (other than Section
8.2(a) relating to representations and
warranties) have been satisfied or waived)
and the Basket Amount after the Closing would
be $5,000; and (y) if such Indemnifiable
Damages amounted to $200,000, Purchaser would
not be obligated to close the transaction;
but if it chooses to close the transaction,
the Basket Amount after the closing would be
$0, and Seller and the Stockholders would
have an indemnification obligation to
Purchaser of $145,000.
(2) The total amount of Indemnifiable Damages for
which Seller and the Stockholders shall be
liable to Group 1 shall not exceed the value
of the consideration received in the
Acquisition, of which the stock portion shall
be valued as provided in Section 2.3 herein.
9.2 Agreement by Purchaser to indemnify. Purchaser agrees to
indemnify, defend and hold Seller harmless from and against the aggregate of
all Seller Indemnifiable Damages (as defined below).
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(a) For purposes of this Agreement, "Seller Indemnifiable
Damages" means, without duplication, the aggregate of all losses
incurred or suffered by Seller, on a pre-tax consolidated basis, to
the extent (i) resulting from any breach of a representation or
warranty made by Purchaser in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by
Purchaser in or pursuant to this Agreement, or (iii) resulting from
any inaccuracy in any certificate delivered by Purchaser pursuant to
this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Seller Indemnifiable Damages,
Seller has the right to be put in the same pre-tax consolidated
financial position as it would have been in had each of the
representations and warranties of Purchaser hereunder been true and
correct and had the covenants and agreements of Purchaser hereunder
been performed in full.
(c) Each of the representations and warranties made by
Purchaser in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date. No claim for the
recovery of Seller Indemnifiable Damages may be asserted by Seller
against Purchaser after such representations and warranties shall thus
expire, provided, however, that claims for Seller Indemnifiable
Damages first asserted within the applicable period shall not
thereafter be barred. Notwithstanding any knowledge of facts
determined or determinable by any party by investigation (and whether
or not such party was negligent in connection with any such
investigation), each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other
parties contained in this Agreement or in any other documents or
papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this
Agreement is independent of each other representation, warranty,
covenant and agreement.
(d) In the event that Seller believes it is entitled to a
claim for any Seller Indemnifiable Damages hereunder, Seller shall
promptly give written notice to Purchaser of such claim and the amount
or the estimated amount of such claim, and the basis for such claim.
9.3 Conditions of Indemnification. The obligations and
liabilities of Seller, the Stockholders and Purchaser hereunder with respect to
their respective indemnities pursuant to this Article IX resulting from any
claim or other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such Indemnifying Party is
harmed by the failure of the Indemnified Party to provide timely
notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Purchaser, then Purchaser shall have the right to control the
defense of the Claim;
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(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
9.4 Applicability. THE PROVISIONS OF THIS ARTICLE IX SHALL APPLY
NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OF THE INDEMNIFIED PARTY. IF BOTH THE INDEMNIFIED PARTY AND THE
INDEMNIFYING PARTY ARE NEGLIGENT OR OTHERWISE AT FAULT OR STRICTLY LIABLE
WITHOUT FAULT, THE CONTRACTUAL OBLIGATIONS OF INDEMNIFICATION UNDER THIS
ARTICLE IX SHALL CONTINUE, BUT THE INDEMNIFYING PARTY SHALL INDEMNIFY THE
INDEMNIFIED PARTY ONLY FOR THE PERCENTAGE OF RESPONSIBILITY FOR THE DAMAGE OR
INJURIES ATTRIBUTABLE TO THE INDEMNIFYING PARTY.
9.5 Statutory Requirement. If a court of competent jurisdiction
determines that the provisions of Section 56-7-1 NMSA 1978, as amended, are
applicable to this Agreement or any claim arising under this Agreement, then
any agreement to indemnify in connection with this Agreement will not extend to
liability, claims, damages, losses or expenses, including attorney fees,
arising out of (1) the preparation or approval of maps, drawings, opinions,
reports, surveys, change orders, designs or specifications by the indemnitee,
or the agents or employees of the indemnitee, or (2) the giving of or the
failure to give directions or instructions by the indemnitee, or the agents or
employees of the indemnitee, where such giving or failure to give directions or
instructions is the primary cause of bodily injury to persons or damage to
property.
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. The Schedules to this Agreement,
contain all disclosure required to be made by Seller and the Stockholders under
the various terms and provisions of this Agreement.
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10.2 Certain Post-Closing Payments.
(a) As soon as reasonably practicable after completion of
the audited Group 1 consolidated financial statement for the year
ending December 31, 1998, but in no event later than April 30, 1999,
Seller shall receive from Newco a Post-Closing Payment calculated as
follows: (i) the annualized income before income taxes of the
Acquired Dealerships from Closing through December 31, 1998 will be
determined based on the statements of operations of Newco and Other
Newco included in the 1998 audited Group 1 consolidated financial
statements (such statement of operations to be based upon the books
and records of Newco and Other Newco); (ii) from this amount
$4,425,000 will be deducted; and (iii) the result will be multiplied
by 3.3. For purposes of this calculation, finance earnings will
include earnings as reported in the December 31, 1998, Premier Auto
Finance L.P. report of Newco's participation in the limited
partnership (before the deferral relating to FASB #125) and will
include income earned from Resource Group (or similar providing entity
mutually agreeable to the parties) with respect to 1998 credit life,
accident and health insurance and extended service contract operations
of Newco and Other Newco. Prior to December 31, 1998, (i) the
programs for finance, service and insurance income will not be changed
without Seller's consent, (ii) Group 1 will not require Newco to
change to more costly or less efficient providers than those used
prior to Closing without Seller's consent, and (iii) any Group 1
allocations of indirect costs, indirect overhead or goodwill
amortization will not be included in income before income taxes for
purposes of the computation. The amount of this Post-Closing Payment
will be paid in cash up to an amount of $3,445,000. Any amount
payable up to and including this initial cash amount of $3,445,000
will be escalated at 8% per annum from the Closing Date. Any amounts
due over $3,445,000 (as escalated) will be paid 50% in cash and 50% in
Group 1 Common Stock at the Designated Value of Group 1 Common Stock
as of the date of payment (such date to be fixed at least two weeks in
advance of the payment, i.e. no later than April 16, 1999) and in
accordance with the procedures, including the dispute resolution
procedures, set forth for the payment of the Closing Payment. The
parties hereto acknowledge that this Section 10.2(a) and Section
10.2(a) of the Other Agreement each require only one calculation and
payment. Annualized income before income taxes of each Acquired
Dealership shall equal (i) pre-tax income as previously described and
included in the 1998 operations of Group 1, (ii) divided by the number
of months the Acquired Dealership is included in the 1998 operations
of Group 1, and (iii) which quotient shall be multiplied by 12. This
same method of annualization shall be used with respect to the
Additional Dealerships, if annualization is required by Section
10.2(b)(ii).
(b) As additional consideration for the Assets, Seller
and Stockholders are required to participate in Group 1's acquisition
of Additional Dealerships (as defined below) following the Closing and
to assume, with the mutual consent of Group 1 and Stockholders,
managerial responsibility for such Additional Dealerships. As partial
consideration for such participation, Group 1 will pay Seller as
follows: (i) the income before income taxes of each Additional
Dealership will be determined for the applicable Calculation Year and
multiplied by 5.5, (ii) from this amount the Group 1 investment in the
applicable Additional Dealership will be deducted, and (iii) the
difference will be paid to Seller 50% in Group 1 Common Stock and 50%
in cash.
For purposes of this Section 10.2(b), (i) Additional
Dealerships shall mean any dealerships acquired from the Closing Date
through December 31, 2000, and those acquisitions
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which are in progress at such date and are consummated on or before
June 30, 2001, which become part of the executive management
responsibility of Stockholders and Seller; (ii) Calculation Year shall
mean, with respect to each Additional Dealership, the first full
calendar year following Group 1's completed acquisition of such
Additional Dealership (except that the Calculation Year for any
Additional Dealership acquired by Group 1 in the first quarter of a
calendar year shall be that year, and income before income taxes for
such dealership earned post-acquisition shall be annualized); (iii) in
calculating the stock portion of any payment due to Sellers hereunder,
Designated Value of Group 1 Common Stock will be used; (iv) Group 1
Investment shall be the purchase price paid by Group 1 with respect to
each acquisition, costs of moving franchises to alternate facilities,
costs of modification of facilities to accommodate expanded operations
or any other investment in the operation required by Group 1 with
respect to the Calculation Year; and (v) income before income taxes
will be calculated in accordance with Section 10.2(a) herein. Any
payments due to Seller under this Section 10.2(b) will be paid by
Group 1 no later than April 30 of the calendar year immediately
following the Calculation Year (with two weeks advance notice required
to calculate the Designated Value of the Group 1 Common Stock to be
paid).
(c) The payments due to Seller under paragraphs (a) and
(b) of this Section 10.2 (the "Post-Closing Payments," and together
with the Closing Payment, as adjusted pursuant to Section 2.2, the
"Purchase Price") are additional consideration for the Assets, and the
parties hereto agree to report such amounts on such basis for income
tax purposes.
(d) Any Post-Closing Payments payable to Seller may be
applied by Purchaser to offset any Indemnifiable Damages for which a
Claim has been filed pursuant to Sections 9.1 and 9.3 herein.
10.3 Certain Repurchase Rights. In the event Group 1 elects to
sell one or more of the dealerships under Stockholders' management (in a
transaction not involving the sale of Group 1 or a major portion thereof),
Stockholders shall have a right of first refusal on terms identical to the
third party offer. Stockholders' right hereunder shall expire on the tenth
anniversary of the Closing Date.
10.4 Non-Competition Obligations.
(a) As an additional inducement for Purchaser to enter
into this Agreement, the Stockholders and Purchaser agree to the
non-competition provisions of this Section 10.4. Each Stockholder
agrees that during the period of the Stockholder's non-competition
obligations hereunder, the Stockholder will not, directly or
indirectly for himself or herself or for others, within twelve miles
of or in the county of any operations sold to Purchaser under this
Agreement or operations subsequently under the executive management of
such Stockholder as of the date in question or during the previous
twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates;
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(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or affiliates, or hire
or assist in the hiring of any such employee by person,
association, or entity not affiliated with Group 1 or any of
its subsidiaries or affiliates.
These non-competition obligations shall apply for the period
specified in any employment agreement entered into by such Stockholder
with Group 1 or its Subsidiaries. If Group 1 or any of its
subsidiaries or affiliates abandons a particular aspect of its
business, that is, ceases such aspect of its business with the
intention to permanently refrain from such aspect of its business,
then this non-competition covenant shall not apply to such former
aspect of that business.
Notwithstanding the foregoing, the non-competition obligations
of this Section 10.4 shall not apply (i) to any Stockholder's
operation and management of any dealership purchased in accordance
with Section 10.3 hereof and (ii) with respect to (a) Kenneth E.
Johns, such individual's passive investment in an automobile
dealership owned and managed by members of his immediate family or
affiliates of such individuals or (b) Cynthia C. Johns, such
individual's investment and management participation in an automobile
dealership owned and operated by members of her immediate family or
affiliates of such individuals, provided that Mrs. Johns continues to
devote substantially all of her business time, energy and best efforts
to the business and affairs of Group 1, its subsidiaries and
affiliates so long as she is an employee of Group 1 or any of its
subsidiaries or affiliates.
(b) During this non-competition period the Stockholders
will not engage in these restricted activities or assist in the
industry consolidation efforts on behalf of any publicly held entity
in the automotive retailing industry (nor any entity with the ultimate
intention of becoming a publicly held entity or being acquired in any
manner by a publicly held entity), regardless of geographic area or
market.
(c) The Stockholders understand that the foregoing
restrictions may limit their ability to engage in certain businesses
during the period provided for above, but acknowledge that the
Stockholders will receive sufficiently high remuneration and other
benefits under this Agreement to justify such restriction. The
Stockholders acknowledge that money damages would not be sufficient
remedy for any breach of this Section 10.4 by the Stockholders, and
Group 1 or any of its subsidiaries or affiliates shall be entitled to
enforce the provisions of this Section 10.4 by terminating any
payments then owing to the Stockholders under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach
or any threatened breach, without any requirement for the securing or
posting of any bond in connection with such remedies. Such remedies
shall not be deemed the exclusive remedies for a breach of this
Section 10.4, but shall be in addition to all remedies available at
law or in equity to Group 1 or any of its subsidiaries or affiliates,
including, without limitation, the recovery of damages from Group 1
and the Stockholders' agents involved in such breach.
(d) It is expressly understood and agreed that Group 1
and the Stockholders consider the restrictions contained in this
Section 10.4 to be reasonably necessary to protect the legitimate
business interests of Group 1 and its subsidiaries and affiliates,
including the confidential and proprietary information and trade
secrets of Group 1 and its subsidiaries and affiliates. Nevertheless,
if any of the aforesaid restrictions are found by a court having
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jurisdiction to be unreasonable, or overly broad as to geographic area
or time, or otherwise unenforceable, the parties intend for the
restrictions therein set forth to be modified by such courts so as to
be reasonable and enforceable and, as so modified by the court, to be
fully enforced.
(e) The parties hereto expressly acknowledge that
Purchaser's rights under this Section 10.4 are assignable and that
such rights shall be fully enforceable by any of Purchaser's assignees
or successors in interest.
10.5 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Purchaser and Seller;
(b) by either Purchaser or Seller if the Acquisition has
not been effected on or before March 31, 1998;
(c) by either Purchaser or Seller if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(d) by Purchaser if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of Seller; (ii) there has been a material breach
of any representation, warranty, covenant or other agreement set forth
in this Agreement by Seller or the Stockholders which breach has not
been cured within ten business days following receipt by Seller of
notice of such breach (or if such breach cannot be cured within such
time, reasonable efforts have begun to cure such breach and such
breach is then cured within 30 days after notice) or (iii) there is a
material adverse change in the normalized pre-tax income (after
addbacks) expected for Seller, on which the Purchase Price was based;
(e) by Seller if there has been a material breach of any
representation or warranty set forth in this Agreement by Purchaser
which breach has not been cured within ten business days following
receipt by Purchaser of notice of such breach (or if such breach
cannot be cured within such time, reasonable efforts have begun to
cure such breach and such breach is then cured within 30 days after
notice);
(f) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate
hereunder shall expire thirty (30) calendar days following the
execution of this Agreement; or
(g) by Purchaser if the Seller 1997 Financial Statements
reflect a material adverse change from the Seller Interim Financial
Statements, except as contemplated by this Agreement.
10.6 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.5, Seller and Purchaser shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.7 survive any such termination.
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10.7 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by Purchaser shall be paid by
Purchaser and all such costs and expenses incurred by Seller and the
Stockholders shall be paid by the Sellers. Seller's expenses shall not be
included in Assumed Liabilities. Seller and Purchaser each represent and
warrant to each other that there is no broker or finder involved in the
transactions contemplated hereby.
10.8 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period"), neither Seller nor any Stockholder voluntarily will: (i)
sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or
otherwise dispose of (A) any shares of Group 1 Common Stock received by any
such Seller or Stockholder in the Acquisition or (B) any interest in (including
any option to buy or sell) any of those shares of Group 1 Common Stock, in
whole or in part, and Group 1 will have no obligation to, and shall not, treat
any such attempted transfer as effective for any purpose or (ii) engage in any
transaction, whether or not with respect to any shares of Group 1 Common Stock
or any interest therein, the intent or effect of which is to reduce the risk of
owning the shares of Group 1 Common Stock acquired pursuant to this Agreement
(including, for example, engaging in put, call, short sale, straddle or similar
market transactions). Notwithstanding the foregoing, Seller may distribute
shares of Group 1 Common Stock to the Stockholders, and Seller and each such
Stockholder may (i) pledge shares of Group 1 Common Stock, provided that the
pledgee of such shares shall agree not to sell or otherwise dispose of any such
shares for the Restricted Period; (ii) transfer shares to immediate family
members or the estate of any such individual (including, without limitation,
any transfer by such Seller or Stockholder to or among any trust, custodial or
other similar accounts or funds that are for the benefit of his or her
immediate family members), provided that such person or entity shall agree not
to sell or otherwise dispose of any such shares for the Restricted Period;
(iii) transfer all of such shares to a charitable foundation, provided that
such foundation (a) agrees not to sell or otherwise dispose of any such shares
for the Restricted Period, and (b) executes a customary investor representation
letter with respect to exemptions from the Securities Act and any applicable
blue sky laws; and (iv) transfer shares by will or the laws of descent and
distribution or otherwise by reason of such Stockholder's death. The
certificates evidencing the Group 1 Common Stock delivered to Seller and each
Stockholder pursuant to this Agreement will bear a legend substantially in the
form set forth below and containing such other information as Group 1 may deem
necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE ASSET PURCHASE AGREEMENT AMONG THE
ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES THERETO,
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
ONE-YEAR PERIOD ENDING ON ______________ [DATE THAT IS THE ANNIVERSARY
OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE
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<PAGE> 41
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE.
(b) Seller and each Stockholder, severally and not jointly with
any other Person, (i) acknowledges that the shares of Group 1 Common Stock to
be delivered to Seller and that Stockholder pursuant to this Agreement have
not been and, if applicable, will not be registered under the Securities Act
and therefore may not be resold by Seller or that Stockholder without
compliance with the Securities Act and (ii) covenants that none of the shares
of Group 1 Common Stock issued to Seller or that Stockholder pursuant to this
Agreement will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all the applicable
provisions of the Securities Act and the rules and regulations of the
Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Group 1 Common Stock issued pursuant to this
Agreement will bear the following legend in addition to the legend prescribed
by Section 10.8(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Acquisition to Seller and each Stockholder will bear any legend
required by the securities or blue sky laws of the state in which Seller or
that Stockholder resides.
10.9 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf of each party hereto.
The waiver by any party hereto of any condition or of a breach of another
provision of this Agreement shall not operate or be construed as a waiver of
any other condition or subsequent breach. The waiver by any party hereto of
any of the conditions precedent to its obligations under this Agreement shall
not preclude it from seeking redress for breach of this Agreement other than
with respect to the condition so waived.
10.10 Public Statements. Seller, the Stockholders and Purchaser
agree to consult with each other prior to issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated hereby, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law.
10.11 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
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<PAGE> 42
10.12 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to Seller: United Management, Inc.
7201 Lomas Blvd. NE
Albuquerque, New Mexico 87110
Telecopy: (505) 262-8696
Attention: Kenneth E. Johns
with a copy to: Sutin Thayer & Browne
Two Park Square, Suite 1000
6565 Americas Parkway
Albuquerque, New Mexico 87710
Attention: Graham Browne
if to the Stockholders: Kenneth E. Johns and Cynthia C. Johns
1117 Salamanca St. NW
Albuquerque, New Mexico 87106
Telecopy: (505) 344-0124
James J. Burns, Trustee
4801 Loop, 289 South
Lubbock, Texas 79424
Telecopy: (806) 798-4592
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.12. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back
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<PAGE> 43
is received, or (iii) if mailed, upon the earlier of five days after deposit in
the mail and the date of delivery as shown by the return receipt therefor.
Delivery to the Stockholders' representative, if any, of any notice to
Stockholders hereunder shall constitute delivery to all Stockholders and any
notice given by such Stockholders' representative shall be deemed to be notice
given by all Stockholders.
10.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Mexico, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
10.14 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.15 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.16 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
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<PAGE> 44
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B.B. HOLLINGSWORTH, JR.
-------------------------------------
Name: B.B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
CASA CHEVROLET INC.
By: /s/ JOHN T. TURNER
-------------------------------------
Name: John T. Turner
Title: President
UNITED MANAGEMENT, INC.
By: /s/ KENNETH E. JOHNS
-------------------------------------
Name: Kenneth E. Johns
Title: President
STOCKHOLDERS
/s/ KENNETH E. JOHNS
-----------------------------------------
Kenneth E. Johns
/s/ CYNTHIA C. JOHNS
-----------------------------------------
Cynthia C. Johns
Johns Investment Trust
By: /s/ JAMES J. BURNS
-------------------------------------
James J. Burns, as Trustee for
Jeffrey Johns and Julie Johns
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<PAGE> 45
ANNEX I
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly, through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Asset Purchase Agreement made and entered
into as of February 20, 1998 by and among Group 1, Newco, Seller and the
Stockholders, including any amendments thereto and each Annex (including this
Annex I), Exhibit and schedule thereto (including the Schedules).
"Allocation of Purchase Price" shall have the meaning set forth in
Sections 6.18 and 7.8 herein.
"Assets" shall mean, except for the Excluded Assets set forth on Annex
III, all of the assets, properties, goodwill, and rights (contractual or
otherwise) of every kind, nature and description, real, personal or mixed,
tangible or intangible and wherever situated purportedly owned or used by
Seller relating to the business and operations of the Acquired Dealership,
including, without limitation, the sale and service of new and used
automobiles, trucks and related products, and the provision of financing and
insurance in connection therewith under the names "Casa Chevrolet," and any
derivations thereof. The Assets shall include the Assets listed on Annex II
hereto.
"Assumed Liabilities" shall mean all liabilities of Seller set forth
on Annex IV hereto (which liabilities shall include all accounts payable of
Seller attributable to the Acquired Dealership incurred in the ordinary course
of business on or after December 31, 1997 that would be required to be recorded
on its balance sheets prepared in accordance with generally accepted accounting
principles). Without limiting the generality of the foregoing, the term
"Assumed Liabilities" shall not include (a) any liabilities arising from or
relating to any Excluded Assets, or (b) any transaction expenses or other
amounts expressly provided to be paid by Seller pursuant to the provisions of
this Agreement.
"Benefit Program or Agreement" shall have the meaning set forth in
Section 3.13.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.5, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions
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<PAGE> 46
precedent to the consummation of the transactions contemplated by the Agreement
are executed and delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.5.
"Closing Payment" shall have the meaning set forth in Section 2.1(b)
herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or
as trustee or executor, by contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Documents" shall have the meaning set forth in Section 3.2 herein.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder.
"Excluded Assets" shall mean those assets set forth on Annex III
attached hereto.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures included in the
Assets.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person, as defined by the independent public accountants retained by
Group.
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<PAGE> 47
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the Seller States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Guarantees" shall have the meaning set forth in Section 3.7 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et
seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any similar state
statute or regulations implementing such statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental Authority to be a
hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indemnifiable Damages" shall have the meaning set forth in Section
9.1 herein.
"Indemnified Party" shall have the meaning set forth in Section 9.3
herein.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
herein.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Properties" has the meaning set forth in Section 3.14 herein.
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<PAGE> 48
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
"Material Contract" has the meaning set forth in Section 3.7 herein.
"Material Leases" shall have the meaning set forth in Section 3.7
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Owned Properties" shall have the meaning set forth in Section 3.14
herein.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
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<PAGE> 49
"Phase I Environmental Surveys" shall mean the surveys being prepared
by O'Brien & Gere Engineers, Inc.
"Plan" shall have the meaning set forth in Section 3.13.
"Post-Closing Payments" shall have the meaning set forth in Section
10.2(c) herein.
"Purchase Price" shall have the meaning set forth in Section 10.2(c)
herein.
"Related Party Agreements" shall have the meaning set forth in Section
3.7 herein.
"Related Party Guarantees" shall have the meaning set forth in Section
6.10 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority.
"Restricted Period" shall have the meaning set forth in Section 10.8
herein.
"SEC Documents" shall mean the Group 1 Automotive, Inc. Prospectus
dated October 29, 1997, Form 10-Q for the third quarter ended September 30,
1997, and Form 8-K dated December 17, 1997.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller" shall mean United Management, Inc., a New Mexico corporation,
all predecessor entities of Seller and its successors from time to time.
"Seller 1997 Balance Sheet" shall have the meaning set forth in
Section 6.16 herein.
"Seller 1997 Financial Statements" shall have the meaning set forth in
Section 6.16 herein.
"Seller Indemnifiable Damages" shall have the meaning set forth in
Section 9.2 herein.
"Seller's 401(k) Plan" shall have the meaning set forth in Section
2.4(c) herein.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
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<PAGE> 50
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by a specified Person or any of its
Subsidiaries within six years prior to the date of the Agreement but which have
been terminated prior to the date of the Agreement.
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
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<PAGE> 51
ANNEX II
ASSETS
[All to be as included in the Manufacturer Financial Statements (MS)
for Westside and Casa,
prepared as of the Closing Date, unless otherwise indicated below]
Total cash & equivalents MS
Total receivables MS
Total inventories MS
Prepaid expenses MS
Other assets & investments MS
Service equipment; company cars &
service vehicles; furniture, signs &
equipment (except as included in
EXCLUDED ASSETS) MS
Contracts Schedule 3.7
Permits Schedule 3.12
Insurance Schedule 3.15
Bank accounts Schedule 3.19
Names, reputation, intellectual property and goodwill (except as included in
EXCLUDED ASSETS) to include the following:
o Competitor information including notes of meetings, financial
analyses, valuation studies, personal notes, lists of acquisition
candidates, etc.
o Market information, including market studies, market sales
history, personal notes and list of top performing dealership
employees in market for possible future hire, etc.
o Manufacturer information including correspondence to and from
manufacturers, sales and service agreements, financial analyses
prepared by manufacturers, notes of meetings, competitor analyses,
CSI reports/comparisons, manufacturers channeling strategies,
personal notes, etc.
o Market and legal data from local and state automobile dealer
associations
o Reports received from any consultants regarding market or
competitor
o Regional and local market maps and population trends
o Architectural plans for new facilities
o Market demographics studies
o Market research on cost savings or consolidation of the market
o Organization charts for multi-dealer franchise groups
o Regional and local compensation information
o Business Plan
<PAGE> 52
ANNEX III
EXCLUDED ASSETS
All real estate
"United Management" and all derivations thereof
Personal furniture and office accessories of Kenneth E. Johns and Cynthia C.
Johns
<PAGE> 53
ANNEX IV
ASSUMED LIABILITIES
Except as indicated below, the Assumed Liabilities shall include all
liabilities of the Acquired Dealership at Closing that would be recorded on the
Seller's Closing Date balance sheet prepared consistently with Seller's past
accounting principles and practices, including accounts and notes payable,
accrued expenses, and other liabilities and obligations. The Assumed
Liabilities shall also include accounts payable, accrued expenses, and other
liabilities and obligations incurred by the Acquired Dealership prior to
Closing in the normal course of its business that may not have been reflected
on the Seller's Closing balance sheet prepared consistently with Seller's past
accounting principles and practices. Without limiting the foregoing, Assumed
Liabilities shall also include future chargebacks of finance, insurance and
service contracts commission income on prematurely terminated contracts sold by
the Acquired Dealership, the obligation to perform on limited guarantees made
to financial institutions by the Acquired Dealership to enable customers to
obtain financing for vehicles purchased from Seller, contractual obligations
referred to in Schedule 3.7(i)(b) and 3.7(ii)(a)(1), to the extent that such
contractual obligations are normal and customary contracts relating to the
normal operation of the Acquired Dealership, with no unusual, material negative
terms, and Seller's benefit plan identified on Section 2.4(c).
In addition, at the Closing Date, Purchaser will obtain substitute floor plan
financing the proceeds of which will be used to pay off any amounts outstanding
on Seller's floor plan financing and will obtain substitute line of credit
financing which will pay off any amounts outstanding on Seller's line of credit
financing, in accordance with Section 7.9.
Purchaser will not assume any obligations or liabilities arising from any of
the contracts, leases, guarantees or Related Party Agreements referred to in
Schedules 6.10, 3.7(i)(a), (ii)(b), (iii)(b), (iii)(c), (iii)(d), (iii)(e),
(iv)(a), and (iv)(c).
<PAGE> 1
EXHIBIT 10.51
ASSET PURCHASE AGREEMENT
AMONG
GROUP 1 AUTOMOTIVE, INC.,
CASA CHRYSLER PLYMOUTH JEEP INC.,
A WHOLLY OWNED SUBSIDIARY OF GROUP 1 AUTOMOTIVE, INC.,
UNITED MANAGEMENT, INC.,
AND
THE STOCKHOLDERS OF
UNITED MANAGEMENT, INC.
DATED AS OF
February 25, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE ACQUISITION
2.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Working Capital Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Group 1 Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
3.1 Approval and Authority; Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Authorization of Agreement - No Violation - No Consents . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Subsidiaries; Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.7 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 Employee Benefit Plans and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.14 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.16 Affiliate Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.17 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.18 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.21 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.22 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.23 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.24 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE STOCKHOLDERS
<S> <C> <C>
4.1 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Authorization For Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
COVENANTS OF THE SELLER AND THE STOCKHOLDERS
6.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Conduct of Business by Seller Pending the Acquisition . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.7 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Stockholders' Agreements Not to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Intellectual Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Removal of Related Party Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.11 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.12 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.13 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.14 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.15 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.16 Audit of Seller Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.17 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.18 Record Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<PAGE> 4
ARTICLE VII
COVENANTS OF PURCHASER
<TABLE>
<S> <C> <C>
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Reservation of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 New Limited Partnership Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.6 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.8 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.9 Security for Newco Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the Acquisition . . . . . . . . . . . . . 25
8.2 Additional Conditions Precedent to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . 25
8.3 Additional Conditions Precedent to Obligations of Seller and the Stockholders . . . . . . . . . . . 26
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by Seller and the Stockholders to Indemnify . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Agreement by Purchaser to indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Statutory Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Certain Post-Closing Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Certain Repurchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.4 Non-Competition Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.6 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.8 Restrictions on Transfer of Group 1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.9 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.10 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.11 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<PAGE> 5
GROUP 1 AUTOMOTIVE, INC.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of the 25th
day of February, 1998, is among GROUP 1 AUTOMOTIVE, INC., a Delaware
corporation ("Group 1"), CASA CHRYSLER PLYMOUTH JEEP INC. a New Mexico
corporation and a wholly owned subsidiary of Group 1 ("Newco," and together
with Group 1, "Purchaser"), UNITED MANAGEMENT, INC., a New Mexico corporation
("Seller"), and THE STOCKHOLDERS OF SELLER (each a "Stockholder" and
collectively the "Stockholders") set forth on the signature page hereof.
RECITALS:
WHEREAS, Seller is presently a party to a Sales and Service Agreement
with Chrysler Corp. (the "Manufacturer"), which provides for the sale and
service of Chrysler Plymouth Jeep vehicles ("Acquired Dealership") at 9733
Coors Blvd. NW, Albuquerque, New Mexico (the "Acquired Dealership Location");
WHEREAS, Purchaser wishes to acquire the Assets (as hereinafter
defined) of the Acquired Dealership for the purpose of succeeding Seller as the
authorized Chrysler dealer at the Acquired Dealership Location (the
"Acquisition");
WHEREAS, Group 1 has formed Newco to acquire the Assets;
WHEREAS, the parties hereto have executed an agreement substantially
similar to this Agreement (the "Other Agreement") dated as of the date hereof
by and among Group 1, Casa Chevrolet Inc., a wholly-owned subsidiary of Group 1
("Other Newco"), Seller and the Stockholders providing for Group 1's
acquisition (the "Other Acquisition") of all assets related to Seller's sale
and service of Chevrolet vehicles and related activities at 7201 Lomas NE,
Albuquerque, New Mexico (the "Other Dealership"). For the purposes of this
Agreement, the Acquired Dealership and the Other Dealership shall be referred
to collectively as the "Acquired Dealerships."
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which Purchaser shall purchase, and
Seller shall sell, all of the Assets; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex I hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning
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ascribed to it in accordance with GAAP; (c) "or" is not exclusive; (d)
"including" means "including, without limitation;" (e) words in the singular
include the plural; (f) words in the plural include the singular; (g) words
applicable to one gender shall be construed to apply to each gender; (h) the
terms "hereof," "herein," "hereby," "hereto" and derivative or similar words
refer to this entire Agreement; (i) the terms "Article" or "Section" shall
refer to the specified Article or Section of this Agreement; and (j) section
and paragraph headings in this Agreement are for convenience only and shall not
affect the construction of this Agreement.
ARTICLE II
THE ACQUISITION
2.1 The Acquisition.
(a) Assets to be Sold.
(i) Subject to the terms and conditions of this
Agreement, at the closing provided for in Section 2.5 hereof
(the "Closing"), Seller will, sell, convey, assign, transfer
and deliver to Newco all of Seller's right, title and interest
at the time of the Closing in and to the Assets free and clear
of any mortgage, pledge, lien, charge, encumbrance or other
adverse claim (whether absolute, accrued, contingent or
otherwise), except as otherwise disclosed in Schedule 3.1.
(ii) Such sale, conveyance, assignment, transfer
and delivery will be effected by delivery by Seller to Newco
of (A) a duly executed bill of sale ("Bill of Sale") in the
form of Exhibit A annexed hereto, (B) instruments of
assignment (collectively the "Instruments of Assignment"), and
(C) such other good and sufficient instruments of conveyance
and transfer as shall be necessary to vest in Newco (subject
to the terms of this Agreement) good and marketable title to
the Assets (collectively the "Other Instruments"), free and
clear of all mortgages, pledges, liens, charges, encumbrances
and other adverse claims (whether absolute, accrued,
contingent or otherwise), except as otherwise disclosed in
Schedule 3.1.
(b) Closing Payment. At the Closing, Seller will sell,
transfer, convey and deliver to Newco the Assets, in exchange for (a)
(i) $7,224,750 in cash, by a certified or bank cashier's check,
subject to adjustment as set forth in Section 2.2, and (ii) 393,750
shares of common stock, par value $.01 per share of Group 1 ("Group 1
Common Stock") as set forth in Section 2.3, (clauses (i) and (ii) are
collectively referred to as the "Closing Payment") and (b) the
assumption or discharge by Newco of the Assumed Liabilities, all of
which are listed on Annex IV attached hereto. Except for the Assumed
Liabilities, Purchaser shall not assume or otherwise be liable for,
and shall be indemnified with respect to, in accordance with the
provisions of Section 9.1 hereof, all other liabilities and
obligations of Seller.
(c) Assumption of Liabilities. Newco shall at Closing
execute and deliver to Seller an undertaking, in the form attached
hereto as Exhibit B (the "Undertaking"), whereby Newco will, as
specified therein, assume and agree to pay and discharge the Assumed
Liabilities of Seller.
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2.2 Working Capital Adjustment.
(a) Adjustment. The cash portion of the Closing Payment
set forth in Section 2.1(a)(i) shall be adjusted based on the product
of (i) the difference of (x) the amount of Working Capital (as defined
below) on the Closing Date, less (y) $5,163,000, times (ii) 0.45 (the
"Working Capital Adjustment"). If the Working Capital Adjustment is
positive, then the cash portion of the Closing Payment shall be
increased by the amount of the Working Capital Adjustment. If the
Working Capital Adjustment is negative, then the cash portion of the
Closing Payment shall be reduced by the amount of the Working Capital
Adjustment.
(b) Procedure. As promptly as possible, but in any event
within sixty (60) days after the Closing, Purchaser will deliver to
Seller a schedule setting forth the calculation of the Working Capital
Adjustment (the "Adjustment Schedule"). Seller and its independent
certified public accountant shall have the right to observe and
comment upon the preparation of such schedule, including the taking of
a physical inventory of the new and used automobiles of the Acquired
Dealership, which physical inventory shall be taken at Purchaser's
expense on the Closing Date. Within thirty (30) days after receipt of
the Adjustment Schedule by Seller, Seller may notify Purchaser in
writing that such schedule does not fairly state the Working Capital
Adjustment in accordance with the provisions of this Agreement,
setting forth in full the respects in which it fails to do so and the
reasons for reaching that conclusion. In the event that Purchaser and
Seller are unable to resolve any dispute so raised within sixty (60)
days after receipt of the Adjustment Schedule by Seller, they shall
appoint an independent, nationwide accounting firm acceptable to both
of them, whose expenses will be shared equally by Seller, on the one
hand, and Purchaser, on the other hand. Such accounting firm shall as
promptly as possible determine whether the Adjustment Schedule fairly
states, in accordance with the provisions of this Agreement, the
values of the items as to which Seller has taken issue and, if such
firm concludes that it does not do so with respect to any of such
items, the value which in such firm's opinion does so shall be final
and dispositive. The determination of the Working Capital Adjustment
by such independent firm shall be conclusive and binding on the
parties hereto.
(c) Payment. Within five (5) days after receipt of the
report by such accounting firm or the settlement of any dispute, or
within thirty-five (35) days following receipt of the Adjustment
Schedule by Seller if no dispute exists, payment shall be made of the
Working Capital Adjustment, if any. If the Working Capital Adjustment
is positive, such amount shall be paid in cash by a certified or bank
cashier's check by Purchaser to Seller. If the Working Capital
Adjustment is negative, such amount shall be paid in cash by a
certified or bank cashier's check by Seller to Purchaser.
(d) Working Capital. For purposes of calculating the
Working Capital Adjustment, the term "Working Capital" shall mean, as
of the Closing Date, the Seller's current assets less current
liabilities as of such date with respect to the Acquired Dealerships,
all calculated in accordance with GAAP, on a basis consistent with the
preparation of the Seller 1997 Balance Sheet, with inventory being
valued at the lower of cost, determined by the first-in, first-out
method ("FIFO"), or market; provided, however, that Seller's current
assets or liabilities with respect to the Acquired Dealership for the
purposes of this calculation shall not give effect to (i) any
charge-back reserve resulting from the audit of the Seller 1997
Balance Sheet, and (ii) any
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<PAGE> 8
expenditures of working capital, made in accordance with Section 6.3
hereof, to acquire equipment and other Fixed Assets sold to Purchaser
pursuant to this Agreement.
2.3 Group 1 Common Stock. The number of shares of Group 1 Common
Stock to be issued to Seller at Closing shall be appropriately adjusted to give
effect to any stock split or stock dividend of Group 1 Common Stock effected
prior to the Closing Date. The "Designated Value of Group 1 Common Stock"
shall mean the average closing price of Group 1 Common Stock on the New York
Stock Exchange for the five full trading days immediately preceding the date
specified. No fractional shares of Group 1 Common Stock shall be issued, but
in lieu thereof, Seller shall receive cash for any fractional shares at the
Designated Value of Group 1 Common Stock.
2.4 Employees.
(a) Continued Employment. Except as Newco has otherwise
heretofore disclosed to Seller, Newco will offer to employ, beginning
on the Closing Date, all of those persons who are employed by Seller
on a full-time basis with respect to the Acquired Dealership on the
Closing Date, upon total compensation and benefit terms substantially
commensurate with the total compensation and benefit terms of the
employee's employment with Seller. Newco further agrees that with
respect to any such employee who presently is employed by Seller
pursuant to a written employment contract, Newco's offer of employment
to such employee shall be expressly conditioned upon the execution and
delivery by such employee of a written release relieving and
discharging Seller from any obligation or liability following the
Closing Date under such employment contract and Newco shall deliver a
written copy of any such offer to Seller. Seller agrees to cooperate
with Newco by permitting Newco throughout the period prior to the
Closing Date (i) to inspect such employees' medical and other
employment records maintained by Seller, (ii) to meet with the
employees of Seller at such times as shall be approved by a
representative of Seller (which approval will not be unreasonably
withheld) and (iii) to distribute to such employees such forms and
other documents relating to employment by Newco after the Closing as
Newco shall reasonably request.
(b) Benefits, Workers' Compensation. Seller agrees that,
with respect to claims for workers' compensation and all claims under
Seller's employee benefit programs by persons working for Seller with
respect to the Acquired Dealership arising out of events occurring
prior to the Closing Date, whether insured or otherwise (including,
but not limited to, workers' compensation, life insurance, medical and
disability programs), Seller will, at its own expense, honor or cause
its insurance carriers to honor such claims in accordance with the
terms and conditions of such programs or applicable workers'
compensation statutes without interruption as a result of the
employment by Newco of any such employees on or after the Closing
Date.
(c) 401(k) Matters. Newco shall assume at Closing the Ken
and Cindy Johns Automotive Group 401(k) Profit Sharing Plan (the
"Seller's 401(k) Plan").
(d) Vacation Pay. Seller shall accrue in the Seller 1997
Balance Sheet a liability for the amount due for vacation pay with
respect to employees of Seller for vacation due but not taken. Newco
will thereafter assume responsibility under Newco's vacation program
for such vacation due but not taken.
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(e) Severance Pay. Seller will promptly reimburse Newco
and otherwise hold Newco harmless from and against all direct and
indirect costs, expenses and liabilities of any sort whatsoever
arising from or relating to any claims by or on behalf of present or
former employees of Seller in respect of severance pay and similar
obligations relating to the termination of such employee's employment
on or prior to the Closing Date.
(f) Purchaser's Plans. Effective as of the Closing Date
until January 1, 1999 Purchaser shall continue the same health plans
currently provided by Seller to its employees with respect to each
employee of Seller who is hired by Newco pursuant to Section 2.4(a)
("Transferring Employees"), and after January 1, 1999, Purchaser shall
cause each Transferring Employee to be provided with benefits on a
basis substantially similar to Purchaser's normal practice.
Purchaser shall cause each Transferring Employee to be covered under a
group health plan that (i) provides medical and dental benefits to the
Transferring Employee, (ii) credits such Transferring Employee, for
the year during which such coverage under such group health plan
begins, with any deductibles and copayments already incurred during
such year under the group health plan maintained by Seller listed on
Schedule 3.13(a), and (iii) waives any preexisting condition
restrictions to the extent necessary to provide immediate coverage and
to the extent such restrictions did not apply under the group health
plan maintained by Seller. Purchaser shall cause the employee benefit
plans and programs maintained after the Closing by Purchaser to
recognize each Transferring Employee's years of service and level of
seniority prior to the Closing Date with Seller and its affiliates for
purposes of terms of employment and eligibility, vesting and benefit
determination under such plans and programs (other than benefit
accruals under any defined benefit pension plan).
2.5 Closing. The Closing of the purchase and sale of the Assets
as contemplated by this Agreement shall take place at the offices of Sutin
Thayer & Browne, Two Park Square, 6565 Americas Parkway, Albuquerque, New
Mexico 87110, on a date mutually established by the parties following the
satisfaction or waiver of the conditions set forth in Article VIII or at such
other time and place and on such other date as Purchaser and Seller shall
agree; provided, that the conditions set forth in Article VIII shall have been
satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date."
(a) Delivery by Seller. At the Closing, Seller will
deliver to Newco (unless delivered previously), the following:
(i) a duly executed Bill of Sale substantially in
the form of Exhibit A hereto;
(ii) the Instruments of Assignment and Other
Instruments, in form and substance satisfactory to
Newco, pursuant to Section 2.1(a)(ii);
(iii)true copies of any consents referred to in
Section 3.2 hereof;
(iv) the opinion of counsel referred to in Section
8.2(l) hereof;
(v) all the books and records of Seller pertaining
to the Assets;
(vi) executed copies of the Leases referred to in
Sections 6.14 and 7.6 hereto;
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(vii) executed copies of the Employment Agreements;
and
(viii) all other documents, instruments and writings
required to be delivered by Seller at or prior to the
Closing pursuant to this Agreement or otherwise
required in connection herewith.
(b) Delivery by Newco. At the Closing, Newco will
deliver to Seller (unless previously delivered), the following:
(i) the certified or bank cashier's check referred
to in Section 2.1(b) hereof;
(ii) the certificates representing Group 1 Common
Stock pursuant to Section 2.1(b) hereof;
(iii) the Undertaking referred to in Section 2.1(c)
hereof;
(iv) the opinion referred to in Section 8.3(b)
hereof;
(v) executed copies of the Leases referred to in
Sections 6.14 and 7.6 hereto;
(vi) executed copies of the Employment Agreements; and
(vii) all other documents, instruments and writings
required to be delivered by Newco at or prior to the
Closing pursuant to this Agreement or otherwise
required in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
The Seller and the Stockholders, jointly and severally, represent and
warrant to Group 1 as follows:
3.1 Approval and Authority; Title to Assets. The Seller has the
full right, power and authority to enter into this Agreement and to perform all
of its obligations under this Agreement, and the execution and delivery of this
Agreement and the performance by Seller of its obligations under this Agreement
require no further action or approval of any other person in order to
constitute this Agreement as a binding and enforceable obligation of Seller.
Except as disclosed in Schedule 3.1, Seller has good and indefeasible title to
the Assets, free and clear of any claim, pledge, lien, charge, encumbrance,
mortgage or other adverse claim.
3.2 Authorization of Agreement - No Violation - No Consents. The
Seller has full power and authority to enter into this Agreement and the other
documents delivered pursuant to this Agreement (collectively, the "Documents").
Except as disclosed in Schedule 3.2, neither the execution and delivery by
Seller and the Stockholders of the Documents, nor the performance by Seller and
the Stockholders of their obligations under the Documents will (assuming
receipt of all consents, approvals,
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<PAGE> 11
authorizations, permits, certificates and orders disclosed as requisite in
Schedule 3.2) (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, (iii) any applicable permits
received from any Governmental Authority (iv) the articles of incorporation or
bylaws or other organizational documents of Seller or (v) any contract or
agreement to which Seller or the Stockholders are a party or by which they, or
any of the Assets, are bound; or (b) result in the creation or imposition of
any Lien on any of the Assets; or (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit, certificate or order of any Court or
Governmental Authority; or (d) with the passage of time or the giving of notice
or the taking of any action of any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section. Except for the applicable
requirements, if any, of the HSR Act and as expressly contemplated by the
Documents, no consent, action, approval or authorization of, or registration,
declaration or filing with, any Court, Governmental Authority or any other
person or entity is required to authorize, or is otherwise required in
connection with, the execution and delivery of the Documents by any Seller,
performance of the terms of the Documents or the validity or enforceability of
the Documents. This Agreement and each Document delivered pursuant hereto
constitutes the legal, valid and binding obligation of Seller and the
Stockholders enforceable against each such Person in accordance with its terms.
3.3 Subsidiaries; Equity Investments. Seller has not controlled
directly or indirectly, or had any direct or indirect equity participation in
any corporation during the five-year period preceding the date hereof.
3.4 Financial Statements. Included in Schedule 3.4 are true and
complete copies of the financial statements of Seller consisting of an
unaudited balance sheet of Seller as of December 31, 1997 (the "Interim Balance
Sheet") and the related unaudited statement of income for the twelve-month
period then ended (collectively, the "Seller Interim Financial Statements").
Except as provided in Schedule 3.4, the Seller Interim Financial Statements
present fairly the financial position of Seller and the results of its
operations and changes in financial position as of the dates and for the
periods indicated therein in conformity with GAAP. Except as provided in
Schedule 3.4, the Seller Interim Financial Statements do not omit to state any
liabilities, absolute or contingent, required to be stated therein in
accordance with GAAP. All accounts receivable of Seller reflected in the
Seller Interim Financial Statements and as incurred since December 31, 1997
represent sales made in the ordinary course of business, are collectible (net
of any reserves for doubtful accounts or applicable chargebacks shown in the
Seller Interim Financial Statements) in the ordinary course of business and,
except as disclosed in Schedule 3.4, are not in dispute or subject to
counterclaim, set-off or renegotiation. Seller has delivered to Purchaser a
report which contains an aged schedule of accounts receivable included in the
Interim Balance Sheet.
3.5 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet or
as disclosed in Schedule 3.5, Seller does not have any material liabilities or
obligations of any nature whether absolute, accrued, contingent or otherwise,
and whether due or to become due. The reserves reflected in the Interim
Balance Sheet are adequate, appropriate and reasonable in accordance with GAAP.
3.6 Certain Agreements. Except as disclosed in Schedule 3.6,
neither Seller nor any of its officers or directors, is a party to, or bound
by, any contract, agreement or organizational document which purports to
restrict, by virtue of a noncompetition, territorial exclusivity or other
provision
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<PAGE> 12
covering such subject matter purportedly enforceable by a third party against
Seller or any of its officers or directors, the scope of the business or
operations of Seller or any of its officers or directors, geographically or
otherwise.
3.7 Contracts and Commitments. Schedule 3.7 includes (i) a list of
all contracts to which Seller is a party or by which its property is bound that
involve consideration or other expenditure in excess of $50,000 or performance
over a period of more than six months or that is otherwise material to the
business or operations of Seller, taken as a whole ("Material Contracts"); (ii)
a list of all real or personal property leases to which Seller is a lessee
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which Seller is a party ("Guarantees") and (iv) a
list of all contracts or other formal or informal understandings between Seller
and any of their officers, directors, employees, agents or stockholders or
their affiliates ("Related Party Agreements"). True and complete copies of
each Material Contract, Material Lease, Guarantee and Related Party Agreement
have been furnished to Group 1. All of the Material Contracts, Material
Leases, Guarantees and Related Party Agreements are valid, binding and in full
force and effect and are enforceable by the Seller in accordance with their
terms. The Seller has performed all material obligations required to be
performed by it to date under the Material Contracts, Material Leases,
Guarantees and Related Party Agreements and Seller is not (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder and, to the knowledge of Seller or Stockholders, no
other party to any of the Material Contracts, Material Leases, Guarantees or
Related Party Agreements (with or without the lapse of time or the giving of
notice, or both) is in breach or default in any material respect thereunder.
3.8 Absence of Changes. Except as disclosed in Schedule 3.8,
there has not been, since December 31, 1997, any material adverse change with
respect to the business, assets, results of operations, prospects or condition
(financial or otherwise) of Seller. Except as disclosed in Schedule 3.8, since
December 31, 1997, Seller has not engaged in any transaction or conduct of any
kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, Seller
makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since December 31,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
3.9 Tax Matters.
(a) Except for filings and payments of assessments the
failure of which to file or pay will not materially adversely affect
the Assets, (i) all Tax Returns which are required to be filed on or
before the Closing Date by or with respect to Seller have been or will
be duly and timely filed, (ii) all items of income, gain, loss,
deduction and credit or other items required to be included in each
such Tax Return have been or will be so included and all information
provided in each such Tax Return is true, correct and complete, (iii)
all Taxes which have become or will become due with respect to the
period covered by each such Tax Return have been or will be timely
paid in full, (iv) all withholding Tax requirements imposed on or with
respect to Seller have been or will be satisfied in full, and (v) no
penalty, interest or other charge is or will become due with respect
to the late filing of any such Tax Return or late payment of any such
Tax.
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<PAGE> 13
(b) No Tax Returns of or with respect to Seller for tax
years subsequent to 1992 (other than a luxury tax audit) have been
audited by the applicable Governmental Authority. The applicable
statute of limitations has expired for all periods up to and including
the periods set forth in Schedule 3.9(b).
(c) There is no claim against Seller for any Taxes, and
no assessment, deficiency or adjustment has been asserted or proposed
with respect to any Tax Return of or with respect to Seller other than
those disclosed (and to which are attached true and complete copies of
all audit or similar reports) in Schedule 3.9(c).
(d) There is not in force any extension of time with
respect to the due date for the filing of any Tax Return of or with
respect to Seller or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of or with respect to Seller.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes, whether or not assessed or disputed,
which are, or are hereafter found to be, or to have been, due by or
with respect to Seller up to and through the periods covered thereby.
(f) All Tax allocation or sharing agreements affecting
Seller shall be terminated prior to the Closing Date and no payments
shall be due or will become due by Seller on or after the Closing Date
pursuant to any such agreement or arrangement.
(g) Seller will not be required to include any amount in
income for any taxable period as a result of a change in accounting
method for any taxable period pursuant to any agreement with any Tax
authority with respect to any such taxable period.
(h) Seller has not consented to have the provisions of
section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(i) From the end of its most recent tax year through the
Closing Date, (a) Seller continuously has been and will be an S
Corporation within the meaning of section 1361 of the Code, and (b)
each holder of Seller common stock has been an individual resident of
the United States or an estate or trust described in section
1361(c)(2) that is permitted to hold the stock of an S Corporation.
3.10 Litigation.
(a) Except as disclosed in Schedule 3.10(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of Seller or Stockholders, threatened
against or specifically affecting the Assets, Seller before or by any
Court or Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent disclosed in Schedule 3.10(b), Seller has performed all
obligations required to be performed by it to date and is not in
default under, and, to the knowledge of Seller and the Stockholders,
no event has occurred which, with the lapse of time or action by a
third party could result in a default under
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<PAGE> 14
any contract or other agreement to which Seller is a party or by which
it or any of the Assets are bound or under any applicable Order of any
Court or Governmental Authority.
3.11 Compliance with Law. Except as disclosed in Schedule 3.11,
Seller is in compliance with all applicable statutes and other applicable laws
and all applicable rules and regulations of all federal, state, foreign and
local governmental agencies and authorities.
3.12 Permits. Except as disclosed in Schedule 3.12, Seller owns or
holds all franchises, licenses, permits, consents, approvals and authorizations
of all Governmental Authorities necessary for the operation of the Acquired
Dealership. A listing of all such items owned or held by Seller, with their
expiration dates, is included in Schedule 3.12. Each franchise, license,
permit, consent, approval and authorization so owned or held is in full force
and effect, and Seller is in compliance with all of its obligations with
respect thereto, and no event has occurred which allows, or upon the giving of
notice or the lapse of time or otherwise would allow, revocation or termination
of any franchise, license, permit, consent, approval or authorization so owned
or held.
3.13 Employee Benefit Plans and Policies.
(a) Schedule 3.13(a) provides a description of each of
the following which is sponsored, maintained or contributed to by
Seller for the benefit of its employees, or has been so sponsored,
maintained or contributed to within six years prior to the Closing
Date:
(i) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
that is not disclosed in Section 3.13(a)(i) ("Benefit Program
or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
have been furnished to Group 1.
(b) Seller's 401(k) Plan satisfies in form the
requirements of Section 401 of the Code, except to the extent
amendments are not required by law to be made until a date after the
Closing Date, and has not been operated in a way that would adversely
affect its qualified status.
(c) There has been no termination or partial termination
of Seller's 401(k) Plan within the meaning of Section 411(d)(3) of the
Code.
(d) There are no actions, suits or claims pending (other
than routine claims for benefits) or threatened against, or with
respect to, Seller's 401(k) Plan or its assets.
(e) There is no matter pending with respect to Seller's
401(k) Plan before the IRS, the Department of Labor or other
Governmental Authority.
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<PAGE> 15
(f) All contributions required to be made to Seller's
401(k) Plan pursuant to its terms and the provisions of ERISA, the
Code, or any other applicable Law have been timely made.
(g) Schedule 3.13(g) sets forth by name and job
description of the employees of Seller with respect to the Acquired
Dealership as of the date of this Agreement. None of said employees
are subject to union or collective bargaining agreements. Seller has
not at any time had or been threatened with any work stoppages or
other labor disputes or controversies with respect to its employees.
3.14 Properties.
(a) Seller owns, and will retain as Excluded Assets, the
real properties described in Schedule 3.14(a)(1) (the "Owned
Properties"). Seller does not lease any real property or any interest
therein except as disclosed in Schedule 3.14(a)(2) (the "Leased
Properties"), which sets forth the location and size of, principal
improvements and buildings on, and Liens on the Leased Properties.
True and correct copies of all Liens are attached to Schedule
3.14(a)(2) or have been delivered to Purchaser. Except as disclosed
in Schedule 3.14(a)(2), with respect to each such parcel of Leased
Property:
(i) Seller has a good, valid and enforceable
leasehold interest in each parcel of its Leased Property, free
and clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
Seller or Stockholders, threatened condemnation proceedings,
suits or administrative actions relating to the Leased
Properties or other matters affecting adversely the current
use, occupancy or value thereof;
(iii) except as disclosed in Schedule 3.14(a)(iii),
the legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the ownership or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as disclosed in Schedule
3.14(a)(v);
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<PAGE> 16
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Leased Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than Seller) in
possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.14(a)(vii)
who are in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used;
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.14(a)(xi); and
(xii) the owners of each parcel of real property
leased to Seller as part of the Leased Properties have good
and valid title to such properties, free and clear of any Lien
other than Permitted Encumbrances.
(b) Except as disclosed in Schedule 3.14(b), Seller has
good and marketable title to all of the Assets, free and clear of any
Liens or restrictions on use. The Fixed Assets currently in use for
the business and operations of Seller are in good operating condition,
normal wear and tear excepted and have been maintained in accordance
with sound industry practices.
3.15 Insurance. Schedule 3.15 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Acquired Dealership (true and complete copies of which have been furnished to
Group 1). Such insurance policies are in full force and effect. Seller is
presently insured, and since the inception of operations by Seller has been
insured, against such risks as companies engaged in the same or substantially
similar business would, in accordance with good business practice, customarily
be insured. Seller has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as disclosed in Schedule 3.15, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. Seller has not received
any notice or other communication from any such insurer canceling or materially
amending any of such insurance policies, and no such cancellation is pending or
threatened.
3.16 Affiliate Interests. Except as disclosed in Schedule 3.16, no
employee, officer or director, or former employee, officer or director, of
Seller has any interest in any property, tangible or intangible, including
without limitation, patents, trade secrets, other confidential business
information, trademarks, service marks or trade names, used in or pertaining to
the business of Seller, except for the normal rights of employees and
stockholders.
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3.17 Environmental Matters. Except as disclosed in Schedule 3.17,
to the best knowledge of Seller and the Stockholders:
(a) Seller is in compliance with all Environmental Laws,
including, without limitation, Environmental Laws with respect to
discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. Seller is not
currently liable for any penalties, fines or forfeitures for failure
to comply with any Environmental Laws. Seller is in compliance with
all required notice, record keeping and reporting requirements of all
Environmental Laws, and has complied with all informational requests
or demands arising under the Environmental Laws.
(b) Seller has obtained, or caused to be obtained, and is
in compliance with, all Licenses required by the Environmental Laws
for the ownership of its properties and assets and the operation of
its business as presently conducted, including, without limitation,
all air emission, water discharge, water use and solid waste,
hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses (a listing of such items being
included in Schedule 3.17(b)), and Seller is in compliance with all
the terms, conditions and requirements of such Licenses, and copies of
such Licenses have been made available to Group 1. There are no
administrative or judicial investigations, notices, claims or other
proceedings pending or, to the knowledge of Seller or Stockholders,
threatened by any Governmental Authority or third parties against
Seller or its business, operations, properties, or assets, which
question the validity or entitlement of Seller to any License required
by the Environmental Laws for the ownership of each of the respective
properties and assets of Seller and the operation of its business.
(c) Seller has not received nor is aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving Seller
or its business, operations, properties, or assets, issued by any
Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of their business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) Seller is in compliance with, and is not in breach of
or default under any applicable writ, order, judgment, injunction,
governmental communication or decree issued pursuant to the
Environmental Laws and no event has occurred or is continuing which,
with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Owned Properties or the Leased Properties.
(e) Seller has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store, handle, treat, spill, leak, dump, discharge, release or dispose
of, Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
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<PAGE> 18
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. Seller has not generated,
manufactured, used, stored, handled, treated, spilled, leaked, dumped,
discharged, released or disposed of, or arranged for any third parties
to generate, manufacture, use, store, handle, treat, spill, leak,
dump, discharge, release or dispose of, any material quantities of
Hazardous Substances or other waste upon property currently or
previously owned or leased by it, except in compliance with
Environmental Laws.
(f) Seller has not caused a Release or Discharge of any
material quantity of Hazardous Substance on, into or beneath the
surface of the Owned Properties or the Leased Properties or to any
properties adjacent thereto except in compliance with the
Environmental laws. There has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge,
of any Hazardous Substance on, into or beneath the surface of the
Owned Properties or the Leased Properties or to any properties
adjacent thereto.
(g) Seller has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor has it allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified Seller that it has proposed or is proposing to place on
the National Priorities List or its state equivalent. Seller has not
received notice or have knowledge of any facts which could give rise
to any notice, that Seller is a potentially responsible party for a
federal or state environmental cleanup site or for corrective action
under CERCLA, RCRA or any other applicable Environmental Laws. Seller
has not submitted nor was required to submit any notice pursuant to
Section 103(c) of CERCLA with respect to any properties owned by, or
used in the business of, Seller. Seller has not received any written
nor, to the knowledge of Seller or Stockholders, oral request for
information in connection with any federal or state environmental
cleanup site, or in connection with any of the real property or
premises where Seller has transported, transferred or disposed of
other Wastes. Seller has no been required to nor has undertaken any
response or remedial actions or clean-up actions at the request of any
Governmental Authorities or at the request of any other third party.
Seller has no liability under any Environmental Laws for personal
injury, property damage, natural resource damage, or clean up
obligations.
(h) Seller has no Aboveground Storage Tanks or
Underground Storage Tanks, except as disclosed in Schedule 3.17(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which Seller or
Stockholders are aware undertaken by Seller or Stockholders, or by any
Governmental Authority, or by any third party, relating to Seller or
any of the Owned Properties or the Leased Properties; (ii) the results
of which Seller or Stockholders are aware of any ground, water, soil,
air or asbestos monitoring undertaken by Seller, or by any
Governmental Authority, or by any third party, relating to Seller, or
any of the Owned Properties or the Leased Properties; (iii) all
written communications between Seller and any Governmental Authority
arising under or related to Environmental, Laws; and (iv) all
citations issued under OSHA, or similar state or
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<PAGE> 19
local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings, or decrees, relating to or affecting Seller or any of the
Owned Properties or the Leased Properties.
(j) Schedule 3.17(j) contains a list of the assets of
Seller which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
disclosed in Schedule 3.17(j), Seller has operated and continues to
operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as disclosed in Schedule
3.17(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, directly affecting or, to the knowledge of Seller
or Stockholders, threatened against Seller or any of its assets or
operations relating to the use, handling or exposure to and disposal
of asbestos or asbestos-containing materials in connection with its
assets and operations.
(k) Any references in this Section 3.17 to the "Owned
Properties" or the "Leased Properties" are deemed to also refer to any
properties previously owned or leased by Seller.
3.18 Intellectual Property. Except with respect to the Excluded
Assets and as set forth in Schedule 3.18, Seller owns, or is licensed or
otherwise has the right to use all Intellectual Property that are necessary for
the conduct of the business and operations of Seller as currently conducted.
To the knowledge of Seller or Stockholders, (a) the use of the Intellectual
Property by Seller does not infringe on the rights of any Person, and (b) no
Person is infringing on any right of Seller with respect to any Intellectual
Property. No claims are pending or, to the knowledge of Seller or
Stockholders, threatened that Seller is infringing or otherwise adversely
affecting the rights of any Person with regard to any Intellectual Property.
To the knowledge of the Seller, no Person is infringing the rights of Seller
with respect to any Intellectual Property. All of the Intellectual Property
that is owned by Seller is owned free and clear of all encumbrances and was not
misappropriated from any Person. All of the Intellectual Property that is
licensed by Seller is licensed pursuant to valid and existing license
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss of any Intellectual Property.
3.19 Bank Accounts. Schedule 3.19 includes the names and locations
of all banks in which Seller has an account or safe deposit box and the names
of all Persons authorized to draw thereon or to have access thereto.
3.20 Brokers. Except as disclosed in Schedule 3.20, no broker,
finder, investment banker or other person is entitled to any brokerage,
finder's or other fee, commission or payment in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller.
3.21 Disclosure. Seller has disclosed in writing, or pursuant to
this Agreement and the Schedules attached hereto, all facts material to the
business, assets, prospects and condition (financial or otherwise) of Seller.
No representation or warranty to Group 1 by Seller or Stockholders contained in
this Agreement, and no statement contained in the Schedules attached hereto,
any certificate, list or other writing furnished to Group 1 by Seller or
Stockholders pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements herein or therein not misleading. All statements contained in this
Agreement, the Schedules attached hereto, and any
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<PAGE> 20
certificate, list, document or other writing delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed a
representation and warranty of Seller for all purposes of this Agreement.
3.22 Assumed Liabilities. There are no Assumed Liabilities except
as described in Annex IV. Except as disclosed on Schedule 3.22, Seller is not,
and but for a requirement that notice be given or a period of time elapse or
both would not be, in default under any agreements, or documents delivered in
connection therewith, relating to the Assumed Liabilities, including any
mortgages or security interests securing the debt created thereunder. Except
as disclosed on Schedule 3.22, since December 31, 1997, neither Seller's funds
nor any Assumed Liability has been directly or indirectly used or incurred, as
the case may be, in connection with any Excluded Asset or to reduce any
liability that is not an Assumed Liability. Without limiting the generality of
the foregoing, except as disclosed on Schedule 3.22, since December 31, 1997,
Seller's funds and Assumed Liabilities have been used or incurred, as the case
may be, solely in the conduct, and for the benefit, of the Acquired Dealership.
3.23 Accounts Receivable. All accounts and notes receivable of
Seller in excess of $5,000 arose in the ordinary and usual course of its
business, represent valid obligations due, and either have been collected or
there is no legal impediment to their collection (subject only to bankruptcy
stays sought by account debtors) in the ordinary and usual course of business
in the net aggregate recorded amounts as reflected in the books of account of
Seller in accordance with their terms.
3.24 Inventory. The inventories of Seller included in the Assets
consist in all respects of items of a quality, condition and a quantity usable
or saleable in the normal course of the business of Seller, other than for
normal obsolescence; and the amount at which all such items are carried or
reflected in the Interim Financial Statements does not exceed the market or
realizable value thereof.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF SELLER AND THE STOCKHOLDERS
The Seller and each Stockholder hereby, severally and not jointly,
represent and warrant to Group 1 that:
4.1 Investment Intent. The Seller intends to distribute some or
all of the Closing Payment to its stockholders on or shortly after the Closing
Date. The Seller and each Stockholder makes the following representations
relating to his, her or its acquisition of shares of Group 1 Common Stock: (i)
such Stockholder will be acquiring the shares of Group 1 Common Stock to be
issued pursuant to the Acquisition to such Stockholder solely for such
Stockholder's account, for investment purposes only and with no current
intention or plan to distribute, sell or otherwise dispose of any of those
shares in connection with any distribution (except by way of gift to a
charitable foundation, provided that such foundation executes a customary
investor representation letter with respect to exemptions from the Securities
Act and any applicable state blue sky laws); (ii) such Stockholder is not a
party to any agreement or other arrangement for the disposition of any shares
of Group 1 Common Stock; (iii) such Stockholder is an "accredited investor" as
defined in Securities Act Rule 501(a); (iv) such Stockholder (A) is able to
bear the economic risk of an investment in the Group 1 Common Stock acquired
pursuant to this Agreement, (B) can afford to sustain a total loss of that
investment, (C) has such knowledge and experience in financial and business
matters, and such past participation in investments, that he or she is capable
of evaluating the merits and risks of the proposed investment in the Group 1
Common Stock,
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(D) has received and reviewed the SEC Documents, (E) has had an adequate
opportunity to ask questions and receive answers from the officers of Group 1
concerning any and all matters relating to the transactions contemplated
hereby, including the background and experience of the current officers and
directors of Group 1, the plans for the operations of the business of Group 1,
the business, operations and financial condition of Group 1 and any plans of
Group 1 for additional acquisitions, and (F) has asked all questions of the
nature described in the preceding clause (E), and all those questions have been
answered to his or her satisfaction; (v) such Stockholder acknowledges that the
shares of Group 1 Common Stock to be delivered to such Stockholder pursuant to
the Acquisition have not been and will not be registered under the Securities
Act or qualified under applicable blue sky laws and therefore may not be resold
by such Stockholder without compliance with Rule 144 of the Securities Act;
(vi) such Stockholder acknowledges that he or she has agreed, pursuant to
Section 10.8 herein, not to sell the shares of Group 1 Common Stock to be
delivered to such Stockholder pursuant to the Acquisition for a period of one
year from the Closing Date; (vii) such Stockholder, if a corporation,
partnership, trust or other entity, acknowledges that it was not formed for the
specific purpose of acquiring the Group 1 Common Stock; and (viii) without
limiting any of the foregoing, such Stockholder agrees not to dispose of any
portion of Group 1 Common Stock unless (1) a registration statement under the
Securities Act is in effect as to the applicable shares and the disposition is
made in accordance with that registration statement, (2) the Stockholder has
notified Group 1 of the proposed disposition, disposition is made through
Merrill, Lynch, Pierce, Fenner & Smith Incorporated or Goldman, Sachs & Co.,
Inc., or any of their successors or affiliates, subject to SEC Rule 144 and
such disposition is made in compliance with any other requirements of the
Securities Act, or (3) such disposition is made by gift to a charitable
foundation in compliance with any applicable requirements of the Securities Act
and any applicable state blue sky laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Each of Group 1 and Newco hereby represent and warrant, severally and
not jointly, to Seller that:
5.1 Corporate Organization. Each of Group 1 and Newco is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation with all requisite corporate power and
authority to execute, deliver and perform this Agreement and each instrument
required hereby to be executed and delivered by it at the Closing.
5.2 Authorization. The execution and delivery by Group 1 and
Newco of this Agreement, the performance by Purchaser of its obligations
pursuant to this Agreement, and the execution, delivery and performance of each
instrument required hereby to be executed and delivered by Purchaser at the
Closing have been duly and validly authorized by all requisite corporate action
on the part of Purchaser. This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by Purchaser
at, or prior to, the Closing will then be, duly executed and delivered by
Purchaser. This Agreement constitutes, and, to the extent it purports to
obligate Purchaser, each such instrument, document or agreement will constitute
(assuming due authorization, execution and delivery by each other party
thereto), the legal, valid and binding obligation of Purchaser, enforceable
against it in accordance with its terms.
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5.3 Approvals. Except for applicable requirements, if any, of the
HSR Act, no filing or registration with, and no consent, approval,
authorization, permit, certificate or order of any Court or Government
Authority is required by any applicable Law or by any applicable Order or any
applicable rule or regulation of any Court or Governmental Authority to permit
Purchaser, to execute, deliver or consummate the transactions contemplated by
this Agreement or any instrument required hereby to be executed and delivered
by Purchaser at or prior to the Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Purchaser of this Agreement or any instrument required hereby to be executed by
it at or prior to the Closing nor the performance by Purchaser of its
obligations under this Agreement or any such instrument will (a) violate or
breach the terms of or cause a default under (i) any applicable Law, (ii) any
applicable Order or any applicable rule or regulation of any Court or
Governmental Authority, (iii) the organizational documents of Purchaser or (iv)
any contract or agreement to which Purchaser is a party or by which it or any
of its property is bound, or (b) result in the creation or imposition of any
Liens on any of the properties or assets of Purchaser or any of its
subsidiaries (other than any Lien created by Seller or any of its
Subsidiaries), or (c) result in the cancellation, forfeiture, revocation,
suspension or adverse modification of any existing consent, approval,
authorization, license, permit certificate or order of any Court or
Governmental Authority or (d) with the passage of time or the giving of notice
or the taking of any action by any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section, except, with respect to
clauses (a), (b), (c) or (d) of this Section, where such matter would not have
a material adverse effect on the business, assets, prospects or condition
(financial or otherwise) of Purchaser and its subsidiaries, taken as a whole.
5.5 Authorization For Group 1 Common Stock. All shares of Group 1
Common Stock issuable pursuant to the Acquisition are duly authorized and will,
when issued, be validly issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any stockholder of Group 1.
5.6 SEC Documents. The SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations of the Commission promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Group 1 included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with GAAP during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Group 1 and its consolidated
subsidiaries as of the dates thereto and the consolidated results of their
operations and cash flows for the periods then ended (except in the case of
interim period financial information, for normal year-end adjustments).
ARTICLE VI
COVENANTS OF THE SELLER AND THE STOCKHOLDERS
6.1 Acquisition Proposals. Prior to the Closing Date, neither
Seller, any of its officers, directors, employees or agents nor any Stockholder
shall agree to, solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, business combination or purchase of
all or a substantial portion
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of the assets of, or a substantial equity interest in, Seller, other than the
transactions with Group 1 contemplated by this Agreement.
6.2 Access. The Seller and the Stockholders shall afford Group
1's officers, employees, counsel, accountants and other authorized
representatives access, during normal business hours throughout the period
prior to the Closing Date, to all their properties, books, contracts,
commitments and records related to the Dealerships and, during such period,
Seller and the Stockholders shall furnish promptly to Group 1 any information
concerning their business, properties and personnel related to the Acquired
Dealership as Group 1 may reasonably request; provided, however, that no
investigation pursuant to this Section or otherwise shall affect or be deemed
to modify any representation or warranty made by Seller or the Stockholders
pursuant to this Agreement.
6.3 Conduct of Business by Seller Pending the Acquisition. Seller
and the Stockholders covenant and agree that, from the date of this Agreement
until the Closing Date, unless Group 1 shall otherwise agree in writing or as
otherwise expressly contemplated by this Agreement:
(a) The business of Seller shall be conducted only in,
and Seller shall not take any action except in, the ordinary course of
business and consistent with past practice. In connection therewith,
the parties agree that Seller may dealer trade vehicles for similar
models, but Seller shall not liquidate or otherwise dispose of any of
its new vehicles other than in the ordinary course of business to
retail buyers. Seller agrees to maintain its advertising expenditures
and activities commensurate with prior business practices. Seller
shall not advertise a "Going Out of Business" sale;
(b) Seller shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber, (A) any
capital stock (or securities convertible into capital stock) of Seller
or (B) other than in the ordinary course of business and consistent
with past practice and not relating to the borrowing of money, any
Assets, (ii) amend or propose to amend the articles of incorporation
or bylaws (or other organizational documents) of Seller, (iii) split,
combine or reclassify any outstanding capital stock of Seller, or
declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to the capital stock of Seller
whether now or hereafter outstanding, (iv) redeem, purchase or acquire
or offer to acquire any of the capital stock of Seller, (v) create,
incur, assume, guarantee or otherwise become liable or obligated with
respect to any indebtedness for borrowed money (other than floor plan
indebtedness incurred in the ordinary course of business), or (vi)
except in the ordinary course of business and consistent with past
practice, enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this
Section 6.3(b);
(c) Seller shall use its best efforts (i) to preserve
intact the business organization of Seller, (ii) to maintain in effect
any franchises, authorizations or similar rights of Seller, (iii) to
keep available the services of its current officers and key employees,
(iv) to preserve the goodwill of those having business relationships
with it, (v) to maintain and keep its properties in as good a repair
and condition as presently exists, except for deterioration due to
ordinary wear and tear, (vi) to maintain in full force and effect
insurance comparable in amount and scope of coverage to that currently
maintained by it, (vii) to collect its accounts receivable, (viii) to
preserve in full force and effect all leases, operating agreements,
easements, rights-of-way, permits, licenses, contracts and other
agreements which relate to its assets (other than those
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expiring by their terms), and (ix) to perform or cause to be performed
all of its obligations in or under any of such leases, agreements and
contracts.
(d) Seller shall not make or agree to make any single
capital expenditure or enter into any purchase commitments in excess
of $150,000, provided, however, that expenditures related to new and
used vehicle inventory made consistent with past practice and in the
ordinary course of business shall not be deemed a violation of this
Section 6.3(d);
(e) Seller shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as Seller in good faith may
dispute;
(f) Seller shall not increase the salary, benefits, stock
options, bonus or other compensation of any officer, director or
employee of Seller or its Subsidiaries, except in the ordinary course
of business consistent with past practice; and shall not grant, to any
individual, severance or termination pay that exceeds the lesser of
(i) such individual's compensation for the calendar month immediately
preceding such individual's grant of severance or termination pay, or
(ii) $50,000;
(g) Seller shall not take any action that would, or that
reasonably could be expected to, result in any of the representations
and warranties set forth in this Agreement becoming untrue or any of
the conditions to the Acquisition set forth in Article VIII not being
satisfied;
(h) Seller shall not (i) amend or terminate any Plan or
Benefit Program or Agreement except as may be required by applicable
law, (ii) increase or accelerate the payment or vesting of the amounts
payable under any Plan or Benefit Program or Agreement, or (iii) adopt
or enter into any personnel policy, stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay plan, policy or
agreement, deferred compensation agreement or arrangement, executive
compensation or supplemental income arrangement, consulting agreement,
employment agreement or any other employee benefit plan, agreement,
arrangement, program, practice or understanding (other than the Plans
and the Benefit Programs or Agreements);
(i) Seller shall not enter into any agreement or incur
any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement;
(j) Seller shall not directly or indirectly use Seller's
funds or incur any Assumed Liability in connection with any Excluded
Asset or to reduce any liability that is not an Assumed Liability.
Without limiting the generality of the foregoing, Seller's funds and
Assumed Liabilities will be used or incurred, as the case may be,
solely for the benefit of the Acquired Dealership; and
(k) Notwithstanding anything to the contrary, no
dividends or other form of distribution to the Stockholders shall be
made after the date of the Interim Balance Sheet which will cause
Seller to be in violation of manufacturer working capital or equity
guidelines or requirements.
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6.4 Confidentiality. Seller agrees to cause its officers,
directors, employees, representatives and consultants, to hold in confidence,
and not to disclose, and the Stockholders shall hold and not disclose, to
others for any reason whatsoever, any non-public information received by them
or their representatives in connection with the transactions contemplated
hereby, including but not limited to all terms, conditions and agreements
related to this transaction, except (i) as required by law; (ii) for disclosure
to officers, directors, employees and representatives of Seller as necessary in
connection with the transactions contemplated hereby; and (iii) for information
which becomes publicly available other than through the actions of Seller or
the Stockholders. In the event the Acquisition is not consummated, Seller and
the Stockholders will return all non-public documents and other material
obtained from Group 1 or its representatives in connection with the
transactions contemplated hereby or certify to Group 1 that all such
information has been destroyed.
6.5 Supplemental Disclosure. Seller shall have the continuing
obligation until the Closing promptly to supplement or amend the Schedules
hereto with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in such Schedules; provided, however, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended Schedule shall not be deemed to have been disclosed as
of the date of this Agreement for purposes of determining whether any Closing
conditions have been satisfied, unless so agreed in writing by Purchaser.
6.6 Consents. Subject to the terms and conditions of this
Agreement, Seller shall (i) cooperate with Purchaser in obtaining all consents,
waivers, approvals (including all applicable automobile manufacturers
approvals, and such approvals shall not contain any unreasonably burdensome
restrictions on Purchaser), authorizations and orders required in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Acquisition; and (ii) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary or proper
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
6.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Seller and the
Stockholders agree to cooperate and use reasonable efforts to defend against
and respond thereto.
6.8 Stockholders' Agreements Not to Sell. Except as otherwise
contemplated by this Agreement, each of the Stockholders hereby covenants and
agrees not to sell, pledge, transfer or dispose of or encumber any shares of
Seller common stock currently owned, either beneficially or of record, by such
Stockholder.
6.9 Intellectual Property Matters. Seller shall use its best
efforts to preserve its ownership rights to the Intellectual Property free and
clear of any liens, claims or encumbrances and shall use its best efforts to
assert, contest and prosecute any infringement of any issued foreign or
domestic patent, trademark, service mark, trade name or copyright that forms a
part of the Intellectual Property or any misappropriation or disclosure of any
trade secret, confidential information or know-how that forms a part of the
Intellectual Property.
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6.10 Removal of Related Party Guarantees. Seller and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
terminate, waive or release all guarantees by Seller ("Related Guarantees") of
indebtedness or other obligations of any of Seller's officers, directors,
shareholders or employees or their affiliates; except for those Related
Guarantees that are disclosed in Schedule 6.10 as guarantees that shall not be
subject to this Section 6.10. All Related Guarantees are disclosed in Schedule
6.10.
6.11 Termination of Related Party Agreements. Seller and the
Stockholders agree to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to terminate
the Related Party Agreements except those Related Party Agreements that are
disclosed in Schedule 6.11 as agreements that shall not be subject to this
Section 6.11.
6.12 Related Party Agreements. Seller and the Stockholders agree
not to enter into any Related Party Agreements or engage in any transactions
with the Stockholders or their affiliates; except for those Related Party
Agreements or transactions with affiliates that are disclosed in Schedule 6.12
as agreements or transactions that shall not be subject to this Section 6.12.
6.13 Release.
(a) AS OF THE CLOSING, SELLER AND EACH OF THE STOCKHOLDERS DOES
HEREBY FOR HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND LEGAL
REPRESENTATIVES REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE PURCHASER AND THE
ACQUIRED DEALERSHIP OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES,
RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE
WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED,
FIXED OR CONTINGENT, WHICH EACH OF SUCH INDIVIDUALS NOW HAS, OWNS OR HOLDS OR
HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST PURCHASER OR THE ACQUIRED
DEALERSHIP INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF
THE NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF SELLER OR THE ACQUIRED
DEALERSHIP OR THEIR AFFILIATES, EMPLOYEES AND AGENTS, EXISTING AS OF THE
CLOSING OR RELATING TO ANY MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING;
PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT
MAY ARISE IN CONNECTION WITH THE FAILURE OF ANY OF THE PARTIES HERETO TO
PERFORM ANY OF THEIR OBLIGATIONS HEREUNDER OR UNDER ANY OTHER AGREEMENT
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY OR FROM ANY BREACHES BY ANY OF
THEM OF ANY REPRESENTATIONS OR WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF
SUCH OTHER AGREEMENTS SHALL NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS
AGREEMENT; AND PROVIDED FURTHER ANY LIABILITIES UNDER PLANS OR BENEFIT PROGRAMS
OR AGREEMENTS LISTED ON THE SCHEDULES HERETO SHALL NOT BE RELEASED.
(b) SELLER AND EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS
THAT HE HAS NOT PREVIOUSLY ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR
TRANSFER, TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS,
DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR
OBLIGATIONS RELEASED HEREIN. SELLER AND EACH OF THE STOCKHOLDERS COVENANTS AND
AGREES THAT HE WILL NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER
ALL OR ANY PART OF THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES,
DISPUTES, CAUSES OF ACTION OR OBLIGATIONS TO BE RELEASED HEREIN. SELLER AND
EACH OF THE STOCKHOLDERS REPRESENTS AND WARRANTS THAT HE HAS READ AND
UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION 6.13 AND THAT HE HAS BEEN
REPRESENTED BY LEGAL COUNSEL OF HIS OWN CHOOSING IN CONNECTION WITH THE
NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
6.14 Leases. Seller and the Stockholders agree to cause United
Constructors Limited Company to enter into a lease agreement with Newco on the
basic terms, and covering the real
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properties and improvements, described on Exhibit C. Furthermore, Group 1 will
use commercially reasonable efforts within the parameters of such lease
agreements to structure a lease that will not prevent the transfer of the
related real estate to a real estate investment trust should the applicable
landlord so request.
6.15 Employment Agreements. Mr. Kenneth E. Johns and Mrs. Cynthia
C. Johns agree to enter into employment agreements (the "Employment
Agreements") with Group 1 and Newco in form and substance substantially similar
to Exhibit D attached hereto.
6.16 Audit of Seller Operations. Seller agrees to cause Peltier,
Gustafson & Miller, P.A. to conduct an audit of the operations of Seller for
its year ended December 31, 1997, and to cooperate with Arthur Andersen &
Company to produce an audited balance sheet of Seller as of December 31, 1997
(the "Seller 1997 Balance Sheet") and the related audited statements of income,
changes in stockholders' equity and cash flows for the year then ended
(including the notes thereto) prepared in accordance with GAAP (collectively,
the "Seller 1997 Financial Statements," and together with the Seller Interim
Financial Statements, the "Seller Financial Statements"). Seller further
agrees to complete and provide to Group 1 the Seller 1997 Financial Statements
as soon as reasonably practicable. Seller covenants that the financial
position and results of operations of Seller set forth in the Seller 1997
Financial Statements will not be materially different from the financial
position and results of operations of Seller set forth in the Interim Financial
Statements, except for the amount required to record the charge back reserve
liability. Fees incurred by Peltier, Gustafson & Miller, P.A. will be paid by
Seller, and fees incurred by Arthur Andersen & Company will be paid by Group 1.
6.17 Allocation of Purchase Price. The parties hereto agree that
the Purchase Price is allocated for the purposes of Section 1060 of the Code,
in accordance with the value set forth for each class of Asset, listed on the
attached Annex V ("Allocation of Purchase Price"). Prior to Closing the
parties will agree on the value of the Group 1 Common Stock as part of the
Closing Payment for purposes of determining the purchase price of the Assets.
The parties hereto agree that each of them will timely file with the Internal
Revenue Service Form 8594 and that all tax returns or other tax information any
party hereto files or cause to be filed with any governmental agency including
the Internal Revenue Service, will be prepared in a manner that is consistent
with this Section 6.17.
6.18 Record Retention. For a period of six years after the
Closing, Seller and the Stockholders agree that prior to the destruction or
disposition of any such books or records pertaining to Seller's business which
relate to the Assets, Seller and the Stockholders shall provide not less than
60 days prior written notice to Purchaser of any such proposed destruction or
disposal. If Purchaser desires to obtain any of such documents, it may do so
by notifying Seller in writing at any time prior to the scheduled date for such
destruction or disposal. Such notice must specify the documents which the
Purchaser wishes to obtain. The parties shall then promptly arrange for the
delivery of such documents. All out-of-pocket costs associated with the
delivery of the requested documents shall be paid by Purchaser.
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ARTICLE VII
COVENANTS OF PURCHASER
7.1 Confidentiality. Purchaser agrees, and Purchaser agrees to
cause its officers, directors, employees, representatives and consultants, to
hold in confidence all, and not to disclose to others for any reason
whatsoever, any non-public information received by it or its representatives in
connection with the transactions contemplated hereby except (i) as required by
law; (ii) for disclosure to officers, directors, employees and representatives
of Purchaser as necessary in connection with the transactions contemplated
hereby or as necessary to the operation of Purchaser's business; and (iii) for
information which becomes publicly available other than through the actions of
Purchaser. In the event the Acquisition is not consummated, Purchaser will
return all non-public documents and other material obtained from Seller or its
representatives in connection with the transactions contemplated hereby or
certify to Seller that all such information has been destroyed.
7.2 Reservation of Group 1 Common Stock. Group 1 shall reserve
for issuance and shall issue, out of its authorized but unissued capital stock,
such number of shares of Group 1 Common Stock as may be issuable upon
consummation of the Acquisition.
7.3 Consents. Subject to the terms and conditions of this
Agreement, Purchaser shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
Acquisition; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
7.4 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
or other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, whether before or after the Closing, Purchaser agrees
to cooperate and use reasonable efforts to defend against and respond thereto.
7.5 New Limited Partnership Relationship.
(a) Newco shall form a limited partnership relationship
with Premier Auto Finance L.P. ("Premier") similar to the current
relationship among Seller, Premier and Fiesta Family Partners, Ltd.
("Fiesta"). Benefits flowing from business written with Premier
through Fiesta prior to the formation of the new partnership will
constitute Excluded Assets. Benefits from the new partnership will
accrue to the benefit of Newco.
(b) All benefits from sales of credit life, accident,
health and service contract products consummated by the Acquired
Dealership will accrue to the benefit of Newco. Until December 31,
1998, Newco will conduct business with parties mutually acceptable to
Seller and Newco.
7.6 Leases. Newco agrees, and Group 1 agrees to cause Newco, to
enter into a lease agreement with United Constructors Limited Company on the
basic terms, and covering the real properties and improvements, described on
Exhibit C. Furthermore, Group 1 and Newco will use commercially reasonable
efforts within the parameters of such lease agreement to structure a lease that
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will not prevent the transfer of the related real estate to a real estate
investment trust should the applicable landlord so request.
7.7 Employment Agreements. Group 1 and Newco agree to enter into
Employment Agreements with Mr. Kenneth E. Johns and Mrs. Cynthia C. Johns in
form and substance substantially similar to Exhibit D attached hereto.
7.8 Allocation of Purchase Price. Purchaser and Seller agree that
the Purchase Price is allocated for the purposes of Section 1060 of the Code,
in accordance with the value set forth for each class of Asset, as listed on
the attached Annex V ("Allocation of Purchase Price"). Prior to Closing the
parties will agree on the value of the Group 1 Common Stock as part of the
Closing Payment for purposes of determining the purchase price of the Assets.
The parties hereto agree that each of them will timely file with the Internal
Revenue Service Form 8594 and that all tax returns or other tax information any
party hereto files or cause to be filed with any governmental agency including
the Internal Revenue Service, will be prepared in a manner that is consistent
with this Section 7.8.
7.9 Security for Newco Loans. Purchaser shall not require Seller
or any Stockholder to serve as obligors under any floor plan or credit
facilities to which Newco is a party.
7.10 Guaranteed Price. If Seller or a Stockholder, or any
family foundation to which a Stockholder or Seller has transferred shares of
Group 1 Common Stock, sells any of the Group 1 Common Stock received by such
Stockholder or Seller pursuant to this Agreement at the Closing as part of the
Closing Payment for a per share price of less than twelve dollars ($12.00),
subject to adjustment for stock splits and stock dividends, Group 1 shall pay,
within 30 days after such sale, in cash the difference between the purchase
price for shares sold and the price such Stockholder, Seller or family
foundation, as the case may be, would have received if the shares were sold at
$12.00 per share, subject to adjustment for stock splits and stock dividends;
provided, that this Section 7.10 shall only apply to sales (i) occurring after
the expiration of the Restricted Period and (ii) made in the public market; and
provided, further that this Section 7.10 shall terminate on the date 10 years
after the Closing Date.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the
Acquisition;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or "blue sky" commissions of each
jurisdiction and of any other governmental agency or authority, with
respect to the consummation of the Acquisition; and
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(c) The applicable waiting period under the HSR Act with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
8.2 Additional Conditions Precedent to Obligations of Purchaser.
The obligation of Purchaser to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Seller
contained in Article III and Article IV, respectively, shall be true
and correct in all respects as of the date when made and as of the
Closing Date as though such representations and warranties had been
made at and as of the Closing Date, and all of the terms, covenants
and conditions of this Agreement to be complied with and performed by
Seller and Stockholders on or before the Closing Date shall have been
duly complied with and performed in all respects, in each case except
for breaches as to matters that, in the aggregate, are not reasonably
likely to result in Indemnifiable Damages (as defined in Section
9.1(a) below) in excess of $100,000. A certificate to the foregoing
effect dated the Closing Date and signed by the chief executive
officer of Seller and each of the Stockholders shall have been
delivered to Group 1;
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Authority and of any
automobile manufacturer, that reasonably may be deemed necessary so
that the consummation of the Acquisition and the transactions
contemplated thereby will be in compliance with applicable laws;
(c) Purchaser shall have received all requisite
manufacturer's approvals of the Acquisition and the transactions
contemplated thereby;
(d) Purchaser shall have received evidence, satisfactory
to Purchaser, that all Related Party Agreements shall have been
terminated and all Related Guarantees shall have been terminated,
waived or released pursuant to Sections 6.10 and 6.11 hereto;
(e) Purchaser shall have received executed
representations from Seller and each Stockholder stating that such
Seller or Stockholder (with respect to shares owned beneficially or of
record by him, her or it) has no current plan or intention to sell or
otherwise dispose of the Group 1 Common Stock to be received by him,
her or it in the Acquisition, except as provided in Section 4.1
herein;
(f) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of Seller shall have occurred, and Seller
shall not have suffered any damage, destruction or loss (whether or
not covered by insurance) materially adversely affecting the
properties or business of Seller, and Group 1 shall have received a
certificate signed by the chief executive officer of Seller dated the
Closing Date to such effect;
(g) Receipt by Group 1 of current or updated Phase I
Environmental Surveys, at Seller's expense, prepared by a firm
approved in writing by Group 1, showing no environmental problems or
recommended actions, which will be performed at the discretion of
Group 1;
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(h) Receipt by Group 1, at Sellers's expense, of a title
commitment, issued by a title company, approved by Group 1, subject
only to the exceptions described in Schedule 8.2(h) ("Permitted Title
Exceptions");
(i) Receipt by Group 1, at Seller's expense, of a current
ALTA survey of the Leased Properties showing the location of any
improvements, prepared by a licensed surveyor approved by Group 1;
(j) Receipt by Group 1 of the Lease Agreement executed by
United Constructors Limited Company in accordance with Section 6.14
herein;
(k) Receipt by Group 1 of Employment Agreements executed
by the Stockholders in accordance with Section 6.15 herein;
(l) Group 1 and Newco shall have received a favorable
opinion of Sutin Thayer & Browne A Professional Corporation, counsel
to Seller, dated the Closing Date, with respect to the matters set
forth in Exhibit E hereto;
(m) Receipt by Group 1 of the Seller 1997 Financial
Statements, provided further, that the Seller 1997 Financial
Statements shall not reflect any material adverse change from the
Seller Interim Financial Statements;
(n) Satisfaction or waiver of the conditions set forth in
Article VIII of the Other Agreement and the simultaneous closing of
the Other Acquisition; and
(o) The Board of Directors of Group 1 shall have approved
the Acquisition.
8.3 Additional Conditions Precedent to Obligations of Seller and
the Stockholders. The obligation of the Stockholders to effect the Acquisition
is also subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date; all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Group 1 shall have
been delivered to Seller.
(b) Seller shall have received a favorable opinion of
Vinson & Elkins L.L.P., Counsel to Purchaser, dated the Closing Date,
with respect to the matters set forth in Exhibit F hereto.
(c) Seller shall have received from Purchaser a
Non-Taxable Transaction Certificate relating to Newco's acquisition of
Seller's parts inventory for resale.
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ARTICLE IX
INDEMNIFICATION
9.1 Agreement by Seller and the Stockholders to Indemnify. Seller
and each Stockholder agree jointly and severally to indemnify, defend and hold
Purchaser harmless (subject to the limitations set forth in Section 9.1(e)
below) from and against the aggregate of all Indemnifiable Damages (as defined
below).
(a) For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all losses
incurred or suffered by Purchaser, on a pre-tax consolidated basis to
the extent (i) resulting from any breach of a representation or
warranty made by Seller or the Stockholders in or pursuant to this
Agreement (provided, however, that for purposes of this
indemnification, the representation and warranty contained in Section
3.17 of this Agreement shall be deemed to have been made without the
qualification of knowledge), (ii) resulting from any breach of the
covenants or agreements made by Seller or the Stockholders pursuant to
this Agreement, or (iii) resulting from any inaccuracy in any
certificate or environmental report delivered by Seller or the
Stockholders pursuant to this Agreement. For purposes of this
Agreement, the term "loss" shall mean any and all direct or indirect
payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred, or
diminutions in value of any kind or character (whether known or
unknown, conditional or unconditional, choate or inchoate, liquidated
or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise) that have occurred, including without limitation
penalties, interest on any amount payable to a third party as a result
of the foregoing and any legal or other expenses reasonably incurred
in connection with investigating or defending any demands, claims,
actions or causes of action that, if adversely determined, would
likely result in losses, and all amounts paid in settlement of claims
or actions.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Purchaser
shall have the right to be put in the same pre-tax consolidated
financial position as Purchaser would have been in had each of the
representations and warranties of Seller and the Stockholders
hereunder been true and correct and had the covenants and agreements
of Seller and the Stockholders hereunder been performed in full.
(c) Each of the representations and warranties made by
Seller and the Stockholders in this Agreement or pursuant hereto shall
survive for a period of three years after the Closing Date except (i)
the representations and warranties of Seller and the Stockholders
contained in Section 2.4(c)(i), Section 3.13 and Section 3.17 shall
survive for five years, (ii) the representations and warranties of
Seller and the Stockholders contained in Section 3.9 shall survive
until all applicable limitations periods have expired and (iii) the
representations and warranties of Seller and the Stockholders
contained in Sections 3.1, 3.2, 3.3, 3.14(a)(i), 3.14(a)(xii) and 4.1
shall not expire, but shall continue indefinitely. No claim for the
recovery of Indemnifiable Damages may be asserted by Purchaser against
Seller or the Stockholders after such representations and warranties
shall expire, provided, however, that claims for Indemnifiable Damages
first asserted within the applicable period shall not thereafter be
barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation (and whether or not such
party was negligent in connection with any such investigation), each
party shall have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties contained in
this Agreement or in any other
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documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties
contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
(d) If Purchaser believes it is entitled to a claim for
any Indemnifiable Damages hereunder, Purchaser shall promptly give
written notice to Seller and to the Stockholders of such claim and do
the amount or the estimated amount of such claim, and the basis for
such claim. If Seller or the Stockholders do not pay the amount of
the claim for Indemnifiable Damages to Purchaser within 10 days, then
Purchaser may exercise its respective rights under Section 9.3 and/or
take any action or exercise any remedy available to it by appropriate
legal proceedings to collect the Indemnifiable Damages.
(e) Notwithstanding anything to the contrary contained in
this Section 9.1, Seller's and the Stockholders' liability for
Indemnifiable Damages shall be limited as follows:
(1) Purchaser shall have no claim for
Indemnifiable Damages unless and until all
Indemnifiable Damages incurred by Purchaser
exceed an aggregate of $45,000 (the "Basket
Amount"), in which event Seller and the
Stockholders shall be liable for only such
Indemnifiable Damages in excess of the Basket
Amount; provided, however, that (A) the
Basket Amount shall be reduced by the amount
of any Indemnifiable Damages attributable to
any matter set forth in any supplement or
amendment to any Schedule, any breach of
representation or warranty or any failure to
comply with or perform any covenant, and (B)
Purchaser shall have no obligation to close
the transaction if such Indemnifiable Damages
exceed $45,000. For example, (x) if the
aggregate amount of such Indemnifiable
Damages set forth in any supplement or
amendment, or attributable to any breach of
representation or warranty or failure to
comply with or perform any covenant were
$40,000, Purchaser would be obligated to
close the transaction (assuming all closing
conditions of Purchaser (other than Section
8.2(a) relating to representations and
warranties) have been satisfied or waived)
and the Basket Amount after the Closing would
be $5,000; and (y) if such Indemnifiable
Damages amounted to $200,000, Purchaser would
not be obligated to close the transaction;
but if it chooses to close the transaction,
the Basket Amount after the closing would be
$0, and Seller and the Stockholders would
have an indemnification obligation to
Purchaser of $155,000.
(2) The total amount of Indemnifiable Damages for
which Seller and the Stockholders shall be
liable to Group 1 shall not exceed the value
of the consideration received in the
Acquisition, of which the stock portion shall
be valued as provided in Section 2.3 herein.
9.2 Agreement by Purchaser to indemnify. Purchaser agrees to
indemnify, defend and hold Seller harmless from and against the aggregate of
all Seller Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "Seller Indemnifiable
Damages" means, without duplication, the aggregate of all losses
incurred or suffered by Seller, on a pre-tax consolidated
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basis, to the extent (i) resulting from any breach of a representation
or warranty made by Purchaser in or pursuant to this Agreement, (ii)
resulting from any breach of the covenants or agreements made by
Purchaser in or pursuant to this Agreement, or (iii) resulting from
any inaccuracy in any certificate delivered by Purchaser pursuant to
this Agreement.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Seller Indemnifiable Damages,
Seller has the right to be put in the same pre-tax consolidated
financial position as it would have been in had each of the
representations and warranties of Purchaser hereunder been true and
correct and had the covenants and agreements of Purchaser hereunder
been performed in full.
(c) Each of the representations and warranties made by
Purchaser in this Agreement or pursuant hereto shall survive for a
period of three years after the Closing Date. No claim for the
recovery of Seller Indemnifiable Damages may be asserted by Seller
against Purchaser after such representations and warranties shall thus
expire, provided, however, that claims for Seller Indemnifiable
Damages first asserted within the applicable period shall not
thereafter be barred. Notwithstanding any knowledge of facts
determined or determinable by any party by investigation (and whether
or not such party was negligent in connection with any such
investigation), each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other
parties contained in this Agreement or in any other documents or
papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this
Agreement is independent of each other representation, warranty,
covenant and agreement.
(d) In the event that Seller believes it is entitled to a
claim for any Seller Indemnifiable Damages hereunder, Seller shall
promptly give written notice to Purchaser of such claim and the amount
or the estimated amount of such claim, and the basis for such claim.
9.3 Conditions of Indemnification. The obligations and
liabilities of Seller, the Stockholders and Purchaser hereunder with respect to
their respective indemnities pursuant to this Article IX resulting from any
claim or other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim 10 business days after
the Indemnified Party receives notice thereof (provided that failure
to give notice within such 10 day period does not relieve the
Indemnifying Party of his obligations to indemnify the Indemnified
Party hereunder, except to the extent that such Indemnifying Party is
harmed by the failure of the Indemnified Party to provide timely
notice);
(b) the Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing,
the defense of such Claim; provided, however, if a Claim is made
against Purchaser, then Purchaser shall have the right to control the
defense of the Claim;
(c) if the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Claim from the Indemnified Party shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying
Party) shall have the right
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to undertake the defense, compromise or settlement of such Claim, by
counsel or other representatives of its own choosing, on behalf of and
for the account and risk of the Indemnifying Party (subject to the
right of the Indemnifying Party to assume defense of such Claim at any
time prior to settlement, compromise or final determination thereof);
(d) anything in this Section 9.3 to the contrary
notwithstanding, (A) the Indemnified Party shall have the right, at
its own cost and expense, to have its own counsel to protect its own
interests and participate in the defense, compromise or settlement of
the Claim, (B) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or
consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense,
shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim, and the
Indemnifying Party and the Indemnified Party and their respective
counsel shall cooperate with respect to such Claim.
9.4 Applicability. THE PROVISIONS OF THIS ARTICLE IX SHALL APPLY
NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OF THE INDEMNIFIED PARTY. IF BOTH THE INDEMNIFIED PARTY AND THE
INDEMNIFYING PARTY ARE NEGLIGENT OR OTHERWISE AT FAULT OR STRICTLY LIABLE
WITHOUT FAULT, THE CONTRACTUAL OBLIGATIONS OF INDEMNIFICATION UNDER THIS
ARTICLE IX SHALL CONTINUE, BUT THE INDEMNIFYING PARTY SHALL INDEMNIFY THE
INDEMNIFIED PARTY ONLY FOR THE PERCENTAGE OF RESPONSIBILITY FOR THE DAMAGE OR
INJURIES ATTRIBUTABLE TO THE INDEMNIFYING PARTY.
9.5 Statutory Requirement. If a court of competent jurisdiction
determines that the provisions of Section 56-7-1 NMSA 1978, as amended, are
applicable to this Agreement or any claim arising under this Agreement, then
any agreement to indemnify in connection with this Agreement will not extend to
liability, claims, damages, losses or expenses, including attorney fees,
arising out of (1) the preparation or approval of maps, drawings, opinions,
reports, surveys, change orders, designs or specifications by the indemnitee,
or the agents or employees of the indemnitee, or (2) the giving of or the
failure to give directions or instructions by the indemnitee, or the agents or
employees of the indemnitee, where such giving or failure to give directions or
instructions is the primary cause of bodily injury to persons or damage to
property.
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. The Schedules to this Agreement
contain all disclosure required to be made by Seller and the Stockholders under
the various terms and provisions of this Agreement.
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10.2 Certain Post-Closing Payments.
(a) As soon as reasonably practicable after completion of
the audited Group 1 consolidated financial statement for the year
ending December 31, 1998, but in no event later than April 30, 1999,
Seller shall receive from Newco a Post-Closing Payment calculated as
follows: (i) the annualized income before income taxes of the
Acquired Dealerships from Closing through December 31, 1998 will be
determined based on the statements of operations of Newco and Other
Newco included in the 1998 audited Group 1 consolidated financial
statements (such statement of operations to be based upon the books
and records of Newco and Other Newco); (ii) from this amount
$4,425,000 will be deducted; and (iii) the result will be multiplied
by 2.7. For purposes of this calculation, finance earnings will
include earnings as reported in the December 31, 1998, Premier Auto
Finance L.P. report of Newco's participation in the limited
partnership (before the deferral relating to FASB #125) and will
include income earned from Resource Group (or similar providing entity
mutually agreeable to the parties) with respect to 1998 credit life,
accident and health insurance and extended service contract operations
of Newco and Other Newco. Prior to December 31, 1998, (i) the
programs for finance, service and insurance income will not be changed
without Seller's consent, (ii) Group 1 will not require Newco to
change to more costly or less efficient providers than those used
prior to Closing without Seller's consent, and (iii) any Group 1
allocations of indirect costs, indirect overhead or goodwill
amortization will not be included in income before income taxes for
purposes of the computation. The amount of this Post-Closing Payment
will be paid in cash up to an amount of $3,445,000. Any amount
payable up to and including this initial cash amount of $3,445,000
will be escalated at 8% per annum from the Closing Date. Any amounts
due over $3,445,000 (as escalated) will be paid 50% in cash and 50% in
Group 1 Common Stock at the Designated Value of Group 1 Common Stock
as of the date of payment (such date to be fixed at least two weeks in
advance of the payment, i.e. no later than April 16, 1999) and in
accordance with the procedures, including the dispute resolution
procedures, set forth for the payment of the Closing Payment. The
parties hereto acknowledge that this Section 10.2(a) and Section
10.2(a) of the Other Agreement each require only one calculation and
payment. Annualized income before income taxes of each Acquired
Dealership shall equal (i) pre-tax income as previously described and
included in the 1998 operations of Group 1, (ii) divided by the number
of months the Acquired Dealership is included in the 1998 operations
of Group 1, and (iii) which quotient shall be multiplied by 12. This
same method of annualization shall be used with respect to the
Additional Dealerships, if annualization is required by Section
10.2(b)(ii).
(b) As additional consideration for the Assets, Seller
and Stockholders are required to participate in Group 1's acquisition
of Additional Dealerships (as defined below) following the Closing and
to assume, with the mutual consent of Group 1 and Stockholders,
managerial responsibility for such Additional Dealerships. As partial
consideration for such participation, Group 1 will pay Seller as
follows: (i) the income before income taxes of each Additional
Dealership will be determined for the applicable Calculation Year and
multiplied by 5.5, (ii) from this amount the Group 1 investment in the
applicable Additional Dealership will be deducted, and (iii) the
difference will be paid to Seller 50% in Group 1 Common Stock and 50%
in cash.
For purposes of this Section 10.2(b), (i) Additional
Dealerships shall mean any dealerships acquired from the Closing Date
through December 31, 2000, and those acquisitions
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which are in progress at such date and are consummated on or before
June 30, 2001, which become part of the executive management
responsibility of Stockholders and Seller; (ii) Calculation Year shall
mean, with respect to each Additional Dealership, the first full
calendar year following Group 1's completed acquisition of such
Additional Dealership (except that the Calculation Year for any
Additional Dealership acquired by Group 1 in the first quarter of a
calendar year shall be that year, and income before income taxes for
such dealership earned post-acquisition shall be annualized); (iii) in
calculating the stock portion of any payment due to Sellers hereunder,
Designated Value of Group 1 Common Stock will be used; (iv) Group 1
Investment shall be the purchase price paid by Group 1 with respect to
each acquisition, costs of moving franchises to alternate facilities,
costs of modification of facilities to accommodate expanded operations
or any other investment in the operation required by Group 1 with
respect to the Calculation Year; and (v) income before income taxes
will be calculated in accordance with Section 10.2(a) herein. Any
payments due to Seller under this Section 10.2(b) will be paid by
Group 1 no later than April 30 of the calendar year immediately
following the Calculation Year (with two weeks advance notice required
to calculate the Designated Value of the Group 1 Common Stock to be
paid).
(c) The payments due to Seller under paragraphs (a) and
(b) of this Section 10.2 (the "Post-Closing Payments," and together
with the Closing Payment, as adjusted pursuant to Section 2.2, the
"Purchase Price") are additional consideration for the Assets, and the
parties hereto agree to report such amounts on such basis for income
tax purposes.
(d) Any Post-Closing Payments payable to Seller may be
applied by Purchaser to offset any Indemnifiable Damages for which a
Claim has been filed pursuant to Sections 9.1 and 9.3 herein.
10.3 Certain Repurchase Rights. In the event Group 1 elects to
sell one or more of the dealerships under Stockholders' management (in a
transaction not involving the sale of Group 1 or a major portion thereof),
Stockholders shall have a right of first refusal on terms identical to the
third party offer. Stockholders' right hereunder shall expire on the tenth
anniversary of the Closing Date.
10.4 Non-Competition Obligations.
(a) As an additional inducement for Purchaser to enter
into this Agreement, the Stockholders and Purchaser agree to the
non-competition provisions of this Section 10.4. Each Stockholder
agrees that during the period of the Stockholder's non-competition
obligations hereunder, the Stockholder will not, directly or
indirectly for himself or herself or for others, within twelve miles
of or in the county of any operations sold to Purchaser under this
Agreement or operations subsequently under the executive management of
such Stockholder as of the date in question or during the previous
twelve months:
(i) engage in any business competitive with any
line of business conducted by Group 1 or any of its
subsidiaries or affiliates;
(ii) render advice or services to, or otherwise
assist, including financing, any other person, association, or
entity who is engaged, directly or indirectly, in any business
competitive with any line of business conducted by Group 1 or
any of its subsidiaries or affiliates;
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(iii) induce any employee of Group 1 or any of its
subsidiaries or affiliates to terminate his or her employment
with Group 1 or any of its subsidiaries or affiliates, or hire
or assist in the hiring of any such employee by person,
association, or entity not affiliated with Group 1 or any of
its subsidiaries or affiliates.
These non-competition obligations shall apply for the period
specified in any employment agreement entered into by such Stockholder
with Group 1 or its Subsidiaries. If Group 1 or any of its
subsidiaries or affiliates abandons a particular aspect of its
business, that is, ceases such aspect of its business with the
intention to permanently refrain from such aspect of its business,
then this non-competition covenant shall not apply to such former
aspect of that business.
Notwithstanding the foregoing, the non-competition obligations
of this Section 10.4 shall not apply (i) to any Stockholder's
operation and management of any dealership purchased in accordance
with Section 10.3 hereof and (ii) with respect to (a) Kenneth E.
Johns, such individual's passive investment in an automobile
dealership owned and managed by members of his immediate family or
affiliates of such individuals or (b) Cynthia C. Johns, such
individual's investment and management participation in an automobile
dealership owned and operated by members of her immediate family or
affiliates of such individuals, provided that Mrs. Johns continues to
devote substantially all of her business time, energy and best efforts
to the business and affairs of Group 1, its subsidiaries and
affiliates so long as she is an employee of Group 1 or any of its
subsidiaries or affiliates.
(b) During this non-competition period the Stockholders
will not engage in these restricted activities or assist in the
industry consolidation efforts on behalf of any publicly held entity
in the automotive retailing industry (nor any entity with the ultimate
intention of becoming a publicly held entity or being acquired in any
manner by a publicly held entity), regardless of geographic area or
market.
(c) The Stockholders understand that the foregoing
restrictions may limit their ability to engage in certain businesses
during the period provided for above, but acknowledge that the
Stockholders will receive sufficiently high remuneration and other
benefits under this Agreement to justify such restriction. The
Stockholders acknowledge that money damages would not be sufficient
remedy for any breach of this Section 10.4 by the Stockholders, and
Group 1 or any of its subsidiaries or affiliates shall be entitled to
enforce the provisions of this Section 10.4 by terminating any
payments then owing to the Stockholders under this Agreement and/or to
specific performance and injunctive relief as remedies for such breach
or any threatened breach, without any requirement for the securing or
posting of any bond in connection with such remedies. Such remedies
shall not be deemed the exclusive remedies for a breach of this
Section 10.4, but shall be in addition to all remedies available at
law or in equity to Group 1 or any of its subsidiaries or affiliates,
including, without limitation, the recovery of damages from Group 1
and the Stockholders' agents involved in such breach.
(d) It is expressly understood and agreed that Group 1
and the Stockholders consider the restrictions contained in this
Section 10.4 to be reasonably necessary to protect the legitimate
business interests of Group 1 and its subsidiaries and affiliates,
including the confidential and proprietary information and trade
secrets of Group 1 and its subsidiaries and affiliates. Nevertheless,
if any of the aforesaid restrictions are found by a court having
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<PAGE> 39
jurisdiction to be unreasonable, or overly broad as to geographic area
or time, or otherwise unenforceable, the parties intend for the
restrictions therein set forth to be modified by such courts so as to
be reasonable and enforceable and, as so modified by the court, to be
fully enforced.
(e) The parties hereto expressly acknowledge that
Purchaser's rights under this Section 10.4 are assignable and that
such rights shall be fully enforceable by any of Purchaser's assignees
or successors in interest.
10.5 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Purchaser and Seller;
(b) by either Purchaser or Seller if the Acquisition has
not been effected on or before March 31, 1998;
(c) by either Purchaser or Seller if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(d) by Purchaser if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of Seller; (ii) there has been a material breach
of any representation, warranty, covenant or other agreement set forth
in this Agreement by Seller or the Stockholders which breach has not
been cured within ten business days following receipt by Seller of
notice of such breach (or if such breach cannot be cured within such
time, reasonable efforts have begun to cure such breach and such
breach is then cured within 30 days after notice) or (iii) there is a
material adverse change in the normalized pre-tax income (after
addbacks) expected for Seller, on which the Purchase Price was based;
(e) by Seller if there has been a material breach of any
representation or warranty set forth in this Agreement by Purchaser
which breach has not been cured within ten business days following
receipt by Purchaser of notice of such breach (or if such breach
cannot be cured within such time, reasonable efforts have begun to
cure such breach and such breach is then cured within 30 days after
notice);
(f) by Group 1 if the results of Group 1's general due
diligence investigation are not satisfactory to Group 1 in its sole
discretion; provided, however, that Group 1's right to terminate
hereunder shall expire thirty (30) calendar days following the
execution of this Agreement; or
(g) by Purchaser if the Seller 1997 Financial Statements
reflect a material adverse change from the Seller Interim Financial
Statements, except as contemplated by this Agreement.
10.6 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.5, Seller and Purchaser shall have no
obligation or liability to each other except that the provisions of Sections
6.4, 6.7, 7.1, 7.4 and 10.7 survive any such termination.
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<PAGE> 40
10.7 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby incurred by Purchaser shall be paid by
Purchaser and all such costs and expenses incurred by Seller and the
Stockholders shall be paid by the Sellers. Seller's expenses shall not be
included in Assumed Liabilities. Seller and Purchaser each represent and
warrant to each other that there is no broker or finder involved in the
transactions contemplated hereby.
10.8 Restrictions on Transfer of Group 1 Common Stock. (a) During
the one-year period ending on the anniversary of the Closing Date (the
"Restricted Period"), neither Seller nor any Stockholder voluntarily will: (i)
sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or
otherwise dispose of (A) any shares of Group 1 Common Stock received by Seller
or any such Stockholder in the Acquisition or (B) any interest in (including
any option to buy or sell) any of those shares of Group 1 Common Stock, in
whole or in part, and Group 1 will have no obligation to, and shall not, treat
any such attempted transfer as effective for any purpose or (ii) engage in any
transaction, whether or not with respect to any shares of Group 1 Common Stock
or any interest therein, the intent or effect of which is to reduce the risk of
owning the shares of Group 1 Common Stock acquired pursuant to this Agreement
(including, for example, engaging in put, call, short sale, straddle or similar
market transactions). Notwithstanding the foregoing, Seller may distribute
shares of Group 1 Common Stock to the Stockholders, and Seller and each such
Stockholder may (i) pledge shares of Group 1 Common Stock, provided that the
pledgee of such shares shall agree not to sell or otherwise dispose of any such
shares for the Restricted Period; (ii) transfer shares to immediate family
members or the estate of any such individual (including, without limitation,
any transfer by Seller or such Stockholder to or among any trust, custodial or
other similar accounts or funds that are for the benefit of his or her
immediate family members), provided that such person or entity shall agree not
to sell or otherwise dispose of any such shares for the Restricted Period;
(iii) transfer all of such shares to a charitable foundation, provided that
such foundation (a) agrees not to sell or otherwise dispose of any such shares
for the Restricted Period, and (b) executes a customary investor representation
letter with respect to exemptions from the Securities Act and any applicable
blue sky laws; and (iv) transfer shares by will or the laws of descent and
distribution or otherwise by reason of such Stockholder's death. The
certificates evidencing the Group 1 Common Stock delivered to Seller and each
Stockholder pursuant to this Agreement will bear a legend substantially in the
form set forth below and containing such other information as Group 1 may deem
necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE ASSET PURCHASE AGREEMENT AMONG THE
ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES THERETO,
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
ONE-YEAR PERIOD ENDING ON ______________ [DATE THAT IS THE ANNIVERSARY
OF THE CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE
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<PAGE> 41
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE.
(b) Seller and each Stockholder, severally and not jointly with
any other Person, (i) acknowledges that the shares of Group 1 Common Stock to
be delivered to Seller and that Stockholder pursuant to this Agreement have
not been and, if applicable, will not be registered under the Securities Act
and therefore may not be resold by Seller or that Stockholder without
compliance with the Securities Act and (ii) covenants that none of the shares
of Group 1 Common Stock issued to Seller or that Stockholder pursuant to this
Agreement will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all the applicable
provisions of the Securities Act and the rules and regulations of the
Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Group 1 Common Stock issued pursuant to this
Agreement will bear the following legend in addition to the legend prescribed
by Section 10.8(a):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR SUCH
STATE LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
In addition, certificates evidencing shares of Group 1 Common Stock issued
pursuant to the Acquisition to Seller and each Stockholder will bear any legend
required by the securities or blue sky laws of the state in which Seller or
that Stockholder resides.
10.9 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf of each party hereto.
The waiver by any party hereto of any condition or of a breach of another
provision of this Agreement shall not operate or be construed as a waiver of
any other condition or subsequent breach. The waiver by any party hereto of
any of the conditions precedent to its obligations under this Agreement shall
not preclude it from seeking redress for breach of this Agreement other than
with respect to the condition so waived.
10.10 Public Statements. Seller, the Stockholders and Purchaser
agree to consult with each other prior to issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated hereby, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law.
10.11 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
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<PAGE> 42
10.12 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to Seller: United Management, Inc.
7201 Lomas Blvd. NE
Albuquerque, New Mexico 87110
Telecopy: (505) 262-8696
Attention: Kenneth E. Johns
with a copy to: Sutin Thayer & Browne
Two Park Square, Suite 1000
6565 Americas Parkway
Albuquerque, New Mexico 87710
Attention: Graham Browne
if to the Stockholders: Kenneth E. Johns and Cynthia C. Johns
1117 Salamanca St. NW
Albuquerque, New Mexico 87106
Telecopy: (505) 344-0124
James J. Burns, Trustee
4801 Loop, 289 South
Lubbock, Texas 79424
Telecopy: (806) 798-4592
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and
Chief Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.12. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back
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<PAGE> 43
is received, or (iii) if mailed, upon the earlier of five days after deposit in
the mail and the date of delivery as shown by the return receipt therefor.
Delivery to the Stockholders' representative, if any, of any notice to
Stockholders hereunder shall constitute delivery to all Stockholders and any
notice given by such Stockholders' representative shall be deemed to be notice
given by all Stockholders.
10.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Mexico, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
10.14 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.15 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.16 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
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<PAGE> 44
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ B.B. HOLLINGSWORTH, JR.
----------------------------------------
Name: B.B. Hollingsworth, Jr.
Title: Chairman, President and
Chief Executive Officer
CASA CHRYSLER PLYMOUTH JEEP INC.
By: /s/ JOHN T. TURNER
-----------------------------------------
Name: John T. Turner
Title: President
UNITED MANAGEMENT, INC.
By: /s/ KENNETH E. JOHNS
-----------------------------------------
Name: Kenneth E. Johns
Title: President
STOCKHOLDERS
/s/ KENNETH E. JOHNS
--------------------------------------------
Kenneth E. Johns
/s/ CYNTHIA C. JOHNS
--------------------------------------------
Cynthia C. Johns
Johns Investment Trust
By: /s/ JAMES J. BURNS
-----------------------------------------
James J. Burns, as Trustee for Jeffrey
Johns and Julie Johns
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<PAGE> 1
EXHIBIT 10.52
================================================================================
PURCHASE AGREEMENT
BETWEEN
GROUP 1 AUTOMOTIVE, INC.,
AND
THE STOCKHOLDER OF
BOB HOWARD NISSAN, INC.
DATED AS OF
DECEMBER 30, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE ACQUISITION
2.1 The Acquisition . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Qualification . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . 2
3.4 Equity Investments . . . . . . . . . . . . . . . . . . . . . 3
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . 3
3.7 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 3
3.8 Certain Agreements . . . . . . . . . . . . . . . . . . . . . 4
3.9 Contracts and Commitments . . . . . . . . . . . . . . . . . 4
3.10 Absence of Changes . . . . . . . . . . . . . . . . . . . . . 4
3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 4
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . 5
3.14 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.15 Employee Benefit Plans and Policies . . . . . . . . . . . . 6
3.16 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.18 Affiliate Interests . . . . . . . . . . . . . . . . . . . . 7
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . 8
3.20 Intellectual Property . . . . . . . . . . . . . . . . . . . 10
3.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . 10
3.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<PAGE> 3
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE STOCKHOLDER
<TABLE>
<S> <C> <C>
4.1 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . 11
4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . 12
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI
COVENANTS OF THE STOCKHOLDER
6.1 Acquisition Proposals . . . . . . . . . . . . . . . . . . . 13
6.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Conduct of Business by the Company Pending the Acquisition . 13
6.4 Notification of Certain Matters . . . . . . . . . . . . . . 15
6.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Removal of Related Party Guarantees . . . . . . . . . . . . 15
6.7 Termination of Related Party Agreements . . . . . . . . . . 15
6.8 Related Party Agreements . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 Additional Conditions Precedent to Obligations of Group 1 . 16
8.3 Additional Conditions Precedent to Obligations of the
Stockholder . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE> 4
<TABLE>
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
9.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. . . . . . . . . . . . . . . . . 17
10.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 Effect of Termination . . . . . . . . . . . . . . . . . . . 18
10.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 Waiver and Amendment . . . . . . . . . . . . . . . . . . . . 18
10.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 20
10.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 20
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 20
10.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.12 Third Party Beneficiaries . . . . . . . . . . . . . . . . . 20
</TABLE>
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<PAGE> 5
GROUP 1 AUTOMOTIVE, INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of the 30th
day of December, 1997, is between Group 1 Automotive, Inc., a Delaware
corporation ("Group 1") and Robert E. Howard, II, the sole stockholder
("Stockholder") of Bob Howard Nissan, Inc., an Oklahoma corporation (the
"Company").
RECITALS:
WHEREAS, the Stockholder is the holder of all of the issued and
outstanding capital stock of the Company;
WHEREAS, Group 1 proposes to acquire all of the capital stock of the
Company from the Stockholder (the "Acquisition") on the terms and conditions
set forth herein; and
WHEREAS, the parties hereto wish to set forth the representations,
warranties, agreements and conditions under which Group 1 shall purchase, and
the Stockholder shall sell, all of the capital stock of the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires,
as used in this Agreement, (a) a term has the meaning ascribed to it; (b) an
accounting term not otherwise defined has the meaning ascribed to it in
accordance with GAAP; (c) "or" is not exclusive; (d) "including" means
"including, without limitation;" (e) words in the singular include the plural;
(f) words in the plural include the singular; (g) words applicable to one
gender shall be construed to apply to each gender; (h) the terms "hereof,"
"herein," "hereby," "hereto" and derivative or similar words refer to this
entire Agreement; (i) the terms "Article" or "Section" shall refer to the
specified Article or Section of this Agreement; and (j) section and paragraph
headings in this Agreement are for convenience only and shall not affect the
construction of this Agreement.
<PAGE> 6
ARTICLE II
THE ACQUISITION
2.1 The Acquisition. At the Closing, the Stockholder shall sell
to Group 1 and Group 1 shall purchase from the Stockholder 1,000 shares of
Common Stock of the Company for a purchase price of $1,250,000 in cash payable
in immediately available funds.
2.2 Closing Date. The Closing of the Acquisition as contemplated
by this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
2300 First City Tower, Houston, Texas 77002, as soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII or at such
other time and place and on such other date as Group 1 and the Stockholder
shall agree; provided, that the conditions set forth in Article VIII shall have
been satisfied or waived at or prior to such time. The date on which the
Closing occurs is herein referred to as the "Closing Date," and shall be
effective as of the first day of the month in which the Closing Date occurs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represent and warrant to Group 1 as follows:
3.1 Organization. The Compay is a corporation duly organized,
validly existing and in good standing under the laws of the state of Oklahoma
with all requisite corporate power and authority to own or lease its properties
and conduct its business as now owned, leased or conducted. True and complete
copies of the articles of incorporation and bylaws of the Company are included
in Schedule 3.1. The minute books of the Company previously made available to
Group 1 are complete and accurately reflect all action taken prior to the date
of this Agreement by its board of directors and stockholders in their
capacities as such.
3.2 Qualification. The Company is duly qualified to do business
as a foreign entity and is in good standing in each jurisdiction in which the
nature of the business as now conducted or the character of the property owned
or leased by it makes such qualification necessary. Schedule 3.2 sets forth a
list of the jurisdictions in which each of the Company is qualified to do
business, if any.
3.3 Absence of Conflicts. Except to the extent set forth in the
Schedule 3.3, neither the execution and delivery by the Stockholder of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by them at, or prior to, the Closing, nor the
performance by the Stockholder of their obligations under this Agreement or any
such instrument, document or agreement will (assuming receipt of all consents,
approvals, authorizations, permits, certificates and orders disclosed as
requisite in Schedule 4.3) (a) violate or breach the terms of or cause a
default under (i) any applicable Order or any applicable rule or regulation of
any Court or Governmental Authority with respect to the Company, (ii) any
applicable permits received from any Governmental Authority with respect to the
Company, (iii) the certificate of incorporation or bylaws of the Company or
(iv) any contract or agreement to which the Company is a party or by which it,
or any of its properties, is bound, or (b) result in the creation or imposition
of any Lien on any of the
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<PAGE> 7
properties or assets of the Company, or (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit, certificate or order of any
Court or Governmental Authority with respect to the Company, or (d) with the
passage of time or the giving of notice or the taking of any action of any
third party have any of the effects set forth in clause (a), (b) or (c) of this
Section.
3.4 Equity Investments. The Company owns no equity securities,
interests or other investments in any Person.
3.5 Capitalization. The authorized capital stock of the
Company consists of 50,000 shares of Common Stock, $1.00 par value per share,
of which 1,000 shares are issued and outstanding. Each outstanding share of
the Common Stock of the Company has been duly authorized, is validly issued,
fully paid and nonassessable and was not issued in violation of any preemptive
rights of any stockholder. Except for 1,000 shares of Common Stock owned by
Robert E. Howard, II, there are no shares of capital stock of, or other equity
interests in, the Company authorized, issued or outstanding. There is not
outstanding any other security, including without limitation any option,
warrant or right, entitling the holder thereof to purchase or otherwise acquire
any Common Stock or other equity interest of the Company. There are no
contracts, agreements, commitments or arrangements obligating the Company (i)
to issue, sell, pledge, dispose of or encumber any Common Stock, or any
options, warrants or rights of any kind to acquire, or any securities that are
convertible into or exercisable or exchangeable for, any Common Stock of, or
any other class of securities of the Company or (ii) to redeem, purchase or
acquire or offer to acquire any Common Stock of, or any outstanding option,
warrant or right to acquire, or any securities that are convertible into or
exercisable or exchangeable for, any Common Stock of, or any other class of
securities of the Company.
3.6 Financial Statements. Included in Schedule 3.6 are true and
complete copies of the financial statements of the Company consisting of (i) an
unaudited balance sheet of the Company as of November30, 1997 (the "Interim
Balance Sheet") and the related unaudited statement of income for the four
month period (from August 1997, the month of incorporation of the Company) then
ended (the "Company Financial Statements"). The Company Financial Statements
present fairly the financial position of the Company and the results of its
operations and changes in financial position as of the dates and for the
periods indicated therein in conformity with GAAP. The Company Financial
Statements do not omit to state any liabilities, absolute or contingent,
required to be stated therein in accordance with GAAP. All accounts receivable
of the Company reflected in the Company Financial Statements and as incurred
since November 30, 1997 represent sales made in the ordinary course of
business, are collectible (net of any reserves for doubtful accounts shown in
the Company Financial Statements) in the ordinary course of business and,
except as set forth in Schedule 3.6, are not in dispute or subject to
counterclaim, set-off or renegotiation. Schedule 3.6 contains an aged schedule
of accounts receivable included in the Interim Balance Sheet.
3.7 Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or accrued for in the Interim Balance Sheet or
as set forth in Schedule 3.7, the Company does not have any liabilities or
obligations of any nature whether absolute, accrued, contingent or otherwise,
and whether due or to become due. The reserves reflected in the Interim
Balance Sheet are adequate, appropriate and reasonable in accordance with GAAP.
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<PAGE> 8
3.8 Certain Agreements. Except as set forth in Schedule 3.8,
neither the Company nor any of its officers or directors, is a party to, or
bound by, any contract, agreement or organizational document which purports to
restrict, by virtue of a non-competition, territorial exclusivity or other
provision covering such subject matter purportedly enforceable by a third party
against the Company, or any of its officers or directors, the scope of the
business or operations of the Company, or any of its officers or directors,
geographically or otherwise.
3.9 Contracts and Commitments. Schedule 3.9 includes (i) a list
of all contracts to which the Company is a party or by which its property is
bound that involve consideration or other expenditure in excess of $50,000 or
performance over a period of more than six months or that is otherwise material
to the business or operations of the Company ("Material Contracts"); (ii) a
list of all real or personal property leases to which the Company is a party
involving consideration or other expenditure in excess of $50,000 over the term
of the lease ("Material Leases"); (iii) a list of all guarantees of, or
agreements to indemnify or be contingently liable for, the payment or
performance by any Person to which the Company is a party ("Guarantees") and
(iv) a list of all contracts or other formal or informal understandings between
the Company and any of their officers, directors, employees, agents or
stockholders or their affiliates ("Related Party Agreements"). True and
complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreement have been furnished to Group 1.
3.10 Absence of Changes. Except as set forth in Schedule 3.10,
there has not been, since November 30, 1997, any adverse change with respect to
the business, assets, results of operations, prospects or condition (financial
or otherwise) of the Company. Except as set forth in Schedule 3.10, since
November 30, 1997, the Company has not engaged in any transaction or conduct of
any kind which would be proscribed by Section 6.3 herein after execution and
delivery of this Agreement. Notwithstanding the preceding sentence, the
Company makes no representation regarding, and need not disclose, increases in
compensation (of the type contemplated in Section 6.3(f)) since November 30,
1997, for any employee who after such increase would receive annual
compensation of less than $50,000.
3.11 Tax Matters.
(a) Except as set forth in Schedule 3.11, (i) all Tax
Returns which are required to be filed on or before the Closing Date
by or with respect to the Company have been or will be duly and timely
filed, (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) all Taxes which have
become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, (iv) all
withholding Tax requirements imposed on or with respect to the Company
have been or will be satisfied in full, and (v) no penalty, interest
or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax.
(b) There is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or
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<PAGE> 9
with respect to the Company, other than those disclosed (and to which
are attached true and complete copies of all audit or similar reports)
in Schedule 3.11(b).
(c) There is not in force any extension of time with
respect to the due date for the filing of any Tax Return of or with
respect to the Company, or any waiver or agreement for any extension
of time for the assessment or payment of any Tax of or with respect to
the Company.
(d) The total amounts set up as liabilities for current
and deferred Taxes in the Interim Balance Sheet are sufficient to
cover the payment of all Taxes, whether or not assessed or disputed,
which are, or are hereafter found to be, or to have been, due by or
with respect to the Company up to and through the periods covered
thereby.
(e) The Company will not be required to include any
amount in income for any taxable period as a result of a change in
accounting method for any taxable period pursuant to any agreement
with any Tax authority with respect to any such taxable period.
(f) The Company has not consented to have the provisions
of section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(g) From the end of its most recent tax year through the
Closing Date, (a) the Company continuously has been and will be an S
Corporation within the meaning of section 1361 of the Code, and (b)
each holder of the stock of the Company has been an individual
resident of the United States.
3.12 Litigation.
(a) Except as set forth in Schedule 3.12(a), there are no
actions at law, suits in equity, investigations, proceedings or claims
pending or, to the knowledge of the Stockholder, threatened against or
specifically affecting the Company before or by any Court or
Governmental Authority.
(b) Except as contemplated by this Agreement and except
to the extent set forth in Schedule 3.12(b), the Company has
performed all obligations required to be performed by it to date and
is not in default under, and, to the knowledge of the Stockholder, no
event has occurred which, with the lapse of time or action by a third
party could result in a default under any contract or other agreement
to which the Company is a party or by which it or any of its
properties is bound or under any applicable Order of any Court or
Governmental Authority.
3.13 Compliance with Law. Except as set forth in Schedule 3.13,
the Company is in compliance with all applicable statutes and other applicable
laws and all applicable rules and regulations of all federal, state, foreign
and local governmental agencies and authorities.
3.14 Permits. Except as set forth in Schedule 3.14, the Company
owns or holds all franchises, licenses, permits, consents, approvals and
authorizations of all Governmental Authorities
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<PAGE> 10
necessary for the conduct of its business. Each franchise, license, permit,
consent, approval and authorization so owned or held is in full force and
effect, and the Company is in compliance with all of its obligations with
respect thereto, and no event has occurred which allows, or upon the giving of
notice or the lapse of time or otherwise would allow, revocation or termination
of any franchise, license, permit, consent, approval or authorization so owned
or held.
3.15 Employee Benefit Plans and Policies. Except as set forth in
Schedule 3.15, the Company has no benefit plans of any kind.
3.16 Properties.
(a) The Company does not own any real property or any
interest therein. Schedule 3.16(a) (the "Leased Properties") sets
forth the location and size of, principal improvements and buildings
on, and Liens on all parcels of real estate leased by the Company
(individually, a "Leased Property" and collectively, the "Leased
Properties"). True and correct copies of all such Liens are attached
to Schedule 3.16(a). Except as set forth in Schedule 3.16(a), with
respect to each Leased Property:
(i) the Company has good and valid leasehold
interests in each parcel of its Leased Property, free and
clear of any Lien other than Permitted Encumbrances;
(ii) there are no pending or, to the knowledge of
the Company or the Stockholder, threatened condemnation
proceedings, suits or administrative actions relating to the
Leased Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) except as set forth in Schedule 3.16(a), the
legal descriptions for the parcels of Leased Property
contained in the deeds thereof describe such parcels fully and
adequately; the buildings and improvements are located within
the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and
none of the properties or buildings or improvements thereon
are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval by
any Governmental Authority, and do not encroach on any
easement which may burden the land;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the leasing or operation thereof
and have been operated and maintained in compliance with
applicable laws, ordinances, rules and regulations;
(v) there are no contracts granting to any party
or parties the right of use or occupancy of any portion of the
parcels of Leased Property, except as set forth in Schedule
3.16(a);
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<PAGE> 11
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Leased Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Company)
in possession of the parcels of Leased Property, other than
tenants under any leases disclosed in Schedule 3.16(a) who are
in possession of space to which they are entitled;
(viii) all facilities located on the parcels of
Leased Property are supplied with utilities and other services
necessary for the operation of such facilities;
(ix) each parcel of Leased Property abuts on and
has direct vehicular access to a public road, or has access to
a public road;
(x) all improvements and buildings on the Leased
Property are in good repair and adequate for the use of such
Leased Property in the manner in which presently used; and
(xi) there are no material service contracts,
management agreements or similar agreements which affect the
parcels of Leased Property, except as set forth in Schedule
3.16(a).
(b) Except as set forth in Schedule 3.16(b), each of the Company
has good and marketable title to all of its Assets, free and clear of any Liens
or restrictions on use. The Fixed Assets currently in use for the business and
operations of the Company are in good operating condition, normal wear and tear
excepted and have been maintained in accordance with sound industry practices.
3.17 Insurance. Schedule 3.17 sets forth a list of all policies of
insurance currently in effect relating to the business or operations of the
Company (true and complete copies of which have been furnished to Group 1).
Such insurance policies are in full force and effect. The Company is presently
insured, and since the inception of operations by the Company has been insured,
against such risks as companies engaged in the same or substantially similar
business would, in accordance with good business practice, customarily be
insured. The Company has given in a timely manner to its insurers all notices
required to be given under such insurance policies with respect to all claims
and actions covered by insurance, and, except as set forth in Schedule 3.17, no
insurer has denied coverage of any such claims or actions or reserved its
rights in respect of or rejected any of such claims. The Company has not
received any notice or other communication from any such insurer canceling or
materially amending any of such insurance policies, and no such cancellation is
pending or threatened. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not cause such insurance policies to
lapse, terminate or be canceled and will not result in any party thereto having
the right to terminate or cancel such insurance policies.
3.18 Affiliate Interests. Except as set forth in Schedule 3.18, no
employee, officer or director, or former employee, officer or director, of the
Company has any interest in any property, tangible or intangible, including
without limitation, patents, trade secrets, other confidential business
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<PAGE> 12
information, trademarks, service marks or trade names, used in or pertaining to
the business of the Company, except for the normal rights of employees,
partners, and stockholders.
3.19 Environmental Matters. Except as set forth in Schedule 3.19:
(a) The Company is in compliance with all Environmental
Laws, including, without limitation, Environmental Laws with respect
to discharges into the ground water, surface water and soil, emissions
into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release
or disposal of Hazardous Substances, or other Waste. The Company is
currently not liable for any penalties, fines or forfeitures for
failure to comply with any Environmental Laws. The Company is in
compliance with all required notice, record keeping and reporting
requirements of all Environmental Laws, and has complied with all
informational requests or demands arising under the Environmental
Laws.
(b) The Company has obtained, or caused to be obtained,
and is in compliance with, all Licenses required by the Environmental
Laws for the ownership of its properties and assets and the operation
of its business as presently conducted, including, without limitation,
all air emission, water discharge, water use and solid waste,
hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses (a listing of such items being
included in Schedule 3.19(b), and the Company is in compliance with
all the terms, conditions and requirements of such Licenses, and
copies of such Licenses have been made available to Group 1. There
are no administrative or judicial investigations, notices, claims or
other proceedings pending or threatened by any Governmental Authority
or third parties against the Company or its business, operations,
properties, or assets, which question the validity or entitlement of
the Company to any License required by the Environmental Laws for the
ownership of each of the respective properties and assets of the
Company and the operation of its business.
(c) The Company has not received or is aware of any
non-compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative or
judicial proceeding pending or threatened against or involving the
Company or its business, operations, properties, or assets, issued by
any Governmental Authority or third party with respect to any
Environmental Laws in connection with the ownership of its properties
or assets or the operation of its business, which has not been
resolved to the satisfaction of the issuing Governmental Authority or
third party.
(d) The Company is in compliance with, and is not in
breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to
the Environmental Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or
affect the Leased Properties.
(e) The Company has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it arranged for any
third parties to generate, manufacture, use, transport, transfer,
store,
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<PAGE> 13
handle, treat, spill, leak, dump, discharge, release or dispose of,
Hazardous Substances or other waste in an amount so as to require
remedial efforts to or at any location other than a site permitted to
receive such Hazardous Substances or other waste, nor has it
performed, arranged for or allowed by any method or procedure such
generation, manufacture, use, transportation, transfer, storage,
treatment, spillage, leakage, dumping, discharge, release or disposal
in contravention of any Environmental Laws. The Company has not
generated, manufactured, used, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed of, or arranged for
any third parties to generate, manufacture, use, store, handle, treat,
spill, leak, dump, discharge, release or dispose of, any material
quantities of Hazardous Substances or other waste upon property
currently or previously owned or leased by it, except in compliance
with Environmental Laws.
(f) The Company has not caused a Release or Discharge of
any material quantity of Hazardous Substance on, into or beneath the
surface of the Leased Properties or to any properties adjacent thereto
except in compliance with the Environmental laws. There has not
occurred, nor is there presently occurring, a Release or Discharge, or
threatened Release or Discharge, of any Hazardous Substance on, into
or beneath the surface of the Leased Properties or to any properties
adjacent thereto.
(g) The Company has not generated, handled, manufactured,
treated, stored, used, shipped, transported, transferred, or disposed
of, nor has it allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture,
treat, store, use, ship, transport, transfer or dispose of, any
material quantity of Hazardous Substance or other Waste to or at a
site which, pursuant to CERCLA or any similar state law (i) has been
placed on the National Priorities List or its state equivalent; or
(ii) the Environmental Protection Agency or the relevant state agency
has notified the Company that it has proposed or is proposing to place
on the National Priorities List or its state equivalent. Neither the
Company nor the Stockholder have received notice or have knowledge of
any facts which could give rise to any notice, that the Company is a
potentially responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA, RCRA or any other
applicable Environmental Laws. The Company has not submitted nor was
required to submit any notice pursuant to Section 103(c) of CERCLA
with respect to any properties owned by, or used in the business of,
the Company. The Company has not received any written or, to the
knowledge of the Company or the Stockholder, oral request for
information in connection with any federal or state environmental
cleanup site, or in connection with any of the real property or
premises where the Company has transported, transferred or disposed of
other Wastes. The Company has not been required to nor has undertaken
any response or remedial actions or clean-up actions at the request of
any Governmental Authorities or at the request of any other third
party. The Company has no liability under any Environmental Laws for
personal injury, property damage, natural resource damage, or clean up
obligations.
(h) The Company has no Aboveground Storage Tanks or
Underground Storage Tanks, except as listed in Schedule 3.19(h).
(i) The following have been made available to Group 1
regardless of their materiality, (i) all environmental audits,
assessments or occupational health studies of which
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<PAGE> 14
the Company or the Stockholder are aware undertaken by the Company or
their agents, or by the Stockholder, or by any Governmental Authority,
or by any third party, relating to the Company, or any of the Leased
Properties; (ii) the results of which the Company or the Stockholder
are aware of any ground, water, soil, air or asbestos monitoring
undertaken by the Company or its agents, or by the Stockholder, or by
any Governmental Authority, or by any third party, relating to the
Company, or any of the Leased Properties; (iii) all written
communications between the Company and any Governmental Authority
arising under or related to Environmental, Laws; and (iv) all
citations issued under OSHA, or similar state or local statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting the Company, or any of the Leased Properties.
(j) Schedule 3.19(j) contains a list of the assets of the
Company which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental Laws). Except as
set forth in Schedule 3.19(j), the Company has operated and continue
to operate in compliance with all Environmental Laws governing the
handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule
3.19(j), there are no claims, actions, suits, governmental
investigations or proceedings before any Governmental Authority or
third party pending, or threatened against or directly affecting the
Company or any of its assets or operations relating to the use,
handling or exposure to and disposal of asbestos or
asbestos-containing materials in connection with their assets and
operations.
3.20 Intellectual Property. Except as set forth in Schedule 3.20,
the Company owns, or is licensed or otherwise has the right to use all
Intellectual Property that is necessary for the conduct of the business and
operations of the Company as currently conducted. To the knowledge of the
Company and the Stockholder, (a) the use of the Intellectual Property by the
Company does not infringe on the rights of any Person, and (b) no Person is
infringing on any right of the Company with respect to any Intellectual
Property. No claims are pending or, to the knowledge of the Company and the
Stockholder threatened that the Company is infringing or otherwise adversely
affecting the rights of any Person with regard to any Intellectual Property.
To the knowledge of the Company and the Stockholder, no Person is infringing
the rights of the Company with respect to any Intellectual Property. All of
the Intellectual Property that is owned by the Company is owned free and clear
of all encumbrances and was not misappropriated from any Person. All of the
Intellectual Property that is licensed by the Company is licensed pursuant to
valid and existing license agreements. The consummation of the transactions
contemplated by this Agreement will not result in the loss of any Intellectual
Property.
3.21 Bank Accounts. Schedule 3.21 includes the names and locations
of all banks in which the Company has an account or safe deposit box and the
names of all Persons authorized to draw thereon or to have access thereto.
3.22 Brokers. No broker, finder, investment banker or other person
is entitled to any brokerage, finder's or other fee, commission or payment in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
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<PAGE> 15
3.23 Disclosure. The Company has disclosed in writing, or pursuant
to this Agreement and the Schedules attached hereto, all facts material to the
business, assets, prospects and condition (financial or otherwise) of the
Company. No representation or warranty to Group 1 by the Stockholder contained
in this Agreement, and no statement contained in the Schedules attached hereto,
any certificate, list or other writing furnished to Group 1 by the Stockholder
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein or
therein not misleading. All statements contained in this Agreement, the
Schedules attached hereto, and any certificate, list, document or other writing
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed a representation and warranty of the Stockholder for all
purposes of this Agreement.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE STOCKHOLDER
The Stockholder further represents and warrants to Group 1 that:
4.1 Capital Stock. The Stockholder is the beneficial and record
Stockholder of 1,000 shares of Common Stock of the Company, free and clear of
any lien, claim, pledge, encumbrance or other adverse claim. The Stockholder
does not own, beneficially or of record, any capital stock or other security,
including without limitation any option, warrant or right entitling the holder
thereof to purchase or otherwise acquire any shares of capital stock of the
Company.
4.2 Authorization of Agreement.
(a) The Stockholder has full legal right, power, capacity
and authority to execute, deliver and perform its obligations pursuant
to this Agreement and to execute, deliver and perform its obligations
under each instrument, document or agreement required hereby to be
executed and delivered by the Stockholder at, or prior to, the
Closing.
(b) This Agreement has been, and each instrument,
document or agreement required hereby to be executed and delivered by
the Stockholder at, or prior to, the Closing will then be, duly
executed and delivered by the Stockholder, and this Agreement
constitutes and, to the extent it purports to obligate the
Stockholder, each such instrument, document or agreement will
constitute (assuming due authorization, execution and delivery by each
other party thereto), the legal, valid and binding obligation of the
Stockholder enforceable against him in accordance with its terms.
4.3 Approvals. No filing or registration with, and no consent,
approval, authorization, permit, certificate or order of any Court or
Governmental Authority is required by any applicable Law or by any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority to permit the Stockholder to execute, deliver or perform this
Agreement or any instrument required hereby to be executed and delivered by him
at the Closing.
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<PAGE> 16
4.4 Absence of Conflicts. Except to the extent set forth in
Schedule 4.4, neither the execution and delivery by the Stockholder of this
Agreement or any instrument, document or agreement required hereby to be
executed and delivered by him at, or prior to, the Closing, nor the performance
by the Stockholder of his obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Law, (ii) any applicable Order or any applicable rule or
regulation of any Court or Governmental Authority, or (iii) any contract or
agreement to which the Stockholder is a party or by which he, or any of his
properties, is bound, or (b) result in the creation or imposition of any Lien
on any of the properties or assets of the Stockholder, or (c) result in the
cancellation, forfeiture, revocation, suspension or adverse modification of any
existing consent, approval, authorization, license, permit, certificate or
order of any Court or Governmental Authority, or (d) with the passage of time
or the giving of notice or the taking of any action of any third party have any
of the effects set forth in clause (a), (b) or (c) of this Section.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF GROUP 1
Group 1 hereby represents and warrants to the Stockholder that:
5.1 Corporate Organization. Group 1 is a corporation duly
organized, validly existing and in good standing under the laws of Delaware
with all requisite corporate power and authority to execute, deliver and
perform this Agreement and each instrument required hereby to be executed and
delivered by it at the Closing.
5.2 Authorization. The execution and delivery by Group 1of this
Agreement, the performance by Group 1 of its obligations pursuant to this
Agreement, and the execution, delivery and performance of each instrument
required hereby to be executed and delivered by Group 1 at the Closing have
been duly and validly authorized by all requisite corporate action on the part
of Group 1. This Agreement has been, and each instrument, document or
agreement required hereby to be executed and delivered by Group 1 at, or prior
to, the Closing will then be, duly executed and delivered by Group 1. This
Agreement constitutes, and, to the extent it purports to obligate Group 1, each
such instrument, document or agreement will constitute (assuming due
authorization, execution and delivery by each other party thereto), the legal,
valid and binding obligation of Group 1, enforceable against it in accordance
with its terms.
5.3 Approvals. No filing or registration with, and no consent,
approval, authorization, permit, certificate or order of any Court or
Government Authority is required by any applicable Law or by any applicable
Order or any applicable rule or regulation of any Court or Governmental
Authority to permit Group 1 to execute, deliver or consummate the transactions
contemplated by this Agreement or any instrument required hereby to be executed
and delivered by Group 1 at or prior to the Closing.
5.4 Absence of Conflicts. Neither the execution and delivery by
Group 1 of this Agreement or any instrument required hereby to be executed by
it at or prior to the Closing nor the
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<PAGE> 17
performance by Group 1 of its obligations under this Agreement or any such
instrument will (a) violate or breach the terms of or cause a default under (i)
any applicable Order or any applicable rule or regulation of any Court or
Governmental Authority, (ii) the organizational documents of Group 1 or (iii)
any contract or agreement to which Group 1 is a party or by which it or any of
its property is bound, or (b) result in the creation or imposition of any Liens
on any of the properties or assets of Group 1 (other than any Lien created by
the Company), or (c) result in the cancellation, forfeiture, revocation,
suspension or adverse modification of any existing consent, approval,
authorization, license, permit certificate or order of any Court or
Governmental Authority or (d) with the passage of time or the giving of notice
or the taking of any action by any third party have any of the effects set
forth in clause (a), (b) or (c) of this Section, except, with respect to
clauses (a), (b), (c) or (d) of this Section, where such matter would not have
a material adverse effect on the business, assets, prospects or condition
(financial or otherwise) of Group 1 and its subsidiaries, taken as a whole.
ARTICLE VI
COVENANTS OF THE STOCKHOLDER
6.1 Acquisition Proposals. Prior to the Closing Date, neither the
Company nor any of its officers, directors, employees or agents nor any
Stockholder shall agree to, solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition, business combination
or purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, the Company, other than the transactions with Group 1
contemplated by this Agreement.
6.2 Access. The Company shall afford Group 1's officers,
employees, counsel, accountants and other authorized representatives access,
during normal business hours throughout the period prior to the Closing Date,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall furnish promptly to Group 1 any information
concerning its business, properties and personnel as Group 1 may reasonably
request; provided, however, that no investigation pursuant to this Section or
otherwise shall affect or be deemed to modify any representation or warranty
made by the Stockholder pursuant to this Agreement.
6.3 Conduct of Business by the Company Pending the Acquisition.
The Stockholder covenant and agree that, from the date of this Agreement until
the Closing Date, unless Group 1 shall otherwise agree in writing or as
otherwise expressly contemplated by this Agreement:
(a) The business of the Company shall be conducted only
in, and the Company shall not take any action except in, the ordinary
course of business and consistent with past practice. In connection
therewith, the parties agree that the Company may dealer trade
vehicles for similar models, but the Company shall not liquidate or
otherwise dispose of any of its new vehicles other than in the
ordinary course of business to retail buyers. The Company shall
maintain its advertising expenditures and activities commensurate with
prior business practices. The Company shall not advertise a "Going
Out of Business" sale;
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<PAGE> 18
(b) The Company shall not, directly or indirectly do any
of the following: (i) issue, sell, pledge, dispose of or encumber, (A)
any capital stock (or securities convertible into capital stock) of
the Company or (B) other than in the ordinary course of business and
consistent with past practice and not relating to the borrowing of
money, any assets of the Company, (ii) amend or propose to amend the
articles of incorporation or bylaws (or other organizational
documents) of the Company, (iii) split, combine or reclassify any
outstanding capital stock of the Company or declare, set aside or pay
any dividend payable in cash, stock, property or otherwise with
respect to the capital stock of the Company whether now or hereafter
outstanding, (iv) redeem, purchase or acquire or offer to acquire any
of the capital stock of the Company, (v) create, incur, assume,
guarantee or otherwise become liable or obligated with respect to any
indebtedness for borrowed money (other than floor plan indebtedness
incurred in the ordinary course of business), or (vi) except in the
ordinary course of business and consistent with past practice, enter
into any contract, agreement, commitment or arrangement with respect
to any of the matters set forth in this Section 6.3(b);
(c) The Company shall use its best efforts (i) to
preserve intact the business organization of the Company, (ii) to
maintain in effect any franchises, authorizations or similar rights of
the Company, (iii) to keep available the services of its current
officers and key employees, (iv) to preserve the goodwill of those
having business relationships with it, (v) to maintain and keep its
properties in as good a repair and condition as presently exists,
except for deterioration due to ordinary wear and tear, (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it, (vii) to collect
its accounts receivable, (viii) to preserve in full force and effect
all leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other agreements which relate to its assets
(other than those expiring by their terms), and (ix) to perform or
cause to be performed all of its obligations in or under any of such
leases, agreements and contracts.
(d) The Company shall not make or agree to make any
single capital expenditure or enter into any purchase commitments in
excess of $50,000;
(e) The Company shall perform its obligations under any
contracts and agreements to which it is a party or to which its assets
are subject, except for such obligations as the Company in good faith
may dispute;
(f) The Company shall not increase the salary, benefits,
stock options, bonus or other compensation of any officer, director or
employee of the Company other than normal, annual compensation
increases consistent with the Company's past practices; and shall not
grant, to any individual, severance or termination pay that exceeds
the lesser of (i) such individual's compensation for the calendar
month immediately preceding such individual's grant of severance or
termination pay, or (ii) $5,000;
(g) The Company shall not take any action that would, or
that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming
untrue or any of the conditions to the Acquisition set forth in
Article VIII not being satisfied; provided, however, that no such
notification shall affect the representations or
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<PAGE> 19
warranties or covenants or agreements of the parties or the conditions
to the obligations of the parties hereunder;
(h) The Company shall not adopt or enter into any
personnel policy, stock option plan, collective bargaining agreement,
bonus plan or arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement, employment
agreement or any other employee benefit plan, agreement, arrangement,
program, practice or understanding;
(i) The Company shall not enter into any agreement or
incur any obligation, the terms of which would be violated by the
consummation of the transactions contemplated by this Agreement; and
6.4 Notification of Certain Matters. The Company shall give
prompt notice to Group 1, orally and in writing, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date hereof to the Closing, (ii) any failure
of the Company, or any officer, director, employee or agent thereof, or the
Stockholder to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, or (iii) any litigation, or any
claim or controversy or contingent liability of which the Company or the
Stockholder has knowledge of that might reasonably be expected to become the
subject of litigation, against the Company or affecting any of their assets, in
each case in an amount in controversy in excess of $50,000, or that is seeking
to prohibit or restrict the transactions contemplated hereby.
6.5 Consents. Subject to the terms and conditions of this
Agreement, the Company shall (i) obtain all consents, waivers, approvals
(including all applicable automobile manufacturers approvals, and such
approvals shall not contain any unreasonably burdensome restrictions on the
Company or Group 1), authorizations and orders required in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Acquisition; and (ii) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary or proper to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement.
6.6 Removal of Related Party Guarantees. The Stockholder agree to
take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to terminate, waive or release
all Company guarantees (such guarantees shall be referred to herein as "Related
Guarantees", as described in Schedule 6.6 pursuant to Section 3.9 of this
Agreement) of indebtedness or other obligations of any of the Company's
officers, directors, shareholders or employees or their affiliates.
6.7 Termination of Related Party Agreements. The Stockholder
agree to take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable to terminate the Related
Party Agreements except those Related Party Agreements that are disclosed in
Schedule 6.7 as agreements that shall not be subject to this Section 6.7.
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6.8 Related Party Agreements. The Stockholder agrees to cause the
Company not to enter into any Related Party Agreements or engage in any
transactions with the Stockholder or his affiliates; except for those Related
Party Agreements or transactions with affiliates that are disclosed in Schedule
6.8 as agreements or transactions that shall not be subject to this Section
6.8.
ARTICLE VII
COVENANTS OF GROUP 1
7.1 Consents. Subject to the terms and conditions of this
Agreement, Group 1 shall (i) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
Acquisition; and (ii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligation of Each Party to Effect the
Acquisition. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Order shall have been entered and remain in effect
in any action or proceeding before any Court or Governmental Authority
that would prevent or make illegal the consummation of the
Acquisition;
(b) There shall have been obtained any and all permits,
approvals and consents of any governmental agency or authority, with
respect to the consummation of the Acquisition;
8.2 Additional Conditions Precedent to Obligations of Group 1.
The obligation of Group 1 to effect the Acquisition is also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Stockholder
contained in Article III and Article IV, respectively, shall be true
and correct in all respects as of the date when made and as of the
Closing Date as though such representations and warranties had been
made at and as of the Closing Date; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by the
Company and the Stockholder on or before the Closing Date shall have
been duly complied with and performed in all respects, and a
certificate to the foregoing effect dated the Closing Date and signed
by the Stockholder shall have been delivered to Group 1.
(b) There shall have been obtained any and all permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental
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<PAGE> 21
Authority and of any automobile manufacturer, that reasonably may be
deemed necessary so that the consummation of the Acquisition and the
transactions contemplated thereby will be in compliance with
applicable laws.
(c) Group 1 shall have received evidence, satisfactory to
Group 1, that all Related Party Agreements shall have been terminated
and all Related Guarantees shall have been terminated, waived or
released pursuant to Sections 6.6 and 6.7 hereto.
(d) Since the date of this Agreement, no material adverse
change in the business, condition (financial or otherwise), assets,
operations or prospects of the Company shall have occurred, and the
Company shall not have suffered any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting
the properties or business of the Company and Group 1 shall have
received a certificate signed by the Stockholder dated the Closing
Date to such effect.
8.3 Additional Conditions Precedent to Obligations of the
Stockholder. The obligation of the Stockholder to effect the Acquisition is
also subject to the fulfillment at or prior to the Closing Date of the
following condition:
(a) The representations and warranties of Group 1
contained in Article V shall be true and correct in all respects as of
the date when made and as of the Closing Date as though such
representations and warranties had been made at and as of the Closing
Date; all the terms, covenants and conditions of this Agreement to be
complied with and performed by Group 1 on or before the Closing Date
shall have been duly complied with and performed in all material
respects; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Group 1 shall have
been delivered to the Stockholder.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
9.1 Survival. The representations, warranties and agreements in
this Agreement shall terminate at Closing.
ARTICLE X
MISCELLANEOUS
10.1 Schedules to this Agreement. The Schedules to this Agreement,
contain all disclosure required to be made by the Stockholder under the various
terms and provisions of this Agreement.
10.2 Termination. This Agreement may be terminated and the
Acquisition and the other transactions contemplated herein may be abandoned at
any time prior to the Closing:
(a) by mutual consent of Group 1 and the Stockholder;
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<PAGE> 22
(b) by either Group 1 or the Stockholder if the
Acquisition has not been effected on or before February 28, 1998;
(c) by Group 1 if the information disclosed on the
Schedules or the results of Group 1's general due diligence
investigation are not satisfactory to Group 1 in its sole discretion;
provided, however, that Group 1's right to terminate under this
Section 10.2(c) shall expire at midnight on January 31, 1998;
(d) by either Group 1 or the Stockholder if a final,
unappealable order to restrain, enjoin or otherwise prevent, or
awarding substantial damages in connection with, a consummation of the
Acquisition or the other transactions contemplated hereby shall have
been entered;
(e) by Group 1 if (i) since the date of this Agreement
there has been a material adverse change in the business operations or
financial condition of the Company; (ii) there has been a material
breach of any representation, warranty, covenant or other agreement
set forth in this Agreement by the Company or the Stockholder which
breach has not been cured within ten business days following receipt
by the Company of notice of such breach (or if such breach cannot be
cured within such time, reasonable efforts have begun to cure such
breach and such breach is then cured within 30 days after notice) or
(iii) there is a material adverse change in the pre-tax income
expected for the Company, on which the purchase price of the
acquisition was based; or
(f) by the Stockholder if there has been a material
breach of any representation or warranty set forth in this Agreement
by Group 1 which breach has not been cured within ten business days
following receipt by Group 1 of notice of such breach (or if such
breach cannot be cured within such time, reasonable efforts have begun
to cure such breach and such breach is then cured within 30 days after
notice).
10.3 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 10.2, the Stockholder and Group 1 shall have
no obligation or liability to each other except that the provisions of Section
10.4 survive any such termination.
10.4 Expenses. Regardless of whether the Acquisition is
consummated, all costs and expenses in connection with this Agreement and the
transactions contemplated hereby shall be paid by Group 1. The Stockholder and
Group 1 each represent and warrant to each other that there is no broker or
finder involved in the transactions contemplated hereby.
10.5 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto. The waiver by any
party hereto of any condition or of a breach of another provision of this
Agreement shall not operate or be construed as a waiver of any other condition
or subsequent breach. The waiver by any party hereto of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement other than with respect to the
condition so waived.
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<PAGE> 23
10.6 Assignment. This Agreement shall inure to the benefit of and
will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be
assignable by the parties hereto without the written consent of the other
parties hereto.
10.7 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, by registered or
certified mail, postage prepaid, return receipt requested, to the parties
hereto at the following addresses:
if to the Stockholder: Robert E. Howard, II.
13300 N. Broadway Extension
Oklahoma City, Oklahoma 73114
Telecopy: (405) 936-8851
with a copy to: Randall K. Calvert
6520 N. Western, Suite 100
Oklahoma City, Oklahoma 73116
Telecopy: (405) 848-5052
if to Group 1: 950 Echo Lane, Suite 350
Houston, Texas 77024
Telecopy: (713) 467-1513
Attention: B.B. Hollingsworth, Jr.
Chairman, President and Chief
Executive Officer
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002-6760
Telecopy: (713) 615-5236
Attention: John S. Watson
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 10.7. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when
the answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor.
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<PAGE> 24
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction.
10.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated unless such an
interpretation would materially alter the rights and privileges of any party
hereto or materially alter the terms of the transactions contemplated hereby.
10.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.11 Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10.12 Third Party Beneficiaries. Neither this agreement nor any
document delivered in connection with this Agreement, confers upon any Person
not a party hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
GROUP 1 AUTOMOTIVE, INC.
By: /s/ SCOTT L. THOMPSON
----------------------------------------
Name: Scott L. Thompson
Title: Senior Vice President
STOCKHOLDER
/s/ ROBERT E. HOWARD, II
----------------------------------
Robert E. Howard, II
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<PAGE> 25
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have
the meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree, as in effect as of the Closing Date, governing
Aboveground Storage Tanks or Underground Storage Tanks.
"affiliate" shall mean, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person.
"Agreement" shall mean the Stock Purchase Agreement made and entered
into as of December 30, 1997 by and between Group 1and the Stockholder,
including any amendments thereto and each Annex (including this Annex A),
Exhibit and schedule thereto (including the Schedules).
"Assets" shall mean all of the properties and assets owned by the
Company, other than the Leased Properties, whether personal or mixed, tangible
or intangible, wherever located.
"Business Day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 2.2, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean Bob Howard Nissan, Inc., an Oklahoma corporation,
all predecessor entities of the Company and its successors from time to time.
"Common Stock" shall mean the common stock, par value $1.00 per share,
of the Company.
"control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct
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<PAGE> 26
or cause the direction of the management or policies of a Person, whether
through the ownership of stock or as trustee or executor, by contract or credit
arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Environmental Laws" shall mean all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative
interpretations thereof, as in effect on the Closing Date, any of which govern
or relate to pollution, protection of the environment, public health and
safety, air emissions, water discharges, hazardous or toxic substances, solid
or hazardous waste or occupational health and safety, as any of these terms are
in such statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation, RCRA, CERCLA, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture and fixtures owned by the Company
or set forth on the Interim Balance Sheet or acquired by the Company since the
date of the Interim Balance Sheet.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a
specified Person.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or
any domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Guarantees" shall have the meaning set forth in Section 3.9 herein.
"Hazardous Substance" shall mean any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-products, pesticides,
asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires remediation under any
Environmental, Health and Safety Laws in effect on the Closing Date, including,
without limitation, the United States Department of Transportation Table (49
CFR 172, 101) or by the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq.
(hereinafter collectively "CERCLA"); the Solid Waste Disposal Act, as amended
by the Resource Conversation and Recovery Act of 1976 and subsequent Hazardous
and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as amended,
33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended
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<PAGE> 27
(42 U.S.C. Section 7401-7642); Toxic Substances Control Act, as amended, 15
U.S.C. Section 2601 et seq.; the Federal Insecticide, Fungicide, and
Rodenticide Act as amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency
Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C. Section
11001, et seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any
similar state statute or regulations implementing such statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees, or which
has been or shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"Intellectual Property" shall mean all patents, trademarks, copyrights
and other proprietary rights.
"IRS" shall mean the Internal Revenue Service.
"Law" shall mean all laws, statutes, ordinances, rules and regulations
of the United States, any foreign country, or any domestic or foreign state,
and any political subdivision or agency thereof, including all decisions of
Courts having the effect of law in each such jurisdiction.
"Leased Property" and "Leased Properties" have the meaning set forth
in Section 3.16 herein.
"Licenses" shall mean all licenses, certificates, permits, approvals
and registrations.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Law of any jurisdiction.
"Material Contract" has the meaning set forth in Section 3.9 herein.
"Material Leases" shall have the meaning set forth in Section 3.9
herein.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person shall have set aside on its books adequate
reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent or which are filed of record
but are being contested in good faith by appropriate proceedings;
provided that, in the latter case, the specified Person shall have set
aside on its books adequate reserves with respect thereto;
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<PAGE> 28
(3) liens in respect of judgments or awards with respect
to which the specified Person shall in good faith currently be
prosecuting an appeal or other proceeding for review and with respect
to which such Person shall have secured a stay of execution pending
such appeal or such proceeding for review; provided that such Person
shall have set aside on its books adequate reserves with respect
thereto;
(4) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to, property
or assets of a specified Person; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for which
they are held; and
(5) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations of a specified Person
thereunder so long as the payment of such rent or the performance of
such obligations is not delinquent.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Related Party Agreements" shall have the meaning set forth in Section
3.19 herein.
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
"Tax Returns" shall mean all returns, reports and filings relating to
Taxes.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
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<PAGE> 29
"Waste" shall mean toxic agricultural wastes, biomedical wastes,
biological wastes, bulky wastes, construction and demolition debris, garbage,
household wastes, industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods, and yard trash;
provided, however, the term "Waste" shall not include scrap metal.
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<PAGE> 1
EXHIBIT 10.53
================================================================================
REVOLVING CREDIT AGREEMENT
DATED AS OF
DECEMBER 31, 1997
AMONG
GROUP 1 AUTOMOTIVE, INC.,
ITS SUBSIDIARY BORROWERS LISTED HEREIN
THE BANKS LISTED HEREIN,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
AS ADMINISTRATIVE AGENT
COMERICA BANK
AS FLOOR PLAN AGENT,
NATIONSBANK OF TEXAS, N.A.
AS DOCUMENTATION AGENT
AND
U. S. BANK
AS CO-AGENT
================================================================================
<PAGE> 2
REVOLVING CREDIT AGREEMENT dated as of December 31, 1997, among GROUP
1 AUTOMOTIVE, INC., a Delaware corporation (the "Company"), each of the
Subsidiaries of the Company listed on the signature pages hereof and such other
Subsidiaries of the Company which hereafter shall become parties to this
Agreement (the Company and the Subsidiaries are sometimes referred to herein
as, individually, a "Borrower," and collectively, the "Borrowers"), the Banks
listed on the signature pages hereof (the "Banks"), TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, a national banking association, as Administrative Agent
for the Banks (in such capacity together with any successor in such capacity
pursuant to Section 12.6, the "Agent"), COMERICA BANK, a Michigan banking
association, as Floor Plan Agent for the Banks (in such capacity together with
any successor in such capacity pursuant to Section 12.13, the "Floor Plan
Agent").
ARTICLE I
CERTAIN DEFINED TERMS, ACCOUNTING TERMS AND
CONSTRUCTION
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"ABR Borrowing" means a Borrowing comprised of Alternate Base Rate
Loans.
"Accounts" means any and all rights of the Company or any of its
Subsidiaries to payment for goods and services sold or leased, including any
such right evidenced by chattel paper, whether due or to become due, whether or
not it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates.
"Acquisition" means the acquisition by any Borrower of (i) not less
than one hundred percent (100%) of the capital stock or other evidence of
equity ownership of an Auto Dealer, or (ii) all or substantially all of the
assets of an Auto Dealer.
"Acquisition Loan" has the meaning specified in Section 3.1.
"Acquisition Loan Advance Limit" means as of any Borrowing Date of an
Acquisition Loan, for the Company and its Subsidiaries on a consolidated basis,
calculated as of the last day of the most recently ended fiscal quarter or year
for which financial statements have been delivered under either Section 7.5 or
9.5, an amount equal to the lesser of (i) 2.75 times the difference between
Pro Forma EBITDA of the Floor Plan Subsidiaries minus Pro Forma Interest
Expense of the Floor Plan Subsidiaries, or (ii) an amount equal to the greater
of (y) 1.50 times the difference between Consolidated Pro Forma EBITDA minus
Pro Forma Floor Plan Interest Expense or (z) 2.0 times the difference between
Pro Forma EBITDA of the Floor Plan Subsidiaries minus Pro Forma Interest
Expense of the Floor Plan Subsidiaries. If the purpose of any Borrowing of an
Acquisition Loan is to make a Permitted Acquisition, then the foregoing amounts
shall be calculated to give effect to such Permitted Acquisition as if such
Acquisition had been consummated on or before the last day of the fiscal
quarter immediately preceding such Borrowing Date.
<PAGE> 3
"Acquisition Loan Commitment" means for each Bank, its obligation to
make Acquisition Loans to the Borrowers up to the amount set forth opposite
such Bank's name on Schedule I under the caption "Acquisition Loan Commitments"
(as the same may be permanently terminated or reduced from time to time
pursuant to Section 2.3(g)(iii), 3.5, 5.5, or 11.1 and as such amount may be
increased or decreased from time to time by assignment or assumption pursuant
to Section 13.3(b)).
"Addendum" means the Addendum to Revolving Credit Agreement and Note
substantially in the form attached hereto as Exhibit A.
"Adjusted Indebtedness" means as of any date of determination, for the
Company and its Subsidiaries, on a consolidated basis, the difference between
(i) Indebtedness minus (ii) the sum of (x) Floor Plan Loans outstanding, (y)
Retail Loan Guaranties, and (z) Subordinated Indebtedness.
"Adjustment Period" means the period of time commencing on a Floor
Plan Adjustment Date and ending on the next succeeding Floor Plan Adjustment
Date.
"Administrative Questionnaire" means an Administrative Questionnaire
in the form of Exhibit B hereto, which each Bank shall complete and provide to
the Agent.
"Affiliate" means any Person (including any member of the immediate
family of any such natural person) who directly or indirectly beneficially owns
or controls five percent (5%) or more of the total voting power of shares of
capital stock of the Company having the right to vote for directors under
ordinary circumstances, any Person controlling, controlled by or under common
control with any such Person (within the meaning of Rule 405 under the
Securities Act of 1933) and any director or executive officer of such Person.
"Agency Fee" has the meaning specified in Section 5.4(b).
"Agent" has the meaning specified in the introduction to this
Agreement.
"Agent's Letter" has the meaning specified in Section 5.4(b).
"Agreement" means this Revolving Credit Agreement.
"Alternate Base Rate" means, for any day, a fluctuating rate per annum
(rounded upwards to the next highest one-eighth (1/8) of one percent (1%) if
not already an integral multiple of one-eighth (1/8) of one percent (1%)) equal
to the greater of (a) the Prime Rate in effect on such day, or (b) the Federal
Funds Effective Rate in effect on such day plus one-half ( 1/2) of one percent
(1%). "Prime Rate" shall mean, as of a particular date, the prime rate most
recently announced by TCB and thereafter entered in the minutes of TCB's Loan
and Discount Committee, automatically fluctuating upward and downward with and
at the time specified in each such announcement without notice to any Borrower
or any other Person, which prime rate may not necessarily represent the lowest
or best rate actually charged to a customer. "Federal Funds Effective Rate"
shall mean, for any day, an interest rate per annum equal to the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as
2
<PAGE> 4
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three federal funds brokers of recognized standing selected by it. Any change
in the Alternate Base Rate due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective on the effective date of such change in
the Prime Rate, or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Loan" means any Loan with respect to which the
Company shall have selected an interest rate based on the Alternate Base Rate
in accordance with the provisions of this Agreement.
"Applicable Interest Rate" means the LIBO Rate, the Alternate Base
Rate, or the Comerica Prime-based Rate, as selected by the Company from time to
time subject to the terms and conditions of this Agreement.
"Applicable Margin" means, on any date, with respect to Eurodollar
Loans which are Acquisition Loans or to Alternate Base Rate Loans, as the case
may be, the applicable percentages set forth below based upon the Leverage
Ratio as in effect as of such date.
<TABLE>
<CAPTION>
Leverage Eurodollar Alternate Base
Ratio Margin Rate Margin
--------- ------ -----------
<S> <C> <C>
Category 1
x > 1.75 2.75% 1.25%
Category 2
1.25 < x > 1.75 2.25% .75%
-
Category 3
1.00 < x > 1.25 1.75% .25%
-
Category 4
x < 1.00 1.50% .0%
-
</TABLE>
Each change in the Applicable Margin shall apply to all Eurodollar
Loans that are outstanding at any time during the period commencing on the
effective date of such change and ending on the date immediately preceding the
effective date of the next such change.
"Applicable Lending Office" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of a Comerica Prime Rate Loan and
such Bank's Eurodollar Lending Office in the case of a Eurodollar Loan.
3
<PAGE> 5
"Assignment and Acceptance" has the meaning specified in Section
13.3(b).
"Auto Dealer" means a Person engaged in the sale of new and/or Used
Motor Vehicles pursuant to a franchise or licensing agreement with a
Manufacturer and related operations.
"Banks" has the meaning specified in the introduction to this
Agreement, and Bank(s) shall include the Swing Line Bank unless the context
otherwise requires.
"Board" means the Board of Governors of the Federal Reserve System of
the United States.
"Book Value" means the wholesale value set forth in the most recent
edition of the National Automotive Dealers Association ("N.A.D.A.") Official
Used Car Guide Retail Edition.
"Borrower" or "Borrowers" has the meaning specified in the
introduction to this Agreement.
"Borrowing" means a Loan or a group of Loans of a single Type made by
the Banks on a single date and as to which a single Interest Period is in
effect.
"Borrowing Date" means, with respect to each Borrowing, the Business
Day upon which the proceeds of such Borrowing are made available to any
Borrower.
"Business Day" means a day when the Agent and each Bank are open for
business, and if the applicable Business Day relates to any Eurodollar Loan, a
day on which dealings are carried on in the London interbank market and
commercial banks are open for domestic or international business in London,
England, in New York City, New York, Detroit, Michigan and in Houston, Texas.
"Capital Lease" means any lease required to be accounted for as a
capital lease under generally accepted accounting principles.
"Cash Collateral Account" has the meaning specified in Section 6.8(a).
"Cash Receipted" means, in connection with the sale of a Motor
Vehicle, that cash has been received upon the sale thereof.
"Closing Date" means the earliest date upon which all of the following
shall have occurred: counterparts of this Agreement and all of the Loan
Documents shall have been executed by each Borrower, each Bank, the Agent and
the Floor Plan Agent and the Agent shall have received counterparts hereof
which taken together, bear the signature of all such signatories and all of the
other conditions to the initial Borrowing or the issuance of any Letters of
Credit set forth in Section 8.1 hereof shall have been satisfied.
"Code" means the Internal Revenue Code of 1986 and any successor
statute of similar import, together with the regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall
be construed to also refer to any successor sections.
4
<PAGE> 6
"Collateral" means the collateral described in each of the Loan
Documents including the Security Documents and shall include (a) all of the
capital stock and any other equity interests of all Subsidiaries of the Company
or other Borrowers, now or hereafter existing (except such capital stock and
equity interests which the Company or other applicable Borrower is prohibited
by a Manufacturer from pledging), and (b) with respect each of the Borrowers,
(i) all inventory, including without limitation, Motor Vehicles, (ii) all
Accounts, (iii) all equipment, machinery, furniture and fixtures, and (iv) all
real estate owned or leased by any Borrower.
"Comerica Alternate Base Rate" shall mean, for any day, an interest
rate per annum equal to the Federal Funds Effective Rate in effect on such day,
plus one percent (1%).
"Comerica Prime-based Rate" shall mean, for any day, that rate of
interest which is equal to (a) the greater of (i) the Comerica Prime Rate and
(ii) the Comerica Alternate Base Rate minus (b) 0.50%.
"Comerica Prime Rate" shall mean the per annum rate of interest
announced by the Floor Plan Agent, at its main office from time to time as its
"prime rate" (it being acknowledged that such announced rate may not
necessarily be the lowest rate charged by the Floor Plan Agent to any of its
customers), which rate shall change simultaneously with any change in such
announced rate.
"Comerica Prime Rate Loan" or "Comerica Prime Rate Borrowing" means
any Loan with respect to which the Company shall have selected an interest rate
based on the Comerica Prime-based Rate in accordance with the provisions of
this Agreement.
"Commitment" means (a) for each Bank (or, as to any Person who becomes
a Bank after the Closing Date), its obligation to make Loans to the Borrowers
up to the amounts of its Pro Rata Share of the Acquisition Loan Commitment and
Floor Plan Loan Commitment, respectively, but in any event not to exceed the
amount set forth opposite such Bank's name on Schedule I under the caption
"Total Commitments," as the same may be permanently terminated or reduced from
time to time pursuant to Section 5.5 or 11.1 and as such amount may be
increased or decreased from time to time by assignment or assumption pursuant
to Section 13.3(b); and (b) for the Swing Line Bank, its obligation to make
Swing Line Loans to the Floor Plan Borrowers up to the amount of the Swing Line
Commitment as the same may be increased pursuant to the provisions of Section
2.3(g)(iii) or decreased pursuant to the provisions of Section 5.5.
"Commitment Fee" has the meaning specified in Section 5.4(a).
"Communications" has the meaning specified in Section 13.1.
"Company" has the meaning specified in the introduction to this
Agreement.
"Confidential Information Memorandum" means the Confidential
Information Memorandum dated October 29, 1997 furnished by Chase Securities
Inc., as Arranger on behalf of the Agent, the Floor Plan Agent and the Banks,
relating to the credit facilities evidenced by this Agreement.
5
<PAGE> 7
"Consolidated EBITDA" means, for any period for which the amount
thereof is to be determined, Consolidated Net Income for such period, plus, to
the extent deducted in the determination of Consolidated Net Income and without
duplication with items included in the adjustments under generally accepted
accounting principles to net income in the determination of Consolidated Net
Income, (a) provisions for income taxes, (b) Interest Expense, (c) depreciation
and amortization expense, and (d) other non-cash income or charges.
"Consolidated Net Income" means for any period for which the amount
thereof is to be determined, the Net Income of the Company in accordance with
generally accepted accounting principles.
"Consolidated Pro Forma EBITDA" means, Pro Forma EBITDA of the Company
and its Subsidiaries, determined on a consolidated basis.
"Consolidated Tangible Net Worth" means, with respect to the Company,
at any time, the total Stockholders' Equity less the total amount of any
intangible assets, with all such amounts being calculated for the Company and
its Subsidiaries on a consolidated basis in accordance with generally accepted
accounting principles applied on a consistent basis. Intangible assets shall
include unamortized debt discount and expense, unamortized deferred charges and
goodwill.
"Current Ratio" means, as of any date of determination, for the
Company and its Subsidiaries on a consolidated basis, the quotient of (a)
current assets as of such date divided by (b) the sum of (without duplication)
current liabilities and the outstanding balance of all Floor Plan Indebtedness
as of such date.
"Curtailment Date" means (a) with respect to new Motor Vehicles, one
year after the date they are Deemed Floored, (b) with respect to Fleet Motor
Vehicles, thirty (30) days from the date they are Deemed Floored, (c) with
respect to Demonstrators, two hundred ten (210) days from the date they are
Deemed Floored, (d) with respect to Used Motor Vehicles, one hundred twenty
(120) days from the date they are Deemed Floored and (v) with respect to
Program Cars, one hundred eighty (180) days from the date they are Deemed
Floored.
"Dealer Franchise Agreement" has the meaning specified in Section
7.20.
"Deemed Floored" means with respect to a Motor Vehicle, the earlier of
(a) the date a Floor Plan Loan Borrowing is deemed by the Floor Plan Agent in
its sole discretion to be advanced by the Floor Plan Agent; or (b) thirty (30)
days after an advance is made on a Floor Plan Loan with respect to such Motor
Vehicle.
"Default" means any event or condition which, with the lapse of time
or giving of notice or both, would constitute an Event of Default.
"Demonstrator" means a new Motor Vehicle with mileage resulting from
customer test drives or use of such Motor Vehicle by dealership personnel.
"Disposition" means the sale, lease, conveyance or other disposition
of property.
6
<PAGE> 8
"Dollars" and the symbol "$" mean the lawful currency of the United
States of America.
"Domestic Lending Office" means, with respect to any Bank, the office
of such Bank specified as its "Domestic Lending Office" on such Bank's
signature page to this Agreement or, as to any Person who becomes a Bank after
the Closing Date, on the signature page of the Assignment and Acceptance
executed by such Person or such other office of such Bank as such Bank may
hereafter designate from time to time as its "Domestic Lending Office" by
notice to the Company and the Agent.
"Draft" means a draft on a Floor Plan Borrower's account at the Floor
Plan Agent made by a Manufacturer in accordance with the terms of a Drafting
Agreement by and among the Floor Plan Agent, the Manufacturer and/or any of the
Borrowers.
"Drafting Agreement" means an agreement (whether or not issued in the
form of a letter of credit) by and between the Floor Plan Agent and a
Manufacturer, entered into for the account of a Floor Plan Borrower (and in
some cases acknowledged or countersigned by a Floor Plan Borrower) under which
a Manufacturer is entitled to submit Drafts to the Floor Plan Agent (via ACH
electronic transfer or otherwise) for payment of invoices identifying Motor
Vehicles delivered or shipped to the applicable Floor Plan Borrower, such
agreements to be substantially in the form of the existing Drafting Agreements
identified in Schedule II hereto or otherwise on terms and conditions
consistent with the usual customs and practices in effect from time to time for
the floor plan industry.
"EBITDA" means, for any Person, for any period for which the amount
thereof is to be determined, Net Income for such period, plus, to the extent
deducted in the determination of Net Income and without duplication with items
included in the adjustments under generally accepted accounting principles to
Net Income in the determination of net income, (a) provisions for income taxes,
(b) Interest Expense, (c) depreciation and amortization expense and (d) other
non-cash income or charges.
"Earnings Available for Fixed Charges" means, for any period for which
the amount thereof is to be determined, Consolidated EBITDA plus (a) lease
expense of the Company and its Subsidiaries on a consolidated basis minus (b)
the cash income taxes of the Company and its Subsidiaries, determined on a
consolidated basis as reported in the annual audited and the quarterly
unaudited financial statements.
"Eligible Assignee" means (a) any Bank or any Affiliate of any Bank
(b) a commercial bank organized under the laws of the United States, or any
state there of, and having total assets in excess of One Billion Dollars
($1,000,000,000) or its equivalent in any other currency and having deposits
that rated in either of the two highest generic letter rating categories
(without regard to subcategories) from either S&P or Moody's or a comparable
nationally recognized national or international rating agency; (c) a commercial
bank organized under the laws of any other country which is a member of the
OECD, or a political subdivision of any such country, and having total assets
in excess of One Billion Dollars ($1,000,000,000) or its equivalent in any
other currency, provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is
also a member of the OECD; (d) the central bank of any country which is a
member of the
7
<PAGE> 9
OECD; or (e) any other financial institution approved by the Agent and the
Company, (if such consent is required pursuant to Section 13.3) whose consent
shall not be unreasonably withheld.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" means any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in sections 414(b) and
414(c), respectively, of the Code or section 4001 of ERISA.
"Eurodollar Borrowing" means a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Lending Office" means, with respect to each Bank, the
branches or Affiliates of such Bank which such Bank has designated as its
"Eurodollar Lending Office" on such Bank's signature page to this Agreement or,
as to any Person who becomes a Bank after the Closing Date, on the signature
page of the Assignment and Acceptance executed by such Person or such other
office of such Bank as such Bank may hereafter designate from time to time as
its "Eurodollar Lending Office" by notice to the Company and the Agent.
"Eurodollar Loan" means any Loan with respect to which the Company
shall have selected an interest rate based on the LIBO Rate in accordance with
the provisions of this Agreement.
"Event of Default" has the meaning specified in Section 11.1.
"Excess/Payments in Process" means as of any date of determination the
funds transferred from any Floor Plan Borrower to the Floor Plan Agent in
payment of Floor Plan Loans which have at such time not yet been applied on a
VIN specific basis.
"Federal Funds Effective Rate" has the meaning specified in the
definition of "Alternate Base Rate."
"Fixed Charges" means, for any period for which the amount thereof is
to be determined, the sum of Interest Expense, lease expense, principal
payments, cash dividends, and capital expenditures, in each case, for the
Company and its Subsidiaries, determined on a consolidated basis.
"Fixed Charge Coverage Ratio" means the quotient of (a) Earnings
Available for Fixed Charges divided by (b) Fixed Charges.
"Fleet Motor Vehicle" means one of a large group of new Motor Vehicles
sold to a purchaser (e.g., a rental car agency) which purchases vehicles for
short term use.
"Floor Plan Adjustment Date" means (a) the last Business Day of each
calendar month, or (b) any Business Day designated by the Swing Line Bank upon
at least two (2) Business Days prior written notice to the Agent requesting
therein a Floor Plan Adjustment Date.
8
<PAGE> 10
"Floor Plan Advance Limit" means (a) with respect to new Motor
Vehicles and Demonstrators, the wholesale purchase price charged by a
Manufacturer as reflected in the invoice to the Company or any other Floor Plan
Borrower for such Motor Vehicles, and (b) with respect to Used Motor Vehicles
and Program Cars, the cost of such Motor Vehicles to the Company or any other
Floor Plan Borrower; provided, however, with respect to Demonstrators, Used
Motor Vehicles and Program Cars, (x) the aggregate amount of Floor Plan Loans
outstanding at any time in connection with Used Motor Vehicles may not exceed
an amount equal to fifty-five percent (55%) of the aggregate Book Value of all
Used Motor Vehicles of the Floor Plan Borrowers, as reflected in their current
Manufacturer/Dealer Statement, (y) the aggregate amount of Floor Plan Loans
outstanding at any time in connection with Used Motor Vehicles and Program Cars
may not exceed Fourteen Million Five Hundred Thousand Dollars ($14,500,000),
and (z) the aggregate amount of Floor Plan Loans outstanding at any time in
connection with Demonstrators may not exceed Nine Million Five Hundred Thousand
Dollars ($9,500,000).
"Floor Plan Agency Fee" has the meaning specified in Section 5.4(c).
"Floor Plan Borrowers" shall mean the Company and/or any Floor Plan
Subsidiaries.
"Floor Plan Indebtedness" means (without duplication) all Indebtedness
of the Borrowers secured by Motor Vehicles.
"Floor Plan Interest Expense" means that component of the Company's
aggregate Interest Expense, determined on a consolidated basis, attributable to
Floor Plan Indebtedness.
"Floor Plan Loan" has the meaning specified in Section 2.1.
"Floor Plan Loan Commitment" means for each Bank, its obligation to
make Floor Plan Loans to the Floor Plan Borrowers up to the amount set forth
opposite such Bank's name on Schedule I under the caption "Floor Plan Loan
Commitments" (as the same may be increased pursuant to the provisions of
2.3(g)(iii) or permanently terminated or reduced from time to time pursuant to
Section 5.5 or 11.1 and as such amount may be increased or decreased from time
to time by assignment or assumption pursuant to Section 13.3(b)).
"Floor Plan Subsidiary" means any Subsidiary of the Company which has
granted a general Lien to the Agent for the benefit of the Banks on
substantially all of its assets in the manner required by the Loan Documents
and which does not have any Third Party Floor Plan Financing.
"Fronting Fees" has the meaning specified in Section 6.7(b).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
9
<PAGE> 11
"Guaranties" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including all
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor,
(b) to advance or supply funds (a) for the purchase
or payment of such Indebtedness or obligation, (b) to maintain working capital
or other balance sheet condition or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or obligation,
(c) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or perform such obligation, or
(d) otherwise to assure the owner of the Indebtedness
or the obligation of the primary obligor against loss in respect thereof.
For the purposes of all computations made under this Agreement, a Guaranty in
respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation, liability or
dividend.
"Highest Lawful Rate" means, as to any Bank, the maximum nonusurious
rate of interest, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the aggregate principal
amount of all Loans under the laws of the United States of America and/or the
laws of the State of Texas as may be applicable thereto that are presently in
effect or, to the extent allowed under such applicable law, which may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than
applicable law now allows. To the extent, if any, that the maximum
non-usurious rate is determined with reference to the laws of the State of
Texas, the Highest Lawful Rate shall be the "weekly" rate ceiling as defined in
Chapter 1D of Subtitle 1 of Title 79, Texas Revised Civil Statutes (as amended)
(the "Act"), calculated on the basis of a 365/366 day year; provided, however,
that to the extent permitted by the Act, the Agent may at its election or at
the request of the Required Banks substitute for the "weekly" rate ceiling the
"annual" or "quarterly" ceiling, as those terms are defined in the Act, upon
the giving of notices provided for by the Act and effective upon the giving of
such notices.
"Honor Date" has the meaning specified in Section 6.3(b).
"Indebtedness" of any Person means, without duplication:
10
<PAGE> 12
(a) any obligation of such Person for borrowed money,
including any obligation of such Person evidenced by bonds, debentures, notes
or other similar debt instruments, and
(b) any obligation of such Person on account of
deposits or advances,
(c) all obligations of such Person under conditional
sale or other title retention agreements relating to property purchased by such
Person,
(d) any obligation of such Person for the deferred
purchase price of any property or services, except accounts payable arising in
the ordinary course of such Person's business,
(e) rentals in respect of Capital Leases of such
Person,
(f) Guaranties by such Person to the extent required
pursuant to the definition thereof,
(g) any Indebtedness of another Person secured by a
Lien on any asset of such first Person, whether or not such Indebtedness is
assumed by such first Person, and
(h) any Indirect Indebtedness of such Person.
"Indemnitee" has the meaning specified in Section 13.4(b).
"Indirect Indebtedness" means preferred stock of a Person having a
mandatory redemption prior to the Maturity Date.
"Insolvency Proceeding" means (a) any case, action or proceeding
relating to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general assignment for
the benefit of creditors, composition, marshalling of assets for creditors, or
other, similar arrangements in respect of its creditors generally or any
substantial portion of a Person's creditors, undertaken under federal.
"Interest Coverage Ratio" means for any period the quotient of (a)
Consolidated EBITDA for such period divided by (b) Interest Expense of the
Company for such period.
"Interest Expense" means, for any Person, determined on a consolidated
basis, the sum of all interest on Indebtedness paid or payable (including the
portion of rents payable under Capital Leases allocable to interest, but
excluding interest allowances from Manufacturers).
"Interest Payment Date" means, (a) with respect to Floor Plan Loans
(other than Swing Line Loans and Swing Line Overdraft Loans), the last day of
the Interest Period applicable to each such Loan (and, in addition, in the case
of any Interest Period more than 30 days' duration, the day that would have
been the Interest Payment Date of such Interest Period if such Interest Period
had been of one month or 30 days' duration), (b) with respect to Acquisition
Loans which are Eurodollar
11
<PAGE> 13
Loans, the last day of the Interest Period applicable to each such Loan (and in
addition, in the case of any Interest Period of six months or 180 days'
duration, the day that would have been the Interest Payment Date of such
Interest Period if such Interest Period had been of three months' or 90 days'
duration), (c) with respect to Alternate Base Rate Loans, on the first Business
Day of each January, April, July and October of each year, commencing January
1, 1998 and with respect to Swing Line Loans, Swing Line Overdraft Loans and
Comerica Prime Rate Loans, on the fifth (5th) Business Day of each month.
"Interest Period" means: with respect to:
(a) Floor Plan Loans and Swing Line Loans (i) as to any Eurodollar
Loan, the period commencing on the date of such Eurodollar Loan and
ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month
that is fourteen (14) days or one month thereafter, as the Company may
elect, and (ii) as to any Comerica Prime Rate Loan, the period
commencing on the date of such Comerica Prime Rate Loan and ending on
the date such Loan is repaid; or converted into a Eurodollar Loan in
accordance with the terms of Section 5.15(b); provided, however, that
(A) if any Interest Period would end on a day that shall not be a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, with respect to Eurodollar Loans only,
such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the next
preceding Business Day, (B) no Interest Period shall end later than
the Maturity Date and (C) interest shall accrue from and including the
first day of an Interest Period to but excluding the last day of such
Interest Period; and
(b) Acquisition Loans (i) as to any Eurodollar Loan, the period
commencing on the date of such Eurodollar Loan and ending on the
numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is one,
two, three or six months thereafter, as the Company may elect and (ii)
as to any Alternate Base Rate Loan, a period commencing on the date of
such Loan and ending on the date such Loan is repaid or converted into
a Eurodollar Loan in accordance with the terms of Section 5.15(a);
provided, however, that (A) if any Interest Period would end on a day
that shall not be a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, with respect to
Eurodollar Loans only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end
on the next preceding Business Day, (B) no Interest Period shall end
later than the Maturity Date and (C) interest shall accrue from and
including the first day of an Interest Period to but excluding the
last day of such Interest Period.
"Inventory Detail Report" means a report delivered pursuant to Section
9.5(f) by the Company and the other Floor Plan Borrowers (on an individual and
consolidated basis) which breaks out in detail the new Motor Vehicles, Used
Motor Vehicles, Demonstrators, and Program Vehicles held by such Floor Plan
Borrower as reflected in its Manufacturer/Dealer Statements.
"Investment" means, as to any Person, any investment so classified
under generally accepted accounting principles made by stock purchase, capital
contribution, loan or advance or by purchase
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of property or otherwise, but in any event shall include as an investment in
any other Person the amount of all Indebtedness owed by such other Person and
all Accounts from such other Person which are not current assets or did not
arise from services rendered or sales to such other Person in the ordinary
course of business.
"IPO" means the initial public offering of stock of the Company.
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiration date of, or to renew or increase the amount of, such
Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
"Issuing Bank" means Texas Commerce Bank National Association in its
capacity as issuer of one or more Letters of Credit hereunder, together with
any successor letter of credit issuer and any replacement letter of credit
issuer.
"Leasehold Mortgage" has the meaning specified in Section 8.1(c)(iv).
"Letter of Credit" means any letter of credit issued by the Issuing
Bank pursuant to Article VI.
"Letter of Credit Advance" means each Bank's participation in any
Letter of Credit Borrowing in accordance with its Pro Rata Share.
"Letter of Credit Application" and "Letter of Credit Amendment
Application" means an application form for Issuance of, and for amendment of,
Letters of Credit as shall at any time be in use at the Issuing Bank, as the
Issuing Bank shall request.
"Letter of Credit Borrowing" means an extension of credit resulting
from a drawing under any Letter of Credit which shall not have been reimbursed
on the date when made from proceeds of a Borrowing of Acquisition Loans under
Section 6.3(b).
"Letter of Credit Commitment" means the commitment of the Issuing Bank
to Issue, and the commitment of the Banks severally to participate in, Letters
of Credit from time to time Issued or outstanding under Article VI in an
aggregate amount not to exceed on any date the amount of Five Million Dollars
($5,000,000); provided that the Letter of Credit Commitment is a part of the
combined Acquisition Loan Commitment, rather than a separate, independent
commitment.
"Letter of Credit Fees" has the meaning specified in Section 6.7(a).
"Letter of Credit Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding, plus (b)
the amount of all unreimbursed drawings under all Letters of Credit, including
all outstanding Letter of Credit Borrowings.
"Letter of Credit-Related Documents" means the Letters of Credit, the
Letter of Credit Applications, the Letter of Credit Amendment Applications and
any other document relating to any
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Letter of Credit, including any of the Issuing Bank's standard for documents
for Letter of Credit Issuances.
"Letter of Credit Termination Date" has the meaning provided in
Section 6.1(a).
"Leverage Ratio" means as of any date of determination, for the
Company, the quotient of (a) Adjusted Indebtedness as of such date divided by
(b) (y) Consolidated Pro Form EBITDA as of such date, minus (z) Pro Forma Floor
Plan Interest Expense of the Company and its Subsidiaries, determined on a
consolidated basis and after having given effect to any proposed Acquisition,
as of such date.
"LIBO Rate" means with respect to a Borrowing the rate (rounded to
the nearest one-eighth (1/8) of one percent (1%) or, if there is no nearest
one-eighth (1/8) of one percent (1%), the next higher one-eighth (1/8) of one
percent (1%) at which dollar deposits approximately equal in principal amount
of such Borrowing and for a maturity equal to the applicable Interest Period
are offered in immediately available funds to the principal office of the Agent
in London, England (or if the Agent does not at the time any such determination
is made, maintain an office in London, England, the principal office of any
Affiliate of the Agent in London, England) by leading banks in the London
interbank market for Eurodollars at approximately 11:00 A.M., LONDON, ENGLAND
TIME, two Business Days prior to the commencement of such Interest Period.
"Lien" means any mortgage, pledge, hypothecation, judgment lien or
similar legal process, title retention lien, or other lien or security
interest, including the interest of a vendor under any conditional sale or
other title retention agreement and the interest of a lessor under any Capital
Lease.
"Loan" means an Alternate Base Rate Loan, a Comerica Prime Rate Loan,
a Eurodollar Loan, an Acquisition Loan, a Floor Plan Loan, a Swing Line Loan,
or a Swing Line Overdraft Loan; and "Loans" means all such Loans made pursuant
to this Agreement
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Agent's Letter and all other documents and instruments executed
by the Borrowers or any other Person in connection with this Agreement and the
Loans.
"Manufacturer" means the manufacturer of a Motor Vehicle.
"Manufacturer/Dealer Statement" means a financial statement prepared
by a Floor Plan Borrower for a Manufacturer and delivered to the Manufacturer
on a monthly basis.
"Manufacturer's Certificate" means any Manufacturer's Statement of
Origin, Manufacturer's Certificate, MSO, Certificate of Origin or any other
document evidencing the ownership or transfer of ownership of a new Motor
Vehicle from a Manufacturer to any Borrower.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding),
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(i) a material adverse effect on the financial condition, business, operations,
assets or prospects of the Company and its Subsidiaries, on a consolidated
basis, (ii) a material impairment of the ability of the Company and its
Subsidiaries on a consolidated basis or the Floor Plan Subsidiaries as a group,
to perform their Obligations under the Loan Documents or (iii) a material
impairment of the validity or enforceability of the Loan Documents.
"Maturity Date" means December 31, 2000, or the earlier termination of
the Commitments under Sections 5.5 and 11.1.
"Maximum Permissible Rate" has the meaning specified in Section 13.8.
"Mortgage" means a mortgage or deed of trust substantially in the form
of Exhibit D covering each parcel of real estate owned by any Borrower (other
than real estate securing Non-Recourse Real Estate Debt that cannot be
subordinately mortgaged), executed by the respective Borrower in favor of the
Agent for the benefit of the Banks.
"Motor Vehicle" means an automobile, truck, van or any other motor
vehicle, including, without limitation, new Motor Vehicles, Used Motor
Vehicles, Program Cars, Fleet Motor Vehicles, and Demonstrators.
"Net Income" means for any Person for any period for which the amount
thereof is to be determined the net income (or net losses) of such Person and
its Subsidiaries on a consolidated basis as determined in accordance with
generally accepted accounting principles after deducting, to the extent
included in computing said net income and without duplication, (i) the income
(or deficit) of any Person (other than a Subsidiary) in which such Person or
any of its Subsidiaries has any ownership interest, except to the extent that
any such income has been actually received by such Person or such Subsidiary in
the form of cash dividends or similar cash distribution, (ii) any income (or
deficit) of any other Person accrued prior to the date it becomes a Subsidiary
of such Person or merges into or consolidates with such entity, (iii) the gain
or loss (net of any tax effect) resulting from the sale of any capital assets,
(iv) any gains or losses or other income which is non-recurring, extraordinary
or attributable to discontinued operations, (v) income resulting from the
write-up of any assets, and (vi) any portion of the net income of any
Subsidiaries which is not available for distribution.
"Non-Recourse Real Estate Debt" means Indebtedness of a Subsidiary of
the Company existing as of the Closing Date and described in Schedule XII or
incurred in connection with an Acquisition, provided that such Indebtedness is
non-recourse to such Borrower and secured solely by real estate of such
Borrower used in the day-to-day operations of its business.
"Note" and "Notes" mean each of the Promissory Notes substantially in
the form of Exhibit C-1 duly executed by all of the Borrowers each payable and
delivered to each of the respective Banks in the principal face amount of the
respective Bank's Commitment.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by any Borrower to
any Bank, the Agent, the Floor Plan Agent,
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the Swing Line Bank, or the Issuing Bank, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
"OECD" means the Organization for Economic Cooperation and
Development.
"Other Activities" has the meaning specified in Section 12.3.
"Other Financings" has the meaning specified in Section 12.3.
"Other Taxes" has the meaning specified in Section 5.14(b).
"Out of Balance" means (i) with respect to a Motor Vehicle, the
outstanding balance of the Floor Plan Loan pursuant to which such Motor Vehicle
was purchased exceeds the Floor Plan Advance Limit and (ii) with respect to a
Floor Plan Loan, the outstanding balance thereof has not been paid in
accordance with the terms of this Agreement; provided, however, that so long as
the outstanding balance of (y) Cash Receipted Motor Vehicles shall have been
received within five (5) days of the sale thereof and (z) Sale Dated Motor
Vehicles shall have been received within ten (10) days of the sale thereof,
such Loans shall not be considered Out of Balance.
"Out of Balance Amount" has the meaning specified in Section 9.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Performance Letter of Credit" has the meaning specified in Section
6.2.
"Permitted Acquisition" means (a) in connection with an Acquisition by
the Company pursuant to which (i) the total consideration (exclusive of stock
or other equity consideration) is less than or equal to Ten Million Dollars
($10,000,000), (ii) when combined with the total consideration (exclusive of
stock or other equity consideration) paid or payable in connection with all
other Acquisitions completed within the immediately preceding twelve (12)
calendar months is less than or equal to Twenty-five Million Dollars
($25,000,000) and (iii) not less than one hundred percent (100%) of the capital
stock or other evidence of equity ownership of the target entity is acquired,
and that satisfies all the requirements for a Permitted Acquisition set forth
in Section 9.16(a)(i)(ii)(v)(vi)(viii)(ix) and Section 9.16(b); and (b) in
connection with an Acquisition by the Company pursuant to which (i) the total
consideration (exclusive of stock or other equity consideration) is greater
than Ten Million Dollars ($10,000,000), (ii) when combined with the total
consideration (exclusive of stock or other equity consideration) paid or
payable in connection with all other Acquisitions completed within the
immediately preceding twelve (12) calendar months is greater than Twenty-five
Million Dollars ($25,000,000) and (iii) not less than one hundred percent
(100%) of the capital stock or other evidence of equity ownership of the target
entity is acquired, and that satisfies all the requirements for a Permitted
Acquisition set forth in Section 9.16(a) and Section 9.16(b).
"Permitted Acquisition Notice" has the meaning specified in Section
9.16(a)(ii).
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"Permitted Liens" means those Liens described in Section 10.2.
"Person" means any natural person, corporation, business trust,
association, company, limited liability company, joint venture, partnership or
government or any agency or political subdivision thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any of its Subsidiaries or any
ERISA Affiliate or as to which the Company or any of its Subsidiaries or any
ERISA Affiliate contributes or is a member or otherwise may have any liability.
"Pledge Agreement" means a Pledge Agreement substantially in the form
of Exhibit E attached hereto, executed by the Company and certain other
Borrowers in favor of the Agent for the benefit of the Banks covering all of
the capital stock and other equity interests of the Company's direct and
indirect Subsidiaries.
"Prime Rate" has the meaning specified in the definition of the term
"Alternate Base Rate."
"Pro Forma EBITDA" means, for any Person, as of any date of
determination, based upon the immediately preceding four fiscal quarters, for
any period for which the amount thereof is to be determined, EBITDA of such
Person plus (or minus), without duplication, the EBITDA for such four quarter
period of any Person acquired during such period.
"Pro Forma Floor Plan Interest Expense" means, for any Person, as of
any date of determination, based upon the immediately preceding four fiscal
quarters of such Person, Floor Plan Interest Expense of such Person plus (or
minus), without duplication, the Floor Plan Interest Expense for such period of
any Person acquired during such period.
"Pro Forma Interest Expense" means Pro Forma Floor Plan Interest
Expense plus pro forma Interest Expense of other permitted Indebtedness of the
Borrowers.
"Program Car" means a Motor Vehicle in the current or immediately
preceding model year in readily saleable condition, previously used by a car
rental company as a part of its rental fleet or previously driven by an
executive of a Manufacturer before being offered for sale to the Company or any
other Floor Plan Borrower at a Manufacturer sponsored auction.
"Pro Rata Share" shall mean, at any time, with respect to any Bank,
the percentage corresponding to the fraction the numerator of which shall be
the amount of the Commitment of such Bank and the denominator of which shall be
the aggregate amount of the Commitments of all of the Banks.
"Quoted Rate" shall mean the lesser of (i) rate of interest per annum
offered by Swing Line Bank in its sole discretion with respect to a Swing Line
Loan or a Swing Line Overdraft Loan, such rate to be derived from the LIBO Rate
(or other cost of funds, as selected by Swing Line Bank) on the applicable date
of determination, plus 1.5% and (ii) the Highest Lawful Rate.
"Refunded Swing Line Loans" has the meaning specified in Section
4.5(a).
"Register" has the meaning specified in Section 13.3(d).
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"Retail Loan Guarantees" means any Guaranty by the Company or any of
its Subsidiaries in favor of any Person of retail installment contracts or
other retail payment obligations in respect of Motor Vehicles sold to a
customer.
"Sale Dated" means, in connection with the sale of a Motor Vehicle,
that closing of the sale of such Motor Vehicle is pending financing or other
contingencies.
"Security Agreement" means a Security Agreement substantially in the
form of Exhibit G attached hereto, executed by each of the Borrowers in favor
of the Agent for the benefit of the Banks covering all assets of the Borrowers
described therein.
"Security Documents" means this Agreement, the Pledge Agreement, the
Security Agreements, the agreements or instruments described or referred to in
Section 8.1(c) and any and all other agreements or instruments now or hereafter
executed and delivered by any Borrower or any other Person in connection with,
or as security for, the payments or performance of any of the Obligations.
"Stockholders' Equity" means the consolidated stockholders' equity of
the Company and its Subsidiaries after eliminating all intercompany items and
after deducting from stockholders' equity such portion thereof as is properly
attributable to minority interests in such Subsidiaries.
"Subordinated Indebtedness" means Indebtedness of any Borrower having
maturities and terms, and which is subordinated to payment of the Notes in a
manner, approved in writing by the Agent and the Required Banks and which in
the aggregate, is less than Ten Million Dollars ($10,000,000).
"Subsidiary" means any Person of which or in which any other Person
(the "Parent") and the other Subsidiaries of the Parent own directly or
indirectly fifty percent (50%) or more of:
(a) the combined voting power of all classes of stock
having general voting power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a corporation;
(b) the capital interest or profits interest of such
Person, if it is a partnership, joint venture or similar entity; or
(c) the beneficial interest of such Person, if it is
a trust, association or other unincorporated organization.
The term Subsidiary (or Subsidiaries), as used in the introduction to
this Agreement, means a Subsidiary (or the Subsidiaries) of the Company.
"Swing Line Bank" means Comerica Bank and its successors and assignees
as provided in this Agreement.
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"Swing Line Commitment" means, for the Swing Line Bank, its obligation
to make Swing Line Loans to the Floor Plan Borrowers up to the amount equal to
the Floor Plan Loan Commitment, as in effect from time to time; provided that,
subject to the provisions of Article IV, the Swing Line Commitment is a part of
the Floor Plan Loan Commitment rather than a separate, independent commitment.
"Swing Line Loan" has the meaning specified in Section 4.1.
"Swing Line Minimum Amount" means the amount of Swing Line Loans
which in the mutual determination of the Borrowers and the Floor Plan Agent
shall remain outstanding as of each Floor Plan Adjustment Date, which amount
may change from time to time as the Borrowers and the Floor Plan Agent shall
mutually agree; provided, however, the Swing Line Minimum Amount shall in any
event not be in excess of Ten Million Dollars ($10,000,000).
"Swing Line Note" means the Swing Line Note substantially in the form
of Exhibit C-2, duly executed by all of the Floor Plan Borrowers and payable to
and delivered to the Swing Line Bank, in the principal face amount of the Swing
Line Commitment.
"Swing Line Overdraft Borrowing Request" has the meaning specified in
Section 2.3(g)(iii).
"Swing Line Overdraft Loan" has the meaning specified in Section
2.3(g)(iii).
"Taxes" has the meaning specified in Section 5.14(a).
"TCB" means Texas Commerce Bank National Association and its
successors and assigns as permitted in this Agreement.
"Third Party Floor Plan Financing" means a floor plan credit facility
by and among certain of the Borrowers that are not Floor Plan Borrowers and
third party lenders, which facilities are in existence on the date hereof and
are set forth in Schedule III or which are hereafter in effect with respect to
a Subsidiary acquired in connection with a Permitted Acquisition.
"Total Commitment" means, at any time, the aggregate amount of the
Commitments, as in effect at such time.
"Transferee" has the meaning specified in Section 5.14(a).
"Type" means any type of Loan determined with respect to the interest
option applicable thereto, i.e., a Eurodollar Loan, an Alternate Base Rate Loan
or Comerica Prime Rate Loan.
"UCC" means the Uniform Commercial Code as adopted and in effect in
the State of Texas from time to time.
"Used Motor Vehicle" means a Motor Vehicle in the current or any of
the four preceding model years which is in readily saleable condition.
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"Wholly-Owned Subsidiary" means any Person of which the Company or its
other Wholly-Owned Subsidiaries own directly or indirectly one hundred percent
(100%) of:
(a) the issued and outstanding shares of stock
(except shares required as directors' qualifying shares and shares constituting
less than two percent (2%) of the issued and outstanding shares);
(b) the capital interest or profits interest of such
Person, if it is a partnership, joint venture or similar entity; or
(c) the beneficial interest of such Person, if it is
a trust, association or other unincorporated organization.
SECTION 1.2 Accounting Terms. Except as otherwise herein
specifically provided, each accounting term used herein shall have the meaning
given it under generally accepted accounting principles as in effect, as of the
applicable date of determination thereof, from time to time as set forth in the
opinions, statements and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board and applied on a consistent basis.
SECTION 1.3 Interpretation.
(a) In this Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural
number and vice versa;
(ii) reference to any gender includes each
other gender;
(iii) the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article,
Section or other subdivision;
(iv) reference to any Person includes
such Person's successors and assigns but, if applicable, only
if such successors and assigns are permitted by this
Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually,
provided that nothing in this clause (iv) is intended to
authorize any assignment not otherwise permitted by this
Agreement;
(v) reference to any agreement
(including this Agreement), document or instrument means such
agreement, document or instrument as amended, supplemented or
modified and in effect from time to time in accordance with
the terms thereof and, if applicable, the terms hereof, and
reference to any Note includes any note issued pursuant hereto
in extension or renewal thereof and in substitution or
replacement therefor;
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(vi) unless the context indicates
otherwise, reference to any Article, Section, Schedule or
Exhibit means such Article or Section hereof or such Schedule
or Exhibit hereto;
(vii) the word "including" (and with
correlative meaning "include") means including, without
limiting the generality of any description preceding such
term;
(viii) with respect to the determination of
any period of time, the word "from" means "from and including"
and the word "to" means "to but excluding"; and
(ix) reference to any law means such law
as amended, modified, codified or reenacted, in whole or in
part, and in effect from time to time.
(b) The Article and Section headings herein and the
Table of Contents are for convenience only and shall not affect the
construction hereof.
(c) No provision of this Agreement shall be
interpreted or construed against any Person solely because that Person or its
legal representative drafted such provision.
ARTICLE II
THE FLOOR PLAN LOANS
SECTION 2.1 Floor Plan Loan Commitments. Subject to the
terms and conditions and relying upon the representations and warranties of the
Borrowers herein set forth, each Bank severally and not jointly agrees, on the
terms and conditions set forth herein, to make revolving credit loans (each
such loan, a "Floor Plan Loan") to any Floor Plan Borrower from time to time on
any Business Day during the period from the Closing Date to the Maturity Date
in an aggregate amount not to exceed at any time outstanding such Bank's Floor
Plan Loan Commitment; provided, however, that after giving effect to all Floor
Plan Loans and Swing Line Loans requested on any date, the aggregate principal
amount of all outstanding Floor Plan Loans, all outstanding Swing Line Loans,
all outstanding Acquisition Loans, and all outstanding Letter of Credit
Obligations shall not at any time exceed the Total Commitment within the limits
of each Bank's Commitment and subject to the other terms and conditions hereof,
any Floor Plan Borrower may borrow, prepay and reborrow Floor Plan Loans under
this Section 2.1.
SECTION 2.2 Floor Plan Loans.
(a) Each Floor Plan Loan Borrowing made to any of the
Floor Plan Borrowers by the Banks on the Closing Date or on any Floor Plan
Adjustment Date shall be in the minimum aggregate principal amount of One
Million Dollars ($1,000,000) and in integral multiples of One Million Dollars
($1,000,000; provided that a Comerica Prime Rate Loan or a Floor Plan Loan
resulting from a Draft may be in any amount) and shall consist of Floor Plan
Loans of the same Type made ratably by the Banks in accordance with their
respective Floor Plan Loan Commitments;
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provided, however, that the failure of any Bank to make any Floor Plan Loan
shall not relieve any other Bank of its obligation to lend hereunder.
(b) Each Floor Plan Loan Borrowing shall be a
Comerica Prime Rate Borrowing or a Eurodollar Borrowing as any of the Floor
Plan Borrowers may request pursuant to Section 2.3. Each Bank may fulfill its
obligation to make Floor Plan Loans with respect to any Eurodollar Loan by
causing, at its option, any domestic or foreign branch or Affiliate of such
Bank to make such Loan, provided that the exercise of such option shall not
affect the obligation of the applicable Floor Plan Borrower to repay such Loan
in accordance with the terms of the applicable Note.
(c) Not later than 10:00 A.M., HOUSTON, TEXAS TIME on
the Closing Date any one or more of the Floor Plan Borrowers shall deliver a
Request for Borrowing to the Floor Plan Agent. Not later than 11:00 A.M.
HOUSTON, TEXAS TIME of the same day, the Floor Plan Agent shall notify the
Agent of the Type of Borrowing requested and the aggregate amount of Floor Plan
Loans being requested by the Floor Plan Borrowers as of the Closing Date, less
an amount equal to the initial Swing Line Loan Minimum Amount. Upon receipt of
such notice, the Agent shall notify each Bank of the contents thereof and of
such Bank's Pro Rata Share of such Borrowing.
(d) Each Bank shall, upon request from the Agent,
from time to time as herein provided, make its Pro Rata Share of the amount of
such Floor Plan Loan Borrowing to the Agent by paying the amount required to
the Agent in U.S. Dollars and in immediately available funds on the same day
not later than 3:00 P.M., HOUSTON, TEXAS TIME, and, subject to satisfaction of
the conditions set forth in Article VIII, and the terms, provisions and
conditions set forth in Section 2.3 and Section 4.3, the Agent shall promptly
and in any event on the same day, credit the amounts so received to the account
of the Floor Plan Agent, or, if a Floor Plan Loan Borrowing shall not occur on
such date because any condition precedent herein specified shall not have been
met, return the amounts so received to the respective Banks. Upon receipt of
such funds the Floor Plan Agent shall promptly and in any event on the same
day, credit the amount so received to the account of the applicable Borrower.
(e) Unless the Agent shall have received notice from
a Bank prior to the date of any such Floor Plan Loan Borrowing that such Bank
will not make available to the Agent such Bank's portion of such Borrowing, the
Agent may assume that such Bank has made such portion available to the Agent on
the date of such Floor Plan Loan Borrowing in accordance with this Section
2.2(e) and the Agent may, in reliance upon such assumption, make available to
the Floor Plan Agent on such date a corresponding amount. If, and to the
extent that such Bank shall not have made such portion available to the Agent,
such Bank and the applicable Floor Plan Borrowers severally agree to repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the Floor
Plan Agent until the date such amount is repaid to the Agent (i) in the case of
the Floor Plan Borrowers, at the Applicable Interest Rate at the time to the
Loans comprising such Borrowing and (ii) in the case of such Bank, at the
Federal Funds Effective Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount shall constitute such Bank's Loan as part of
such Borrowing for purposes of this Agreement.
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(f) A Floor Plan Subsidiary shall not be entitled to
request a Floor Plan Borrowing hereunder until it (i) has executed and
delivered to the Banks, as aforesaid, the Notes, and to the Swing Line Bank, a
Swing Line Note, (ii) has become a party to this Agreement by execution and
delivery of an Addendum, and (iii) has become a party to the Security
Documents, accompanied in each case by authority documents, legal opinions and
other supporting documents as required by Agent, Floor Plan Agent and the
Required Banks hereunder and has otherwise complied with the provisions of
Section 9.15.
SECTION 2.3 Floor Plan Borrowing Procedure. Any Floor
Plan Borrower may request a Floor Plan Loan, (i) subject to Sections 2.8
through 2.12, inclusive, in the case of a Draft by a Manufacturer, if such
Draft is delivered in accordance with the express terms of a Drafting Agreement
and (ii) in the case of Floor Plan Loans requested directly by a Floor Plan
Borrower, only after delivery to the Floor Plan Agent of a written Request for
Borrowing executed by a Person authorized by such Floor Plan Borrower to make
such requests on behalf of such Floor Plan Borrower. Floor Plan Loan
Borrowings are subject to the following and to the remaining provisions hereof:
(a) each such Request for Borrowing shall set forth
the following information:
(i) the proposed date of such Borrowing,
which must be a Business Day;
(ii) the aggregate amount of such requested
Borrowing;
(iii) whether such Floor Plan Borrowing is to be
a Comerica Prime Rate Loan or a Eurodollar Loan, or in the
case of a Swing Line Loan, a Loan at the Quoted Rate
(provided, however, that all Drafts shall be deemed to be
requested at the Quoted Rate) and, except in the case of a
Eurodollar Loan, the Interest Period applicable thereto;
(iv) a description of the Motor Vehicle(s)
purchased or to be purchased with the proceeds of such
Borrowing, including for each Motor Vehicle, its vehicle
identification number, make, model and purchase price, and
whether such Motor Vehicle is a new Motor Vehicle, Used Motor
Vehicle, Program Car or Demonstrator; and
(v) if requested by the Floor Plan Agent, in the
case of a Request for Borrowing requested directly by a Floor
Plan Borrower to fund the purchase of Used Motor Vehicles,
such Borrower shall deliver a current Manufacturer/Dealer
Statement with appropriate inventory breakout as required by
the Floor Plan Agent with the first such Request for Borrowing
in any month.
(b) each such Request for Borrowing shall be
delivered to the Floor Plan Agent (i) in the case of a Draft by a Manufacturer,
by 11:00 A.M., HOUSTON, TEXAS TIME one (1) Business Day prior to the Borrowing
Date of a proposed Borrowing, (ii) in the case of a Eurodollar Borrowing, not
later than 10:00 A.M., HOUSTON, TEXAS TIME, three (3) Days prior to the
Borrowing
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Date of a proposed Borrowing, and (iii) in the case of a Comerica Prime Rate
Borrowing, not later than 11:00 A.M., HOUSTON, TEXAS TIME on the Borrowing Date
of a proposed Borrowing.
(c) the aggregate principal amount of such Borrowing
shall not exceed the aggregate Floor Plan Advance Limit for the Motor Vehicles
described in such Request for Borrowing;
(d) subject to Section 2.3(g) hereof, the aggregate
principal amount of such requested Borrowing, plus the principal amount of all
Floor Plan Loans then outstanding plus the aggregate principal amount of all
Swing Line Loans then outstanding shall not exceed the Floor Plan Loan
Commitment;
(e) the aggregate principal amount of such requested
Borrowing, plus the principal amount of all Floor Plan Loans then outstanding
hereunder plus the aggregate principal amount of all Swing Line Loans (but
minus the amount of any Swing Line Advances to be refunded with the proceeds of
such Borrowing) then outstanding plus the aggregate principal amount of all
Acquisition Loans then outstanding plus all outstanding Letter of Credit
Obligations shall not exceed the Total Commitment;
(f) each Request for Borrowing shall be irrevocable
and shall constitute a certification as to itself by the applicable Floor Plan
Borrower as of the date thereof that:
(i) both before and after such
Borrowing, the obligations of the Company and its Subsidiaries
under this Agreement and the other Loan Documents to which it
is a party, as applicable, are valid, binding, and enforceable
obligations of such Person;
(ii) to the best knowledge of the Company
and the applicable Borrower, all conditions to such Borrowing
have been satisfied;
(iii) there is no Default or Event of Default
in existence, and none will exist upon the making of such
Floor Plan Loan;
(iv) the representations and warranties
contained in this Agreement and the other Loan Documents are
true and correct in all material respects and shall be true
and correct in all material aspects as of and immediately
after the making of such Floor Plan Loan; and
(v) such Borrowing will not violate the
material terms and conditions of any material contract,
agreement or other Borrowing of the Company and such
applicable Borrower, or any of its Subsidiaries.
(g) Notwithstanding the foregoing,
(i) if the Floor Plan Agent has, at the
request of the Required Banks or acting in its discretion
according to the terms hereof, taken action to suspend or
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terminate Drafts pursuant to one or more Drafting Agreements
and such Drafting Agreements have in fact been suspended or
terminated in accordance with their respective terms, then
subject to the terms of any such Drafting Agreements, the
Floor Plan Agent shall not fund the amount of such Draft; and
(ii) if on any day the requirements set
forth in Section 2.3(f) have been satisfied and the aggregate
principal amount of a Request for Borrowing of a Floor Plan
Loan, plus (A) the aggregate principal amount of all other
Floor Plan Loans then outstanding plus (B) the aggregate
principal amount of all Swing Line Loans (but minus the amount
of any Swing Line Loans to be refunded with the proceeds of
such Borrowing) then outstanding exceeds the aggregate
principal amount of such Loans outstanding as of the
immediately preceding Floor Plan Adjustment Date and is less
than the Swing Line Commitment, then such Request for
Borrowing shall be deemed for all purposes a Request for
Borrowing of a Swing Line Loan and the Borrowing to be
disbursed in connection therewith shall constitute a Swing
Line Loan, and shall be disbursed in accordance with the
provisions of Article IV hereof; and
(iii) if on any day the requirements set forth
in Section 2.3(f) have been satisfied and the aggregate
principal amount of a Request for Borrowing of a Floor Plan
Loan consists of a Draft, the payment of which would cause (A)
the aggregate principal amount of all Floor Plan Loans then
outstanding, plus (B) the aggregate principal amount of all
Swing Line Loans then outstanding, plus (C) the aggregate
principal amount of all Requests for Borrowings of Floor Plan
Loans outstanding as of such day to exceed the Floor Plan Loan
Commitment, as of such day, and the Company fails to either
immediately reduce any pending Request for a Borrowing of a
Floor Plan Loan which does not consist of a Draft or make a
payment of principal on Floor Plan Loans and/or Swing Line
Loans in an amount which would prevent the aggregate amounts
described in (A), (B) and (C) above from exceeding such Floor
Plan Loan Commitment, then, in such event:
(1) to the extent that the Company has
availability under the Acquisition Loan
Commitment and is able to comply with all
conditions to funding an Acquisition Loan,
the Company may deliver a Request for
Borrowing of an Acquisition Loan, the
proceeds of which shall be used to fund such
Draft; or
(2) pursuant to Section 5.5(b), the
Company may request an increase in the Floor
Plan Loan Commitment and such Request for
Borrowing shall be funded to the extent of
the increased Floor Plan Loan Commitment (if
any), or
(3) if the Company does not elect to act
under clause (1) or (2) above and if pursuant
to Section 3.4 there is a Reserve Commitment
available, then the Floor Plan Loan
Commitment shall be deemed to be irrevocably
increased by the amount of such Reserve
Commitment, and the Request for Borrowings of
Floor Plan Loans
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shall be funded to the extent of the Floor
Plan Loan Commitment as increased by the
Reserve Commitment, or
(4) if there is no Reserve Commitment
available, such Request for Borrowing shall
be deemed for all purposes a Swing Line
Overdraft Loan Borrowing Request (each a
"Swing Line Overdraft Borrowing Request") and
such Borrowing shall constitute a Swing Line
Overdraft Loan (each, a "Swing Line Overdraft
Loan") to be disbursed and subject to the
provisions of Section 4.6.
(h) The Floor Plan Agent, acting on behalf of the
Banks, may, at its option make Loans under this Article II upon the irrevocable
telephone request of a duly authorized officer of any Floor Plan Borrower and,
in the event the Floor Plan Agent, acting on behalf of the Banks, makes any
such Loan upon a telephone request, the requesting officer of such Floor Plan
Borrower shall, if so requested by the Floor Plan Agent, deliver (including via
fax) to the Floor Plan Agent, on the same day as such telephone request, a
written Request for Borrowing. Each of the Floor Plan Borrowers hereby
authorizes the Floor Plan Agent to disburse Floor Plan Loans under this Section
2.3 pursuant to the telephone instructions of any Person purporting to be a
Person identified by name on a written list of Persons authorized by each such
Floor Plan Borrower to make a Request for Borrowing for Floor Plan Loans on
behalf of such Borrower(s). Notwithstanding the foregoing, each of the Floor
Plan Borrowers acknowledges and agrees that the applicable Floor Plan Borrower
shall bear all risk of loss resulting from disbursements made upon any
telephone request. Each Request for Floor Plan Loan Borrowing made via
telephone as hereunder provided shall constitute a certification of the matters
set forth in Section 2.3(f) of this Agreement.
(i) If at any time during an Adjustment Period the
payment of all of a Swing Line Loan would cause the outstanding balance of all
Swing Line Loans to be fully repaid, the Company may elect to cause such funds
to be invested in overnight funds or other securities held by Comerica
Securities, Inc. and acceptable to the Floor Plan Agent and the Banks, which
investments shall be subject to the first priority security interest of the
Floor Plan Agent to secure the outstanding balance of Swing Line Loans and
Swing Line Overdraft Loans. The Floor Plan Agent and any of the Floor Plan
Borrowers may enter into an agreement from time to time to facilitate the
investment of such funds.
SECTION 2.4 Notice of Types of Floor Plan Loans and Interest
Periods.
(a) On or before 10:00 A.M. HOUSTON, TEXAS TIME,
three (3) Business Days prior to each Floor Plan Adjustment Date, the Company
shall provide written (including via fax) Request for Borrowing to the Floor
Plan Agent designating the Type of Floor Plan Loans which will be outstanding
commencing on the Floor Plan Adjustment Date immediately following such notice
until the next succeeding Floor Plan Adjustment Date. If, for any reason, the
Company does not deliver the Request for Borrowing as herein provided,
including, without limitation providing for three (3) Business Days' notice,
the Company shall be deemed to have delivered the Request for Borrowing and
requested that on the Floor Plan Adjustment Date all Floor Plan Loans be
Comerica Prime Rate Borrowings.
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(b) On or before 11:00 A.M. HOUSTON, TEXAS TIME on
each Floor Plan Adjustment Date, the Floor Plan Agent shall provide written
(including via fax) notice to the Agent of the amount of (i) Floor Plan Loans
outstanding, plus (ii) Swing Line Loans (plus Swing Line Overdraft Loans, if
any) outstanding in excess of the Swing Line Minimum Amount (if any), plus
(iii) the amount of Floor Plan Loans being requested pursuant to any Request
for Borrowing of Floor Plan Loans, as of 10:00 A.M., HOUSTON, TEXAS TIME on
such date. Upon receipt of such notice, the Agent shall provide written
(including via fax) notice to the Banks advising them (A) that the amount of
Floor Plan Loans required pursuant to (i), (ii) and (iii) above is greater than
the amount required as of the immediately preceding Floor Plan Adjustment Date
and, with respect to each Bank, the amount of additional Floor Plan Loans to be
advanced by such Bank, (B) that the amount of Floor Plan Loans has decreased
since the immediately preceding Floor Plan Adjustment Date and, with respect to
each Bank, the amount of such repayment to be made to such Bank, or (C) that
the Floor Plan Loans outstanding as of such date are not greater than the
amount as on the immediately preceding Floor Plan Adjustment Date. Such notice
shall also advise the Banks of the Type of Floor Plan Loans the Floor Plan
Borrowers have selected for the period of time from the next Floor Plan
Adjustment to the next succeeding Floor Plan Adjustment Date.
(c) On each Floor Plan Adjustment Date (i) if Swing
Line Loans (plus Swing Line Overdraft Loans, if any) outstanding are greater
than the Swing Line Minimum Amount, the Swing Line Overdraft Loans shall be
repaid and the Swing Line Loans shall be reduced to the Swing Line Minimum
Amount with proceeds advanced by the Banks pursuant to notices from the Floor
Plan Agent given to the Agent as provided in Section 2.2(e) hereof; in such
event the Agent shall remit the proceeds of such Floor Plan Loans to the Floor
Plan Agent for application to the Swing Line Loans (and to the Swing Line
Overdraft Loans, if any) outstanding in excess of the Swing Line Minimum
Amount, or (ii) if Swing Line Loans are less than the Swing Line Minimum
Amount, the Swing Line Bank shall make a Swing Line Loan to the Floor Plan
Borrowers in an amount required to cause the total amount of Swing Line Loans
outstanding to equal the Swing Line Minimum Amount; in such event the Floor
Plan Agent shall remit the proceeds of such Swing Line Loan to the Agent, and
the Agent shall remit such proceeds to the Banks.
SECTION 2.5 Payments.
(a) Subject to the provisions of Section 2.3(i), each
Floor Plan Borrower shall, on the Curtailment Date of a Motor Vehicle, pay in
full the Floor Plan Advance Limit with respect to such Motor Vehicle.
(b) Subject to the provisions of Section 2.3(i), upon
the sale of any Motor Vehicle by a Floor Plan Borrower, such Floor Plan
Borrower shall pay in full the Floor Plan Advance Limit with respect to such
Motor Vehicle (i) with respect to Cash Receipted Motor Vehicles, immediately
upon receipt of payment, (ii) with respect to Sale Dated Motor Vehicles, within
ten (10) days of the date of such Motor Vehicle was sold and (iii) with respect
to Fleet Motor Vehicles, within thirty (30) days of the date of sale.
(c) Subject to the provisions of Section 2.3(i) and
Section 4.6(c), payments required to be made by any Floor Plan Borrower as set
forth in Sections 2.5(a) and 2.5(b) shall be applied first to the outstanding
principal balance of Swing Line Overdraft Loans, next to the
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outstanding principal balance of Swing Line Loans and then, only if no Swing
Line Overdraft Loans or Swing Line Loans are then outstanding, to the
outstanding principal balance of Floor Plan Loans.
(d) Each Floor Plan Borrower shall cause all proceeds
from the sale of Motor Vehicles to be deposited directly into an account of the
applicable Borrower with its local financial institution which proceeds shall
be transferred to the Excess/Payments in Process for payment of the Loans as
provided in Section 2.5(b).
SECTION 2.6 Title Documents. All original Manufacturer's
invoices and title documents evidencing the Floor Plan Borrowers' ownership of
all of their Motor Vehicles, including, without limitation, the Manufacturer's
Certificate, shall be maintained in safekeeping by the Floor Plan Borrowers in
a manner acceptable to the Floor Plan Agent, unless and until an Event of
Default has occurred and is continuing, within three (3) Business Days of the
request by the Floor Plan Agent, the Floor Plan Borrowers shall deliver or
cause to be delivered all such original Manufacturer's invoices and title
documents whether at the time of such request or thereafter, to the Floor Plan
Agent and the Floor Plan Agent shall retain or hold all such original
Manufacturer's invoices and title documents received by the Floor Plan Agent
after such request. Thereafter, for so long as such Event of Default shall be
continuing, all original Manufacturer's Certificates and title documents shall
remain in the Floor Plan Agent's possession until the Floor Plan Loan Borrowing
in connection therewith or such ratable portion thereof in respect of a Motor
Vehicle sold by any Floor Plan Borrower in the ordinary course of business has
been paid and performed in full; provided that, upon the happening of an Event
of Default and during the continuance thereof, the Floor Plan Agent may
transfer, as applicable, title documents delivered to it pursuant to this
Section 2.6 in connection with the sale of Motor Vehicles in accordance with
its rights provided for in this Agreement or the other Loan Documents.
SECTION 2.7 Power of Attorney. For the purpose of expediting
the financing of Motor Vehicles under the terms of this Agreement and for other
purposes relating to such financing transaction, each of the Floor Plan
Borrowers irrevocably constitutes and appoints the Floor Plan Agent and any of
its officers, and each of them, severally, as its true and lawful
attorneys-in-fact or attorney-in-fact with full authority to act on behalf of,
and in the name of, place, and stead of, each such Floor Plan Borrower,
regardless of whether or not an Event of Default shall have occurred hereunder,
to prepare, execute, and deliver any and all instruments, documents, and
agreements required to be executed and delivered by each such Floor Plan
Borrower necessary to evidence Floor Plan Loan Borrowings (and if outstanding,
Swing Line Overdraft Loans) hereunder and/or after the occurrence and during
the continuance of an Event of Default, to evidence, perfect, or realize upon
the security interest granted by this Agreement, and/or any of the Loan
Documents, including, without limitation, the Notes, requests for advances,
security agreements, financing statements, other instruments for the payment of
money, receipts, manufacturer's certificates of origin, certificates of origin,
certificates of title, applications for certificates of title, other basic
evidences of ownership, dealer reassignments of any of the foregoing,
affidavits, and acknowledgments. The foregoing power of attorney shall be
coupled with an interest, and shall be irrevocable so long as this Agreement
remains in effect, any Drafting Agreement remains in effect or any Obligations
(including Letter of Credit Obligations and Swing Line Overdraft Loans) remain
outstanding under this Agreement or any of the Notes. Each of said
attorneys-in-fact shall have the power to act hereunder with or without the
other. The Floor Plan Agent may, but shall not be obligated to, notify the
Floor
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Plan Borrowers of any such instruments or documents the Floor Plan Agent has
executed on any Borrower's behalf prior to such execution.
SECTION 2.8 Issuance of Drafting Agreements. Subject to the
terms and conditions of this Agreement, Floor Plan Agent shall, at any time and
from time to time from and after the Closing Date until thirty (30) Business
Days prior to the Maturity Date, upon the written request of the Company or the
applicable Floor Plan Borrower, countersigned by the Company, accompanied by
applications, letter of credit agreements and/or such other documentation
related thereto as the Floor Plan Agent may require, issue Drafting Agreements
for the account of the applicable Floor Plan Borrower.
SECTION 2.9 Conditions to Issuance. The Floor Plan Agent
shall not be obligated to enter into or issue a Drafting Agreement unless, as
of the date of issuance of such Drafting Agreement:
(a) the Company or the applicable Floor Plan Borrower
requesting the Drafting Agreement shall have delivered to the Floor Plan Agent
not less than ten (10) Business Days prior to the requested date for issuance
(or such shorter time as the Floor Plan Agent in its sole discretion may
permit), a written application and such other documentation (including without
limitation a letter of credit agreement if the Drafting Agreement is to be
issued in the form of a letter of credit) and the terms of such documents and
of the proposed Drafting Agreement shall satisfy the terms hereof and otherwise
be satisfactory to Floor Plan Agent;
(b) the obligations of the Company and its
Subsidiaries set forth in this Agreement and the other Loan Documents to which
each is a party are valid, binding and enforceable obligations of such parties
and the valid, binding and enforceable nature of this Agreement and the other
Loan Documents has not been disputed by any of the Company or any of its
Subsidiaries;
(c) the representations and warranties contained in
this Agreement or any other Loan Documents are true in all material respects as
if made on such date (unless limited to an earlier date), and both immediately
before and immediately after issuance of the Drafting Agreement so requested,
no Default or Event of Default has occurred and is continuing;
(d) No order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain the
Floor Plan Agent from entering into or issuing such Drafting Agreement; no
Requirement of Law applicable to the Floor Plan Agent and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over the Floor Plan Agent shall prohibit the Floor
Plan Agent, or request that the Floor Plan Agent refrain, from issuing or
entering into Drafting Agreements generally or such Drafting Agreement in
particular or shall impose upon the Floor Plan Agent with respect to such
Drafting Agreement any restriction, reserve or capital requirement (for which
the Floor Plan Agent is not otherwise compensated hereunder) not in effect on
the Closing Date, or shall impose upon the Floor Plan Agent any unreimbursed
loss, cost or expense which was not applicable on the Closing Date and which
the Floor Plan Agent in good faith deems material to it (relating to Drafts and
Drafting Agreements); and
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(e) The Floor Plan Agent does not receive written
notice from any Bank, the Agent or any Floor Plan Borrower, on or prior to the
Business Day prior to the requested date of issuance or entry into such
Drafting Agreement that one or more of the applicable conditions contained in
Article VIII (or in this Section 2.9) has not been satisfied or that a Default
or Event of Default has occurred and is continuing.
Each application for a Drafting Agreement issued by a Borrower hereunder shall
constitute certification by each of the Company of the matters set forth in
subparagraphs (a) through (d) hereof, and Floor Plan Agent shall be entitled to
rely on such certification without any duty of inquiry. Immediately upon the
issuance or entering into by the Floor Plan Agent of each Drafting Agreement
(except in respect of any Drafting Agreement issued or entered into by the
Floor Plan Agent after it has obtained actual knowledge that an Event of
Default has occurred and is continuing), each Bank shall be deemed to, and
subject to Section 4.6 (relating to a Swing Line Overdraft Loan) hereby
irrevocably and unconditionally agrees to purchase from the Floor Plan Agent a
participation in such Drafting Agreement and each Draft thereunder in an amount
equal to the product of (i) the Pro Rata Share of such Bank and (ii) the amount
of each Draft presented by a Manufacturer.
Notwithstanding the foregoing, the Floor Plan Agent shall take such action as
necessary to terminate and suspend all Drafting Agreements effective ten days
prior to the Maturity Date then in effect.
SECTION 2.10 Notice of Issuance of or entering into
Manufacturers Drafting Letters. The Floor Plan Agent shall give notice,
substantially in the form attached to this Agreement as Exhibit H, to each Bank
of the issuance of or entering into each Drafting Agreement not later than five
(5) Business Days after issuance of or entering into each such Drafting
Agreement, attaching a copy of such Drafting Agreement, as issued or entered
into.
SECTION 2.11 Drafts Under Manufacturers Drafting Letters.
(a) In accordance with Sections 2.3, 4.3 and 4.6
hereof, each Draft submitted by a Manufacturer pursuant to a Drafting Agreement
shall constitute a Request for Borrowing of a Floor Plan Loan, a Swing Line
Loan, or a Swing Line Overdraft Loan, as the case may be, and upon the funding
of each Draft presented by a Manufacturer under a Drafting Agreement, the Floor
Plan Agent shall be deemed to have disbursed or on behalf of the applicable
Floor Plan Borrower and the applicable Floor Plan Borrower shall be deemed to
have elected to substitute for its respective reimbursement obligations in
respect of such Draft, an advance of a Floor Plan Loan, a Swing Line Loan, or a
Swing Line Overdraft Loan, as the case may be, bearing interest at the
Applicable Interest Rate. Each of the Floor Plan Borrowers shall be
irrevocably obligated to reimburse Floor Plan Agent on demand for the amount of
any Draft presented by a Manufacturer under the terms of any Drafting
Agreement; provided however that such reimbursement obligation shall be deemed
satisfied by the funding of a Loan in respect thereto.
(b) Notwithstanding the obligation (if any) of the
Floor Plan Agent to fund a Draft drawn under a Drafting Agreement, (i) if at
any time any of the Floor Plan Borrowers has failed to satisfy the conditions
precedent for the Floor Plan Agent to make a Floor Plan Loan, or the Swing Line
Bank to make a Swing Line Loan or a Swing Line Overdraft Loan, (ii) if at any
time the amount of such Draft would cause the aggregate amount of Floor Plan
Loans to exceed the Floor
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Plan Loan Commitment, or (iii) after a Default or an Event of Default has
occurred and is continuing, then in any such event, the funding of such Draft
shall not constitute a waiver of any such condition, commitment, Default or
Event of Default or otherwise any manner whatsoever affect the rights, and
remedies available to the Floor Plan Agent, the Agent, the Swing Line Bank or
any of the Banks hereunder. In any such event, the Floor Plan Borrowers shall
remain obligated to pay the amount of any Swing Line Overdraft Loan forthwith
as set forth herein and shall have all other duties and obligations applicable
to the Floor Plan Borrowers under this Agreement. Notwithstanding anything to
the contrary contained herein, each of the Floor Plan Borrowers shall bear all
risk of loss resulting from the payment of any Draft, or any resulting
disbursements of the Floor Plan Loans, Swing Line Loans or Swing Line
Overdraft Loans, as the case may be, whether or not due to the gross
negligence, willful misconduct or fraud of any Manufacturer.
(c) Subject to Section 4.6 hereof, each Bank shall be
obligated to fund Floor Plan Loans resulting from the presentation of Drafts by
Manufacturers under the Drafting Agreements, by making available their
respective Pro Rata Shares of the amounts so advanced, all in accordance with
Section 2.2 hereof; provided, however, that if for any reason the Floor Plan
Agent is prohibited from making a Floor Plan Loan in respect of any such Draft,
each such Bank shall be deemed to and unconditionally agrees to purchase from
the Floor Plan Agent a participation interest in the amount of such Draft (in
the amount of its Pro Rata Share), subject only to Section 4.6 hereof. Not
withstanding the amount of the Floor Plan Loan Commitment in effect from time
to time, except with respect to the notices terminating or suspending drafting
privileges to be given pursuant Section 4.6(d) or Section 11.1 hereof or any
other notices given by the Floor Plan Agent in response to the written
direction of the Required Banks, the Floor Plan Agent shall not be obligated to
terminate or suspend the drafting privileges of any Manufacturer under the
Drafting Agreements even though the aggregate amount of Drafts which may be
presented by Manufacturers under the Drafting Agreements may exceed the amount
of the Floor Plan Loan Commitment in effect from time to time. Furthermore,
(i) any limitations contained in any of the Drafting Agreements (whether in
respect of daily Drafts to be presented or otherwise) are for informational
purposes only and Floor Plan Agent shall not be obligated to monitor or limit
the amount of Drafts presented or honored on the basis of any such limitations
and (ii) any right of the Floor Plan Agent, acting in its discretion and not at
the direction or with the concurrence of the Required Banks, to terminate or
suspend drafting privileges of any Manufacturer or otherwise exercise any right
or remedy shall be for the sole benefit and protection of the Floor Plan Agent,
and Floor Plan Agent shall not owe any duty to any of the other Banks with
respect to such rights or remedies or be required to exercise such rights or
remedies to protect any of the other Banks.
SECTION 2.12 Obligations Absolute. The Obligations of the
Floor Plan Borrowers under this Agreement and any of the other Loan Documents
to reimburse the Floor Plan Agent for Drafts presented by a Manufacturer under
a Drafting Agreement, and to repay any Swing Line Loans, the Floor Plan Loans
or the Swing Line Overdraft Loans, as the case may be, funded to pay a Draft
shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other Loan Document
under all circumstances, including the following: (a) any lack of validity or
enforceability of this Agreement or any of the other Loan Documents; (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations of any Borrower in respect of any Draft or any
Drafting Agreement or any other amendment or waiver of or any consent to
departure from all or any of the applicable/related Loan
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Documents; (c) the existence of any claim, set-off, defense or other right that
any Floor Plan Borrower may have at any time against any Manufacturer or any
other beneficiary or transferee of any Drafting Agreement (or any Person for
whom any such beneficiary or such transferee may be acting), the Floor Plan
Agent or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the related Loan Documents or any
unrelated transaction other than the defense of payment or claims arising out
of the gross negligence, bad faith or willful misconduct of the Floor Plan
Agent or the Swing Line Bank; (d) any Draft, demand, certificate or other
document presented under a Drafting Agreement proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a Draft under any Drafting
Agreement; (e) any payment by the Floor Plan Agent under any Drafting Agreement
against presentation of a draft or certificate that does not strictly comply
with the terms of any Drafting Agreement; or any payment made by the Floor Plan
Agent under any Drafting Agreement to any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, liquidator, receiver or
other representative of a successor to any beneficiary or any transferee of any
Drafting Agreement, including any arising in connection with any Insolvency
Proceeding; (f) any exchange, release or non-perfection of any Collateral, or
any release or amendment or waiver of or consent to departure from all or any
of the Obligations of any Borrower in respect of any Drafting Agreement; or (g)
any other circumstance that might otherwise constitute a defense available to,
or discharge of, any Borrower other than the defense of payment or claims
arising out of the gross negligence, bad faith or willful misconduct of the
Floor Plan Agent or the Swing Line Bank.
ARTICLE III
ACQUISITION LOANS
SECTION 3.1 Subject to the terms and conditions and relying
upon the representations and warranties of the Company herein set forth, each
Bank severally and not jointly agrees on the terms and conditions set forth
herein to make revolving credit loans to Company, (each such loan, an
"Acquisition Loan") from time to time on any Business Day during the period
from the Closing Date to the Maturity Date in an aggregate amount not to exceed
at any time outstanding such Bank's Pro Rata Share the lesser of (a) the
Acquisition Loan Advance Limit, or (b) the aggregate amount of the Acquisition
Loan Commitments of all the Banks; provided, however, that, after giving effect
to any Acquisition Loan Borrowing, the aggregate amount of all outstanding
Acquisition Loans, all outstanding Floor Plan Loans, all outstanding Swing Line
Loans and all outstanding Letter of Credit Obligations, shall not at any time
exceed the Total Commitment within the limits of each Bank's Commitment and
subject to the other terms and conditions hereof, the Company may borrow,
prepay and reborrow Acquisition Loans under this Section 3.1.
SECTION 3.2 Acquisition Loans.
(a) Each Acquisition Loan Borrowing made by the Banks
to a Borrower on any Borrowing Date shall be in the minimum aggregate principal
amount of One Million Dollars ($1,000,000) (or the amount of a Letter of Credit
Borrowing or the remaining balance of the aggregate Acquisition Loan
Commitments, if less) and an integral multiple of One Million Dollars
($1,000,000) and shall consist of Acquisition Loans of the same Type made
ratably by the Banks in
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accordance with their respective Commitments; provided, however, that the
failure of any Bank to make any Acquisition Loan shall not relieve any other
Bank of its obligation to lend hereunder.
(b) Each Acquisition Loan Borrowing shall be an ABR
Borrowing or a Eurodollar Borrowing as the Company may request in a Request for
Borrowing delivered to the Agent in accordance with Section 3.3. Each Bank may
fulfill its Commitment with respect to any Eurodollar Loan by causing, at its
option, any domestic or foreign branch or Affiliate of such Bank to make such
Loan, provided that the exercise of such option shall not affect the obligation
of the Company to repay such Loan in accordance with the terms hereof.
Subject to the provisions of Section 3.3 and Section 5.9, Acquisition Loan
Borrowings of more than one Type may be outstanding at the same time.
(c) Each Bank shall make its Pro Rata Share of the
amount of each Acquisition Loan Borrowing to the Company hereunder on the
proposed Borrowing Date thereof by paying the amount required to the Agent in
Houston, Texas in U.S. Dollars and in immediately available funds not later
than 1:00 P.M., HOUSTON, TEXAS TIME, and, subject to satisfaction of the
conditions set forth in Article VIII, the Agent shall promptly and in any event
on the same day, credit the amounts so received to the general deposit account
of the Company, with the Agent, or such other depository account as shall be
designated by the Company or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Banks. Unless the Agent shall
have received notice from a Bank prior to the date of any Acquisition Loan
Borrowing that such Bank will not make available to the Agent such Bank's
portion of such Acquisition Loan Borrowing, the Agent may assume that such
Bank has made such portion available to the Agent on the date of such
Acquisition Borrowing in accordance with this Section 3.2 and the Agent may, in
reliance upon such assumption, make available to the Company on such date a
corresponding amount. If, and to the extent that such Bank shall not have made
such portion available to the Agent, such Bank and the Company jointly and
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Company until the date such amount is repaid to the
Agent (i) in the case of the Company at the interest rate applicable at the
time to the Loans comprising such Borrowing and (ii) in the case of such Bank,
at the Federal Funds Effective Rate. If such Bank shall repay to the Agent
such corresponding amount, such amount shall constitute such Banks' Pro Rata
Share of the Acquisition Loan as part of such Acquisition Loan Borrowing for
purposes of this Agreement.
SECTION 3.3 Notice of Acquisition Loan Borrowings.
(a) In order to obtain an Acquisition Loan, the
Company shall make an irrevocable written request therefor (or irrevocable
telephone notice thereof, confirmed as soon as practicable by written request)
to the Agent, in the form of a Request for Borrowing (i) in the case of an
ABR Borrowing, not later than 11:00 A.M., HOUSTON, TEXAS TIME, one (1) Business
Day before the Borrowing Date of a proposed Acquisition Loan Borrowing, and
(ii) in the case of a Eurodollar Borrowing, not later than 11:00 A.M., HOUSTON,
TEXAS TIME, three (3) Business Days before the Borrowing Date of a proposed
Acquisition Loan Borrowing. Each Request for Loan Borrowing shall be
irrevocable and shall in each case refer to this Agreement and specify (1)
whether the Request for Borrowing then being requested is to be an ABR
Borrowing or a Eurodollar Borrowing,
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(2) the Borrowing Date of such Acquisition Loan Borrowing (which shall be a
Business Day) and (3) the aggregate amount thereof (which shall not be less
than One Million Dollars ($1,000,000) or an integral multiple of One Million
Dollars ($1,000,000) in excess thereof), and (4) the Interest Period or
Interest Periods with respect thereto. If no election as to the Type of
Acquisition Loan Borrowing is specified in any such Request for Borrowing by
the Company, such Acquisition Loan Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Borrowing is specified in any such Request
for Borrowing, the Company shall be deemed to have selected an Interest Period
of one (1) month's duration. The Agent shall promptly advise the Banks of any
Request for Borrowing given by the Company pursuant to this Section 3.3 and of
each Bank's portion of the requested Acquisition Loan Borrowing.
(b) No more than five (5) Acquisition Loans may be
outstanding at any time. For purposes of the foregoing, Borrowings comprised
of Acquisition Loans having different Interest Periods, regardless of whether
they commence on the same date, shall be considered separate Borrowings.
SECTION 3.4 Reserve Commitment; Suspension of Acquisition
Loans. Notwithstanding the foregoing provisions of this Article III, in the
event that on any day the aggregate outstanding principal amount of all (a)
Floor Plan Loans, plus (b) Swing Line Loans, plus (c) Requests for Floor Plan
Loan Borrowings exceeds ninety-five percent (95%) of the Floor Plan Loan
Commitment as of such date, then (i) a portion of the Acquisition Loan
Commitment (the "Reserve Commitment") in an amount equal to the lesser of (ii)
Five Million Dollars ($5,000,000) and (iii) the entire remaining unused portion
of the Acquisition Loan Commitment as of such date shall be reserved and shall
no longer be available for funding Acquisition Loans, and (d) no further
Acquisition Loan Borrowings (after giving effect to the Reserve Commitment in
clause (a) hereof) shall be available to the Borrowers until the next Business
Day on which such condition no longer exists.
ARTICLE IV
SWING LINE LOANS
SECTION 4.1 Swing Line Commitments. The Swing Line Bank
shall, on the terms and subject to the conditions hereinafter set forth
(including Section 4.3), make one or more advances (each such advance being a
"Swing Line Loan") to any Floor Plan Borrower from time to time on any
Business Day during the period from the Closing Date to the Maturity Date in an
aggregate principal amount not to exceed at any time (not including Swing Line
Overdraft Loans) the aggregate amount of the Floor Plan Loan Commitments of all
the Banks; provided, however, that after giving effect to all Borrowings of
Swing Line Loans and all Floor Plan Loans requested on any date, the sum of the
aggregate principal amount of all outstanding Floor Plan Loans and Swing Line
Loans (but excluding Swing Line Overdraft Loans) shall not exceed the aggregate
amount of the then applicable aggregate Floor Plan Loan Commitments. All Swing
Line Loans (including the Swing Line Overdraft Loans) shall be evidenced by the
Swing Line Note, under which advances, repayments and readvances may be made,
subject to the terms and conditions of this Agreement. Each Swing Line Loan
shall mature and the principal amount thereof shall be due and payable by the
applicable Floor Plan Borrower, as the case may be, on the last day of the
Interest Period applicable thereto. In no event whatsoever shall any
outstanding Swing Line Loan be deemed to
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reduce, modify or affect any Bank's commitment to make Floor Plan Loans based
upon its Pro Rata Share of the Floor Plan Loan Commitment.
SECTION 4.2 Accrual of Interest; Margin Adjustments. Each
Swing Line Loan shall, from time to time after the date of such Loan, bear
interest at its Applicable Interest Rate. The amount and date of each Swing
Line Loan, its Applicable Interest Rate, its Interest Period, and the amount
and date of any repayment shall be noted on the Swing Line Bank's records,
which records will be conclusive evidence thereof, absent manifest error;
provided, however, that any failure by the Swing Line Bank to record any such
information shall not affect the obligations of the applicable Floor Plan
Borrower with respect thereto in accordance with the terms of this Agreement
and the Loan Documents.
SECTION 4.3 Requests for Swing Line Loans.
(a) On the Closing Date, subject to the terms and
conditions hereunder set forth, the Swing Line Bank shall make a Swing Line
Loan to one or more of the Floor Plan Borrowers pursuant to a Request for
Borrowing given by such Floor Plan Borrowers in the manner specified in Section
4.3(b) and at the Applicable Interest Rate in the aggregate amount of the Swing
Line Minimum Amount.
(b) On any day that a Request for Borrowing
constitutes a Request for Borrowing of a Swing Line Loan pursuant to Section
2.3(g)(ii), the applicable Floor Plan Borrower shall be deemed to have
delivered to Swing Line Bank a Request for Borrowing in connection therewith,
subject to the following and to the remaining provisions of this Section 4.3:
(i) the aggregate principal amount of such
requested Swing Line Loan Borrowing, plus the aggregate
principal amount of all other Swing Line Loans then
outstanding shall not exceed the Swing Line Commitment;
(ii) each such Request for Borrowing of a
Swing Line Loan once delivered to the Swing Line Bank, shall
not be revocable by the applicable Floor Plan Borrower, as the
case may be, and shall constitute and include a certification
to the extent applicable, by the Company of the provisions of
Section 2.3(f); and
(iii) the Swing Line Bank may, at its option,
make Swing Line Loans under this Section 4.3 upon the
irrevocable telephone request of a duly authorized officer of
any Floor Plan Borrower and, in the event the Swing Line Bank
makes any such Swing Line Loan upon a telephone request, the
requesting officer of such Floor Plan Borrower shall, if so
requested by the Swing Line Bank, deliver (including via fax)
to the Swing Line Bank on the same day as such telephone
request, a written Request for Borrowing of a Swing Line Loan.
Each of the Floor Plan Borrowers hereby authorizes the Swing
Line Bank to disburse Swing Line Loans pursuant to the
telephone instructions of any Person purporting to be a Person
identified by name on a written list of Persons authorized by
each such Floor Plan Borrower to make Requests for Borrowings
of Swing Line Loans on behalf of such Floor Plan Borrowers.
Notwithstanding the foregoing, each of the Floor Plan
Borrowers
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acknowledges and agrees that such Floor Plan Borrower shall
bear all risk of loss resulting from disbursements made upon
any telephone request. Each telephone request for a Swing
Line Loan Borrowing shall constitute a certification of the
matters set forth in Section 2.3(f) of this Agreement.
SECTION 4.4 Disbursement of Swing Line Loans. Subject to
receipt by the Swing Line Bank of a Request for Borrowing of a Swing Line Loan
by any Floor Plan Borrower without exceptions noted in the compliance
certifications in connection therewith, and to the other terms and conditions
of this Agreement, the Swing Line Bank shall make available to any Floor Plan
Borrower the amount so requested, in same day funds, not later than 1:00 P.M.,
HOUSTON, TEXAS TIME on the Borrowing Date of such Swing Line Loan, by credit to
an account of the applicable Floor Plan Borrower maintained with the Swing Line
Bank or to such other account or third party as such Floor Plan Borrower may
reasonably direct. The Swing Line Bank shall promptly notify the Floor Plan
Agent of any Swing Line Loan by telephone or telecopier.
SECTION 4.5 Refunding of or Participation Interest in Swing
Line Loans.
(a) On any Floor Plan Adjustment Date or upon the
occurrence and continuance of an Event of Default, the Swing Line Bank in its
sole and absolute discretion, may on behalf of any Floor Plan Borrower (each of
whom hereby irrevocably directs the Swing Line Bank to act on its behalf) make
a written (including via fax) request to the Floor Plan Agent, requesting each
Bank (including the Swing Line Bank in its capacity as a Bank) to make a Floor
Plan Loan in an amount equal to such Bank's Pro Rata Share of the outstanding
principal amount of the Swing Line Loans (including, only if an Event of
Default shall have occurred and is continuing, the portion thereof which
constitutes the Swing Line Minimum Amount and excluding Swing Line Overdraft
Loans, to the extent that, after giving effect to such request, such Bank's Pro
Rata Share of the outstanding principal amount of all Floor Plan Loans plus all
Swing Line Loans would exceed such Bank's Floor Plan Loan Commitment) (the
"Refunded Swing Line Loans") on the date such request is made; provided
however, unless an Event of Default has occurred and is continuing, Refunded
Swing Line Loans shall not be subject to the indemnification provisions of
Section 5.10, and no losses, costs or expenses may be assessed by the Swing
Line Bank against the applicable Floor Plan Borrower or the other Banks as a
consequence thereof. Unless an Event of Default described in Section 11.1(f)
or 11.1(g) shall have occurred (in which event the procedures of paragraph (b)
of this Section 4.5 shall apply) and regardless of whether the conditions
precedent set forth in this Agreement to the making of a Floor Plan Loan are
then satisfied, each Bank shall upon request by the Agent in the manner
specified in Section 2.4 thereof make the proceeds of its Floor Plan Loan
available to the Floor Plan Agent for the benefit of the Swing Line Bank.
(b) If, prior to the Banks' making of Floor Plan
Loans pursuant to the provisions in paragraph (a) of this Section 4.5, an
Event of Default described in Section 11.1(f) or 11.1(g) shall have occurred,
each Bank shall, in the manner provided in Section 2.4 (b), on the date such
Floor Plan Loan was to have been made, purchase from the Swing Line Bank a
participation interest in the Refunded Swing Line Loan in an amount equal to
its Pro Rata Share of such Refunded Swing Line Loan.
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(c) Each Bank's obligation to make Floor Plan Loans
and to purchase participation interests in accordance with Section 4.5(a) and
Section 4.5(b) shall be absolute and unconditional and shall not be affected by
any circumstance, including, without limitation, (i) any setoff counterclaim,
recoupment, defense or other right which such Bank may have against the Swing
Line Bank, any Floor Plan Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of any Default or Event of
Default; (iii) any adverse change in the condition (financial or otherwise) of
any Floor Plan Borrower or any other Person; (iv) any breach of this Agreement
by any Floor Plan Borrower or any other Person; (v) any inability of any Floor
Plan Borrower to satisfy the conditions precedent to a Borrowing set forth in
this Agreement on the date upon which such participating interest is to be
purchased; or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. If any Bank does not make
available to the Floor Plan Agent the amount required pursuant to Section
4.5(a) or Section 4.5(b), as the case may be, the Swing Line Bank shall be
entitled to recover such amount on demand from such Bank, together with
interest thereon for each day from the date of non-payment until such amount is
paid in full at the Federal Funds Effective Rate.
SECTION 4.6 Swing Line Overdraft Loans.
(a) On any day that a Request for Borrowing of a
Floor Plan Loan constitutes a Swing Line Overdraft Borrowing Request pursuant
to Section 2.3(g)(iii), the applicable Floor Plan Borrower shall be deemed to
have delivered to the Swing Line Bank a Swing Line Overdraft Borrowing Request,
and each such Swing Line Overdraft Borrowing Request shall not be revocable by
the applicable Floor Plan Borrower, as the case may be, and shall constitute
and include a certification as to itself and its Subsidiaries, to the extent
applicable, by such Floor Plan Borrower of the provisions of Section 2.3(f).
(b) Each Swing Line Overdraft Loan shall bear
interest at the Applicable Interest Rate. The amount and date of each Swing
Line Overdraft Loan, the Applicable Interest Rate, the Interest Period, and the
amounts and dates of any repayment shall be noted on the Swing Line Bank's
records, which records will be conclusive evidence thereof, absent manifest
error; provided however, that any failure by the Swing Line Bank to record any
such information shall not affect the applicable Floor Plan Borrower's
obligation under the terms of this Agreement and the Loan Documents.
(c) Swing Line Overdraft Loans shall be made only by
the Swing Line Bank, solely for its own account and shall not be subject to the
provisions of Section 4.5; provided, however, at any time a Swing Line
Overdraft Loan is outstanding, the payment of principal and interest with
respect to all Loans shall be subordinated in right of payment and priority to
the prior payment in full of the Swing Line Overdraft Loans and the Floor Plan
Agent, the Agent and the Banks, as the case may be, shall remit to the Swing
Line Bank, and the Swing Line Bank shall have the right to receive, all
payments of principal and interest made by any Borrower in respect of any Loan
and all other proceeds of Collateral securing the Loans for application and
reduction of the aggregate principal amount of outstanding Swing Line Overdraft
Loans.
(d) If at any time the aggregate outstanding
principal amount of all (i) Floor Plan Loans, plus (ii) Swing Line Loans, plus
(iii) Swing Line Overdraft Loans, plus (iv) Requests
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for Borrowings of Floor Plan Loans exceeds (A) one hundred ten percent (110%)
of the aggregate Floor Plan Loan Commitments as of such date and such condition
exists for two (2) consecutive Business Days or (B) the aggregate Floor Plan
Loan Commitments by any amount for any fifteen (15) days out of any thirty (30)
day period, then, in such event, the Floor Plan Agent acting in its sole
discretion may, and upon the election of the Required Banks shall (y) take any
and all actions reasonably necessary to suspend and/or terminate Drafts
pursuant to the Drafting Agreements and (z) elect by written notice to the
Company to terminate the Commitments and to deem such occurrence as
constituting an Event of Default.
ARTICLE V
ALL LOANS
SECTION 5.1 Notes: Repayment of Loans.
(a) All Loans made hereunder shall be evidenced by
the Notes or the Swing Line Note, as the case may be, shall be payable as
therein provided, dated the Closing Date, and shall be in a principal amount
equal to the Commitments on such date. All Borrowers agree, jointly and
severally, to pay the outstanding principal balance of such Loans and all
interest thereon and all the obligations, as evidenced by the Notes, in
accordance with the terms and provisions of this Agreement and on the Maturity
Date. Each Note shall bear interest from its date on the outstanding principal
balance thereof as provided in Section 5.2.
(b) Each Bank, the Agent or the Floor Plan Agent and
the Swing Line Bank, on its behalf, and the Swing Line Bank shall, and is
hereby authorized by each Borrower to, endorse on the schedule attached to the
Notes delivered to each Bank (or a continuation of such schedule attached to
such Notes and made a part thereof), or otherwise record in such Bank's
internal records, an appropriate notation evidencing the date and amount of
each Loan, as well as the date and amount of each payment and prepayment with
respect thereto; provided, however, that the failure of any Bank, Agent or the
Floor Plan Agent, or the Swing Line Bank to make such a notation or any error
in such a notation shall not affect the obligations of all Borrowers hereunder
or under the Notes or the Swing Line Note.
SECTION 5.2 Interest on Loans.
(a) Subject to the provisions of Section 5.3, each
Alternate Base Rate Loan shall bear interest at a rate per annum, equal to the
lesser of (i) the Alternate Base Rate plus the Applicable Margin for ABR Loans
and (ii) the Highest Lawful Rate (if the Alternate Base Rate is based on the
Prime Rate, computed on the basis of the actual number of days elapsed over a
year of 365 or 366 days, as the case may be; or if the Alternate Base Rate is
based on the Federal Funds Effective Rate, computed on the basis of the actual
number of days elapsed over a year of 360 days).
(b) Subject to the provisions of Section 5.3, each
Comerica Prime Rate Loan shall bear interest at a rate per annum (computed on
the basis of the actual number of days elapsed over a year of 360 days) equal
to the lesser of (i) the Comerica Prime-based Rate for the Interest Period in
effect for such Loan and (ii) the Highest Lawful Rate.
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(c) Subject to the provisions of Section 5.3, (i)
each Eurodollar Loan which is an Acquisition Loan shall bear interest at a rate
per annum (computed on the basis of the actual number of days elapsed over a
year of 360 days) equal to the lesser of (1) the LIBO Rate for the Interest
Period in effect for such Loan plus the Applicable Margin for Eurodollar
Acquisition Loans and (2) the Highest Lawful Rate; and (ii) each Eurodollar
Loan which is a Floor Plan Loan shall bear interest at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to the lesser of (1) the LIBO Rate for the Interest Period in
effect for such Loan plus 1.50% and (2) the Highest Lawful Rate.
(d) Interest on each Acquisition Loan and each Floor
Plan Loan shall be payable in arrears on each Interest Payment Date applicable
to such Loan except as otherwise provided in this Agreement. Interest on each
Swing Line Loan and Swing Line Overdraft Loan shall be payable in arrears on
each Interest Payment Date applicable to such Loan except as otherwise provided
in this Agreement. The applicable LIBO Rate, and the Alternate Base Rate shall
be determined by the Agent, and the Comerica Prime Rate shall be determined by
the Floor Plan Agent, and such determination shall be conclusive absent
demonstrable error. The Agent shall promptly advise the Borrowers and each
Bank of each such determination.
SECTION 5.3 Interest on Overdue Amounts. If any Borrower
shall default in the payment of the principal of or interest on any Loan or any
other amount due hereunder, by acceleration or otherwise, such Borrower shall
on demand from time to time pay interest, to the extent permitted by law, on
such defaulted amount up to (but not including) the date of actual payment
(after as well as before judgment) at a rate per annum (computed on the basis
of the actual number of days elapsed over a period of 360 days) equal to the
lesser of (a) the Highest Lawful Rate and (b) the Alternate Base Rate plus two
percent (2%) per annum.
SECTION 5.4 Fees.
(a) The Company shall pay each Bank, through the
Agent, on the last day of each March, June, September and December, and on the
Maturity Date, in immediately available funds, a commitment fee (such Bank's
"Commitment Fee") equal to twenty-five-one-hundredths of one percent (0.25%)
per annum times the average unused amount of the Commitment of such Bank,
during the immediately preceding fiscal quarter (or shorter portion thereof)
just ended. All Commitment Fees under this Section 5.4(a) shall be computed on
the basis of the actual number of days elapsed in a year of 365 or 366 days, as
the case may be. The Commitment Fee due to each Bank shall commence on the
Closing Date cease to accrue on the earlier of the Maturity Date or the
termination of the Commitment of such Bank pursuant to Section 5.5 or 13.3 (b).
(b) The Company shall pay the Agent and Chase
Securities Inc. the fees (the "Agency Fees") in such amount and on such dates
as may be agreed between the Company, the Agent and Chase Securities Inc.
pursuant to that certain letter agreement dated September 22, 1997, herewith
among the Company, the Agent, and Chase Securities Inc. (the "Agent's Letter").
(c) The Company shall pay the Floor Plan Agent a
Floor Plan Agency Fee ("Floor Plan Agency Fee") in such amount on such dates as
may be agreed between the Company
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and the Floor Plan Agent pursuant to that certain letter agreement of even date
herewith between the Company and the Floor Plan Agent (the "Floor Plan Agent's
Letter").
(d) The Company shall pay the Agent for the benefit
of the Banks, according to their Pro Rata Share, a fee in the amount of $750.00
for each day any Swing Line Overdraft Loan is outstanding; and such amount (if
any) shall be payable on the last Business Day of each month.
SECTION 5.5 Termination and Reduction of Commitments. The
Commitment of a Bank shall be deemed "unused" to the extent and in the amount
such Bank is obligated to fund future Loans or Letter of Credit Obligations of
any Borrower.
(a) Subject to Section 3.5, upon at least ten (10)
Business Days' prior written notice to the Agent, the Company may at any time
in whole permanently terminate, or from time to time permanently reduce, the
Total Commitment, ratably among the Banks in accordance with their respective
Commitments; provided, however, that any partial reduction of the Total
Commitment shall be in minimum increments of Five Million Dollars ($5,000,000)
and the Total Commitment may not be reduced to less than Fifty Million Dollars
($50,000,000) unless the Commitment is terminated in whole; and (ii) no
reduction shall reduce the amount of the Acquisition Loan Commitment to an
amount which is less than the Letter of Credit Obligations outstanding at such
time; provided however that the Floor Plan Agent in its sole discretion may, or
at the direction of the Required Banks, shall suspend and/or terminate all or
any portion of the then outstanding Drafting Agreements.
(b) At any time there exists any unused portion of
the Acquisition Loan Commitment, the Company may irrevocably request the Agent
to convert such unused portion of the Acquisition Loan Commitment to the Floor
Plan Loan Commitment and thereafter each Bank's Pro Rata Share of the
Acquisition Loan Commitment shall be in an aggregate amount equal to (i) the
sum of all Acquisition Loans then outstanding, plus (ii) all Letter of Credit
Obligations then outstanding, plus (iii) the remaining unused portion of the
Acquisition Loan Commitment after subtracting the amount thereof converted to
the Floor Plan Loan Commitment; in such event, the Floor Plan Loan Commitment
shall, upon such request, be irrevocably increased by the amount so requested
by the Company, such amount together with the Acquisition Loan Commitment not
to exceed the Total Commitment.
(c) At the time the Commitments of any Bank are
terminated or reduced pursuant to Section 5.5, the Floor Plan Company shall pay
to the Agent for the account of each such Bank, the Commitment Fees on the
amount of the Commitments so terminated or reduced owed through the date of
such termination or reduction.
(d) Each of the Commitments shall automatically and
permanently terminate on the Maturity Date.
SECTION 5.6 Alternate Rate of Interest. In the event, and
on each occasion, that on the day two (2) Business Days prior to the
commencement of any Interest Period for a Eurodollar Borrowing, the Agent shall
have determined (which determination shall be conclusive and binding upon the
Borrowers) that: (a) dollar deposits in the amount set forth in such request
for Borrowing
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are not generally available in the London interbank market, or that the rate at
which dollar deposits are being offered will not adequately and fairly reflect
the cost to any Bank or the Swing Line Bank of making or maintaining the
principal amount of its Eurodollar Loan comprising such Borrowing during such
Interest Period, or (b) reasonable means do not exist for ascertaining the LIBO
Rate, then the Agent shall as soon as practicable thereafter give written
notice of such determination to the Company, the Banks and/or the Swing Line
Bank; and any request by a Borrower for the making of a Eurodollar Borrowing
shall, until the circumstances giving rise to such notice no longer exist, be
deemed to be a request for a Borrowing to be comprised of (i) if such Borrowing
is a Floor Plan Loan Borrowing, Comerica Prime Rate Loans, and (ii) if such
Borrowing is an Acquisition Loan Borrowing, Alternate Base Rate Loans. Each
determination of the Agent hereunder shall be conclusive absent demonstrable
error.
SECTION 5.7 Prepayment of Loans; Mandatory Reduction of
Indebtedness.
(a) So long as no Swing Line Overdraft Loans are
outstanding, each Acquisition Loan Borrowing and each Floor Plan Loan Borrowing
may be prepaid at any time and from time to time, in whole or in part, subject
to the requirements of Section 5.10, but otherwise without premium or penalty,
upon at least thee (3) Business Days' prior written or telex notice to the
Agent.
(b) On the date of any termination or reduction of
the Total Commitment pursuant to Section 5.5(a), each shall prepay so much of
its Loans (up to the amount by which the Commitment is so terminated or
reduced) as shall be necessary in order that the aggregate principal amount of
the Loans and Letter of Credit Obligations outstanding will not exceed the
Total Commitment following such termination or reduction. All prepayments
under this paragraph shall be subject to Section 5.10.
(c) Each notice of prepayment shall specify the
prepayment date and the principal amount of each Loan (or portion thereof) to
be prepaid, which notice shall be irrevocable and shall commit the Borrower
making such notice to prepay such Loan by the amount stated therein on the date
stated therein. All prepayments shall be accompanied by accrued interest on
the principal amount being prepaid to the date of prepayment.
(d) Subject to the provisions of Section
2.3(g)(iii), at any time and for any reason:
(i) the aggregate principal amount of all (y)
Floor Plan Loans outstanding, plus (z) Swing Line Loans
outstanding shall exceed the amount of Floor Plan Loan
Commitment at such time, or
(ii) the aggregate principal amount of
all (y) Acquisition Loans, plus (z) Letter of Credit
Obligation's shall exceed the amount of the Acquisition Loan
Commitment, or
(iii) the aggregate principal amount of all (w)
Floor Plan Loans outstanding, (x) Swing Line Loans
outstanding, plus (y) Acquisition Loans
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outstanding, plus (z) Letter of Credit Obligations outstanding
shall exceed the Total Commitment,
the Borrowers shall immediately pay to the Agent (for application in the manner
directed by the Company) an amount of such Obligations equal to such excess,
provided, however, that Borrowers shall have the right to direct such repayment
first to prepay such portion of the Indebtedness not subject to the
indemnification provisions of this Agreement in Section 5.10.
SECTION 5.8 Reserve Requirements; Change in Circumstances.
(a) It is understood that the cost to each Bank of
making or maintaining any of the Eurodollar Loans may fluctuate as a result of
the applicability of reserve requirements imposed by the Board at the ratios
provided for in Regulation D on the date hereof. The Borrowers agree to pay to
each of the Banks from time to time such amounts as shall be necessary to
compensate such Bank for the portion of the cost of making or maintaining
Eurodollar Loans resulting from any increase in such reserve requirements
provided for in Regulation D from those as in effect on the date hereof, it
being understood that the rates of interest applicable to Eurodollar Loans have
been determined on the assumption that no such reserve requirements exist or
will exist and that such rates do not reflect costs imposed on the Banks in
connection with such reserve requirements.
(b) Notwithstanding any other provision herein, if
after the date of this Agreement any change in applicable law or regulation or
in the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof (whether or not
having the force of law) shall change the basis of taxation of payments to any
Bank of the principal of or interest on any Eurodollar Loan made by such Bank
or any other fees or amounts payable hereunder (other than taxes imposed on the
overall net income of such Bank by the jurisdiction in which such Bank has its
principal office or is located or by any political subdivision or taxing
authority therein), or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, such Bank or shall impose on such Bank
or the London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Bank and the result of any of the foregoing shall
be to increase the cost to such Bank of making or maintaining any Eurodollar
Loan or to reduce the amount of any sum received or receivable by such Bank
hereunder (whether of principal, interest or otherwise) in respect thereof, by
an amount deemed by such Bank in its sole discretion to be material, then the
Borrowers shall pay as required in Section 5.8(d) such additional amount or
amounts as will compensate such Bank for such additional costs or reduction
will be paid to such Bank with respect to the Eurodollar Loans.
(c) If any Bank shall have determined that the
applicability of any law, rule, regulation or guideline adopted pursuant to or
arising out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards," or the adoption after the date
hereof of any other law, rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any lending office of such Bank) or any
Bank's holding company with
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any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's capital or
on the capital of such Bank's holding company, if any, as a consequence of this
Agreement or the Loans made by such Bank pursuant hereto to a level below that
which such Bank or such Bank's holding company could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
and the policies of such Bank's holding company with respect to capital
adequacy) by an amount deemed by such Bank to be material, then the Borrowers
shall pay as required to Section 5.8(d) to such Bank such additional amount or
amounts as will compensate such Bank or such Bank's holding company for any
such reduction suffered.
(d) A certificate of each Bank setting forth in
reasonable detail calculations (together with the basis and assumptions
therefor) to establish such amount or amounts as shall be necessary to
compensate such Bank (or participating banks or other entities pursuant to
Article XIII) as specified in paragraph (a), (b) or (c) above shall be
delivered to the Agent which shall promptly deliver the same to the Company and
such certificate shall be rebuttably presumptive evidence of the amount or
amounts which such Bank is entitled to receive. The Borrowers shall pay such
Bank the amount shown as due on any such certificate within ten (10) days after
its receipt of the same.
(e) Any demand for compensation pursuant to this
Section 5.8 must be made on or before one (1) year after the Bank incurs the
expense, cost or economic loss referred to or such Bank shall be deemed to have
waived the right to such compensation. The protection of this Section 5.8 shall
be available to each Bank regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other condition which
shall give rise to any demand by such Bank for compensation.
(f) Nothing in this Section 5.8 shall entitle any
Bank to receive interest at a rate per annum in excess of the Highest Lawful
Rate.
(g) The term "Bank" or "Banks" as used in this
Section 5.8 shall include the Swing Line Bank and the provisions hereof, when
applicable, shall apply to the Swing Line Bank.
SECTION 5.9 Change in Legality.
(a) Notwithstanding anything to the contrary herein
contained, if any change in any law or regulation or in the interpretation
thereof by any Governmental Authority charged with the administration or
interpretation thereof shall make it unlawful for any Bank to make or maintain
any Eurodollar Loan or to give effect to its obligations in respect of any
Eurodollar Borrowing contemplated hereby, then, by written notice to the Agent,
such Bank may:
(i) declare that Eurodollar Loans will not
thereafter be made by such Bank hereunder, whereupon any
request by any Borrower for a Eurodollar Borrowing shall, as
to such Bank only, be deemed a request for an Alternate Base
or the Comerica Prime Rate, as applicable, Rate Loan unless
such declaration shall be subsequently withdrawn; and
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(ii) require that all outstanding
Eurodollar Loans made by it be converted to Alternate Base
Rate Loans, in which event all such Eurodollar Loans shall be
automatically converted to Alternate Base Rate Loans if
Acquisition Loans and to Comerica Prime Rate Loans if Floor
Plan Loans, as of the effective date of such notice as
provided in paragraph (b) below.
In the event any Bank shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied
to repay the Eurodollar Loans that would have been made by such Bank or the
converted Eurodollar Loans of such Bank shall instead be applied to repay the
Alternate Base Rate Loans if Acquisition Loans and to Comerica Prime Rate Loans
if Floor Plan Loans, made by such Bank in lieu of, or resulting from the
conversion of, such Eurodollar Loans; provided, however, the Alternate Base
Rate Loans or Comerica Prime Rate Loans resulting from the conversion of such
Eurodollar Loans shall be prepayable only at the times the converted Eurodollar
Loans would have been prepayable, notwithstanding the provisions of Section
5.7(a).
(b) For purposes of Section 5.9(a), a notice to the
Agent by any Bank shall be effective as to each Eurodollar Loan, if lawful, on
the last day of the then-current Interest Period or, if there are then two (2)
or more current Interest Periods, on the last day of each such Interest Period,
respectively; otherwise, such notice shall be effective on the date of receipt
by the Agent.
(c) The term "Bank" or "Banks" as used in this
Section 5.9 shall include the Swing Line Bank and the provisions hereof, when
applicable, shall apply to the Swing Line Bank.
SECTION 5.10 Indemnity.
(a) The Borrowers shall indemnify each Bank against
any loss or expense which such Bank may sustain or incur as a consequence of
(i) any failure by any Borrower to fulfill on the date of any Borrowing
hereunder the applicable conditions set forth in Article VIII, (ii) any failure
by any Borrower to borrow, convert or continue hereunder after delivery of a
Request for Borrowing or a notice of conversion or continuation has been given
pursuant to Sections 2.4, 3.3 and 5.15, (iii) any payment, prepayment or
conversion of a Eurodollar Loan required by any other provision of this
Agreement or otherwise made on a date other than the last day of the applicable
Interest Period, (iv) any default in payment or prepayment of the principal
amount of any Loan or any part thereof or interest accrued thereon, as and when
due and payable (at the due date thereof, by irrevocable notice of prepayment
or otherwise), or (v) the occurrence of any Event of Default, including, but
not limited to, any loss or reasonable expense sustained or incurred or to be
sustained or incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Loan or any part thereof as a Eurodollar
Loan. Such loss or reasonable expense shall include an amount equal to the
excess, if any, as reasonably determined by each Bank of (A) its cost of
obtaining the funds for the Loan being paid, prepaid or converted or not
borrowed (based on the LIBO Rate applicable thereto) for the period from the
date of such payment, prepayment or conversion or failure to borrow to the last
day of the Interest Period for such Loan (or, in the case of a failure to
borrow, the Interest Period for such Loan which would have commenced on the
date of such failure to borrow) over (B) the amount of interest (as reasonably
determined by such Bank) that could be realized by such Bank in reemploying
during such period the funds so paid, prepaid
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or converted or not borrowed. A certificate of each Bank setting forth in
reasonable detail calculations (together with the basis and assumptions
therefore) to establish any amount or amounts which such Bank is entitled to
receive pursuant to this Section 5.10 shall be delivered to the Agent which
shall promptly deliver the same to the Company and such certificate shall be
rebuttably presumptive evidence of the amount or amounts which such Bank is
entitled to receive. Nothing in this Section 5.10 shall entitle any Bank to
receive interest at a rate per annum in excess of the Highest Lawful Rate.
(b) The provisions of this Section 5.10 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the invalidity or unenforceability of any
term or provision of this Agreement or any Note, or any investigation made by
or on behalf of any Bank; provided demand for compensation pursuant to Section
5.08 must be made on or before one (1) year after the Bank incurs the expense,
cost or economic loss referred to or such Bank shall be deemed to have waived
the right to such compensation. All amounts due under this Section 5.10 shall
be payable within ten (10) days after receipt of demand therefor.
(c) The term "Bank" or "Banks" as used in this
Section 5.10 shall include the Swing Line Bank and the provisions hereof, when
applicable, shall apply to the Swing Line Bank.
SECTION 5.11 Pro Rata Treatment. Subject to Section 4.6(c)
hereof, and except as permitted under Section 5.8, each Borrowing, each payment
or prepayment of principal of the Notes, each payment of interest on such
Notes, each other reduction of the principal or interest outstanding under such
Notes, however achieved, each payment of the Commitment Fees and each reduction
of the Commitments shall be made pro rata among the Banks in the proportions
that their respective Commitments bear to the Total Commitment.
SECTION 5.12 Payments.
(a) The Company and/or any of the Borrowers shall
make all payments of principal and interest on any Swing Line Loan and any
Swing Line Overdraft Loan, any curtailment payment, and payments of the
proceeds of the sale of any Motor Vehicle to the Floor Plan Agent on the date
when due in dollars to the Floor Plan Agent at its offices in Detroit Michigan,
and except as otherwise provided in this Agreement, the Company and/or any of
the Borrowers shall make all payments (including principal of or interest on
any Borrowing, Agency Fee, or any other fees or other amounts) payable
hereunder and under any other Loan Document not later than 1:00 P.M., HOUSTON,
TEXAS TIME, on the date when due in dollars to the Agent at its offices at 707
Travis Street, Houston, Texas 77002, in immediately available funds, without
setoff or counterclaim.
(b) Subject to the provisos contained in subclauses
(A) of the definition of "Interest Period", whenever any payment (including
principal of or interest on any Borrowing or any fees or other amounts)
hereunder or under any other Loan Document shall become due, or otherwise would
occur, on a day that is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, if applicable.
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SECTION 5.13 Sharing of Setoffs. Except as otherwise provided
in Section 4.6(c) in connection with the payment of Swing Line Overdraft Loans,
each Bank agrees that if it shall, in any manner, including through the
exercise of a right of banker's lien, setoff or counterclaim against any
Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Bank under any Insolvency Proceeding or
otherwise, obtain payment (voluntary or involuntary) in respect of the Note
held by it as a result of which the unpaid principal portion of the Note held
by it shall be proportionately less than the unpaid principal portion of the
Note held by any other Bank, it shall be deemed to have simultaneously
purchased from such other Bank a participation in the Note held by such other
Bank, so that the aggregate unpaid principal amount of the Note and
participations in Notes held by each Bank shall be in the same proportion to
the aggregate unpaid principal amount of all Notes then outstanding as the
principal amount of the Note held by it prior to such exercise of banker's
lien, setoff or counterclaim was to the principal amount of all Notes
outstanding prior to such exercise of banker's lien, setoff or counterclaim;
provided, however, that if any such purchase or purchases or adjustments shall
be made pursuant to this Section 5.13 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrowers expressly consent to the
foregoing arrangements and agree that any Person holding a participation in a
Note under this Section 5.13 deemed to have been so purchased may exercise any
and all rights of banker's lien, setoff or counterclaim with respect to any and
all moneys owing by any such Borrower to such Bank as fully as if such Bank had
made a Loan directly to such Borrower in the amount of such participation.
SECTION 5.14 Payments Free of Taxes.
(a) Any and all payments by the Borrowers
hereunder shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on the
Agent's, the Floor Plan Agent's, the Swing Line Bank's or any Bank's or any
transferee's or assignee's, excluding a participation holder's (any such entity
a "Transferee") net income and franchise taxes imposed on the Agent, the Floor
Plan Agent, the Swing Line Bank or any Bank (or Transferee) by the United
States or any jurisdiction under the laws of which it is organized or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrowers shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder to the Banks (or any
Transferee), the Agent, the Floor Plan Agent or the Swing Line Bank (i) the sum
payable shall be increased by the amount necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 5.14) such Bank (or Transferee) or the Agent, the Floor Plan
Agent or the Swing Line Bank (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrowers shall make such deductions and (iii) the Borrowers shall pay the full
amount deducted to the relevant taxing authority or other governmental
authority in accordance with applicable law.
(b) In addition, the Borrowers agree to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with
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respect to, this Agreement or any other Loan Document which are not excluded
under Section 5.14(a) (hereinafter referred to as "Other Taxes").
(c) The Borrowers will indemnify each Bank (or
Transferee), the Swing Line Bank, the Agent and/or the Floor Plan Agent for the
full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 5.14) paid by
such Bank (or Transferee), the Swing Line Bank, the Agent and/or the Floor Plan
Agent, as the case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted by the relevant taxing
authority or other Governmental Authority. Such indemnification shall be made
within thirty (30) days after the date any such Person indemnified hereunder
makes written demand therefor, such demand to contain a certificate setting
forth the calculations (including all assumptions and the basis therefor) to
establish the amount for which indemnity is claimed. If a Bank (or
Transferee), the Agent, the Swing Line Bank, and/or the Floor Plan Agent shall
become aware that it is entitled to receive a refund in respect of Taxes or
Other Taxes, it shall promptly notify the Company of the availability of such
refund and shall, within thirty (30) days after receipt of a request by the
Borrowers, apply for such refund at the Company's expense. If any Bank (or
Transferee), the Swing Line Bank, the Agent and/or the Floor Plan Agent
receives a refund in respect of any Taxes or Other Taxes for which such Person
has received payment from any of the Borrowers, it shall promptly notify the
Company of such refund and shall, within thirty (30) days after receipt of a
request by any of the Borrowers (or promptly upon receipt, if any of the
Borrowers has requested application for such refund pursuant hereto), repay
such refund to the Company, net of all out-of-pocket expenses of such Person
and without interest; provided that the Borrowers, upon the request of such
Person, agree to return such refund (plus penalties, interest or other charges)
to such Person in the event such Person is required to repay such refund.
(d) Within thirty (30) days after the date of any
payment of Taxes or Other Taxes withheld by the Borrowers in respect of any
payment to any Bank (or Transferee) the Swing Line Bank, the Agent, and/or the
Floor Plan Agent, the Borrowers will furnish to such Person, at its address
referred to in Section 13.1, the original or a certified copy of a receipt
evidencing payment thereof to the extent available.
(e) Without prejudice to the survival of any other
agreement contained herein, the agreements and obligations contained in this
Section 5.14 shall survive the payment in full of the principal of and
interest on all Loans made hereunder.
(f) The Agent, the Floor Plan Agent, each Bank, the
Swing Line Bank and each Transferee each represents that is either (i) a
corporation organized under the laws of the United States of America or any
state thereof or (ii) it is entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments, including fees, to
be made to it pursuant to this Agreement (y) under an applicable provision of a
tax convention to which the United States of America is a party or (z) because
it is acting through a branch, agency or office in the United States of America
and any payment to be received by it hereunder is effectively connected with a
trade or business in the United States of America. Each Bank (or Transferee)
which is organized outside the United States shall, on the date it becomes a
signatory hereto, deliver to the Company such certificates, documents or other
evidence, as required by the Code or Treasury
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Regulations issued pursuant thereto, including Internal Revenue Service Form
1001 or Form 4224 and any other certificate or statement of exemption required
by Treasury Regulation Section 1.1441-1(a) or Section 1.1441-6(c) or any
subsequent version thereof, properly completed and duly executed by such Bank
(or Transferee) establishing such payments to it are (i) not subject to
withholding under the Code because such payment is effectively connected with
the conduct by such Bank (or Transferee) of a trade or business in the United
States or (ii) totally exempt from United States tax under a provision of an
applicable tax treaty. Unless the Company and the Agent have received forms or
other documents satisfactory to them indicating that payments hereunder or
under the Notes are not subject to United States withholding tax or are subject
to such tax at a rate reduced by an applicable tax treaty, the Borrowers, the
Agent, the Swing Line Bank and/or the Floor Plan Agent shall withhold taxes
from such payments at the applicable statutory rate in the case of payments to
or for any Bank (or Transferee) or assignee organized under the laws of a
jurisdiction outside the United States.
(g) The Borrowers shall not be required to pay any
additional amounts to any Bank (or Transferee) in respect of United States
withholding tax pursuant to paragraph (a) or (c) above if the obligation to pay
such additional amounts would not have arisen but for the failure of the
representation in Section 5.14(f) to be true or a failure by such Bank (or
Transferee) to comply with the provisions of paragraph (f) above unless such
failure results from (i) a change in applicable law, regulation or official
interpretation thereof or (ii) an amendment, modification or revocation of any
applicable tax treaty or a change in official position regarding the
application or interpretation thereof, in each case after the Closing Date
(and, in the case of a Transferee, after the date of assignment or transfer).
(h) Any Bank (or Transferee) claiming any additional
amounts payable pursuant to this Section 5.14 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document requested by the Company or to change the jurisdiction of its
Applicable Lending Office if the making of such a filing or change would avoid
the need for or reduce the amount of any such additional amounts which may
thereafter accrue and would not, in the sole determination of such Bank, be
otherwise disadvantageous to such Bank (or Transferee).
(i) If any Bank (or Transferee) requests compensation
pursuant to this Section 5.14, the Company may give notice to such Bank (with
a copy to the Agent) that they wish to seek one or more Eligible Assignees
(which may be one or more of the Banks) to assume the Commitments of such Bank
and to purchase its outstanding Loans and Note. Each Bank (or Transferee)
requesting compensation pursuant to this Section 5.14 hereto agrees to sell all
of its Commitments, its Loans and its Note pursuant to Section 13.3 to any such
Eligible Assignee for an amount equal to the sum of the outstanding unpaid
principal of and accrued interest on such Loans and Note plus all Commitment
Fees and other fees and amounts due such Bank (or Transferee) hereunder
calculated, in each case, to the date such Commitment, Loans and Note are
purchased, whereupon such Bank (or Transferee) shall thereafter have no other
Commitments or other obligation to the Floor Plan Borrowers hereunder or under
any Note.
SECTION 5.15 Conversion and Continuation of Acquisition
Loan Borrowings and Floor Plan Borrowings.
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(a) The Company shall have the right with respect to
Acquisition Loan Borrowings, on behalf of any Borrower, at any time upon prior
irrevocable notice to the Agent (a) not later than 10:00 A.M., HOUSTON, TEXAS
TIME, on the date of conversion, to convert any Eurodollar Borrowing into an
ABR Borrowing, (b) not later than 11:00 A.M., HOUSTON, TEXAS TIME, three
Business Days prior to conversion or continuation, to convert all or any
portion of any ABR Borrowing into a Eurodollar Borrowing or to continue all or
any portion of any Eurodollar Borrowing of any Borrower as a Eurodollar
Borrowing for an additional Interest Period, and (c) not later than 11:00 A.M.,
HOUSTON, TEXAS TIME, three Business Days prior to conversion, to convert all or
any portion of the Interest Period with respect to any Eurodollar Borrowing to
another permissible Interest Period subject in each case to the following:
(i) each conversion or continuation shall be made
pro rata among the Banks, in accordance with the respective principal
amounts of the Acquisition Loans comprising the converted or continued
Acquisition Loan Borrowing;
(ii) if less than all the outstanding principal
amount of any such Acquisition Loan Borrowing shall be converted or
continued, the aggregate principal amount of such Acquisition Loan
Borrowing converted or continued shall be an integral multiple of One
Million Dollars ($1,000,000) and not less than One Million Dollars
($1,000,000);
(iii) if any Eurodollar Borrowing is converted at a
time other than the end of the Interest Period applicable thereto, the
Company shall pay, upon demand, any amounts due, if any, to the Banks
under Section 5.10;
(iv) any portion of a Borrowing maturing or
required to be repaid in less than one month may not be converted into
or continued as a Eurodollar Borrowing;
(v) any portion of a Eurodollar Borrowing which
cannot be converted into or continued as a Eurodollar Borrowing by
reason of clause (iv) above shall be automatically converted at the
end of the Interest Period in effect for such Acquisition Loan
Borrowing into an ABR Borrowing;
(vi) no Interest Period may be selected for any
Eurodollar Borrowing that would end later than the Maturity Date; and
(vii) accrued interest on an Acquisition Loan (or
portion thereof) being converted or continued shall be paid by the
Company at the time of conversion or continuation.
Each notice pursuant to this Section 5.15(a) shall be irrevocable and
shall refer to this Agreement and specify (w) the identity and amount of the
Acquisition Loan Borrowing that the Company requests to be converted or
continued, (x) whether such Acquisition Loan Borrowing is to be converted to or
continued as a Eurodollar Borrowing or an ABR Borrowing, (y) if such notice
requests a conversion, the date of such conversion (which shall be a Business
Day) and (z) if such Acquisition Loan Borrowing is to be converted to or
continued as a Eurodollar Borrowing, the
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Interest Period with respect thereto. If no Interest Period is specified in
any such notice with respect to any conversion to or continuation as a
Eurodollar Borrowing, the Company shall be deemed to have selected an Interest
Period of one (1) month's duration. The Agent shall promptly advise the other
Banks of any notice given pursuant to this Section 5.15(a) and of each Bank's
Pro Rata Share of any converted or continued Borrowing. If the Company shall
not have given written notice in accordance with this Section 5.15(a) to
continue any Eurodollar Borrowing into a subsequent Interest Period (and shall
not otherwise have given written notice in accordance with this Section 5.15(a)
to convert such Acquisition Loan Borrowing), such Acquisition Loan Borrowing
shall, at the end of the Interest Period applicable thereto (unless repaid
pursuant to the terms hereof), automatically be converted into as an ABR
Borrowing.
(b) The Company shall have the right with respect to
Floor Plan Loan Borrowings, on behalf of any Floor Plan Borrower, at any time
upon prior irrevocable notice to the Agent (a) not later than 10:00 A.M.,
HOUSTON, TEXAS TIME, on the date of conversion, to convert any Eurodollar
Borrowing into a Comerica Prime Rate Borrowing, (b) not later than 11:00 A.M.,
HOUSTON, TEXAS TIME, three Business Days prior to conversion or continuation,
to convert all or any portion of any Comerica Prime Rate Borrowing into a
Eurodollar Borrowing or to continue all or any portion of any Eurodollar
Borrowing of any Floor Plan Borrower as a Eurodollar Borrowing for an
additional Interest Period, and (c) not later than 11:00 A.M., HOUSTON, TEXAS
TIME, three Business Days prior to conversion, to convert all or any portion of
the Interest Period with respect to any Eurodollar Borrowing to another
permissible Interest Period subject in each case to the following:
(i) each conversion or continuation shall be made
pro rata among the Banks, in accordance with the respective principal
amounts of the Floor Plan Loans comprising the converted or continued
Floor Plan Loan Borrowing;
(ii) if less than all the outstanding principal
amount of any such Floor Plan Loan Borrowing shall be converted or
continued, the aggregate principal amount of such Floor Plan Loan
Borrowing converted or continued shall be an integral multiple of One
Million Dollars ($1,000,000) and not less than One Million Dollars
($1,000,000);
(iii) if any Eurodollar Borrowing is converted at a
time other than the end of the Interest Period applicable thereto, the
Company shall pay, upon demand, any amounts due, if any, to the Banks
under Section 5.10;
(iv) any portion of a Borrowing maturing or
required to be repaid in less than one month may not be converted into
or continued as a Eurodollar Borrowing;
(v) any portion of a Eurodollar Borrowing which
cannot be converted into or continued as a Eurodollar Borrowing by
reason of clause (iv) above shall be automatically converted at the
end of the Interest Period in effect for such Floor Plan Loan
Borrowing into a Comerica Prime Rate Borrowing;
(vi) no Interest Period may be selected for any
Eurodollar Borrowing that would end later than the Maturity Date; and
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(vii) accrued interest on an Floor Plan Loan (or
portion thereof) being converted or continued shall be paid by the
Company at the time of conversion or continuation.
Each notice pursuant to this Section 5.15(b) shall be irrevocable and
shall refer to this Agreement and specify (w) the identity and amount of the
Floor Plan Loan Borrowing that the Company requests to be converted or
continued, (x) whether such Floor Plan Loan Borrowing is to be converted to or
continued as a Eurodollar Borrowing or a Comerica Prime Rate Borrowing, (y) if
such notice requests a conversion, the date of such conversion (which shall be
a Business Day) and (z) if such Floor Plan Loan Borrowing is to be converted to
or continued as a Eurodollar Borrowing, the Interest Period with respect
thereto. If no Interest Period is specified in any such notice with respect to
any conversion to or continuation as a Eurodollar Borrowing, the Company shall
be deemed to have selected an Interest Period of one (1) month's duration. The
Agent shall promptly advise the other Banks of any notice given pursuant to
this Section 5.15(b) and of each Bank's Pro Rata Share of any converted or
continued Borrowing. If the Company shall not have given written notice in
accordance with this Section 5.15(b) to continue any Eurodollar Borrowing into
a subsequent Interest Period (and shall not otherwise have given written notice
in accordance with this Section 5.15(b) to convert such Floor Plan Loan
Borrowing), such Floor Plan Loan Borrowing shall, at the end of the Interest
Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be converted into a Comerica Prime Rate Borrowing.
SECTION 5.16 Extension of Maturity Date.
(a) Provided that no Default or Event of Default has
occurred and is continuing, the Company may, by written notice to Agent (with
sufficient copies for each Bank) (which notice shall be irrevocable and which
shall not be deemed effective unless actually received by Agent) prior to
November 1, but not before October 1, of each fiscal year, request that the
Banks extend the then applicable Maturity Date to a date that is one year later
than the Maturity Date, then in effect (each such request, a "Request"). Each
Bank shall, not later than November 30th of such fiscal year, give written
notice to the Agent stating whether such Bank is willing to extend the Maturity
Date as requested. If Agent has received the aforesaid written approvals of
such Request from each of the Banks, then, effective upon the date of Agent's
receipt of all such written approvals from the Banks, as aforesaid, the
Maturity Date shall be so extended for an additional one year period, the term
Maturity Date shall mean such extended date and Agent shall promptly notify the
Company that such extension has occurred.
(b) If (i) any Bank gives the Agent written notice
that it is unwilling to extend the Maturity Date as requested or (ii) any Bank
fails to provide written approval to Agent of such a Request on or before
November 30th of such fiscal year, the (w) the Banks shall be deemed to have
declined to extend the Maturity Date, (x) the then- current Maturity Date shall
remain in effect (with no further right on the part of the Company to request
extensions thereof under this Section 2.9), and (y) the commitments of the
Banks to make Floor Plan Loans or Acquisition Loans hereunder shall terminate
on the Maturity Date then in effect, the Floor Plan Agent shall take such
action as necessary to terminate and suspend all Drafting Agreements effective
ten (10) days prior to the Maturity Date then in effect, and Agent shall
promptly notify Company thereof.
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ARTICLE VI
LETTERS OF CREDIT
SECTION 6.1
(a) On the terms and conditions set forth herein (i)
the Issuing Bank agrees from time to time on any Business Day during the period
from the Closing Date to the last Business Day thirty (30) days prior to the
Maturity Date (the "Letter of Credit Termination Date") to issue Letters of
Credit for the account of any Borrower, and to amend or renew Letters of Credit
previously issued by it, in accordance with Section 6.2; and (ii) the Banks
severally agree to participate in Letters of Credit Issued for the account of
the Borrowers; provided, that the Issuing Bank shall not be obligated to Issue,
and no Bank shall be obligated to participate in, any Letter of Credit if, as
of the date of request of such Letter of Credit, after giving effect to the
maximum amount payable under such Letter of Credit, (y) the aggregate
principal amount of all Letter of Credit Obligations outstanding shall at any
time exceed Five Million Dollars ($5,000,000) or (z) the aggregate principal
amount of Acquisition Loans outstanding plus the Letter of Credit Obligations
outstanding as of such day shall exceed the Acquisition Loan Commitment;
further, the aggregate principal amount of all Letter of Credit Obligations
outstanding, plus the aggregate principal amount of all Acquisition Loans
outstanding, plus the aggregate principal amount of all Swing Line Loans
outstanding plus the aggregate principal amount of all Floor Plan Loans
outstanding shall not at any time exceed the Total Commitment. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
ability of the Borrowers to obtain Letters of Credit shall be fully revolving,
and, accordingly, the Borrowers may, during the foregoing period, obtain
Letters of Credit to replace Letters of Credit which have expired or which have
been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue
any Letter of Credit if: (i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain the
Issuing Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction over
the Issuing Bank shall prohibit Issuing Bank, or request that the Issuing Bank
refrain, from the Issuance of Letters of Credit generally or such Letter of
Credit in particular or shall impose upon the Issuing Bank with respect to such
Letter of Credit any restriction, reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated hereunder) not in effect on the
Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost
or expense which was not applicable on the Closing Date and which the Issuing
Bank in good faith deems material to it; (ii) the Issuing Bank has received
written notice from any Bank, the Agent or any Borrower, on or prior to the
Business Day prior to the requested date of Issuance of such Letter of Credit,
that one or more of the applicable conditions contained in Article VIII is not
then satisfied; (iii) the expiration date of any requested Letter of Credit is
more than one (1) year from the date of Issuance thereof or after the Maturity
Date; (iv) any requested Letter of Credit does not provide for drafts, or is
not otherwise in form and substance acceptable to the Issuing Bank, or the
Issuance of a Letter of Credit shall violate any applicable policies of the
Issuing Bank, or the Issuance of a Letter of Credit is for an amount less than
One Hundred Thousand Dollars ($100,000) or to be denominated in a currency
other than U.S. Dollars.
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SECTION 6.2 Issuance, Amendment and Renewal of Letters of
Credit.
(a) Each Letter of Credit shall be issued upon the
irrevocable written request of the Company received by the Issuing Bank (with a
copy sent by the Company to the Agent) at least three (3) days (or such shorter
time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of Issuance. Each such request for
Issuance of a Letter of Credit shall be by facsimile, confirmed immediately in
an original writing, in the form of a Letter of Credit Application, and shall
specify in form and detail satisfactory to the Issuing Bank such matters as the
Issuing Bank may require. Each Letter of Credit (i) will be for the account of
such Borrower, (ii) will be a (A) nontransferable standby letter of credit to
support certain performance obligations of such Borrower, or (B)
non-transferable standby letter of credit to support certain payment
obligations of such Borrower that are not prohibited by this Agreement, (iii)
will be for purposes reasonably satisfactory to the Issuing Bank and (iv) will
contain such terms and provisions as may be customarily required by the Issuing
Bank.
(b) Prior to the Issuance of any Letter of Credit,
the Issuing Bank will confirm with the Agent (by telephone or in writing) that
the Agent has received a copy of the Letter of Credit Application or Letter of
Credit Amendment Application from any Borrower and, if not, the Issuing Bank
will provide the Agent with a copy thereof. Unless the Issuing Bank has
received notice prior to its Issuance of a requested Letter of Credit from the
Agent (i) directing the Issuing Bank not to Issue such Letter of Credit because
such Issuance is not then permitted under this Section 6.2, or (ii) that one or
more conditions specified in Article VIII are not then satisfied or waived;
then, subject to the terms and conditions hereof, the Issuing Bank shall, on
the requested date, Issue a Letter of Credit for the account of such Borrower
in accordance with the Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Letter of Credit Termination Date, the Issuing
Bank will, upon the written request of any Borrower received by the Issuing
Bank (with a copy sent by the Borrower to the Agent) at least three (3) days
(or such shorter time as the Issuing Bank may agree in particular instance in
its sole discretion) prior to the proposed date of amendment or extension,
amend any Letter of Credit Issued by it or extend the expiry date. Each such
request for amendment or extension of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, made in such form as
the Issuing Bank shall require. The Issuing Bank shall be under no obligation
to amend or extend the expiry date any Letter of Credit if: (i) the Issuing
Bank would have no obligation at such time to Issue such Letter of Credit in
its amended form under the terms of this Agreement; or (ii) the beneficiary of
any such Letter of Credit does not accept the proposed amendment to the Letter
of Credit.
(d) Upon receipt of notice from the Issuing Bank, the
Agent will promptly notify the Banks of the Issuance of a Letter of Credit and
any amendment or extension thereto.
(e) If any outstanding Letter of Credit shall provide
that it shall be automatically renewed unless the beneficiary thereof receives
notice from the Issuing Bank that such Letter of Credit shall not be renewed,
the Issuing Bank shall be permitted to allow such Letter of Credit to renew,
and the Borrowers and the Banks hereby authorize such renewal. The Issuing
Bank
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shall not be obligated to allow such Letter of Credit to renew if the Issuing
Bank would have no obligation at such time to Issue or amend such Letter of
Credit under the terms of this Agreement.
(f) The Issuing Bank may, at its election (or as
required by the Agent at the direction of the Required Banks), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the
expiration date of any Letter of Credit to be a date not later than the
Maturity Date.
(g) This Agreement shall control in the event of any
conflict with any Letter of Credit- Related Document.
(h) The Issuing Bank will also deliver to the Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment or extension to a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit, amendment,
or extension to a Letter of Credit.
SECTION 6.3 Risk Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter of
Credit, each Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a participation in
such Letter of Credit and each drawing thereunder in an amount equal to the
product of (i) the Pro Rata Share of such Bank, and (ii) the maximum amount
available to be drawn under such Letter of Credit and the amount of such
drawing respectively. Each Issuance of a Letter of Credit shall be deemed to
utilize the Acquisition Loan Commitment of each Bank by an amount equal to the
amount of such participation.
(b) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Issuing Bank
will promptly notify the Company. In the case of Letters of Credit under which
drawings are payable one or more Business Days after the drawing is made, the
Issuing Bank will give such notice to the Company at least one Business Day
prior to the Honor Date. The Company shall reimburse the Issuing Bank prior to
11:00 A.M., HOUSTON, TEXAS TIME, on each date that any amount is paid by the
Issuing Bank under any Letter of Credit (each such date, an "Honor Date") in an
amount equal to the amount so paid by the Issuing Bank. In the event the
Company fails to reimburse the Issuing Bank for the full amount of any drawing
under any Letter of Credit by 11:00 A.M., HOUSTON, TEXAS TIME, on the Honor
Date, the Issuing Bank will promptly notify the Agent and the Agent will
promptly notify each Bank thereof, and the Company shall be deemed to have
requested an Alternate Base Rate Loan be made by the Banks to be disbursed on
the Honor Date under such Letter of Credit, subject to the amount of the
unutilized portion of the Acquisition Loan Commitment and subject to the
conditions set forth in Article VIII. Any notice given by the Issuing Bank or
the Agent pursuant to this Section 6.3(b) may be oral if immediately confirmed
in writing (including by facsimile); provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.
(c) Each Bank shall upon any notice pursuant to
Section 6.3(b) make available to the Agent for the account of the Issuing Bank
an amount in Dollars and in immediately available
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funds equal to its Pro Rata Share of the amount of the drawing, whereupon the
participating Banks shall each be deemed to have made an Acquisition Loan
consisting of an Alternate Base Rate Loan to the applicable Borrower in that
amount. If any Bank so notified fails to make available to the Agent for the
account of the Issuing Bank the amount of such Bank's Pro Rata Share of the
amount of the drawing by no later than 12:00 NOON, HOUSTON, TEXAS TIME, on the
Honor Date, then interest shall accrue on such Bank's obligation to make such
payment, from the Honor Date to the date such Bank makes such payment, at the
rate per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Agent will promptly give notice to each Bank of the
occurrence of the Honor Date, but failure of the Agent to give any such notice
on the Honor Date or in sufficient time to enable any Bank to effect such
payment on such date shall not relieve such Bank from its obligations under
this Section 6.3.
(d) With respect to any unreimbursed drawing that is
not converted into an Alternate Base Rate Loan to the Company in whole or in
part, because of failure of the Company to satisfy the conditions set forth in
Article VIII or for any other reason, the Company shall be deemed to have
incurred from the Issuing Bank a Letter of Credit Borrowing in the amount of
such drawing, which Letter of Credit Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at a rate per annum
equal to the Alternate Base Rate plus two percent (2%) per annum, and each
Bank's payment to the Issuing Bank pursuant to Section 6.3(b) shall be deemed
payment in respect of its participation in such Letter of Credit Borrowing and
shall constitute a Letter of Credit Advance from such Bank in satisfaction of
its participation obligation under this Section 6.3.
(e) Each Bank's obligation in accordance with this
Agreement to make Acquisition Loans or Letter of Credit Advances, as
contemplated by this Section 6.3, as a result of a drawing under the Letter of
Credit, shall be absolute and unconditional and without recourse to the Issuing
Bank and shall not be affected by any circumstance, including (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank may have
against the Issuing Bank, any Borrower or any other Person for any reason
whatsoever, (ii) the occurrence or continuance of a Default, an Event of
Default or a Material Adverse Effect; or (iii) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing;
provided, however, that each Bank's obligation to make Acquisition Loans under
this Section 6.3 is subject to the conditions set forth in Article VIII.
SECTION 6.4 Repayment of Participation.
(a) When the Agent receives (and only if the Agent
receives), for the account of the Issuing Bank, immediately available funds
from the Borrowers (i) in respect of which any Bank has paid the Agent for the
account of the Issuing Bank for such Bank's participation in the Letter of
Credit Advance pursuant to Section 6.3 or (ii) in payment of interest thereon,
the Agent will pay to each Bank, in the same funds as those received by the
Agent for the account of the Issuing Bank, the amount of such Bank's Pro Rata
Share of such funds and the Issuing Bank shall receive and retain the amount of
the Pro Rata Share of such funds of any Bank that did not so pay the Agent for
the account of the Issuing Bank.
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(b) If the Agent or the Issuing Bank is required at
any time to return to the Borrowers or to a trustee, receiver, liquidator,
custodian, or any official in an Insolvency Proceeding, any portion of the
payments made by the Borrowers to the Agent for the account of the Issuing Bank
pursuant to Section 6.4(a) in reimbursement of a payment made under the Letter
of Credit Advance or interest thereon, each Bank shall, on demand of the Agent,
forthwith return to the Agent or the Issuing Bank the amount of its Pro Rata
Share of any amounts so returned by the Agent or the Issuing Bank plus interest
thereon from the date such demand is made to the date such amounts are returned
by such Bank to the Agent or the Issuing Bank, at a rate per annum equal to the
Federal Funds Rate in effect from time to time.
SECTION 6.5 Role of the Issuing Bank.
(a) Each Bank and each Borrower agree that, in paying
any drawing under a Letter of Credit, the Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and other documents, if any, expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.
(b) Neither the Issuing Bank nor any of its
correspondents, participants or assignees shall be liable to any Bank for: (i)
any action taken or omitted in connection herewith at the request or with the
approval of the Banks (including the Required Banks, as applicable); (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any Letter of Credit-Related Document.
(c) The Borrowers hereby assume all risks of the acts
or omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude any Borrower from pursuing such rights and remedies as
it may have against the beneficiary or transferee at law or under any other
agreement or assume risks or losses arising out of the gross negligence, bad
faith or wilful misconduct of the Issuing Bank. Neither the Issuing Bank, nor
any correspondents, participants or assignees of the Issuing Bank, shall be
liable or responsible for any of the matters described in clauses (i) through
(vii) of Section 6.6; provided, however, that any Borrower may have a claim
against the Issuing Bank, and the Issuing Bank may be liable to such Borrower,
to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered or incurred by such Borrower(s)
which are caused by the Issuing Bank's willful misconduct or gross negligence
(i) in failing to pay under any Letter of Credit after the presentation to it
by the beneficiary of a sight draft, certificate(s) and any other documents, if
any, strictly complying with the terms and conditions of such Letter of Credit,
(ii) in its paying under a Letter of Credit against presentation of a sight
draft, certificate(s) or other documents not complying with the terms of such
Letter of Credit or (iii) its failure to comply with the obligations imposed
upon it, as an issuing bank, under applicable state law; provided, however,
that (y) the Issuing Bank may accept documents that appear on their face to be
in order, without responsibility for further investigation, regardless of any
notice or information to the contrary, and (z) the Issuing Bank shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason, provided that any such
instrument appears on its face to be in order.
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SECTION 6.6 Obligations Absolute. The Obligations of the
Borrowers under this Agreement and any Letter of Credit-Related Document to
reimburse the Issuing Bank for a drawing under a Letter of Credit, and to repay
any Letter of Credit Borrowing and any drawing under a Letter of Credit
converted into an Acquisition Loan, shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement and each
such other Letter of Credit-Related Document under all circumstances, including
the following: (i) any lack of validity or enforceability of this Agreement or
any Letter of Credit-Related Document; (ii) any change in the time, manner or
place of payment of, or in any other term of, all or any of the Obligations of
any Borrower in respect of any Letter of Credit, (iii) the existence of any
claim, set-off, defense or other right that any Borrower may have at any time
against any beneficiary or any such transferee of any Letter of Credit (or any
Person for whom any such beneficiary or any such transferee may be acting), the
Issuing Bank or any other Person, whether in connection with this Agreement,
the transactions contemplated hereby or by the Letter of Credit-Related
Documents or any unrelated transaction other than the defense of payment or
claims arising out of the gross negligence, bad faith or wilful misconduct of
the Floor Plan Agent or the Swing Line Bank; (iv) any draft, demand,
certificate or other document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit; (v) any payment by the Issuing Bank under any
Letter of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment made by
the Issuing Bank under any Letter of Credit to any trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of a successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in connection with
any Insolvency Proceeding; (vi) any exchange, release or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to departure
from any other guarantee, for all or any of the Obligations of any Borrower in
respect of any Letter of Credit; or (vii) any other circumstance that might
otherwise constitute a defense available to, or discharge of, any Borrower.
SECTION 6.7 Letter of Credit Fees.
(a) Letter of Credit Fees. The Company shall pay to
the Agent for the account of each of the Banks a letter of credit fee (the
"Letter of Credit Fees") with respect to outstanding Letters of Credit equal to
the Applicable Margin for Eurodollar Loans which are Acquisition Loans by the
average daily maximum amount available to be drawn on such outstanding Letters
of Credit.
(b) Fronting Fees. The Company shall pay to the
Issuing Bank for its own account a letter of credit fronting fee (the "Fronting
Fees") for each Letter of Credit Issued by the Issuing Bank equal to one
hundred twenty-five-one-thousandths percent (0.125%) per annum multiplied by
the average daily maximum amount available to be drawn on such outstanding
Letters of Credit.
(c) Calculation of Fees. The Letter of Credit Fees
and the Fronting Fees each shall be computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon Letters of Credit
outstanding for that quarter as calculated by the Agent (computed on the basis
of the actual number of days elapsed over a year of 360 days). Such fees shall
be due and
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payable quarterly in arrears on the last Business Day of each calendar quarter
during which Letters of Credit are outstanding, commencing on the first such
quarterly date to occur after the Closing Date, through the Maturity Date, with
the final payment to be made on the Maturity Date.
(d) Other. The Company shall pay to the Issuing Bank
from time to time on demand the normal issuance, presentation, amendment and
other processing fees, and other standard costs and charges of the Issuing Bank
relating to Letters of Credit as from time to time in effect.
SECTION 6.8 Cash Collateralization.
(a) If any Event of Default shall occur and be
continuing, or the Acquisition Loan Commitment is terminated or reduced to an
amount insufficient to fund the outstanding Letter of Credit Obligations, the
Company agrees that it shall on the Business Day it receives notice from the
Agent, acting upon instructions of the Required Banks, deposit in an account
(the "Cash Collateral Account") held by the Agent, for the benefits of the
Banks, an amount of cash equal to the Letter of Credit Obligations as of such
date. Such deposit shall be held by the Agent as Collateral for the payment
and performance of the Obligations. The Agent shall have exclusive dominion
and control, including exclusive right of withdrawal, over such account. Cash
Collateral shall be held in a blocked, interest- bearing account held by the
Agent upon such terms and in such type of account as customary at the
depository institution. The Company shall pay any fees charged by the Agent
which fees are of the type customarily charged by such institution with respect
to such accounts. Moneys in such account shall (i) be applied by the Agent to
the payment of Letter of Credit Borrowings and interest thereon, (ii) be held
for the satisfaction of the reimbursement Obligations of the Borrowers in
respect of Letters of Credit, and (iii) in the event the maturity of the Loans
has been accelerated, with the consent of the Required Banks, be applied to
satisfy the Obligations. If the Company shall provide Cash Collateral under
this Section 6.08(a) or shall prepay any Letter of Credit and thereafter either
(i) drafts or other demands for payment complying with the terms of such
Letters of Credit are not made prior to the respective expiration dates
thereof, or (ii) such Event of Default shall have been waived or cured, then
the Agent, the Floor Plan Agent, the Swing Line Bank and the Banks agree that
the Agent is hereby authorized, without further action by any other Person, to
release the Lien in such cash and will direct the Agent to remit to the Company
amounts for which the contingent obligations evidenced by such Letters of
Credit have ceased.
(b) As security for the payment of all Obligations,
each Borrower hereby grants, conveys, assigns, pledges, sets over and transfers
to the Agent, and creates in the Agent's favor a Lien on, and security interest
in, all money, instruments and securities at any time held in or acquired in
connection with the Cash Collateral Account, together with all proceeds
thereof. At any time and from time to time, upon the Agent's request, each
Borrower promptly shall execute and deliver any and all such further
instruments and documents as may be reasonably necessary, appropriate or
desirable in the Agent's judgment to obtain the full benefits (including
perfection and priority) of the security interest created or intended to be
created by this Section 6.8(b) and of the rights and powers herein granted.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Company, as to itself and as to all of the other Borrowers and
each of the Borrowers other than the Company, as to itself and its Subsidiaries
only, represent and warrant to the Agent, the Floor Plan Agent, the Swing Line
Bank and the Banks as follows:
SECTION 7.1 Organization; Corporate Powers. The Company and
each of its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the state of its respective incorporation or
organization, has the requisite power and authority, governmental licenses,
consents and approvals to own its property and assets and to carry on its
business as now conducted and is qualified to do business in every jurisdiction
where such qualification is required and is in compliance with all Requirements
of Law except where the failure to so qualify or comply could not reasonably be
expected to have a Material Adverse Effect. Each Borrower and each of their
Subsidiaries has the corporate power to execute, deliver and perform its
Obligations under this Agreement and the other Loan Documents to which it is a
party, to borrow hereunder and to execute and deliver the Notes and the Swing
Ling Note.
SECTION 7.2 Authorization. The execution, delivery and
performance of this Agreement and the Loan Documents, the Borrowings hereunder,
and the execution and delivery of the Notes and the Swing Line Note by the
Borrowers, the issuance of Letters of Credit and Drafting Agreements hereunder
and the use of the proceeds of the Borrowings (a) have been duly authorized by
all requisite corporate and, if required, stockholder action on the part of the
Company and each Subsidiary and (b) will not (i) violate (A) any provision of
law, statute, rule or regulation or the certificate of incorporation or the
bylaws of the Company or any Subsidiary, (B) any order of any court, or any
rule, regulation or order of any other agency of government binding upon the
Company or any Subsidiary or (C) any provisions of any indenture, agreement or
other instrument to which the Company or any of its Subsidiaries is a party, or
by which the Company or any Subsidiary or any of their respective properties or
assets are or may be bound (other than with respect to the granting or filing
of Liens in favor of the Agent for the benefit of the Banks on Collateral owned
by SMC Luxury Cars, Inc. and Southwest Toyota Inc, respectively, in which
Toyota Motor Credit Corporation has a first priority Lien and has not consented
in writing to the granting or filing by the Agent of a Lien on such Collateral)
which violation could reasonably be expected to have a Material Adverse Effect,
(ii) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under any indenture, agreement or
other instrument referred to in (b)(i)(C) above which violation could
reasonably be expected to have a Material Adverse Effect or (iii) result in the
creation or imposition of any Lien whatsoever upon any property or assets of
the Company or any of its Subsidiaries.
SECTION 7.3 Governmental Approval. No registration with, or
consent or approval of, or other action by, any federal, state or other
Governmental Authority is or will be required in connection with the execution,
delivery and performance of this Agreement, any other Loan Document, the
execution and delivery of the Notes and the Swing Line Note or repayment of the
Borrowings hereunder.
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SECTION 7.4 Enforceability. This Agreement and each of the
Loan Documents have been duly executed and delivered by each of the Borrowers
and each of their Subsidiaries which is a party thereto and constitute legal,
valid and binding obligations of the Borrowers and such Subsidiaries, and the
Notes, and the Swing Line Note, when duly executed and delivered by each
applicable Borrower, will constitute legal, valid and binding Obligations of
such Borrower(s), in each case enforceable in accordance with their respective
terms (subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditors'
rights generally and general principles of equity).
SECTION 7.5 Financial Statements.
(a) The audited consolidated financial statements of
the Company and each of its Subsidiaries, as at December 31, 1996, copies of
which have been furnished to the Banks, have been prepared in conformity with
generally accepted accounting principles applied on a basis consistent with
that of the preceding fiscal year, and present fairly the financial condition
of the Company and each of its Subsidiaries, as at such date and the
consolidated results of the operations of the Company and each of its
Subsidiaries for the period then ended.
(b) The Form S-1 of the Company dated October 29,
1997, copies of which have been furnished to the Banks, have been prepared in
accordance with all applicable rules, regulations and guidelines of the
Securities and Exchange Commission and present fairly the financial condition
of the Company and each of its Subsidiaries, as at such dates and the results
of their operations for the periods then ended, subject to year-end audit
adjustments.
SECTION 7.6 No Material Adverse Change. There has been no
material adverse change in the businesses, assets, operations, prospects or
condition, financial or otherwise, as determined on a consolidated basis, of
the Company or any of its Subsidiaries, since December 31, 1996.
SECTION 7.7 Title to Properties; Security Documents.
(a) Each Borrower and each of their respective
Subsidiaries has good and marketable title to, or valid leasehold interests in,
all its properties and assets, including, without limitation, those properties
and assets which constitute real property as specified in Schedule IV (which
Schedule specifies the owner of, current leases (if any) of, and general
description of each individual property or asset listed therein), except for
(i) such properties as are no longer used or useful in the conduct of its
business or as have been disposed of in the ordinary course of business, (ii)
Liens permitted by Section 7.16 and Section 10.2, and (iii) minor defects in
title that do not interfere with the ability of such Borrower or such
Subsidiary to conduct its business as now conducted.
(b) The Security Documents contain descriptions of
the Collateral sufficient to grant to the Agent for the benefit of Banks,
perfected Liens therein pursuant to applicable law and the terms, provisions
and conditions of this Agreement.
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SECTION 7.8 Litigation; Compliance with Laws; Etc.
(a) There are no actions, suits or proceedings,
except as specified in Schedule V, at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of any of the Borrowers
or any of their respective Subsidiaries, threatened against or affecting any of
the Borrowers or any of their respective Subsidiaries or the business, assets
or rights of any of the Borrowers or any of their respective Subsidiaries as to
which there is a reasonable possibility of an adverse determination and which,
if adversely determined, could, individually or in the aggregate, reasonably to
be expected to have a Material Adverse Effect.
(b) None of the Borrowers and none of their
respective Subsidiaries is (i) in violation of any law, the breach or
consequence of which could reasonably be expected to have a Material Adverse
Effect and to the best knowledge of the Company and its Subsidiaries after due
investigation, the Company and each of its Subsidiaries are in material
compliance with all statutes and governmental rules and regulations applicable
to them, or (ii) in default under any material order, writ, injunction, award
or decree of any Governmental Authority binding upon it or its assets or any
material indenture, mortgage, contract, agreement or other undertaking or
instrument to which it is a party or by which any of its properties may be
bound, (other than with respect to the granting or filing of Liens in favor of
the Agent for the benefit of the Banks on Collateral owned by SMC Luxury Cars,
Inc. and Southwest Toyota, Inc., respectively, in which Toyota Motor Credit
Corporation has a first priority Lien and has not consented in writing to the
granting or filing by the Agent of a Lien on such Collateral) which default
could reasonably be expected to have a Material Adverse Effect, and nothing has
occurred which would materially and adversely affect the ability of any
Borrower to carry on its business as now conducted or perform its obligations
under any such order, writ, injunction, award or decree or any such material
indenture, mortgage, contract, agreement or other undertaking or instrument.
SECTION 7.9 Agreements; No Default.
(a) None of the Borrowers and none of their
respective Subsidiaries is a party to any agreement or instrument or subject to
any corporate restriction reasonably to be expected to have a Material Adverse
Effect.
(b) No Event of Default has occurred and is
continuing.
SECTION 7.10 Federal Reserve Regulations.
(a) Neither the Company nor any of its Subsidiaries
is not engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock.
(b) No part of the proceeds of the Loans will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to purchase or carry Margin Stock or to extend credit to others
for the purpose of purchasing or carrying Margin Stock or to refund
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indebtedness originally incurred for such purpose, or (ii) for any purpose
which entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board, including Regulations G, T, U or X; provided,
however, the Company may acquire Margin Stock if, upon the acquisition of such
Margin Stock, twenty-five percent (25%) or less of the Company's total assets
subject to the restrictions set forth in Section 10.1 would then be composed of
Margin Stock, and the Company shall furnish to the Agent upon its request, a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
SECTION 7.11 Taxes. The Company and each of its Subsidiaries
has filed all tax returns which are required to have been filed and has paid,
or made adequate provisions for the payment of, all of its taxes which are due
and payable, except such taxes, if any, as are being contested in good faith
and by appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by generally accepted accounting
principles have been maintained. Neither the Company nor any of its
Subsidiaries is aware of any proposed assessment against it for additional
taxes (or any basis for any such assessment) which might be material to the
Company or such Subsidiary.
SECTION 7.12 Pension and Welfare Plans. Each Plan complies in
all respects with all applicable statutes and governmental rules and
regulations except where the failure to comply could not reasonably be expected
to have a Material Adverse Effect, and: (a) no Reportable Event has occurred
and is continuing with respect to any Plan, (b) since December 31, 1996,
neither the Company nor any ERISA Affiliate has withdrawn from any Plan or
instituted steps to do so, except as listed on Schedule VI and (c) since
December 31, 1996, no steps have been instituted to terminate any Plan, except
as listed on Schedule VI. No condition exists or event or transaction has
occurred in connection with any Plan which could result in the incurrence by
the Company or any ERISA Affiliate of any liability, fine or penalty which
could reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate is a member of, or contributes to, any multiple
employer Plan as described in Section 4064 of ERISA. None of the Borrowers has
any contingent liability with respect to any post-retirement "welfare benefit
plans," as such term is defined in ERISA.
SECTION 7.13 No Material Misstatements. Neither this
Agreement, the other Loan Documents, the Confidential Information Memorandum
nor any other document delivered by or on behalf of the Company or any
Subsidiary in connection with any Loan Document or included therein contained
or contains any material misstatement of fact or omitted or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 7.14 Investment Company Act; Public Utility Holding
Company Act. Neither the Company nor any of its Subsidiaries is an "investment
company" or company "controlled" by an investment company as defined in, or
subject to regulation under, the Investment Company Act of 1940. Neither the
Company nor any of its Subsidiaries is a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
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SECTION 7.15 Maintenance of Insurance. The Company and each
of its Subsidiaries agree to maintain insurance to such extent and against such
hazards and liabilities as is commonly maintained by companies similarly
situated.
SECTION 7.16 Existing Liens. None of the assets of the
Company or any Subsidiary is subject to any Lien, except:
(a) Liens for current taxes not delinquent or taxes
being contested in good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be required by generally
accepted accounting principles are being maintained;
(b) carriers', warehousemen's, mechanics',
materialmen's and other like statutory Liens arising in the ordinary course of
business securing obligations which are not overdue for a period of more than
ninety (90) days or which are being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate provisions as
may be required by generally accepted accounting principles are being
maintained;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, and other obligations of a like
nature incurred in the ordinary course of business, and Liens securing
reimbursement obligations created by open letters of credit for the purchase of
inventory;
(e) Liens granted by a Subsidiary of the Company to
secure such Subsidiary's Indebtedness to the Company or to any other Subsidiary
of the Company;
(f) Liens, if any, disclosed in the financial
statements referred to in Section 7.5; and
(g) Liens listed on Schedule VII as permitted by
Section 10.2.
SECTION 7.17 Environmental Matters. Each Borrower has
complied in all respects with all applicable federal, state, local and other
statutes, ordinances, orders, judgments, rulings and regulations relating to
environmental pollution or to environmental regulation or control except where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has received
notice of any failure so to comply which alone or together with any other such
failure could reasonably be expected to have a Material Adverse Effect.
Neither the Company, any of its Subsidiaries nor any of its facilities manages
any hazardous wastes, hazardous substances, hazardous materials, toxic
substances or toxic pollutants, as those terms are used in the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substance Control Act, the Clean Air Act or the Clean Water Act, in
violation of any regulations promulgated pursuant thereto or in any other
applicable law where such violation could
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reasonably be expected to have, individually or together with other violations,
a Material Adverse Effect.
SECTION 7.18 Subsidiaries. As of the Closing Date, the
Company has no Subsidiaries, and no Subsidiary has a Subsidiary other than
those specifically disclosed in part (a) of Schedule VIII, and neither the
Company nor any Subsidiary has any equity investments in any other corporation
or entity other than those specifically disclosed in part (b) of Schedule VIII.
The state of incorporation, address, principal place of business and a list of
other business locations for each Subsidiary is specified in part (a) of
Schedule VIII. The Company and/or each of its Subsidiaries is the owner,
directly or indirectly, free and clear of all Liens (except for Liens in favor
of the Agent and the Banks and transfer restrictions contained in the Dealer
Franchise Agreements), of all of the issued and outstanding voting stock of
each Subsidiary disclosed on Schedule VIII (except where ownership of less than
one hundred percent (100%) is indicated on Schedule VIII). All shares of such
stock have been validly issued and are fully paid and nonassessable, and no
rights to subscribe to additional shares have been granted or exist.
SECTION 7.19 Engaged in Motor Vehicle Sales. The Floor Plan
Borrowers are engaged in the business of selling new and/or Used Motor
Vehicles; all such Motor Vehicles consist solely of goods held by the Borrowers
for sale; no sales or other transactions involving such Motor Vehicles are and
will not become subject to set-off, counterclaim, defense, allowance, or
adjustment (other than warranty claims, the aggregate amount of which shall not
be material); except as set forth in Schedule VII, as of the Closing Date,
there is no financing statement, or similar statement or instrument of
registration under the laws of any jurisdiction, covering or purporting to
cover any interest of any kind in all such Motor Vehicles or their proceeds on
file or registered in any public office other than a financing statement in
favor of the Agent for the benefit of the Banks covering all such Motor
Vehicles; except as set forth in Schedule VII, as of the Closing Date, there is
no other floor plan or other financing arrangement with any party other than
the Agent for the benefit of the Banks with respect to all such Motor Vehicles;
and except as set forth in Schedule VII, as of the Closing Date, none of the
Borrowers has made any other verbal or written contract or arrangement of any
kind, the performance of which by the other party thereto would give rise to a
Lien against any such Motor Vehicle, or the proceeds thereof; all such Motor
Vehicles are free from damage caused by fire or other casualty, unless covered
by insurance, subject to customary deductibles. The locations (and addresses)
set forth in Schedule IV are the locations at which the Company and its
Subsidiaries keep the Motor Vehicles held as inventory, except when such Motor
Vehicles may be in transit between locations, in transit for 'dealer swaps' or
being test driven by potential customers. The addresses set forth in Schedule
IV are each Floor Plan Borrower's place of business if such Person has only one
such place of business; or a Floor Plan Borrower's chief executive office if it
has more than one place of business. All of each Floor Plan Borrower's books
and records with regard to all Motor Vehicles are maintained and kept at the
address(es) of such Floor Plan Borrower set forth in Schedule IV.
SECTION 7.20 Dealer Franchise Agreements. As of the Closing
Date, none of the Borrowers is a party to any dealer franchise agreements
("Dealer Franchise Agreements") other than those specifically disclosed in
Schedule IX, which schedule shows the Manufacturer and the Borrower which is a
party to each such agreement, the date such agreement was entered into and the
expiration date (if any) of each such agreement. Each of the Dealer Franchise
Agreements is
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currently in full force and effect, and no Borrower has received any notice of
termination with respect to any such agreements; and, except as disclosed on
Schedule IX, no Borrower is aware of any event which with notice, lapse of
time, or both would allow any Manufacturer which is a party to any of the
Dealer Franchise Agreements to terminate any such agreements. There exists no
actual or threatened termination, cancellation, or limitation of, or any
modification or change in, the business relationship between any Borrower and
any customer or any group of customers whose purchases individually or in the
aggregate are material to the business of such Borrower, or with any material
Manufacturer, and there exists no present condition or state of facts or
circumstances which could reasonably be expected to have a Material Adverse
Effect.
ARTICLE VIII
CONDITIONS OF LENDING
SECTION 8.1 Conditions Precedent to Closing Date. The
Closing Date shall be deemed to have occurred when the following conditions
precedent shall have occurred and the Agent shall have received on or before
such date the following, each dated (unless otherwise indicated) the Closing
Date and, with respect to all such documents referred to in Section 8.1(a),
Section 8.1(c), Section 8.1(d), Section 8.1(e), Section 8.1(f), Section 8.1(g),
Section 8.1(h) and Section 8.1(i) in sufficient copies for each Bank:
(a) A counterpart of this Agreement (to which all of
the Exhibits and Schedules have been attached) executed by the Borrowers, the
Agent, the Floor Plan Agent, the Swing Line Bank and the Banks.
(i) (1) Notes of the Borrowers dated the
Closing Date, properly executed by the Borrowers to the order of the Banks,
respectively.
(ii) The Swing Line Note, dated the Closing
Date, properly executed by the Floor Plan Borrowers to the order of the Swing
Line Bank.
(b) Counterparts of each of the following:
(i) a Security Agreement in the form set
forth in Exhibit G;
(ii) a Pledge Agreement in the form set
forth in Exhibit E;
(iii) Mortgages in the form set forth in
Exhibit D, with respect to each parcel or tract of real
property required by the Agent to be encumbered by a Lien in
favor of the Agent for the benefit of the Banks;
(iv) Leasehold Mortgage in the form set forth
in Exhibit I, covering the same property referenced in
8.1(c)(iii);
(v) Landlord Estoppel Agreements in the form
set forth in Exhibit J, with respect to all real property
leased by any of the Borrowers;
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(vi) First Lienholder Estoppel Agreements in
the form set forth in Exhibit K, with respect to all real
property subject to Non-Recourse Real Estate Debt; and
(vii) Any other necessary Security Documents
in the form satisfactory to the Agent and its Counsel;
each of which, if required by this Agreement, shall be duly executed by the
parties thereto.
(c) The Banks shall have received from each Borrower,
a certificate dated as of the Closing Date (i) a copy of the certificate of
incorporation of the Company and each of its Subsidiaries, and a certificate as
to the good standing of and charter documents filed by the Company and each of
its Subsidiaries from such Secretary of State; (ii) a copy of the certificate
of authority to do business as a foreign corporation in each state in which the
Company or such Subsidiary maintains activities which require such
certification, certified by the Secretary of State of such state and a
certificate as to the good standing of the Company and/or each such Subsidiary
from the Comptroller or other official state official responsible for the
delivery of such certification; (iii) a certificate of the Secretary or an
Assistant Secretary of the Company and each of its Subsidiaries, dated the
Closing Date and certifying (A) that attached thereto is a true and complete
copy of its articles and bylaws as in effect on the date of such
certificate,(B) that attached thereto is a true and complete copy of
resolutions or unanimous consent duly adopted by its Board of Directors
authorizing the execution, delivery and performance of the Agreement, Notes,
the Swing Line Note and/or Loan Documents to which it is a party, and that
such resolutions have not been modified, rescinded or amended and are in full
force and effect, and (C) as to the incumbency and specimen signature of each
officer of each Borrower executing this Agreement, the Notes, the Swing Line
Note, any of the Loan Documents or any other document delivered in connection
herewith or therewith; (iii) a certificate of another officer of each Borrower,
which is a party to this Agreement, the Notes, the Swing Line Note and/or any
of the Loan Documents as to the incumbency and specimen signature of the
Secretary or such Assistant Secretary of such Person; and (iv) such other
documents as Jackson Walker L.L.P., special counsel for the Agent, may
reasonably request.
(d) A certificate of a Senior Vice President, an
Executive Vice President or a Vice President of each Borrower dated the Closing
Date certifying (i) the truth of the representations and warranties made by
such Borrower in this Agreement, and (ii) the absence of the occurrence and
continuance of any Default or Event of Default.
(e) The Agent shall have received the Agent's Letter
duly executed by the Company.
(f) The Floor Plan Agent shall have received the
Floor Plan Agent's Letter duly executed by the Company.
(g) The opinion of counsel to the Borrowers and any
Subsidiary which signs any of the Loan Documents, dated the initial Borrowing
Date, addressed to the Agent and the Banks and in the form of Exhibit L hereto.
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(h) An Administrative Questionnaire completed by each
Bank and, if required, the tax forms set forth in Section 5.14.
(i) The fees and disbursements required to be paid by
Section 13.4 on the Closing Date shall have been paid.
(j) The Company shall have filed its S-1 in
substantial compliance with all rules and regulations of the Securities and
Exchange Commission.
SECTION 8.2 Conditions Precedent to Initial Borrowing.
(a) The date on which the obligation of each Bank to make
the initial Acquisition Loans, or of the Issuing Bank to issue any Letter of
Credit (the "Acquisition Funding Date")to the Company shall be deemed to have
occurred and is subject to the conditions precedent that:
(i) Each document (including, without limitation,
any UCC financing statement) required by the Security Documents or
under law or requested by Agent to be filed, registered or recorded in
order to create, in favor of Agent, for the benefit of Banks, a
perfected first Lien (subject to any Permitted Liens) on the Collateral
owned by the Company shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and the Agent, as
herein provided, shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary
fee, tax or expense relating thereto; and
(ii) Such other and further conditions
shall have been fulfilled as the Agent, or its counsel shall have
reasonably determined.
(b) The date on which the obligation of each Bank to make
the initial Floor Plan Loans or of the Swing Line Bank to make the initial
Swing Line Loan, or of the Floor Plan Agent to issue any Drafting Agreement
("each, a Floor Plan Funding Date") to any Floor Plan Borrower shall be deemed
to have occurred and is subject to the condition precedent that :
(i) Each document (including, without limitation,
any UCC financing statement) required by the Security Documents or
under law or requested by Agent or the Floor Plan Agent to be filed,
registered or recorded in order to create, in favor of Agent, for the
benefit of Banks, a perfected first Lien on the Collateral owned by
such Floor Plan Borrower shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and the Agent or Floor
Plan Agent, as herein provided, shall have received an acknowledgment
copy, or other evidence satisfactory to it, of each such filing,
registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto;
(ii) The Floor Plan Agent shall have
completed to its' satisfaction any and all audits of Motor Vehicles
owned by or in transit to each such Floor Plan Borrower; and
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(iii) The Company shall have delivered to the Agent
copies of substantially all Dealer Franchise Agreements between
Manufacturers and its Subsidiaries, which Dealer Franchise Agreements
have been duly executed between a Manufacturer and such Subsidiary.
For purposes of this subsection, the term "substantially all" shall
mean that the Agent and the Floor Plan Agent shall be satisfied in
their sole determination that a sufficient amount of duly executed
Dealer Franchise Agreements have been delivered by the Company.
(c) Such other and further conditions shall have been
fulfilled as the Agent, the Floor Plan Agent or its counsel shall have
reasonably determined.
SECTION 8.3 Conditions Precedent to Each Borrowing. The
obligation of each Bank to make a Loan on the occasion of any Borrowing
(including the initial Acquisition Borrowing and the initial Floor Plan
Borrowing) and the obligation of the Issuing Bank to issue Letters of Credit
and the obligation of the Floor Plan Bank to issue Drafting Agreements shall be
subject to the further conditions precedent that on the Borrowing Date of such
Borrowing or Issuance the following statements shall be true (and the
acceptance by any Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty by the Company that on the date of such Borrowing
such statements are true):
(a) The representations and warranties contained in
Article VII are correct on and as of the date of such Borrowing, before and
after giving effect to such Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date;
(b) No event has occurred and is continuing, or would
result from such Borrowing or from the application of the proceeds therefrom,
which constitutes either a Default or an Event of Default; and
(c) Following the making of such Borrowing or
Issuance of any Letter of Credit and all other Borrowings to be made on the
same day under this Agreement, except as may otherwise be permitted hereunder
(i) if such Borrowing is a Floor Plan Loan Borrowing, the aggregate principal
amount of all Floor Plan Loans outstanding plus all Swing Line Loans
outstanding shall not exceed the Floor Plan Loan Commitment, (ii) if such
Borrowing is an Acquisition Loan Borrowing, the aggregate principal amount of
all Acquisition Loans outstanding plus Letters of Credit Obligations
outstanding shall not exceed the Acquisition Loan Commitment, (iii) if such
Borrowing is a Swing Line Loan Borrowing, the aggregate principal amount of all
Swing Line Loans outstanding shall not exceed the Swing Line Commitment, (iv)
if a Letter of Credit is issued, the total amount of Letter of Credit
outstanding plus the aggregate principal amount of all Acquisition Loans
outstanding shall not exceed the Acquisition Loan Commitment, and (v) the
aggregate principal amount of all Loans and Letter of Credit Obligations then
outstanding shall not exceed the Total Commitment.
SECTION 8.4 Conditions Precedent to Conversions and
Continuations. The obligation of the Banks to convert any existing Borrowing
into a Eurodollar Borrowing or to continue any existing Borrowing as a
Eurodollar Borrowing is subject to the condition precedent that on the date of
such conversion or continuation no Default or Event of Default shall have
occurred and be continuing or would result from the making of such conversion
or continuation. The acceptance of
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the benefits of each such conversion and continuation shall constitute a
representation and warranty by the Company to each of the Banks that no Default
or Event of Default shall have occurred and be continuing or would result from
the making of such conversion or continuation.
ARTICLE IX
AFFIRMATIVE COVENANTS
So long as this Agreement shall remain in effect or the principal of
or interest on any Note, the Swing Line Note, any Commitment Fee or any other
fee, expense or amount payable hereunder shall be unpaid and until the
Commitments of the Banks shall expire or terminate, until no Letter of Credit
Obligations are outstanding, and until all Drafting Agreements are terminated,
the Company, as to itself and as to all of the other Borrowers and each of the
Borrowers other than the Company, as to itself and its Subsidiaries only,
covenant and agree with the Agent, the Floor Plan Agent, the Swing Line Bank
and each Bank that:
SECTION 9.1 Existence. The Company will maintain and
preserve, and except as permitted by Section 10.3, will cause each Subsidiary
to maintain and preserve, its respective existence and good standing under the
laws of its state of jurisdiction, as a corporation or other form of business
organization, as the case may be, and all rights, privileges, licenses,
patents, patent rights, copyrights, trademarks, trade names, franchises and
other authority to the extent material and necessary for the conduct of their
respective businesses in the ordinary course as conducted from time to time.
SECTION 9.2 Repair. The Company will maintain, preserve and
keep, and will cause each of its Subsidiaries to maintain, preserve and keep,
all of its properties in good repair, working order and condition (ordinary
wear and tear excepted), and the Company will make, and will cause each of the
Subsidiaries to make, all necessary and proper repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be fully preserved and maintained; the Company will at
all times do or cause to be done all things necessary to preserve, renew and
keep in full force and effect, and will cause each Subsidiary to do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect, the rights, licenses, permits, franchises, patents, copyrights,
trademarks and trade names material to the conduct of its businesses; the
Company and each of its Subsidiaries will maintain and operate such businesses
in substantially the manner in which they are presently conducted and operated
(subject to changes in the ordinary course of business); the Company and each
of its Subsidiaries will comply with all laws and regulations applicable to the
operation of such businesses whether now in effect or hereafter enacted and
with all other applicable laws and regulations except where the failure to
comply could not reasonably be expected to have a Material Adverse Effect; and
the Company and each of its Subsidiaries will take all action which may be
required to obtain, preserve, renew and extend all licenses, permits and other
authorizations which may be material to the operation of such businesses.
SECTION 9.3 Insurance. The Company will maintain, on a
consolidated basis, insurance to such extent and against such hazards and
liabilities as is commonly maintained by companies similarly situated or as may
be required in the Security Documents including, without limitation with
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respect to Motor Vehicles owned by Floor Plan Borrowers, naming the Agent, for
the benefit of the Banks, as Mortgagee (in connection with any real estate),
lender loss payee and additional loss payee.
WARNING
UNLESS EACH BORROWER PROVIDES THE AGENT WITH EVIDENCE OF THE INSURANCE COVERAGE
AS REQUIRED BY THE AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE AGENT (AT ITS
DISCRETION, OR ACTING AT THE REQUEST OF THE FLOOR PLAN AGENT) MAY PURCHASE
INSURANCE AT THE BORROWER'S EXPENSE TO PROTECT THE BANKS' INTEREST. THIS
INSURANCE MAY, BUT NEED NOT, ALSO PROTECT THE BORROWER'S INTEREST. IF THE
COLLATERAL BECOMES DAMAGED, THE COVERAGE THE AGENT PURCHASES MAY NOT PAY ANY
CLAIM ANY BORROWER MAKES OR ANY CLAIM MADE AGAINST THE BORROWER. EACH BORROWER
MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT THE BORROWER HAS
OBTAINED PROPERTY COVERAGE ELSEWHERE.
EACH BORROWER IS RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED
BY THE AGENT. THE COST OF THIS INSURANCE MAY BE ADDED TO THE OBLIGATIONS. IF
THE COST IS ADDED TO THE OBLIGATIONS, THE INTEREST RATE PROVIDED IN SECTION 5.3
SHALL APPLY TO SUCH ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE MAY BE THE
DATE ANY BORROWER'S PRIOR COVERAGE LAPSED OR THE DATE THE BORROWER FAILED TO
PROVIDE PROOF OF COVERAGE.
THE COVERAGE THE AGENT PURCHASES MAY BE CONSIDERABLY MORE EXPENSIVE
THAN INSURANCE ANY BORROWER CAN OBTAIN ON ITS OWN AND MAY NOT SATISFY ANY NEED
FOR PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE REQUIREMENTS
IMPOSED BY APPLICABLE LAW.
SECTION 9.4 Obligations and Taxes. The Company will pay and
discharge and will cause each of its Subsidiaries to pay and discharge, when
due, all taxes, assessments and governmental charges or levies imposed upon the
Company or such Subsidiary, as the case may be, as well as all lawful claims
for labor, materials and supplies or otherwise unless and only to the extent
that the Company or such Subsidiary, as the case may be, is contesting such
taxes, assessments and governmental charges, levies or claims in good faith and
by appropriate proceedings and the Company or such Subsidiary has set aside on
its books such reserves or other appropriate provisions therefor as may be
required by generally accepted accounting principles.
SECTION 9.5 Financial Statements; Reports. The Company will
furnish to the Agent and each Bank:
(a) Annual Audit Reports. Within 120 days after the
end of each fiscal year of the Company, a copy of the annual audit report of
the Company and its Subsidiaries prepared on a consolidated basis in conformity
with generally accepted accounting principles consistently applied
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and certified by Arthur Andersen or another independent certified public
accountant of recognized national standing;
(b) Quarterly Financial Statements. Within 60 days
after the end of each quarter (except the last quarter) of each fiscal year of
the Company, a copy of the Form 10-Q of the Company, for such quarter, prepared
in accordance with the rules, regulations and guidelines of the Securities and
Exchange Commission, subject to normal year end audit adjustments;
(c) Officer's Certificate. Together with the
financial statements furnished by the Company under the preceding clauses (a)
and (b), a certificate of the Company's Chief Financial Officer or Vice
President and Treasurer dated the date of such annual audit report or such
quarterly financial statement, as the case may be, to the effect that no Event
of Default or Default, has occurred or is continuing, or if there is any such
event, describing it and the steps, if any, being taken to cure it;
(d) SEC and Other Reports. Copies of each filing and
report made by the Company or any of its Subsidiaries with or to any securities
exchange or the Securities and Exchange Commission and each communication from
the Company or any of its Subsidiaries to shareholders generally, promptly upon
the making thereof;
(e) Manufacturer/Dealer Statements. As soon as
available, but in any event within thirty (30) days after the end of each
month, copies of each Manufacturer/Dealer Statement of each Floor Plan Borrower
delivered during such month;
(f) Inventory Detail Report. Upon request of the
Floor Plan Agent, the Agent or any Bank, copies of the Inventory Detail Report
of each Floor Plan Borrower individually and on a consolidated basis; and
(g) Requested Information. Promptly, from time to
time, such other reports or information as the Agent, the Floor Plan Agent or
any Bank may reasonably request.
SECTION 9.6 Litigation and Other Notices. The Company will
notify the Agent and the Banks in writing of any of the following immediately
upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken by the Person(s) affected with respect
thereto:
(a) Judgment. The entry of any judgment or decree
against the Company and/or any of its other Subsidiaries if the aggregate
amount of such judgment or decree exceeds $500,000 (after deducting the amount
with respect to which the Company or such Subsidiary is insured and with
respect to which the insurer has assumed responsibility in writing);
(b) Suits and Proceedings. The filing or
commencement of any action, suit or proceeding, whether at law or in equity or
by or before any court or any Governmental Authority as to which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
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(c) Default. The occurrence of any Event of Default
or Default;
(d) Material Adverse Change. The occurrence of any
event which could reasonably be expected to have a Material Adverse Effect.
(e) Pension and Welfare Plans. The occurrence of a
Reportable Event with respect to any Plan; the institution of any steps by the
Company, any of its Subsidiaries or any ERISA Affiliate, the PBGC or any other
Person to terminate any Plan; the institution of any steps by the Company, or
any of its Subsidiaries or any ERISA Affiliate to withdraw from any Plan; or
the incurrence of any material increase in the contingent liability of the
Company or any of its Subsidiaries with respect to any post-retirement welfare
benefits; and
(f) Other Events. The occurrence of such other
events as the Agent or the Required Banks may reasonably specify from time to
time.
SECTION 9.7 ERISA. Each Borrower will comply with the
applicable provisions of ERISA except where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.
SECTION 9.8 Books, Records and Access. Each Borrower will
maintain complete and accurate books and records in which full and correct
entries in conformity with generally accepted accounting principles shall be
made of all dealings and transactions in relation to the business and
activities of such Borrowers. Each Borrower will permit reasonable access by
the Agent and each Bank, upon reasonable request, to the books and records
relating to such Borrower during normal business hours, to permit or cause to
be permitted, the Agent and each Bank to make extracts from such books and
records and permit, or cause to be permitted, upon reasonable request, any
authorized representative designated by any Bank to discuss the affairs,
finances and condition of such Borrower with such Person's principal financial
officers and principal accounting officers and such other officers as such
Borrower shall deem appropriate.
SECTION 9.9 Use of Proceeds. The Borrowers shall use the
proceeds of the Loans for only the following purposes:
(a) Floor Plan Loans. The proceeds of the Floor Plan
Loans may be used only to finance the purchase of Motor Vehicles for resale in
the ordinary course of business of the Floor Plan Borrowers.
(b) Acquisition Loans. The proceeds of the
Acquisition Loans may be used only for the following purposes: (i) for working
capital and general corporate purposes, including, without limitation, the
issuance of Letters of Credit and to pay outstanding Floor Plan Loans; and (ii)
to make Permitted Acquisitions.
(c) Swing Line Loans. The proceeds of the Swing Line
Loans may be used only to finance the purchase of Motor Vehicles for resale in
the ordinary course of business of the Borrowers.
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(d) All Loans. No Loans shall be used for any
purpose which would be in contravention of any Requirement of Law.
SECTION 9.10 Nature of Business. The Borrowers will engage in
substantially the same field of business as they are engaged in on the date
hereof, and except as permitted in Section 10.5(k), will refrain from engaging
in, establishing or becoming in any way involved as a lender in the business of
automobile financing, sub-prime automobile financing or any other credit
transactions related to automobiles other than Retail Loan Guarantees.
SECTION 9.11 Compliance. The Borrowers will comply with all
statutes and governmental rules and regulations applicable to them including
all such statutes and government rules and regulations relating to
environmental pollution or to environmental regulation and control except where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect.
SECTION 9.12 Audits
(a) Entry on Premises. Each Floor Plan Borrower
shall permit a duly authorized representative of the Floor Plan Agent to enter
upon such Borrower's premises during regular business hours to perform audits
of Motor Vehicles in a manner satisfactory to the Agent, provided that the
Floor Plan Agent or its representative shall not perform an audit of such Motor
Vehicles prior to the occurrence of an Event of Default without having given
the applicable Borrower reasonable prior notice; and provided, further,
however, the Floor Plan Agent shall not be required to make more than six (6)
such audits in any fiscal year of any Floor Plan Borrower. Each Floor Plan
Borrower shall assist the Floor Plan Agent, and its representatives, in
whatever way necessary to make the inspections and audits provided for herein.
(b) Excess/Payments in Process. The Borrowers shall
maintain at all times Excess/Payments in Process in an amount of not less than
Three Million Dollars ($3,000,000), which amount may be increased or decreased
from time to time in the sole reasonable determination of the Floor Plan Agent
(the "Out of Balance Amount"). If and to the extent audits performed from time
to time by the Floor Plan Agent as provided in Section 9.12(a) reveal that any
Motor Vehicles of the Floor Plan Borrowers are for any consecutive thirty (30)
day period Out of Balance in an aggregate amount equal to or greater than the
Out of Balance Amount, the Floor Plan Agent shall so notify the Company. The
Company shall, or shall cause the other applicable Floor Plan Borrowers to,
deliver by the next Business Day after receipt of such notice, sufficient funds
so as to cause the Borrowings with respect to any such Motor Vehicles and/or
Floor Plan Loans which are Out of Balance to be in compliance with the Floor
Plan Advance Limits. If the Company or such other Floor Plan Borrowers fail to
deliver such funds, or any of them notifies the Floor Plan Agent that such
funds will not be delivered, the Floor Plan Agent shall, and the Floor Plan
Borrowers hereby authorize the Floor Plan Agent to, apply sufficient funds from
such Excess/Payments in Process to cause the Borrowings with respect to any
such Motor Vehicles and/or Floor Plan Loans which are Out of Balance to be in
compliance with the Floor Plan Advance Limits. The Floor Plan Agent shall
provide written notice (including via fax) to the Company on each Business Day
Excess/Payments in Process are so applied and the Floor Plan Borrowers shall,
on or before the next following Business Day, deposit sufficient funds to
restore the balance thereof back to the Out of Balance Amount then in effect.
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SECTION 9.13 Demonstration, Service Rental or Loaner Vehicles.
The Floor Plan Agent may from time to time limit the number of Motor Vehicles
which may be placed in service as Demonstrators, service rental or loaner
vehicles and establish other requirements for Demonstrators, service rental or
loaner vehicles as the Floor Plan Agent may reasonably determine. Each
Borrower shall maintain records at the premises where the Motor Vehicles are
kept evidencing which Motor Vehicles are being used as Demonstrators, service
rental or loaner vehicles.
SECTION 9.14 Disbursement Account. Subject to the terms and
conditions of this Agreement, including Sections 2.1 and 5.7 hereof, a Floor
Plan Borrower may prepay, in whole or in part, from time to time, outstanding
Floor Plan Loans, Swing Line Loans or Swing Line Overdraft Loans and may
reborrow Floor Plan Loans and Swing Line Loans.
Any or all of the Floor Plan Borrowers and the Floor Plan Agent, at
various times, may be parties to a corporate cash management service agreement
(the "Service Agreement") providing for a controlled disbursement account (the
"Disbursement Account") between such Floor Plan Borrower and the Floor Plan
Agent. Subject to the terms and conditions of this Agreement, each such Floor
Plan Borrower authorizes the Floor Plan Agent to fund the Disbursement Account,
on a daily basis if necessary, by advancing Loans under this Agreement to the
extent of availability under the aggregate Floor Plan Loan Commitments. Each
such Floor Plan Borrower acknowledges and agrees that any requests for funding
from the Disbursement Account will not be paid unless funds in an amount
sufficient to pay such requests are then available for reborrowing in
compliance with the terms and conditions of this Agreement, including Section
2.1 hereof to enable Floor Plan Agent to advance those funds to the
Disbursement Account. Floor Plan Agent agrees that any requests to be
submitted for payment through the Disbursement Account will not be made unless
sufficient funds are available and such request is made in compliance with the
terms and conditions of this Agreement to pay all such requests. Each Floor
Plan Borrower at all times is responsible for having sufficient available funds
in Excess/Payments in Process to pay all requests to be paid through the
Disbursement Account, whether these funds are advances under this Agreement or
otherwise. Each Floor Plan Borrower acknowledges and agrees that the Service
Agreement relating to the Disbursement Account may be canceled by the Floor
Plan Agent at any time upon written notice to the applicable Floor Plan
Borrower, notwithstanding anything to the contrary in the Service Agreement. A
copy of the form of Service Agreement may be attached to this Agreement by the
Floor Plan Agent at any time a Service Agreement is in effect between a Floor
Plan Borrower and the Floor Plan Agent, although the failure to attach it shall
not affect its validity or the effectiveness of this Agreement.
SECTION 9.15 Further Assurances.
(a) The Company shall and shall cause each of its
Subsidiaries to the extent applicable to execute, acknowledge, deliver, and
record or file such further instruments, including, without limitation, further
security agreements, financing statements, and continuation statements, and do
such further acts as may be reasonably necessary, desirable, or proper to carry
out more effectively the purposes of this Agreement, including, without
limitation, (i) causing any additions, substitutions, replacements, or
appurtenances to the Motor Vehicles to be covered by and subject to the Liens
created
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in this Agreement or the Documents to which any Floor Plan Borrower is a party;
and (ii) with respect to any Motor Vehicles which are or are required to be
subject to Liens created in this Agreement or any other Loan Document to which
any Floor Plan Borrower is a party, execute, acknowledge, endorse, deliver,
procure, and record or file any document or instrument, including, without
limitation, any financing statement, certificate of title, manufacturer's
statement of origin, certificate of origin, and dealer reassignment of any of
the foregoing which are evidences of ownership of such Motor Vehicles, deemed
advisable by the Agent or the Floor Plan Agent to protect the Liens granted in
this Agreement or the Loan Documents to which any of them respectively is a
party and against the rights or interests of third persons, and will pay all
reasonable costs connected with any of the foregoing;
(b) The Company shall and shall cause each of its
Subsidiaries to pledge the capital stock or other evidence of ownership of any
Person which becomes a Subsidiary of the Company or any of its Subsidiaries.
The Company shall cause all of its Subsidiaries which become Subsidiaries after
the Closing Date to execute the Addendum to Credit Agreement and Notes, if
applicable, and to execute such other Security Documents as the Agent and/or
the Floor Plan Agent shall reasonably request to establish Liens on the assets
of such Subsidiary consistent with those in place on the Closing Date.
(c) SMC Luxury Cars, Inc. and Southwest Toyota, Inc.
shall each, on or before sixty (60) days after the Closing Date, obtain the
consent of Toyota Motor Credit Corporation to permit the Agent, for the benefit
of the Banks, to file and perfect a Lien (subject only to any Permitted Liens)
on the Collateral owned by each of them, respectively. Until the date such
Liens have been filed and perfected, the EBITDA of each of SMC Luxury Cars,
Inc. and Southwest Toyota, Inc., respectively, shall not be considered in
determining the Acquisition Loan Advance Limit.
SECTION 9.16 Permitted Acquisitions.
(a) Subject to the remaining provisions of this
Section 9.16 applicable thereto and the requirements contained in the
definition of Permitted Acquisition, the Company may, from time to time after
the Closing Date, effect Permitted Acquisitions, as long as with respect
thereto each of the following conditions are satisfied:
(i) no Default or Event of Default is in
existence at the time of the consummation of such proposed
Acquisition or would exist after giving effect thereto, all
representations and warrants contained herein and in the other
Loan Documents shall be true and correct in all material
respects with the same effect as though such representations
and warranties were made on and as of the date of such
proposed Acquisition (both before and after giving effect
thereto), and no other agreement, contract or instrument to
which any Borrower is a party restricts such proposed
Acquisition;
(ii) the Company shall have given the
Agent at least 30 days (or ten Business Days, in the case of
clause (B) below) prior written notice of any such
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proposed Acquisition (each of such notices, a "Permitted
Acquisition Notice"), which notice shall (A) contain the
estimated date such proposed Acquisition is scheduled to be
consummated, (B) attach a true and correct copy of the draft
purchase agreement, letter of intent, description of material
terms or similar agreements executed by the parties thereto in
connection with such proposed Acquisition, (C) contain the
estimated aggregate purchase price of such proposed
Acquisition and the amount of related costs and expenses and
the intended method of financing thereof, (D) contain the
estimated amount of Acquisition Loans required to effect such
proposed Acquisition; and, (E) whether the target company will
be a Floor Plan Borrower;
(iii) the Company shall have provided the Banks
with all information related to the Auto Dealer being acquired
and the proposed Acquisition as the Agent shall reasonably
request, including, without limitation, delivery of the expert
reports (if any) prepared by accounting, environmental, and/or
other experts which the Company has obtained as the Agent
shall reasonably request;
(iv) (A) as soon as available but not less
than the earlier of three (3) days after the execution
thereof, a copy of the executed purchase agreement and all
related agreements, schedules and exhibits with respect to
such proposed Acquisition and (B) at the time of delivery of
the purchase agreement, certification from the Company as to
the purchase price for the acquisition (or a formula therefor)
and the estimated amount of all related costs, fees and
expenses and that, except as described, there are no other
amounts which will be payable in connection with the
respective proposed Acquisition;
(v) the Company shall have given the Agent,
at least ten (10) Business Days prior to the closing date of
the proposed Acquisition, a good faith estimate made by the
Company of its Consolidated Pro Forma EBITDA and Consolidated
Pro Forma Floor Plan Interest Expense, the calculations for
which, the Company shall have furnished to the Agent together
with audited statements from an auditor, satisfactory to the
Agent, supporting such calculations for Pro Forma Floor Plan
Interest Expense and such other information as the Agent may
have reasonably requested to determine the accuracy of such
calculation, calculated as of a date immediately after the
projected closing date of such proposed Acquisition, and the
amount of Consolidated Pro Forma EBITDA shall exceed zero for
the immediately preceding four (4) fiscal quarters of the
Company; provided, however, in the case of calculations based
on financial statements not audited by a nationally recognized
accounting firm reasonably acceptable to the Agent, the Agent
shall be satisfied that the consolidated EBITDA of the Auto
Dealer being acquired pursuant to the proposed Acquisition
exceeds zero for such period;
(vi) recalculations are made by the Company of
compliance with the covenants contained in Sections 10.14
through 10.17, inclusive, for the immediately preceding four
(4) fiscal quarters of the Company on a pro forma basis, and
such
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recalculations shall show that during such period, on a pro
forma basis, the Company would have been in compliance
therewith;
(vii) the Company shall have delivered updated
Schedules of the Agreement to the Agent; and
(viii) prior to the consummation of the
respective proposed Acquisition, the Company shall furnish the
Agent an officer's certificate executed by the chief financial
officer of the Company, certifying as to compliance with the
requirements of the applicable preceding clauses (i) through
(vii) and containing the calculations required in this Section
9.16(a). The consummation of each Permitted Acquisition shall
be deemed to be a representation and warranty by the Company
that all conditions thereto have been satisfied and that same
is permitted in accordance with the terms of this Agreement,
which representation and warranty shall be deemed to be a
representation and warranty for all purposes hereunder.
(ix) For each Permitted Acquisition involving
the creation of a direct or indirect Subsidiary of the
Company, not less than 100% of the capital stock or other
equity interest of such Subsidiary shall be directly owned by
the Company or another Borrower, and all such stock or other
equity interest shall be pledged to the Agent for the benefit
of the Banks pursuant to the Pledge Agreement or pursuant to a
similar agreement satisfactory to the Agent to the extent such
pledge is not prohibited by any Dealer Franchise Agreement to
which such Subsidiary is a party.
(x) The Required Banks shall have consented
in writing to the proposed Acquisition prior to the closing
thereof; provided, however, such consent shall be deemed to
have been granted if the Required Banks shall not have given
written notice of consent or rejection of such consent to the
Agent within thirty (30) days after receipt by the Agent of
the Permitted Acquisition Notice.
(b) The Company shall cause each Subsidiary that is
created, or is otherwise acquired pursuant to a Permitted Acquisition to
execute and deliver, an Addendum, if applicable, and the other applicable Loan
Documents, with the documentation to be in form and substance reasonably
satisfactory to the Agent. Each such Subsidiary shall also grant to the Agent,
for the benefit of the Banks, first priority perfected security interests in
all property of such Subsidiary subject only to Liens permitted by Section 10.2
acquired in connection with the Permitted Acquisition, and such Subsidiary
shall take all actions requested by the Agent or the Required Banks (including,
without limitation, the obtaining of UCC-11's, the filing of UCC-1's in
connection with the granting of such security interests. All security
interests required to be granted pursuant to this Section 9.16(c) shall be
granted pursuant to such security documentation (which shall be substantially
similar to the analogous Security Documents already executed and satisfactory
in form and substance to the Agent) and shall (except as otherwise consented to
by the Agent and the Required Banks) constitute valid and enforceable perfected
security interests prior to the rights of all third Persons and subject to no
other Liens, except Liens permitted under Section 10.2 . The security
documents and other instruments related thereto shall be duly recorded or filed
in such manner and in such places as are required by law to establish, perfect,
preserve and protect the Liens, in favor
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of the Agent for the benefit of the Banks, required to be granted pursuant to
such additional Security Documents and all taxes, fees and other charges
payable in connection therewith shall be paid in full by the Company. At the
time of the execution and delivery of such additional Security Documents, the
Company and the applicable Borrower shall cause to be delivered to the Agent
such documents as may be reasonably requested by the Agent to assure that this
Section 9.16(c) has been complied with. All actions required to be taken by
Section 9.16(c) with respect to the additional Collateral shall be completed no
later than ten (10) Business Days after the date on which the Permitted
Acquisition is effected.
ARTICLE X
NEGATIVE COVENANTS
So long as this Agreement shall remain in effect or the principal of
or interest on any Note, the Swing Line Note, any Commitment Fee or any other
expense or amount payable hereunder shall be unpaid and until the Commitments
of the Banks shall expire or terminate, the Letter of Credit Obligations are
paid in full and all Drafting Agreements are terminated, the Company, as to
itself and as to all of the other Borrowers and each of the Borrowers other
than the Company, as to itself only covenants and agrees with the Agent, the
Floor Plan Agent, the Swing Line Bank and each Bank that:
SECTION 10.1 Indebtedness. No Borrower will incur, create,
assume or suffer to exist any Indebtedness, except:
(a) The Notes, the Swing Line Note, and Indebtedness
and Obligations under this Agreement and the other Loan Documents;
(b) Indebtedness of any Borrower existing at the
Closing Date which is reflected in Schedule X hereto and all renewals and
extensions thereof;
(c) Indebtedness created under leases which, in
accordance with generally accepted accounting principles, have been recorded
and/or should have been recorded on the books of the applicable Borrower as
Capital Leases which, when combined with Indebtedness described in Section
10.1(d), is less than Three Million Dollars ($3,000,000);
(d) Indebtedness which is permitted in connection
with the purchase of property, provided that the aggregate amount of such
Indebtedness shall not exceed $3,000,000;
(e) Subordinated Indebtedness as specified in
Schedule XI;
(f) accounts payable (for the deferred purchase price
of Property or services) from time to time incurred in the ordinary course of
business and which are not in excess of ninety (90) days past the invoice or
billing date;
(g) Non-Recourse Real Estate Debt and any Guaranties
by the Company of such Indebtedness;
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(h) Indebtedness pursuant to Third Party Floor Plan
Financing;
(i) Indebtedness of any Subsidiary of the Company in
existence (but not incurred or created in connection with such acquisition) on
the date on which such Subsidiary is acquired by the Company and for which
Indebtedness neither the Company nor any of its other Subsidiaries has any
obligation and with respect to which Indebtedness none of the properties of the
Company or any of its other Subsidiaries is bound;
(j) Indebtedness secured by Liens upon any property
hereafter acquired by the Company or any of its Subsidiary to secure
Indebtedness in existence on the date of such acquisition (but not incurred or
created in connection with such acquisition), which Indebtedness is assumed by
such Person simultaneously with such acquisition, which Liens extend only to
such Property so acquired and with respect to which Indebtedness none of the
Company or any of its Subsidiaries (other than the acquiring Person) has any
obligation;
(k) Indebtedness owed by the Company or any of its
Subsidiaries to the Company or to any other Subsidiary;
(l) any Retail Loan Guaranties; provided that the
aggregate principal amount of such Retail Loan Guaranties shall not exceed
$12,000,000; and
(m) Indebtedness arising under any Service Agreement
as such term is defined in Section 9.14.
SECTION 10.2 Liens. No Borrower will incur, create, assume
or permit to exist any Lien on any of its property or assets, whether owned at
the date hereof or hereafter acquired, or assign or convey any rights to or
security interests in any future revenues, except:
(a) Liens securing payment of the Obligations;
(b) (i) Liens securing Indebtedness permitted by
Sections 10.1(c) or (d), but only on the property subject to such Capital Lease
or purchase-money arrangement, or (ii) securing Indebtedness permitted by
Sections 10.1(h), (i), (j) and (k);
(c) Liens referred to in Section 7.16;
(d) Liens securing Non-Recourse Real Estate Debt;
(e) extensions, renewals and replacements of Liens
referred to in paragraphs (a) through (d) of this Section 10.2 provided, that
any such extension, renewal or replacement Lien shall be limited to the
property or assets covered by the Lien extended, renewed or replaced and that
the Obligations secured by any such extension, renewal or replacement lien
shall be in an amount not greater than the amount of the Obligations secured by
the Lien extended, renewed or replaced; and
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(f) rights of set off which any Manufacturer may have
on Investments permitted under Section 10.5(i).
SECTION 10.3 Consolidations and Mergers. No Borrower shall
merge, consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except:
(a) any of its Subsidiaries may merge with the
Company, provided that the Company shall be the continuing or surviving
corporation, or with any one or more such Subsidiaries, provided that if any
such transaction shall be between Subsidiaries, one hundred percent (100%) of
the capital stock of which is a Wholly Owned Subsidiary and one of its
Subsidiaries which is not a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation;
(b) any Subsidiary of the Company may sell all or
substantially all of its assets (upon voluntary liquidation or otherwise) to
the Company or a Wholly-Owned Subsidiary); and
(c) any Subsidiary of the Company or the Company may
merge or consolidate with another Person; if (x) the Company or such Subsidiary
involved in the merger or the consolidation is the surviving corporation, and
(y) immediately prior to and after giving effect to such merger or
consolidation, there exists no Default or Event of Default.
SECTION 10.4 Disposition of Assets. Each Borrower agrees that
it shall not permit any Disposition (whether in one or a series of
transactions) of any property or assets (including Accounts, notes receivable,
and/or chattel paper, with or without recourse) or enter into any agreement so
to do, except:
(a) Dispositions of Motor Vehicles and dispositions
of other inventory in the ordinary course of business;
(b) Dispositions of assets, properties or businesses
by the Company or any of its Subsidiaries or Affiliates to any other Subsidiary
or to the Company;
(c) Dispositions of property in connection with any
consolidation or merger permitted by Schedule XIII hereof;
(d) Dispositions of the property described in
Schedule XIV attached hereto;
(e) Dispositions of equipment and other property
which is obsolete, worn out or no longer used or useful in such Person's
business, all in the ordinary course of business;
(f) Dispositions occurring as the result of a
casualty event, condemnation or expropriation; and
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(g) Dispositions of any property, assets (including
capital stock of its Subsidiaries and Affiliates) or businesses of the Company
not otherwise permitted by clauses (a) through (g) of this Section 10.4;
provided, that the aggregate book value of all such property, assets or
businesses sold, leased or otherwise disposed of during the term of this
Agreement shall not at any time exceed the greater of (i) Five Million Dollars
($5,000,000) or (ii) ten percent (10%) of the total book value of the assets of
the Company and each of its Subsidiaries, (determined on a consolidated basis
in accordance with generally accepted accounting principles, as of the end of
the immediately preceding fiscal quarter), and provided, further, that for any
such property, assets or business other than capital stock that is sold, leased
or otherwise disposed of, for purposes of determining compliance with this
Section 10.4, the value of any such property, asset or business shall be equal
to the book value of such property, asset or business as of the date of such
Disposition; and provided, further, that for purposes of determining compliance
with this Section 10.4, the value of any capital stock sold or disposed of
shall be determined by multiplying the number of shares of such capital stock
sold by the net book value per share of such capital stock; and provided,
further, that this Section 10.4 does not authorize Disposition of any Accounts,
notes receivable and/or Chattel Paper with or without recourse.
SECTION 10.5 Investments. No Borrower will make or permit to
exist any Investment in any Person, except for:
(a) Permitted Acquisitions;
(b) extensions of credit in the nature of Accounts
receivable or notes receivable and/or chattel paper arising from the sale of
goods and services in the ordinary course of business;
(c) shares of stock, obligations or other securities
received in settlement of claims arising in the ordinary course of business;
(d) Investments in securities, maturing within two
(2) years and issued or fully guaranteed or insured by the United States of
America or any agency thereof;
(e) Investments in commercial paper, maturing in two
hundred seventy (270) days or less from the date of issuance, rated in the
highest or second highest grade by a nationally recognized credit rating
agency;
(f) Investments in United States Dollar denominated
and Eurodollar denominated time deposits, maturing within two (2) years from
the date of such Investment and issued by a bank or trust company having
capital, surplus and undivided profits aggregating at least Five Hundred
Million Dollars ($500,000,000);
(g) Investments outstanding on the date hereof in
Subsidiaries by the Company and its Subsidiaries;
(h) Investments in negotiable instruments held by
Comerica Securities, Inc. which are acceptable to the Floor Plan Agent;
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(i) Investments with a Manufacturer's affiliated
finance company in Manufacturer floor plan offset accounts in an amount not to
exceed $25,000,000; provided however that Agent shall have a security interest
therein second only to a Lien of third party floor plan lender;
(j) Investments in capital assets, subject to the
limitations set forth in Section 10.11.
(k) Investments in seller financed notes in
connection with Motor Vehicles at Foyt Motors, Inc. not to exceed $2,000,000 in
the aggregate at anytime.
SECTION 10.6 Transactions with Affiliates. No Borrower will
enter into any transaction with any Affiliate except in the ordinary course of
business and upon fair and reasonable terms no less favorable than the
applicable Borrower could obtain or could become entitled to in an arm's-length
transaction with a Person which was not an Affiliate.
SECTION 10.7 Other Agreements. No Borrower will enter into
any agreement containing any provision which would be violated or breached by
such Borrower's performance of its Obligations hereunder or under any
instrument or document delivered or to be delivered by the Borrowers hereunder
or in connection herewith if the effect of such violation or breach could
reasonably be expected to have a Material Adverse Effect.
SECTION 10.8 Fiscal Year; Accounting. No Borrower will change
its fiscal year or method of accounting (other than immaterial changes and
methods and changes authorized by generally accepted accounting principles).
SECTION 10.9 Credit Standards. No Borrower will modify in any
way the credit standards and procedures, the collection policies or the loss
recognition procedures with respect to the creation or collection of Accounts,
notes received and/or chattel paper.
SECTION 10.10 Pension Plans. No Borrower will permit any
condition to exist in connection with any Plan which might constitute grounds
for the PBGC to institute proceedings to have such Plan terminated or a trustee
appointed to administer such Plan, or engage in, or permit to exist or occur
any other condition, event or transaction with respect to any Plan which could
reasonably be expected to have Material Adverse Effect.
SECTION 10.11 Capital Expenditures. The Borrowers will not
make expenditures for capital or fixed assets on improvements in any
consecutive twelve (12) month period in excess of Five Million Dollars
($5,000,000) in the aggregate.
SECTION 10.12 Net Worth of Company. The Company will not at
any time permit (a) its Consolidated Tangible Net Worth to be less than
twenty-five million dollars ($25,000,000), or (b) its Shareholders' Equity to
be less than an amount equal to the sum of (x) $85,000,000 plus (y)
seventy-five percent (75%) of Consolidated Net Income, computed on a cumulative
basis, for the period beginning on December 31, 1997 and ending on the date of
determination (provided that no negative adjustment will be made in the event
that Consolidated Net Income is a deficit figure for such period), plus (z) one
hundred percent (100%) of the net proceeds (cash or non-cash) realized
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from the issuance of any equity securities by the Company (or other capital
contributions made to the Company) after December 31, 1997.
SECTION 10.13 Restricted Payments. Each Borrower agrees that
it shall not declare or make any Restricted Payment, except that any Borrower
may make the following Restricted Payments provided that immediately prior to
and after giving effect to the declaration of any dividend, and immediately
prior to and after giving effect to the payment of any Restricted Payment,
there exists no Default or Event of Default:
(a) any Borrower may declare and make dividend
payments or other distributions payable solely in its capital stock;
(b) any Subsidiaries of the Company may declare and
make Restricted Payments to the Company or to any other Subsidiaries of the
Company;
(c) any Borrower may declare and pay cash dividends
on its capital stock, provided (i) no Default or Event of Default has occurred,
is continuing or would be created thereby and (ii) that the aggregate cash
dividends paid by such Borrower shall not exceed an amount equal to
thirty-three and three-one-hundredths percent (33.3%) of the aggregate
Consolidated Net Income for the period commencing on December 31, 1997 and
ending on the date of determination taken as a single accounting period.
SECTION 10.14 Fixed Charge Coverage Ratio. The Company will
not permit (as of the end of any fiscal quarter) its Fixed Charge Coverage
Ratio to be less than 1.25 to 1, such ratio to be calculated as of the end of
each fiscal quarter of the Company based upon the four fiscal quarters
immediately preceding such date of determination.
SECTION 10.15 Interest Coverage Ratio. The Company will not
permit (as of the end of any fiscal quarter) its Interest Coverage Ratio to be
less than 2.50 to 1, such ratio to be calculated as of the end of each fiscal
quarter of the Company based upon the four fiscal quarters immediately
preceding such date of determination.
SECTION 10.16 Leverage Ratio. The Company shall not, at any
time, permit its Leverage Ratio to be greater than 2.0 to 1.
SECTION 10.17 Current Ratio. The Company shall not, at any
time, permit its Current Ratio to be less than 1.05 to 1.
ARTICLE XI
EVENTS OF DEFAULT
SECTION 11.1 Events of Default. In case of the happening of
any of the following events (herein called "Events of Default"):
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(a) any representation or warranty made or deemed
made in or in connection with this Agreement, the Notes, the Swing Line Note,
any of the Loan Documents or any of the Borrowings hereunder or in any report,
certificate, financial statement or other instrument furnished in connection
with this Agreement or the execution and delivery of the Notes, the Swing Line
Note or any of the Loan Documents or the making of any of the Borrowings
hereunder shall prove to have been false or misleading in any material respect
when made or deemed made;
(b) Default shall be made in the payment of any
principal of any Loan when and as the same shall become due and payable
pursuant to the terms of this Agreement, whether at the due date thereof or at
a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) Default shall be made in the payment of any
interest on any Loan or any Commitment Fee or any other amount due under this
Agreement, when and as the same shall become due and payable which shall remain
unremedied for a period of five (5) days;
(d) Default shall be made in the due observance or
performance of any covenant, condition or agreement contained in Sections 6.3
[Risk Participations, Drawings and Reimbursements], 9.1 [Existence], 9.3
[Insurance], 9.5[ Financial Statements; Reports], 9.6 [Litigation and Other
Notices], 9.8 [Books, Records and Access], 9.10 [Nature of Business], 9.13
[Demonstration, Service Rental or Loaner Vehicles] or in Article X [Negative
Covenants];
(e) except as provided in Sections 11.1(a) through
(d), inclusive, Default shall be made in the due observance or performance of
any other covenant, condition or agreement to be observed or performed pursuant
to this Agreement or any of the Loan Documents and such Default shall continue
unremedied for thirty (30) days after the earlier to occur of (i) any Borrower
obtaining knowledge thereof or (ii) written notice thereof having been given to
the Company;
(f) any Borrower shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code or any other federal or state bankruptcy, insolvency, liquidation
or similar law, (ii) consent to the institution of, or fail to contravene in a
timely and appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for such Borrower or for a
substantial part of such Borrower's property or assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors, (vi)
become unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take any corporate or other action for the
purpose of effecting any of the foregoing;
(g) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent jurisdiction
seeking (i) relief in respect of any Borrower, or of a substantial part of the
property or assets of any Borrower, under Title 11 of the United States Code or
any other federal or state bankruptcy, insolvency, receivership or similar law,
(ii) the appointment of a receiver, trustee, custodian, sequestrator or similar
official for any Borrower or for a substantial part of the property of any
Borrower or (iii) the winding-up or liquidation of any Borrower; and such
proceeding or petition shall continue undismissed for sixty (60) days or an
order or decree approving or ordering any of the foregoing shall continue
unstayed and in effect for sixty (60) days;
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(h) default or defaults (other than defaults in the
payment of principal or interest) shall be made with respect to any
Indebtedness of any Borrower, if the total amount of such Indebtedness in
default exceeds in the aggregate, an amount equal to One Million Dollars
($1,000,000) and if the effect of any such default or defaults shall be to
accelerate, or to permit the holder or obligee of any such Indebtedness (or
any trustee on behalf of such holder or obligee) to accelerate (with or without
notice or lapse of time or both), the maturity of any such Indebtedness; or any
payment of principal or interest, regardless of amount, on any Indebtedness of
the Borrowers which exceeds in the aggregate, an amount equal to One Million
Dollars ($1,000,000) shall not be paid when due, whether at maturity, by
acceleration or otherwise (after giving effect to any period of grace as
specified in the instrument evidencing or governing such Indebtedness);
(i) a Reportable Event or Reportable Events shall
have occurred with respect to any Plan or Plans that reasonably could be
expected to result in a Material Adverse Effect.
(j) there shall be entered against the Company or any
of its Subsidiaries one or more judgments or decrees in excess of Five Million
Dollars ($5,000,000) in the aggregate at any one time outstanding for the
Company and all such Subsidiaries and all such judgments or decrees in the
amount of such excess shall not have been vacated, discharged, stayed or bonded
pending appeal within sixty (60) days from the entry thereof, excluding those
judgments or decrees for and to the extent which the Company or any such
Subsidiary is insured and with respect to which the insurer has assumed
responsibility in writing or for and to the extent which the Company or any
such Subsidiary is otherwise indemnified if the terms of such indemnification
are satisfactory to the Required Banks;
(k) there shall occur any material loss or change to
any Dealer Franchise Agreement between any Borrower and a Manufacturer, which
has a Material Adverse Effect;
(l) there occurs any Material Adverse Effect;
(m) any of the Loan Documents shall cease to be
legal, valid and binding agreements enforceable against the Person executing
the same in accordance with the respective terms thereof except as permitted by
the terms hereof or thereof shall in any way be terminated or become or be
declared ineffective or inoperative or shall in any way whatsoever cease to
give or provide the respective Liens, security interests, rights, titles,
interests, remedies, powers or privileges intended to be created thereby;
(n) an audit performed by the Floor Plan Agent
pursuant to the provisions of Section 9.12(a), reveals that Motor Vehicles
have, for a period of thirty consecutive (30) days been Out of Balance in an
amount equal to or greater than the Out of Balance Amount and none of the Floor
Plan Borrowers has delivered sufficient funds to restore Excess/Payments in
Process to an amount not less than the Out of Balance Amount; or
(o) an audit performed by the Floor Plan Agent
pursuant to the provisions of Section 9.12(a) identifies any specific motor
vehicle by vehicle identification number as an exception to the payment
requirements of Section 2.5, and the Loan advanced to fund such Motor Vehicle
has
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not been repaid within thirty (30) days (except in the case of Fleet Motor
Vehicles, which shall be sixty (60) days) of such audit;
then, and in any such event (other than an event with respect to the Company
described in paragraph (f) or (g) above), and at any time thereafter during the
continuance of such event, (i) the Agent may, and at the request of the
Required Banks shall, by written or telegraphic notice to the Company, take any
of the following actions at the same or different times: (x) terminate
forthwith the Commitments of the Banks hereunder (if not theretofore
terminated) and any such termination shall automatically constitute a
termination of the Swing Line Commitment, (y) declare the Notes then
outstanding to be forthwith due and payable and any such declaration shall
automatically constitute a declaration that the Swing Line Note is due and
payable, whereupon the principal of the Notes, and the Swing Line Note,
together with accrued and unpaid interest thereon and any unpaid accrued
Commitment Fees and all other liabilities of the Borrowers accrued hereunder,
shall become forthwith due and payable both as to principal and interest,
without presentment, demand, protest, notice of protest, notice of intent to
accelerate, notice of acceleration or any other notice of any kind, all of
which are hereby expressly waived by the Borrowers, anything contained herein
or in any Note, the Swing Line Note or other Loan Document to the contrary
notwithstanding, or (z) pursue and enforce any of the rights and remedies of
the Agent on behalf of the Banks as provided in any of the Loan Documents or as
otherwise provided in the UCC or other applicable law and (ii) the Floor Plan
Agent in its sole discretion may, and at the request of the Required Banks
shall (and, to the extent the Commitments have been terminated, such request
shall be deemed to have been made), suspend and terminate all Drafting
Agreements; and in any event with respect to a Borrower described in paragraph
(f) or (g) above, the Commitments of the Banks shall automatically terminate
(if not theretofore terminated) and any such termination shall automatically
constitute a termination of the Swing Line Commitment, and the Notes and the
Swing Line Note shall automatically become due and payable, both as to
principal and interest, without presentment, demand, protest, notice of intent
to accelerate, notice of acceleration or other notice of any kind, all of which
are hereby expressly waived by the Borrowers, anything contained herein or in
any Note, the Swing Line Note or other Loan Document to the contrary
notwithstanding and the Company and the other Borrowers shall immediately
deliver cash collateral to the Agent in such amounts as are acceptable to the
Agent to be held by the Agent, for the benefit of the Swing Line Bank and the
Banks as Collateral for the payment and performance of Drafting Agreements
until all such Drafting Agreements are terminated according to their terms.
ARTICLE XII
THE AGENT AND FLOOR PLAN AGENT
SECTION 12.1 Authorization and Action of the Agent; Rights and
Duties Regarding Collateral.
(a) In order to expedite the various transactions
contemplated by this Agreement, each Bank, the Floor Plan Agent and the Swing
Line Bank hereby irrevocably appoints and authorizes TCB to act as Agent on its
behalf. Each of the Banks, the Floor Plan Agent and the Swing Line Bank and
each subsequent holder of any Note or the Swing Line Note by its acceptance
thereof, hereby irrevocably authorizes and directs the Agent to take such
action on its behalf and to exercise such powers hereunder as are specifically
delegated to or required of the Agent by the terms
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and provisions hereof, together with such powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through its
agents and employees. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect of any Bank, the
Floor Plan Agent or the Swing Line Bank; and nothing in this Agreement or any
other Loan Document, expressed or implied, is intended to, or shall be so
construed as to, impose upon the Agent any obligations in respect of this
Agreement or any other Loan Document except as expressly set forth herein or
therein. The Agent is hereby expressly authorized on behalf of the Banks, the
Floor Plan Agent and the Swing Line Bank, without hereby limiting any implied
authority, (i) to receive on behalf of each of the Banks any payment of
principal of or interest on the Notes outstanding hereunder and all other
amounts accrued hereunder paid to the Agent, and promptly to distribute to each
Bank its proper share of all payments so received; (ii) to give notice within a
reasonable time on behalf of each of the Banks and the Swing Line Bank to the
Borrowers of any Default or Event of Default specified in this Agreement of
which the Agent has actual knowledge as provided in Section 12.7; (iii) to
distribute to each Bank and the Swing Line Bank copies of all notices,
agreements and other material as provided for in this Agreement as received by
the Agent; (iv) to distribute to the Borrowers any and all requests, demands
and approvals received by the Agent or from the Banks, and (v) to distribute
and receive all notices, agreements and other material as provided in this
Agreement with respect to Floor Plan Loans and to deal with the Floor Plan
Agent to the fullest extent required or contemplated by the terms of their
Agreement or any other Loan Document. As to any matters not expressly provided
for by this Agreement, the Notes, the Swing Line Note or the other Loan
Documents (including enforcement or collection of the Notes or the Swing Line
Note), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions
of the Required Banks, and such instructions shall be binding upon all Banks
and all holders of Notes, the Swing Line Note and the Loans, the Floor Plan
Agent and the Swing Line Bank; provided, however, that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or applicable law.
(b) The Agent shall hold all of the Collateral along
with all payments and proceeds arising therefrom, for the benefit of all Banks
and the Swing Line Bank as ratable security for the payment of all the
Obligations. Upon payment in full of all the Obligations, the Agent shall
release all of the Collateral to the Borrowers. Except as otherwise expressly
provided for in Section 13.5, the Agent, in its own name or in the name of the
Borrowers, may enforce any of the Security Documents or the security therefor
by any mode provided under the Loan Documents or by applicable law, and may
collect, receive and receipt for all proceeds receivable on account of the
Collateral.
(c) To the extent that the Collateral includes notes
or other instruments evidencing any monetary obligation to, or interest of any
Borrower, such Borrowers shall, if requested by the Agent, deliver to the Agent
letters, executed by such Borrower and approved by counsel for the Agent,
notifying the obligors to make payments directly to the Agent, such letters to
be held by the Agent and sent to such obligors at its discretion in accordance
with Section 12.1(d) below. All payments and proceeds of every kind from the
Collateral, when directly received by the Agent pursuant to Section 12.1(d)
(whether from payments on or with respect to the Collateral, from
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foreclosure and sale to third parties, from sale of Collateral subsequent to a
foreclosure at which the Agent or another Bank was the purchaser, or otherwise)
shall be held by it as a part of the Collateral and, except as otherwise
expressly provided hereinafter, shall be applied to the Obligations in the
manner set forth in Section 12.1(d).
(d) Upon the occurrence of an Event of Default, and
pursuant to the procedures among the Banks set forth in Section 12.1(e), the
Agent, after giving written notice to the Borrowers and to all Banks and the
Swing Line Bank of the action(s) to be taken, may at any time or times
thereafter (i) deliver the various letters required by Section 12.1(c) hereof
and receive directly, for the pro rata benefit of the Banks and Swing Line Bank
and for reduction of the Obligations as provided hereafter in this Section
12.1(d), all payments and proceeds related to the Collateral and/or (ii) sell,
assign and deliver all of the Collateral or any part thereof, or any
substitution therefor or any additions thereto as provided hereafter. Any such
sale or assignment may be at any broker's board or at any public or private
sale, at the option of the Agent or of any officer or representative acting on
behalf of the Agent, without advertisement or any notice to the Borrowers or
any other Person except those required by applicable law (the Borrowers hereby
agreeing that ten (10) days' notice constitutes "reasonable notice"); and each
Bank (including the Agent), its officers and assigns, may bid and become
purchasers at any such sale, if public, or at any broker's board if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations. Sales
hereunder may be at such time or times, place or places, for cash or credit,
and upon such terms and conditions as the Agent may determine in its sole
discretion. Upon the completion of any sale, the Agent shall execute all
instruments of transfer necessary to vest in the purchaser(s) title to the
property sold, and shall deliver to such purchaser(s) any of the property so
sold which may be in the possession of the Agent.
In the case of any sale of Collateral, the purchase money
proceeds and avails, and all other proceeds which then may be held or recovered
by the Agent or the Floor Plan Agent for the benefit of the Banks and the Swing
Line Bank, shall be applied in the following order:
(w) First, to the payment of the reasonable costs
and expenses of such sale and of the collection or enforcement
of such Collateral, and of all reasonable expenses (including
attorneys fees) and liabilities incurred and advances made by
the Agent or Floor Plan Agent in connection therewith;
(x) Second, to the payment of any amounts due to
Swing Line Bank in the form of Swing Line Overdraft Loans;
(y) Third, to the payment ratably of the amounts
due to the Banks for principal of and interest on all
Obligations other than Swing Line Overdraft Loans then
outstanding, without preference or priority of such
indebtedness owing to one Bank over another, or of principal
over interest, or of interest over principal; and,
(z) Fourth, to the payment of the surplus, if
any, to the Borrowers, their successors or assigns, or to
whomsoever may be lawfully entitled to receive the same, or as
a court of competent jurisdiction may direct.
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(e) After the occurrence and during the continuance
of a Default or an Event of Default, the Required Banks shall meet to establish
written procedures to be taken by the Agent for the protection, collection and
enforcement of the Collateral. The Agent shall not act with respect to the
Collateral except in accordance with the written procedures as established by
the Required Banks; however, if the Required Banks fail to agree upon and
establish such procedures, and the exigency of the circumstances requires, the
Agent, in its sole discretion and in good faith, may (but is not required to)
take whatever action it deems necessary to protect and enforce the Collateral
or the rights of the Banks and the Swing Line Bank under the Loan Documents.
The Borrowers shall acquire no rights or defenses under this Section 12.1(e).
(f) No Bank or the Swing Line Bank may enforce, or
demand enforcement of, any rights or Liens with respect to the Collateral
except upon the terms and conditions elsewhere stated in this Agreement.
SECTION 12.2 Agent's Reliance, Etc.
(a) Neither the Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this Agreement, the
Notes, the Swing Line Note or any of the other Loan Documents (i) with the
consent or at the request of the Required Banks or (ii) in the absence of its
or their own gross negligence or willful misconduct (it being the express
intention of the parties hereto that the Agent and its directors, officers,
agents and employees shall have no liability for actions and omissions under
this Section 12.2 resulting from their sole ordinary or contributory
negligence).
(b) Without limitation of the generality of the
foregoing, the Agent: (i) may treat the payee of each Note, the Swing Line
Note and the Obligations of each Borrower hereunder and the Swing Line Bank,
respectively, as the holder thereof until the Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (ii) may consult with legal counsel (including
counsel for any Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank,
the Swing Line Bank, or the Floor Plan Agent and shall not be responsible to
any Bank, the Swing Line Bank, or the Floor Plan Agent for any statements,
warranties or representations made in or in connection with this Agreement, any
Note, the Swing Line Note or any other Loan Document; (iv) except as otherwise
expressly provided herein, shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or
conditions of this Agreement, any Note, the Swing Line Note or any other Loan
Document or to inspect the property (including the books and records) of any
Borrower; (v) shall not be responsible to any Bank, the Swing Line Bank or the
Floor Plan Agent for the due execution, legality, validity, enforceability,
collectability, genuineness, sufficiency or value of this Agreement, any Note,
the Swing Line Note, any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; (vi) shall not be responsible to
any Bank, the Swing Line Bank or the Floor Plan Agent for the perfection or
priority of any Lien securing the Loans; and (vii) shall incur no liability
under or in respect of this Agreement, any Note, the Swing Line Note or any
other Loan Document by acting upon any notice, consent, certificate or other
instrument or
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writing (which may be by telegram, telecopier, cable or telex) reasonably
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 12.3 Agent and Affiliates; TCB and Affiliates.
Without limiting the right of any other Bank or the Swing Line Bank to engage
in any business transactions with any Borrower or any of its Affiliates, with
respect to their Commitments, the Loans, if any, made by them, the Notes, and
the Swing Line Note, if any, issued to them, TCB shall have the same rights and
powers under this Agreement, any Note, the Swing Line Note or any of the other
Loan Documents as any other Bank and may exercise the same as though it were
not the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include TCB in its individual capacity. TCB and its Affiliates may
be engaged in, or may hereafter engage in, one or more loan, letter of credit,
leasing or other financing activities not the subject of the Loan Documents
(collectively, the "Other Financings") with any of Borrowers or any of their
Affiliates, or may act as trustee on behalf of, or depositary for, or otherwise
engage in other business transactions with any of the Borrowers or any of their
Affiliates (all Other Financings and other such business transactions being
collectively, the "Other Activities") with no responsibility to account
therefor to the Banks or the Floor Plan Agent. Without limiting the rights and
remedies of the Banks, the Swing Line Bank, or the Floor Plan Agent
specifically set forth in the Loan Documents, no other Bank, the Swing Line
Bank, nor the Floor Plan Agent shall have any interest in (a) any Other
Activities, (b) any present or future guarantee by or for the account of any
Borrower not contemplated or included in the Loan Documents, (c) any present or
future offset exercised by the Agent in respect of any such Other Activities,
(d) any present or future property taken as security for any such Other
Activities or (e) any property now or hereafter in the possession or control of
the Agent which may be or become security for the Obligations of any Borrower
under the Loan Documents by reason of the general description of indebtedness
secured, or of property contained in any other agreements, documents or
instruments related to such Other Activities; provided, however, that if any
payment in respect of such guarantees or such property or the proceeds thereof
shall be applied to reduction of the Obligations evidenced hereunder and by the
Notes, then each Bank, the Swing Line Bank and the Floor Plan Agent shall be
entitled to share in such application according to its equitable portion of
such Obligations.
SECTION 12.4 Agent's Indemnity.
(a) The Agent shall not be required to take any
action hereunder or to prosecute or defend any suit in respect of this
Agreement, the Notes, the Swing Line Note or any other Loan Document unless
indemnified to the Agent's satisfaction by the Banks and the Swing Line Bank
against loss, cost, liability and expense. If any indemnity furnished to the
Agent shall become impaired, the Agent may call for additional indemnity and
cease to do the acts indemnified against until such additional indemnity is
given. In addition, the Banks and the Swing Line Bank agree to indemnify the
Agent (to the extent not reimbursed by the Borrowers), ratably according to the
respective aggregate principal amounts of the Notes and the Swing Line Note
then held by each of them (or if no Notes are at the time outstanding, ratably
according to the respective amounts of their Commitments, or if no Commitments
are outstanding, the respective amounts of the Commitments immediately prior to
the time the Commitments ceased to be outstanding), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Agent (or either of
them) in any way relating to or arising out of this
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Agreement or any action taken or omitted by the Agent under this Agreement, the
Notes, the Swing Line Note and the other Loan Documents (including any action
taken or omitted under Article II of this Agreement). Without limitation of
the foregoing, each Bank and the Swing Line Bank agrees to reimburse the Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Agent in connection with
the preparation, execution, administration, or enforcement of, or legal advice
in respect of rights or responsibilities under, this Agreement, the Notes, the
Swing Line Note and the other Loan Documents to the extent that the Agent is
not reimbursed for such expenses by the Borrowers. The provisions of this
Section 12.4 shall survive the termination of this Agreement, the payment of
the Loans and/or the assignment of any of the Notes and the Swing Line Note.
(b) Notwithstanding the foregoing, no Bank or the
Swing Line Bank shall be liable under this Section 12.4 to the Agent for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements due to the Agent resulting
from the Agent's gross negligence or willful misconduct. Each Bank and the
Swing Line Bank agrees, however, that it expressly intends, under this Section
12.4, to indemnify the Agent ratably as aforesaid for all such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements arising out of or resulting from the Agent's sole
ordinary or contributory negligence.
SECTION 12.5 Bank Credit Decision. Each Bank and the Swing
Line Bank acknowledges that it has, independently and without reliance upon the
Agent, the Floor Plan Agent or any other Bank or the Swing Line Bank and based
on the financial statements most recently delivered under either referred to
in Section 7.5 or Section 9.5 and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Bank and the Swing Line Bank also acknowledges that it
will, independently and without reliance upon the Agent, the Floor Plan Agent
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, the other Loan Documents, any
related agreement or any document furnished hereunder.
SECTION 12.6 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided herein, the Agent may resign at any
time by giving written notice thereof to the Banks, the Swing Line Bank, the
Floor Plan Agent and the Company. Upon any such resignation, the Required
Banks shall have the right to appoint a successor Agent, subject to the
approval of the Company, which approval shall not be unreasonably withheld. If
no successor Agent shall have been so appointed by the Required Banks, approved
by the Company and shall have accepted such appointment, all within thirty (30)
calendar days after the retiring Agent's giving of notice of resignation, then
the retiring Agent may, on behalf of the Banks, appoint a successor Agent,
which shall be a commercial bank organized or licensed under the laws of the
United States or of any state thereof and having a combined capital and surplus
of at least Five Hundred Million Dollars ($500,000,000). Upon the acceptance
of any appointment as Agent hereunder and under the Notes by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement
and the Notes. After any retiring Agent's resignation as the Agent hereunder
and under the Notes, the provisions of this Article XII
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and Section 13.4 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and the Notes.
SECTION 12.7 Notice of Default. The Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Agent shall have received notice from a Bank, the
Swing Line Bank, the Floor Plan Agent or the Borrowers referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default" or "notice of event of default," as applicable.
If the Agent receives such a notice, the Agent shall give notice thereof to the
Banks, the Swing Line Bank and the Floor Plan Agent and, if such notice is
received from a Bank, the Swing Line Bank or the Floor Plan Agent, the Agent
shall give notice thereof to the other Banks, the Swing Line Bank and the
Company. The Agent shall be entitled to take action or refrain from taking
action with respect to such Default or Event of Default as provided in Section
12.1 and Section 12.2.
SECTION 12.8 Authorization and Action of the Floor Plan Agent.
(a) In order to expedite the various transactions
contemplated by this Agreement, each Bank, the Swing Line Bank and the Agent
hereby irrevocably appoint and authorize Comerica Bank to act as Floor Plan
Agent on its behalf. Each of the Banks, the Swing Line Bank and the Agent, and
each subsequent holder of any Note or the Swing Line Note by its acceptance
thereof, hereby irrevocably authorizes and directs the Floor Plan Agent to take
such action and to exercise such powers hereunder as are specifically delegated
to or required of the Floor Plan Agent by the terms and provisions hereof,
together with such powers as are reasonably incidental thereto. The Floor Plan
Agent may perform any of its duties hereunder by or through its agents and
employees. The duties of the Floor Plan Agent shall be mechanical and
administrative in nature; the Floor Plan Agent shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship in respect of any
Bank, the Swing Line Bank or the Agent; and nothing in this Agreement or any
other Loan Document, expressed or implied, is intended to, or shall be so
construed as to, impose upon the Floor Plan Agent any obligations in respect of
this Agreement or any other Loan Document except as expressly set forth herein
or therein. The Floor Plan Agent is hereby expressly authorized on behalf of
the Banks to (i) receive and distribute funds, (ii) to receive and distribute
all notices and agreements and other material and (iii) to take all actions and
perform such duties and make such determinations, all as provided in this
Agreement. As to any matters not expressly provided for by this Agreement or
any Loan Document, the Floor Plan Agent shall not be required to exercise any
discretion or take any action, but shall not be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Banks, and such instructions
shall be binding upon all Banks, the Swing Line Bank, the Agent and all holders
of Notes and the Swing Line Note and the Loans and the Floor Plan Agent;
provided, however, that the Floor Plan Agent shall not be required to take any
action which exposes it to personal liability or which is contrary to this
Agreement or applicable law.
(b) To the extent that any proceeds of the Motor
Vehicles includes notes or other instruments evidencing any monetary obligation
to, or interest of, any Borrower, such Borrower shall deliver or cause to be
delivered to the Floor Plan Agent letters, executed by such Borrower and
approved by counsel for the Floor Plan Agent, notifying the obligors to make
payments directly to the Floor Plan Agent, such letters to be held by the Floor
Plan Agent and sent
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to such obligors at its discretion. All payments and proceeds of every kind from
such Motor Vehicles, when directly received by the Floor Plan Agent (whether
from payments on or with respect to proceeds of Motor Vehicles, from foreclosure
and sale to third parties, from sale of Motor Vehicles subsequent to a
foreclosure at which the Floor Plan Agent or another Bank was the purchaser, or
otherwise) shall be, except as otherwise expressly provided hereinafter, applied
to the Obligations in the manner set forth in Section 12.1(d).
SECTION 12.9 Floor Plan Agent's Reliance, etc.
(a) Neither the Floor Plan Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement (i) with the
consent or at the request of the Required Banks acting by and through the Agent
or (ii) in the absence of its or their own gross negligence or willful
misconduct (it being the express intention of the parties hereto that the Floor
Plan Agent and its directors, officers, agents and employees shall have no
liability for actions and omissions under this Section 12.9 resulting from their
sole ordinary or contributory negligence).
(b) Without limitation of the generality of the foregoing,
the Floor Plan Agent: (i) may treat the Agent as Agent hereunder until the Floor
Plan Agent receives written notice of the appointment of a successor Agent as
provided in Section 12.6; (ii) may consult with legal counsel (including counsel
for the Borrowers), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (iii) makes no warranty or representation to any Bank, the Swing Line
Bank or the Agent and shall not be responsible to any Bank, the Swing Line Bank
or the Agent for any statements, warranties or representations made in or in
connection with this Agreement; (iv) except as otherwise expressly provided
herein, shall not have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of this Agreement, or
to inspect the property (including the books and records) of any Borrower; (v)
shall not be responsible to any Bank, the Swing Line Bank or the Agent for the
due execution, legality, validity, enforceability, collectability, genuineness,
sufficiency or value of this Agreement, or any other instrument or document
furnished pursuant hereto or thereto; (vi) except as otherwise expressly
provided herein shall not be responsible to any Bank, the Swing Line Bank or the
Agent for the perfection or priority of any Lien securing the Loans; and (vii)
shall incur no liability under or in respect of this Agreement, by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopier, cable or telex) reasonably believed by it to be genuine
and signed or sent by the proper party or parties.
SECTION 12.10 Floor Plan Agent and Affiliates; Comerica Bank and
Affiliates . Without limiting the right of any other Bank, the Swing Line Bank
or the Agent to engage in any business transactions with any Borrower or any of
its Affiliates, with respect to their Commitments, the Loans, if any, made by
them and the Notes, if any, issued to them, Comerica Bank shall have the same
rights and powers under this Agreement, any Note, the Swing Line Note or any of
the other Loan Documents as any other Bank and may exercise the same as though
it were not the Floor Plan Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include Comerica Bank in its individual capacity.
Unless prohibited hereby, Comerica Bank and its Affiliates may be engaged in, or
may hereafter engage in, one or more Other Financings with the
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Company, any other Borrower or any of their Affiliates, or may act as trustee on
behalf of, or depositary for, or otherwise engage in Other Activities with no
responsibility to account therefor to the Banks or the Agent. Without limiting
the rights and remedies of the Banks or the Agent specifically set forth in the
Loan Documents, no other Bank nor the Agent shall have any interest in (a) any
Other Activities, (b) any present or future guarantee by or for the account of
any of the Borrowers not contemplated or included in the Loan Documents, (c) any
present or future offset exercised by the Floor Plan Agent in respect of any
such Other Activities, (d) any present or future property taken as security for
any such Other Activities or (e) any property now or hereafter in the possession
or control of the Floor Plan Agent which may be or become security for the
Obligations of the Borrowers under the Loan Documents by reason of the general
description of indebtedness secured, or of property contained in any other
agreements, documents or instruments related to such Other Activities; provided,
however, that if any payment in respect of such guarantees or such property or
the proceeds thereof shall be applied to reduction of the Obligations evidenced
hereunder and by the Notes or the Swing Line Note, then each Bank and the Swing
Line Bank shall be entitled to share in such application according to its
equitable portion of such Obligations.
SECTION 12.11 Floor Plan Agent's Indemnity .
(a) The Floor Plan Agent shall not be required to take any
action hereunder or to prosecute or defend any suit in respect of this
Agreement, the Notes, the Swing Line Note, or any other Loan Document unless
indemnified to the Floor Plan Agent's satisfaction by the Banks and the Swing
Line Bank, against loss, cost, liability and expense. If any indemnity furnished
to the Floor Plan Agent shall become impaired, it may call for additional
indemnity and cease to do the acts indemnified against until such additional
indemnity is given. In addition, the Banks and the Swing Line Bank agree to
indemnify the Floor Plan Agent (to the extent not reimbursed by the Borrowers),
ratably according to the respective aggregate principal amounts of the Notes
then held by each of them (or if no Notes are at the time outstanding, ratably
according to the respective amounts of their Commitments, or if no Commitments
are outstanding, the respective amounts of the Commitments immediately prior to
the time the Commitments ceased to be outstanding), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Floor Plan Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Floor Plan Agent under this Agreement, the Notes, the Swing Line Note and
the other Loan Documents (including action taken or omitted under Article II or
Article IV of this Agreement). Without limitation of the foregoing, each Bank
and the Swing Line Bank agrees to reimburse the Floor Plan Agent promptly upon
demand for its ratable share of any out-of-pocket expenses (including reasonable
counsel fees) incurred by the Floor Plan Agent in connection with the
preparation, execution, administration, or enforcement of, or legal advice in
respect of rights or responsibilities under, this Agreement, the Notes, the
Swing Line Note and the other Loan Documents to the extent that the Floor Plan
Agent is not reimbursed for such expenses by the Borrowers. The provisions of
this Section 12.11 shall survive the termination of this Agreement, the payment
of the Loans and/or the assignment of any of the Notes or the Swing Line Note.
(b) Notwithstanding the foregoing, no Bank nor the Swing Line Bank
shall be liable under this Section 12.11 to the Floor Plan Agent for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements
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due to the Floor Plan Agent resulting from the Floor Plan Agent's gross
negligence or willful misconduct. Each Bank and the Swing Line Bank agrees,
however, that it expressly intends, under this Section 12.11, to indemnify the
Floor Plan Agent ratably as aforesaid for all such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements arising out of or resulting from the Floor Plan Agent's sole
ordinary or contributory negligence.
SECTION 12.12 Bank Credit Decision . Each Bank acknowledges that it
has, independently and without reliance upon the Floor Plan Agent, the Agent or
any other Bank and based on the financial statements referred to in Section 7.5
and Section 9.5 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank and the Swing Line Bank also acknowledges that it will,
independently and without reliance upon the Floor Plan Agent, the Swing Line
Bank, the Agent or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, the other Loan
Documents, any related agreement or any document furnished hereunder.
SECTION 12.13 Successor Agent . Subject to the appointment and
acceptance of a successor Floor Plan Agent as provided herein, the Floor Plan
Agent may resign at any time by giving written notice thereof to the Banks, the
Agent and the Company. Upon any such resignation, the Required Banks shall have
the right to appoint a successor Floor Plan Agent, subject to the approval of
the Company, which approval shall not be unreasonably withheld. If no successor
Floor Plan Agent shall have been so appointed by the Required Banks, approved by
the Company and shall have accepted such appointment, all within thirty (30)
calendar days after the retiring Floor Plan Agent's giving of notice of
resignation, then the Agent shall, on behalf of the Banks, appoint a successor
Floor Plan Agent, which shall be a commercial bank organized or licensed under
the laws of the United States or of any state thereof and having a combined
capital and surplus of at least Five Hundred Million Dollars ($500,000,000).
Upon the acceptance of any appointment as Floor Plan Agent hereunder, such
successor Floor Plan Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Floor Plan Agent, and
the retiring Floor Plan Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Floor Plan Agent's
resignation as the Floor Plan Agent hereunder, the provisions of this Article
XII and Section 13.4 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Floor Plan Agent under this Agreement.
SECTION 12.14 Notice of Default . The Floor Plan Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Floor Plan Agent shall have received notice from a
Borrower, a Bank or the Swing Line Bank, stating that such Default or Event of
Default has occurred and stating that such notice is a "notice of default or
"notice of event of default", as applicable. If the Floor Plan Agent receives
such a notice, the Floor Plan Agent shall be entitled to take action or refrain
from taking action with respect to such Default or Event of Default as provided
in Sections 12.8 and 12.9.
SECTION 12.15 Documentation Agent; Co-Agent. None of the Banks
identified on the facing page or signature pages of this Agreement as
Documentation Agent or Co-Agent shall have any right, power, obligation,
liability or responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing, none of the
Banks so identified shall
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have or be deemed to have any fiduciary relations with any Bank. Each Bank
acknowledges that it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in taking any action
hereunder.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices, Etc . The Agent, any Bank, or the holder of any
of the Notes or Loans, the Floor Plan Agent, and the Swing Line Bank giving
consent or notice or making any request of the Company or any of the other
Borrowers provided for hereunder, shall notify each Bank, the Floor Plan Agent
and the Agent thereof. In the event that the holder of any Note (including any
Bank) shall transfer such Note, it shall promptly so advise the Agent which
shall be entitled to assume conclusively that no transfer of any Note has been
made by any holder (including any Bank) unless and until the Agent receives
written notice to the contrary. All notices, consents, requests, approvals,
demands and other communications (collectively, "Communications") provided for
herein shall be in writing (including telecopy Communications) and mailed,
telecopied or delivered:
(a) if to the Company, at 950 Echo Lane, Suite #350, Houston, Texas
77024, Attention of Scott Thompson, Chief Financial Officer (Telecopy No. (713)
467-6268);
(b) if to the Borrowers, or any individual Borrower, at the address of
the Company specified in Section 13.1(a) above;
(c) if to the Agent, at 707 Travis Street, Houston, Texas 77002,
Attention of David Jones, Associate (Telecopy No. (713) 216-4940) with a copy to
Chase Securities, Inc., 707 Travis Street, 8-TCBN-96, Houston, Texas 77002,
Attention of Keith Winzenreid, Managing Director (Telecopy No. (713) 216-2142);
(d) if to any Bank, as specified on the signature page for such Bank
hereto or, in the case of any Person who becomes a Bank after the date hereof,
as specified on the Assignment and Acceptance executed by such Person or in the
Administrative Questionnaire delivered by such Person or;
(e) in the case of any party hereto, such other address or telecopy
number as such party may hereafter specify for such purpose by notice to the
other parties;
(f) if to the Floor Plan Agent, at Comerica Bank National Dealer
Services, 1920 Main Street, Suite 1150 Irvine, California 92614, Attention of
Bruce Nowel, (Telecopy No. (714) 476-1222) with a copy to Comerica Bank,
Attention: Chris Stearns (Telecopy No. (313-222-9419).
All Communications shall, when mailed, telecopied or delivered, be effective
when (i) mailed by certified mail, return receipt requested to any party at its
address specified above, on the signature page hereof or on the signature page
of such Assignment and Acceptance (or other address
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designated by such party in a Communication to the other parties hereto), or
(ii) telecopied to any party to the telecopy number set forth above, on the
signature page hereof or on the signature page of such Assignment and Acceptance
(or other telecopy number designated by such party in a Communication to the
other parties hereto) and confirmed by a transmission report verifying the
correct telecopier number and number of pages and that such transmission was
well transmitted, or (iii) delivered personally to any party at its address
specified above, on the signature page hereof or on the signature page of such
Assignment and Acceptance (or other address designated by such party in a
Communication to the other parties hereto); provided, however, Communications to
the Agent pursuant to Article VI or Article XI shall not be effective until
received by the Agent.
SECTION 13.2 Survival of Agreement . All covenants, agreements,
representations and warranties made by the Borrowers herein and in the other
Loan Documents and in the certificates or other instruments prepared or
delivered in connection with this Agreement shall be considered to have been
relied upon by the Banks and shall survive the making by the Banks of the Loans
and the execution and delivery to the Banks of the Notes evidencing such Loans
and shall continue in full force and effect as long as the principal of or any
accrued interest on any Note or any Commitment Fee or any other fee or amount
payable under the Notes or this Agreement is outstanding and unpaid and so long
as the Commitments have not been terminated.
SECTION 13.3 Successors and Assigns; Participations .
(a) Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the
Borrowers, the Agent, the Floor Plan Agent or the Banks that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns. Except as permitted by ss.10.3, no Borrower may assign
or transfer any of its rights or Obligations hereunder without the prior written
consent of all the Banks.
(b) Each Bank may assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Agreement (including
a portion of its Commitment and the same portion of the Loans at the time owing
to it and the Note held by it); provided, however, that (i) except in the case
of an assignment to a Bank or an Affiliate of a Bank, the Company (except during
the continuance of an Event of Default) and the Agent must give their prior
written consent by countersigning the Assignment and Acceptance (which consent
shall not be unreasonably withheld), (ii) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations to this Agreement, and be pro rata between the Acquisition Loan
Commitment and the Floor Plan Loan Commitment, (iii) the amount of the
Commitment of the assigning Bank subject to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Agent) shall (A) be equal to the entire amount of the
Commitment of the assigning Bank or (B) if not equal to the entire amount of the
Commitment of the assigning Bank, in no event be less than Five Million Dollars
($5,000,000) and shall be in an amount which is an integral multiple of One
Million Dollars ($1,000,000); provided, however, for purposes of this Section
13.3(b)(iii)(B), that the retained Commitment of the assigning Bank may not be
less than Five Million Dollars ($5,000,000), (iv) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance substantially in the
form of Exhibit M
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hereto (an "Assignment and Acceptance"), together with any Note subject to such
assignment and the assignor shall pay a processing and recordation fee of Three
Thousand Dollars ($3,000) payable by the Bank's assignor thereunder, and (v) the
assignee shall deliver to the Agent an Administrative Questionnaire. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be no
later than five (5) Business Days after the execution thereof unless otherwise
agreed to by the assigning Bank, the Eligible Assignee thereunder and the Agent,
(x) the assignee thereunder shall be a party hereto and under the other Loan
Documents and, to the extent provided in such Assignment and Acceptance, have
the rights and obligations of a Bank hereunder and under the other Loan
Documents and (y) the Bank thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Bank thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty contained in Section 5.14 and that it is the legal
and beneficial owner of the interest being assigned thereby free and clear of
any adverse claim, such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, any other Loan Document or any other instrument or document furnished
pursuant hereto; (ii) such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any of
the Borrowers or the performance or observance by any of the Borrowers of any of
their Obligations under this Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements most recently delivered under either in Section 7.5 or
Section 9.5 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such Bank's assignor or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee and
can make the representation contained in Section 5.14 and has, to the extent
required, complied with the covenants contained therein; (vi) such assignee
appoints and authorizes the Agent and the Floor Plan Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent and the Floor Plan Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Bank.
(d) The Agent shall maintain at its address referred to in Section 13.1
a copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Banks and the Commitments of, and
principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive, in the absence of
demonstrable error, and the Borrowers and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes of this
Agreement and the Loan
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Documents. The Register shall be available for inspection by the Borrowers or
any Bank at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an Eligible Assignee together with the Note subject to such
assignment, the processing and recordation fee referred to in paragraph (b)
above and, if required, the Company's written consent to such assignment, the
Agent shall (subject to the consent of the Company to such assignment, if
required), if such Assignment and Acceptance has been completed and is in the
form of Exhibit M, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Company and the Banks. Within five (5) Business Days after
receipt of notice, the Company, at its own expense, shall execute and deliver
and shall cause each of the other Borrowers to execute and deliver to the Agent
in exchange for the surrendered Note a new Note to the order of such Eligible
Assignee in an amount equal to the assigning Bank's Commitment assumed by it
pursuant to such Assignment and Acceptance, and a new Note to the order of the
assigning Bank in an amount equal to the portion of its Commitment retained by
the assigning Bank hereunder. Such new Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit C-1 or C-2 hereto, as
applicable. Each canceled Note shall be promptly returned to the Company.
(f) Each Bank may without the consent of any Borrower or the Agent sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it and the Note held by it); provided,
however, that (i) such Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the participating banks or
other entities shall be entitled to the cost protection provisions and Tax
indemnities contained in Article V only to the same extent that the Bank from
which such participating bank or other entity acquired its participation would
be entitled to the benefit of such cost protection provisions and Tax
indemnities and (iv) the Borrowers, the Agent and the other Banks shall continue
to deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement, and such Bank shall retain the sole right
to enforce the Obligations of any of the Borrowers relating to the Loans and to
approve any amendment, modification or waiver of any provision of this Agreement
(other than amendments, modifications or waivers with respect to any fees
payable hereunder or the amount of principal of or the rate at which interest is
payable on the Loans, or the dates fixed for payments of principal of or
interest on the Loans).
(g) Any Bank or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
13.3, disclose to the assignee or participant or proposed assignee or
participant, any information relating to any Borrower furnished to such Bank by
or on behalf of any of the Borrowers; provided that prior to any such
disclosure, each such assignee or participant or proposed assignee or
participant shall agree (subject to customary exceptions) to preserve the
confidentiality of any confidential information relating to any Borrower
received from such Bank.
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(h) Anything in this Section 13.3 to the contrary notwithstanding, any
Bank may at any time, without the consent of any Borrower or the Agent, assign
and pledge all or any portion of its Commitment and the Loans owing to it to any
Federal Reserve Bank (and its transferees) as collateral security pursuant to
Regulation A of the Board and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Bank from its
obligations hereunder.
(i) All transfers of any interest in any Note hereunder shall be in
compliance with all federal and state securities laws, if applicable.
Notwithstanding the foregoing sentence, however, the parties to this Agreement
do not intend that any transfer under this Section 13.3 be construed as a
"purchase" or "sale" of a "security" within the meaning of any applicable
federal or state securities laws.
SECTION 13.4 Expenses of the Banks; Indemnity .
(a) The Borrowers agree to pay all reasonable out-of-pocket expenses
reasonably incurred by the Agent and the Floor Plan Agent in connection with the
preparation of this Agreement, the Notes and the other Loan Documents or with
any amendments, modifications or waivers of the provisions hereof (whether or
not the transactions hereby contemplated shall be consummated) or reasonably
incurred by the Agent, the Floor Plan Agent or any Bank in connection with the
enforcement or protection of their rights in connection with this Agreement or
with the Loans made or the Notes issued hereunder, including the reasonable fees
and disbursements of Jackson Walker L.L.P., special counsel for the Agent and
Bodman, Longley & Dahling, LLP, special counsel for the Floor Plan Agent, and,
in connection with such enforcement or protection, the reasonable fees and
disbursements of other counsel for any Bank, including allocated staff counsel
costs for any Bank that elects to use the services of staff counsel in lieu of
outside counsel. The Borrowers agree to indemnify the Banks from and hold them
harmless against any documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of this Agreement
or any of the Notes or other Loan Documents.
(b) The Borrowers agree to indemnify the Agent, the Floor Plan Agent
and the Banks and their Affiliates, directors, officers, employees and agents
(each such Person being called an "Indemnitee") against, and to hold the Banks
and such other Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by or asserted against any Indemnitee arising out of, in any
way connected with, or as a result of (i) the execution and delivery of this
Agreement and the other Loan Documents contemplated hereby, the performance by
the parties hereto and thereto of their respective obligations hereunder and
thereunder (including the making of the Commitment of each Bank) and
consummation of the transactions contemplated hereby and thereby, (ii) the use
of proceeds of the Loans or (iii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Bank, apply to
any such losses, claims, damages, liabilities or related expenses that are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee. The Borrowers agree, however, that they expressly intend to
indemnify each Indemnitee from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses arising out of the
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ordinary sole or contributory negligence of such Indemnitee, but not the gross
negligence or willful misconduct of such Indemnitee or to any of the foregoing
arising solely by reason of claims between the Lenders or any Lender and the
Agent or the Floor Plan Agent.
(c) The provisions of this Section 13.4 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any Note, or any investigation made by or on
behalf of any Bank. All amounts due under this Section 13.4 shall be payable
within ten (10) days following receipt by the Company of a detailed invoice or
statement setting forth in reasonable detail the basis of such claim and the
amounts so expended or lost or the amount of damages so incurred.
(d) No Indemnitee may settle any claim to be indemnified without prior
written notice to the Company; provided however, failure to provide such prior
written notice shall in no way affect the settlement of such claims.
(e) In the case of any indemnification hereunder, the Indemnitee shall
give notice to the Company of any such claim or demand being made against the
Indemnitee and the Company may participate in such proceeding at its own expense
if legal counsel to the Company is acceptable to the Agent.
SECTION 13.5 Right of Setoff . If an Event of Default shall have
occurred and be continuing, each Bank and the Swing Line Bank are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Bank, the Swing Line Bank or any branch Subsidiary or
Affiliate thereof to or for the credit or the account of the Borrowers against
any of and all the Obligations of the Borrowers now or hereafter existing under
this Agreement and the Note held by such Bank and the Swing Line Bank,
respectively, according to their respective rights as otherwise provided herein,
irrespective of whether or not such Bank shall have made any demand under this
Agreement or such Note and although such Obligations may be unmatured. Each Bank
and the Swing Line Bank agree promptly to notify the Borrowers after any such
setoff and application, but the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Bank and the Swing
Line Bank under this Section 13.5 are in addition to other rights and remedies
(including other rights of setoff) which such Bank and the Swing Line Bank may
have under applicable law.
SECTION 13.6 Governing Law; Jurisdiction .
(a) This Agreement, the Notes, the other Loan Documents and all other
documents executed in connection herewith, shall be deemed to be contracts and
agreements executed by the Borrowers, the Agent, the Floor Plan Agent and the
Banks under the laws of the State of Texas and of the United States of America
and for all purposes shall be governed by, and construed and interpreted in
accordance with, the laws of said state and of the United States of America.
Without limitation of the foregoing, nothing in this Agreement, the Notes or the
other Loan Documents shall be deemed to constitute a waiver of any rights which
any Bank may have
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under applicable federal legislation relating to the amount of interest which
such Bank may contract for, take, receive, or charge in respect of any Loans,
including any right to contract for, take, receive, reserve and charge interest
at the rate allowed by the law of the state where such Bank is located. The
Agent, the Floor Plan Agent, the Banks and the Borrowers further agree that
insofar as the provisions of Article 1.4, Subtitle 1, Title 79, of the Revised
Civil Statutes of Texas, 1925, as amended, are at any time applicable to the
determination of the Highest Lawful Rate with respect to the Notes, the
indicated rate ceiling computed from time to time pursuant to Section (a) of
such Article shall apply to the Notes, provided, however, that to the extent
permitted by such Article, the Agent may from time to time by notice from the
Agent to the Borrowers revise the election of such interest rate ceiling as such
ceiling affects the then-current or future balances of the Loans outstanding
hereunder and under the Notes. The provisions of Chapter 15 of Subtitle 3 of the
said Title 79 do not apply to this Agreement or any Note issued hereunder.
(b) Each Borrower hereby irrevocably submits generally and
unconditionally for itself and in respect of its property to the non-exclusive
jurisdiction of any Texas state court, or any United States federal court,
sitting in the City of Houston or County of Harris, Texas, and to the
non-exclusive jurisdiction of any state or United States federal court sitting
in the state in which any of the Collateral is located, over any suit, action or
proceeding arising out of or relating to this Agreement or the Obligations. Each
Borrower hereby agrees and consents that, in addition to any methods of service
of process provided for under applicable law, all service of process in any such
suit, action or proceeding in any Texas state court, or any United States
federal court, sitting in the City of Houston or County of Harris, Texas may be
made by certified or registered mail, return receipt requested, directed to such
Borrower at its address stated in Section 13.1, or at a subsequent address of
which Administrative Agent received actual notice from such Borrower in
accordance with this Agreement, and service so made shall be complete five (5)
days after the same shall have been so mailed.
SECTION 13.7 Waivers; Amendments.
(a) No failure or delay of the Agent, the Floor Plan Agent or any Bank
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agent, the Floor Plan Agent and
the Banks hereunder are cumulative and not exclusive of any rights or remedies
which they would otherwise have. No waiver of any provision of this Agreement,
the Notes or the other Loan Documents or consent to any departure by the
Borrowers therefrom shall in any event be effective unless the same shall be
authorized as provided in paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in similar or other
circumstances. Each holder of any Note shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or not
such Note shall have been marked to indicate such amendment, modification,
waiver or consent.
(b) Neither this Agreement, any Loan Document nor any provision hereof
or thereof may be waived, amended or modified except pursuant to an agreement or
agreements in
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writing entered into by the Borrowers and the Required Banks; provided, however,
that no such agreement shall (i) change the principal amount of, or extend or
advance the maturity of or any date for the payment of any principal of or
interest on, any Loan, or waive or excuse any such payment or any part thereof,
or, except as provided in this Agreement, change the rate of interest on any
Loan, without the written consent of each Bank affected thereby, (ii) change the
Commitment of any Bank without the written consent of such Bank or change the
Commitment Fees of any Bank without the written consent of each Bank, (iii)
release or defer the granting or perfecting of a Lien in any Collateral or
release any guaranty or similar undertaking provided by any Person or modify any
indemnity provided to the Banks hereunder or under the other Loan Documents;
provided however the Agent or the Floor Plan Agent, as the case may be, shall be
entitled to release any Collateral or any guaranty which a Borrower is permitted
to sell or transfer or otherwise release under the terms of this Agreement or
any Loan Document without notice to or any further action or consent of the
Banks; or (iv) amend or modify the provisions of this Section 13.7, Section
13.3, Section 4.6(c), Section 12.1(d), Section 6.7(a) or the definition of the
"Required Banks," without the written consent of each Bank; and provided further
that no such agreement shall amend, modify, waive or otherwise affect the rights
or duties of the Agent or the Floor Plan Agent hereunder without the written
consent of the Agent or the Floor Plan Agent, respectively. Each Bank and each
holder of any Note shall be bound by any modification or amendment authorized by
this Section 13.7 regardless of whether its Note shall be marked to make
reference thereto, and any consent by any Bank or holder of a Note pursuant to
this Section 13.7 shall bind any Person subsequently acquiring a Note from it,
whether or not such Note shall be so marked.
SECTION 13.8 Interest . Each provision in this Agreement and each other
Loan Document is expressly limited so that in no event whatsoever shall the
amount contracted for, charged, paid, or otherwise agreed to be paid, or
received to the Agent or any Bank for the use, forbearance or detention of the
money to be loaned under this Agreement or any Loan Document or otherwise
(including any sums paid as required by any covenant or obligation contained
herein or in any other Loan Document which is for the use, forbearance or
detention of such money), exceed that amount of money which would cause the
effective rate of interest to exceed the Highest Lawful Rate, and all amounts
owed under this Agreement and each other Loan Document shall be held to be
subject to reduction to the effect that such amounts so paid or agreed to be
paid which are for the use, forbearance or detention of money under this
Agreement or such Loan Document shall in no event exceed that amount of money
which would cause the effective rate of interest to exceed the Highest Lawful
Rate. Anything in this Agreement or any Note or any other Loan Document to the
contrary notwithstanding, none of the Borrowers shall ever be required to pay
unearned interest on any Note and shall never be required to pay interest on
such Note at a rate in excess of the Highest Lawful Rate, and if the effective
rate of interest which would otherwise be payable under this Agreement, such
Note and the other Loan Documents would exceed the Highest Lawful Rate, or if
the holder of such Note shall receive any unearned interest or shall receive
monies that are deemed to constitute interest which would increase the effective
rate of interest payable by the Borrowers under this Agreement and such Note to
a rate in excess of the Highest Lawful Rate, then (a) the amount of interest
which would otherwise be payable by the Borrowers under this Agreement, such
Note or any Loan Document shall be reduced to the amount allowed under
applicable law, and (b) any unearned interest paid by the Borrowers or any
interest paid by the Borrowers in excess of the Highest Lawful Rate shall be
credited on the principal of such Note (or, if the principal amount of such Note
shall have been paid in full, refunded to the Borrowers). It is further agreed
that, without limitation of the
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foregoing, all calculations of the rate of interest contracted for, charged or
received by any Bank under the Notes held by it, or under this Agreement, are
made for the purpose of determining whether such rate exceeds the Highest Lawful
Rate applicable to such Bank (such Highest Lawful Rate being such Bank's
"Maximum Permissible Rate"), and shall be made, to the extent permitted by usury
laws applicable to such Bank (now or hereafter enacted), by amortizing,
prorating and spreading in equal parts during the period of the full stated term
of the Loans evidenced by said Notes all interest at any time contracted for,
charged or received by such Bank in connection therewith. If at any time and
from time to time (i) the amount of interest payable to any Bank on any date
shall be computed at such Bank's Maximum Permissible Rate pursuant to this
Section 13.8 and (ii) in respect of any subsequent interest computation period
the amount of interest otherwise payable to such Bank would be less than the
amount of interest payable to such Bank computed at such Bank's Maximum
Permissible Rate, then the amount of interest payable to such Bank in respect of
such subsequent interest computation period shall continue to be computed at
such Bank's Maximum Permissible Rate until the total amount of interest payable
to such Bank shall equal the total amount of interest which would have been
payable to such Bank if the total amount of interest had been computed without
giving effect to this Section 13.8.
SECTION 13.9 Severability; Conflicts .
(a) In the event any one or more of the provisions contained in this
Agreement, the Notes or any other Loan Document should be held invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
(b) In the event any of the terms and provisions of any other Loan
Document are inconsistent with the terms and provisions set forth in this
Agreement, the terms and provisions set forth in this Agreement shall prevail.
SECTION 13.10 Counterparts . This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become
effective as provided in Section 13.11.
SECTION 13.11 Binding Effect . This Agreement shall become effective on
the Closing Date, and thereafter shall be binding upon and inure to the benefit
of each Borrower, the Agent, the Floor Plan Agent and each Bank and their
respective successors and assigns, except that no Borrower shall have the right
to assign its rights hereunder or any interest herein except as provided in
Section 13.3(a).
SECTION 13.12 Further Assurances . Each Borrower shall make, execute or
endorse, and acknowledge and deliver or file or cause the same to be done, all
such vouchers, invoices, notices, certifications and additional agreements,
undertakings, conveyances, deeds of trust, mortgages, transfers, assignments,
financing statements or other assurances, and take any and all such other
action, as the Agent or the Floor Plan Agent may, from time to time, deem
reasonably necessary or proper in connection with any of the Loan Documents, the
Obligations of the Borrowers thereunder or for better assuring and confirming
unto the Banks all or any part of the security for any of such Obligations.
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SECTION 13.13 Subsidiary Solvency Savings Clause . Each of the
Borrowers acknowledges the receipt and acceptance of valuable consideration as
of the Closing Date and thereafter in connection with this Agreement; and each
such Borrower further acknowledges and agrees that the direct benefits and
enrichment it derives from being a party to this Agreement constitute a
reasonably equivalent value to it in exchange for the joint and several
liability it has incurred pursuant to this the Agreement. Further, each of the
Borrowers acknowledges the interdependence by and among the other Borrowers in
successfully carrying out their business operations. Each of the Borrowers
represents that it is solvent prior to entering into this Agreement and that the
transactions completed hereby will not render it insolvent and will not cause it
to become financially non-viable in the future; provided, however in the event
that the Indebtedness incurred by any Borrower pursuant to this Agreement or the
transactions contemplated hereby would constitute a "fraudulent transfer"as to
any such Borrower under Section 548 of the Federal Bankruptcy Code or pursuant
to any applicable state law governing "fraudulent transfers" because such
Borrower is deemed to have become insolvent as a result of incurring such
Indebtedness, then, in such event, the liability of any such Borrower hereunder
shall be deemed for all purposes to be equal to one dollar less than that amount
of Indebtedness which would not render such Borrower insolvent.
SECTION 13.14 Joint and Several Liability and Related Matters .
(a) Each of Floor Plan Borrowers other than the Company authorizes the
Company with full power and authority as attorney-in-fact, to execute and
deliver Requests for Borrowings, requests for issuance of Letters of Credit and
each other instrument, certificate and report to be delivered by any Floor Plan
Borrower to the Agent, the Floor Plan Agent and the Banks pursuant to this
Agreement or any Loan Document. Each of the Floor Plan Borrowers other than the
Company agrees that it shall be bound by any action taken by the Company on its
behalf pursuant to such appointment.
(b) The obligations of the Borrowers under this Agreement and the other
Loan Documents are joint and several.
(c) Each Borrower acknowledges and agrees that it is the intent of the
parties that each Borrower be primarily liable for the obligations as a joint
and several obligor. It is the intention of the parties that with respect to
liability of any Borrower hereunder arising solely by reason of its being
jointly and severally liable for Loans and Letter of Credit Obligations and
other extensions of credit taken by other Borrowers, the obligations of such
Borrower shall be absolute, unconditional and irrevocable irrespective of:
(i) any lack of validity, legality or enforceability of this
Agreement, any Note or any Loan Document as to any other Borrower;
(ii) the failure of any Bank or any holder of any Note:
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(A) to enforce any right or remedy against any
Borrower or any other Person (including any surety) under the
provisions of this Agreement, such Note or otherwise, or
(B) to exercise any right or remedy against any
surety of, or Collateral securing, any obligations;
(iii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations, or any other
extension, compromise or renewal of any Obligations;
(iv) any reduction, limitation, impairment or termination of
any Obligations with respect to any other Borrower for any reason,
including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and each Borrower hereby
waives any right to or claim of) any defense (other than the defense of
payment in full of the Obligations) or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any
other event or occurrence affecting, any Obligations with respect to
any other Borrower;
(v) any addition, exchange, release, surrender or
nonperfection of any Collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any guaranty,
held by any Bank or any holder of the Notes securing any of the
Obligations; or
(vi) any other circumstance which might otherwise constitute a
defense (other than the defense of payment in full of the Obligations)
available to, or a legal or equitable discharge of, any other Borrower,
any surety or any guarantor.
(d) Each Borrower agrees that its joint and several liability hereunder
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must be restored by any Bank or any holder of any Note, upon the insolvency,
bankruptcy or reorganization of any Borrower as though such payment had not been
made.
(e) Each Borrower hereby expressly waives: (i) notice of the Banks'
acceptance of this Agreement; (ii) notice of the existence or creation or non
payment of all or any of the Obligations other than notices expressly provided
for in this Agreement; (iii) presentment, demand, notice of dishonor, protest,
and all other notices whatsoever other than notices expressly provided for in
this Agreement; and (iv) all diligence in collection or protection of or
realization upon the Obligations or any part thereof, any obligation hereunder,
or any security for or guaranty of any of the foregoing, subject, however, in
the case of Collateral in the possession of the Agent or a Bank to such Person's
duty to use reasonable care in the custody and preservation of such Collateral.
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(f) No delay on any of the Banks' part in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
any of the Banks of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No action of any of the
Banks permitted hereunder shall in any way affect or impair any such Banks'
rights or any Borrower's Obligations under this Agreement.
(g) Each Borrower hereby represents and warrants to each of the Banks
that it now has and will continue to have independent means of obtaining
information concerning the Borrowers' affairs, financial condition and business.
Banks shall not have any duty or responsibility to provide any Borrower with any
credit or other information concerning the Borrowers' affairs, financial
condition or business which may come into the Banks' possession.
SECTION 13.15 WAIVER OF JURY TRIAL . THE BANKS, THE AGENT, THE FLOOR
PLAN AGENT AND EACH OF THE BORROWERS AFTER CONSULTING OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTION OF ANY OF THEM. NEITHER THE
BANKS, THE AGENT, FLOOR PLAN AGENT NOR ANY OF THE BORROWERS SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL
HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY THE BANKS, THE AGENT, THE FLOOR PLAN AGENT OR ANY OF
THE BORROWERS EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
SECTION 13.16 FINAL AGREEMENT OF THE PARTIES . THIS WRITTEN AGREEMENT
(INCLUDING THE EXHIBITS AND SCHEDULES HERETO), THE NOTES, THE AGENT'S LETTER,
THE FLOOR PLAN AGENT'S LETTER AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.2(a) OF THE TEXAS BUSINESS AND COMMERCE
CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER
HEREOF AND THEREOF. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party other than
the parties hereto any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
* * *
Signatures following on succeeding pages
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IN WITNESS HEREOF, the Borrowers, the Banks listed on the signature
pages hereto, the Agent and the Floor Plan Agent have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
BORROWERS: GROUP 1 AUTOMOTIVE, INC., a Delaware corporation
By: /s/ SCOTT THOMPSON
-------------------
Name: Scott Thompson
Title: Senior Vice President
SOUTHWEST TOYOTA, INC., a Texas corporation,
SMC LUXURY CARS, INC., a Texas corporation,
FOYT MOTORS, INC., a Texas corporation,
SMITH, LIU & CORBIN, INC., a Texas
corporation, COURTESY NISSAN, Inc., a Texas
corporation, ROUND ROCK NISSAN, INC., a
Texas corporation, SMITH, LIU & KUTZ, INC.,
a Texas corporation, TOWN NORTH NISSAN,
INC., a Texas corporation, TOWN NORTH
IMPORTS, INC., a Texas corporation, TOWN
NORTH SUZUKI, INC., a Texas corporation,
MIKE SMITH AUTOPLAZA, INC., a Texas
corporation, HOWARD PONTIAC-GMC, INC., an
Oklahoma corporation, BOB HOWARD CHEVROLET,
INC., an Oklahoma corporation, BOB HOWARD
MOTORS, INC., an Oklahoma corporation, BOB
HOWARD AUTOMOTIVE-H, INC., an Oklahoma
corporation, and BOB HOWARD DODGE, INC., an
Oklahoma corporation, by the undersigned, on
behalf of each of the foregoing:
By: /s/ SCOTT THOMPSON
-------------------
Name: Scott Thompson
Title: Vice President
Revolving Credit Agreement
Signature Page - 1
<PAGE> 110
AGENT AND ISSUING BANK: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ CURTIS D. KARGES
---------------------------------------
Name: Curtis D. Karges
Title: Senior Vice President
FLOOR PLAN AGENT COMERICA BANK
AND SWING LINE BANK
By: /s/ JOSEPH A. MORAN
---------------------------------------
Name: Joseph A. Moran
Title: Senior Vice
Senior Vice President
Revolving Credit Agreement
Signature Page - 2
<PAGE> 111
BANKS: NATIONSBANK OF TEXAS, N.A.
By: /s/ BRUCE CLAY
---------------------------------------
Name: Bruce Clay
Title: Vice President
Address: 140 Cypress Station #208
Houston, Texas 77090
Telecopy No.: 281-537-3246
Domestic Lending Office
Attention: Bruce Clay
Eurodollar Lending Office
Attention: Bruce Clay
Revolving Credit Agreement
Signature Page - 3
<PAGE> 112
BANKS U.S. BANK
By: /s/ MICHAEL F. LUITEN
---------------------------------------
Name: Michael F. Luiten
-------------------------------------
Title: Senior Vice President
------------------------------------
Address: 10800 N.E. 8th, Suite 900
----------------------------------
Bellvue, WA 98004
----------------------------------
Telecopy No.: 425-450-5762
-----------------------------
Domestic Lending Office
Attention:
Eurodollar Lending Office
Attention:
Revolving Credit Agreement
Signature Page - 4
<PAGE> 113
BANKS: Bank Of Scotland
By: /s/ ANNIE CHIN-TAT
---------------------------------------
Name: Annie Chin-Tat
Title: Vice President
Address: 565 5th Avenue
New York, New York 10017
Telecopy No.: (212) 557-9460
Domestic Lending Office
Attention: Annie Chin-Tat
Eurodollar Lending Office
Attention: Annie Chin-Tat
Revolving Credit Agreement
Signature Page - 5
<PAGE> 114
BANKS TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ CURTIS D. KARGES
---------------------------------------
Name: Curtis D. Karges
Title: Senior Vice President
Address: 712 Main Street
8-TCBN-96
Houston, Texas 77002
Telecopy No.:
Domestic Lending Office
Attention: Gale Manning
Eurodollar Lending Office
Attention: Gale Manning
Revolving Credit Agreement
Signature Page - 6
<PAGE> 115
BANKS COMERICA BANK
By: /s/ JOSEPH MORAN
---------------------------------------
Name: Joseph Moran
Title: Senior Vice President
Address: 1920 Main Street, Suite 1150
Irvine, California 92614
Telecopy No.: 714-476-1222
Domestic Lending Office
Attention: Bruce Nowel
Eurodollar Lending Office
Attention: Bruce Nowel
Revolving Credit Agreement
Signature Page - 7
<PAGE> 1
EXHIBIT 10.54
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge
Agreement") is made and executed as of the 19th day of December, 1997, by GROUP
1 AUTOMOTIVE, INC., a Delaware corporation ("Group 1"), and each Subsidiary of
Group 1 executing this Pledge Agreement on the signature pages hereof or on any
supplement, addendum or modification hereof (each a "Pledgor" and collectively
"Pledgors"), in favor of TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association, as Administrative Agent for and representative of (in such
capacity, "Agent") itself and such banks as may from time to time be a "Bank"
under the Credit Agreement (hereinafter defined) (Agent and such other Banks are
sometimes collectively referred to herein as "Pledgees").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Revolving
Credit Agreement (as modified or restated from time to time, the "Credit
Agreement") dated as of December 31, 1997, by and among Agent, Comerica Bank, as
Floor Plan Agent, the Pledgees, as the Banks thereunder, and Pledgors as the
Borrowers thereunder (the "Borrowers"), Pledgees have agreed to make Loans
available to Borrowers upon the terms and conditions set forth therein (unless
otherwise defined herein, each term used herein with its initial letter
capitalized shall have the meaning given to such term in the Credit Agreement);
and
WHEREAS, in consideration for the agreement
of Pledgees to make monies available to Borrowers under the Credit Agreement,
each Pledgor has agreed to pledge all shares of capital stock or equity
interests of the Subsidiaries of the respective Pledgor.
NOW, THEREFORE, for valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and confessed,
Pledgors hereby agree with Agent and Pledgees as follows:
1. Pledge. Upon the terms hereof, the
Pledgors hereby pledge and assign to Agent, and grant to Agent, for the benefit
of Pledgees and any other holder from time to time of any Note or any of the
indebtedness evidenced thereby, a security interest in, all of the rights,
titles and interests of Pledgors in and to the following: (all of the following
being sometimes referred to herein collectively as the "Pledged Interests"): (a)
all of the issued and outstanding shares of capital stock or other equity
interests (the "Pledged Shares") now or hereafter owned by any Pledgor in all
Subsidiaries of such Pledgor, including, without limitation, the shares and
interests described on Exhibit A attached hereto and incorporated herein by
reference for all purposes (as Exhibit A may be amended or supplemented from
time to time)(each such Subsidiary of a Borrower being herein sometimes referred
to as a "Company"), but excluding the stock of any Subsidiary acquired or
established after the date hereof in the case that any automobile franchise
agreement to which such Subsidiary is a party prohibits the pledging or
collateral assignment of such Subsidiary's stock; (b) all cash, securities,
dividends, and other property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the shares
and interests described in clause (a) hereof and any other property substituted
or exchanged therefor; and (c) any and all proceeds or other sums arising from
or by virtue of, and all dividends and distributions (cash or otherwise) payable
and/or distributable with respect to, all or any of the shares and interests
described in the preceding clauses (a) and (b) hereof.
2. Secured Obligation. The security interest
herein granted (the "Security Interest") shall secure the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all the Obligations under and as defined in the
Credit Agreement. Upon full payment and performance of the Obligations, the
Security Interest shall, at the request and expense of Pledgor, be released by
Agent and Pledgees.
EXHIBIT E-i
<PAGE> 2
3. Representations and Warranties; Related
Covenants. Pledgors represent, warrant, covenant and agree to and with
Agent and Pledgees that: (a) each Pledgor is the legal and beneficial owner of
the Pledged Interests; (b) all of the Pledged Shares currently outstanding and
described on Exhibit A are duly authorized and issued, fully paid and
non-assessable, and all documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer and/or pledge thereof have been paid; (c)
to the knowledge of Pledgors, no dispute, right of setoff, counterclaim or
defense exists with respect to all or any part of the Pledged Interests; (d) the
Pledged Interests are free and clear of all liens, mortgages, pledges, charges,
security interests or other encumbrances, options, warrants, puts, calls and
other rights of third persons, and restrictions, other than (i) the Security
Interest, (ii) restrictions on transferability imposed by applicable state and
federal securities laws, and (iii) the restrictions, if any, contained in each
Company's Dealer Franchise Agreements; (e) Pledgors have full corporate or other
applicable power, right and authority to pledge the Pledged Interests for the
purposes and upon the terms set out herein, and the execution, delivery and
performance of this Pledge Agreement are not in contravention of any indenture,
agreement or undertaking to which any Pledgor as a party or by which any Pledgor
is bound, except where such contravention would not have a Material Adverse
Effect or a material adverse effect on Group 1 or the Pledgors; (f) the original
stock certificates representing all of the Pledged Shares have been delivered to
Agent, together with a duly executed blank stock power with signatures
guaranteed, for each certificate; (g) the Pledged Shares and Interests described
on Exhibit A constitute (i) all of the issued and outstanding capital stock of
each of the Companies and (ii) the indicated number of shares and/or ownership
interest percentages of the entities as shown on Exhibit A; (h) none of the
Companies have issued, nor are there outstanding, any options, warrants or other
rights in favor of any Pledgor to acquire capital stock of any of the Companies
nor other interests of any of the Non-Subsidiary Entities; and (i) the Companies
constitute all of the Subsidiaries of Pledgor on the date hereof.
4. Covenants. (a) Further Acts,
Assurances. Pledgors covenant and agree to from time to time promptly execute
and deliver to Agent all such other assignments, certificates, supplemental
writings and financing statements as Agent requests in order to perfect or
evidence the Security Interest. Pledgors further agree that if any Pledgor shall
at any time acquire any additional shares of the capital stock of any class of
any of the Companies, or any additional interests of ownership of any kind of
any Subsidiary, and whether such acquisition shall be by purchase, exchange,
reclassification, dividend or otherwise, such Pledgor shall, as soon as
practically possible, (and without the necessity for any request or demand by
Agent) deliver the certificates representing such shares or interests to Agent,
in the same manner and with the same effect as described in Sections 1 through 3
hereof. Upon delivery, such shares or evidences of ownership shall thereupon
constitute Pledged Interests and shall be subject to the Security Interest
herein created, for the purposes and upon the terms and conditions set forth in
this Pledge Agreement, the Credit Agreement, the Notes and the other Loan
Documents.
(b) No Transfer or Hypothecation. Pledgors
will not, without the prior written consent of Agent, transfer, assign, dispose
of any right, title or interest of Pledgors, or any of them, in the Pledged
Interests, or any part thereof, or create directly or indirectly any other
security interest or otherwise encumber any of the Pledged Interests, or permit
any of the Pledged Interests to ever be or become subject to any warrant, put,
option or other rights of third Persons or any attachment, execution,
sequestration or other legal or equitable process, or any security interest or
encumbrance of any kind, except the Security Interest. Pledgor will warrant and
defend the Security Interest created hereby against the claims of all third
parties other than Pledgees.
(c) Enforcement. Pledgors shall enforce or
secure in the name of Agent for the Pledgees the performance of each and every
obligation, term, covenant, condition and agreement relating to the Pledged
Interests, and Pledgors shall appear in and defend any action or proceeding
arising under, occurring out of or in any manner connected with the Pledged
Interests, and upon request by Agent, Pledgors will do so in the name and on
behalf of Pledgees, but at the expense of Pledgors, and Pledgors shall pay all
costs and expenses of Agent and Pledgees, including, but not limited to,
attorneys' fees and disbursements, in any action or proceeding in which Pledgees
may appear.
(d) Inspection. Pledgors shall allow Agent
to inspect all records of Pledgors relating to the Pledged Interests, and to
make and take away copies of such records.
(e) Changes. Pledgors shall promptly notify
Agent of any material change in any fact or circumstance warranted or
represented by any Pledgor in this Pledge Agreement
EXHIBIT E-ii
<PAGE> 3
or in any other writing furnished by any Pledgor to Agent in connection with the
Pledged Interests or this Pledge Agreement.
(f) Claims. Pledgors shall promptly
notify Agent of any claim, action or proceeding affecting title to the Pledged
Interests, or any part thereof, or the Security Interest, and at the request of
Agent, appear in and defend, at Pledgors' expense, any such action or
proceeding.
(g) Costs. Pledgors shall promptly pay
to Agent the amount of all reasonable costs and expenses of Agent and/or the
Pledgees, including, but not limited to, reasonable attorneys' fees, incurred by
Agent or Pledgees in connection with this Pledge Agreement and the enforcement
of the rights of Agent or Pledgees hereunder, in accordance with Section 13.4 of
the Credit Agreement.
5. Conversions; etc. Should the Pledged
Interests, or any part thereof, ever be in any manner converted by any of the
Companies into another property of the same or another type or any money or
other proceeds ever be paid or delivered to Pledgors as a result of Pledgors'
rights in the Pledged Interests, then in any such event (except as otherwise
provided herein), all such property, money and other proceeds shall be and/or
become part of the Pledged Interests, and Pledgors covenant forthwith to pay or
deliver to Agent all of the same which is susceptible of delivery; and at the
same time, if Agent deems it necessary and so requests, Pledgors will properly
endorse or assign the same to Agent for the benefit of Pledgees. Without
limiting the generality of the foregoing, Pledgors hereby agree that the shares
of capital stock of the surviving corporation in any merger or consolidation
involving any of the Companies or any of the Pledged Interests shall be deemed
to constitute the same property as the Pledged Interests. With respect to any
such property of a kind requiring an additional security agreement, financing
statement or other writing to perfect a security interest therein in favor of
Pledgees, Pledgors will forthwith execute and deliver to Agent, such
documentation as Agent shall request to create and perfect its liens and
security interests herein.
6. Payments on the Pledged Interests.
Subject to the terms of Section 9, with respect to any instruments or warrants
that are or become part of the Pledged Interests, Agent, without notice to
Pledgors, shall have the right at any time and from time to time, after the
occurrence and during the continuance of an Event of Default, to notify and
direct each of the Companies to thereafter make all payments on such Pledged
Interests directly to Agent, regardless of whether any Pledgor was previously
making collections thereon, and, with respect to such instruments or warrants
that are stock certificates, shares of capital or permanent reserve fund stock
or beneficial interest, or other securities, Agent shall have authority, after
the occurrence and during the continuance of an Event of Default, without
further notice to Pledgors, either to have them registered in Agent's name, or
in the name of Agent's nominee, or, with or without registration, to demand of
each of the Companies, and to receive a receipt for, any and all distributions
payable with respect thereto, regardless of the medium in which paid and whether
they be ordinary or extraordinary. Each of the Companies shall be fully
protected in relying on the written statement of Agent that it then holds the
Security Interest which entitles it to receive such payment. The receipt of
Agent for such payment shall be full acquittance therefor to each of the
Companies, and Pledgors agree, at the request of Agent, to execute and deliver a
letter to each of the Companies acknowledging this right of Agent; provided,
that the failure of any Pledgor to execute and deliver such letter shall not
affect or limit the rights of Agent or Pledgees set forth herein.
7. Preservation of Pledged Interests.
Neither Agent nor Pledgees shall have any responsibility for or obligation or
duty with respect to all or any part of the Pledged Interests or any matter or
proceeding arising out of or relating thereto, including, without limitation,
any obligation or duty to collect any sums due in respect thereof or to protect
or preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgors shall be responsible
generally for the preservation of all rights in the Pledged Interests.
8. Collection of the Loan. Neither Agent nor
Pledgees shall ever be liable for any failure to use due diligence in
the collection of any and all amounts due and owing under the Notes, the Credit
Agreement or any other Loan Documents, or any part thereof.
EXHIBIT E-iii
<PAGE> 4
9. Rights of Parties Before and After the Occurrence of an
Event of Default.
(a) Exercising Rights Prior to an Event of Default. Unless
and until an Event of Default shall occur and be continuing,
(i) Each Pledgor shall be entitled to receive all
cash dividends paid to such Pledgor in respect of or
attributable to the Pledged Interests owned by such Pledgor
and any and all other Distributions (hereinafter defined),
except as provided in the following sentence. Notwithstanding
the foregoing, Agent shall be entitled to receive, whether or
not an Event of Default has occurred, any and all
Distributions of stock, whether as a result of a stock
dividend, stock split or otherwise. As used herein
"Distributions" shall mean the retirement, redemption,
purchase or other acquisition for value of the Pledged
Interests, the declaration or payment of any dividend or other
distribution on or with respect to the Pledged Interests, and
any other payment made with respect to the Pledged Interests.
All such Distributions of stock and, after and during the
continuance of an Event of Default, any and all other
Distributions, shall if received by any Person other than
Agent, be held in trust for the benefit of Pledgees and shall
forthwith be delivered to Agent (accompanied by proper
instruments of assignment and/or stock and/or bond powers
executed by the applicable Pledgor in accordance with Agent's
instructions) to be held subject to the terms of this Pledge
Agreement. Any cash proceeds of the Pledged Interests which
come into the possession of Agent or Pledgees after the
occurrence and during the continuance of an Event of Default
may, at Agent's option, be applied in whole or in part to the
Obligations (to the extent then due), or be released in whole
or in part to or on the written instructions of the applicable
Pledgor. Neither Agent nor any Pledgees shall be obligated to
make any investment of such proceeds or shall have any
liability to Pledgors for any loss which may result therefrom.
All interest and other amounts earned from any investment of
such proceeds may be dealt with by Agent for the Pledgees in
the same manner as other cash proceeds.
(ii) Each Pledgor shall have the right to vote and
give consents with respect to all of the Pledged Interests
owned by it and to consent to, ratify, or waive notice of any
and all meetings; provided that such right shall in no case be
exercised for any purpose contrary to, or in violation of, any
of the terms or provisions of this Pledge Agreement, the
Notes, the Credit Agreement, or any other Loan Document.
(b) Exercising Rights After the Occurrence of an Event of
Default. Upon the occurrence and during the continuance of an Event of Default,
Agent, without the consent of Pledgors, may:
(i) At any time vote or consent in respect of any of
the Pledged Interests and authorize any Pledged Interests to
be voted and such consents to be given, ratify and
EXHIBIT E-iv
<PAGE> 5
waive notice of any and all meetings, and take such other
action as shall seem desirable to Agent, in its discretion, to
protect or further the interests of Pledgees in respect of any
of the Pledged Interests as though it were the outright owner
thereof, and, each Pledgor hereby irrevocably constitutes and
appoints Agent, after the occurrence and during the
continuance of an Event of Default, its sole proxy and
attorney-in-fact, with full power of substitution to vote and
act with respect to any and all Pledged Interests standing in
the name of such Pledgor or with respect to which such Pledgor
is entitled to vote and act. The proxy and power of attorney
herein granted are coupled with interests, are irrevocable,
and shall continue throughout the term of this Pledge
Agreement;
(ii) In respect of any Pledged Interests, join in
and become a party to any plan of recapitalization,
reorganization or readjustment (whether voluntary or
involuntary) as shall seem desirable to Agent in respect of
any such Pledged Interests, and deposit any such Pledged
Interests under any such plan; make any exchange,
substitution, cancellation or surrender of such Pledged
Interests required by any such plan and take such action with
respect to any such Pledged Interests as may be required by
any such plan or for the accomplishment thereof; and no such
disposition, exchange, substitution, cancellation or surrender
shall be deemed to constitute a release of Pledged Interests
from the Security Interest of this Pledge Agreement;
(iii) Receive all payments of whatever kind made upon
or with respect to any Pledged Interests; and
(iv) Transfer into its name, or into the name or
names of its nominee or nominees, all or any of the Pledged
Shares or the Pledged Interests.
(c) Right of Sale After the Occurrence of an Event of Default.
Upon the occurrence and during the continuance of an Event of Default, Agent may
sell, without recourse to judicial proceedings, by way of one or more contracts,
with the right (except at private sale) to bid for and buy, free from any right
of redemption, the Pledged Shares and/or Pledged Interests or any part thereof,
upon five (5) days' notice (which notice is agreed to be reasonable notice for
the purposes hereof) to Pledgor of the time and place of sale, for cash, upon
credit or for future delivery, at Agent's option and in Agent's complete
discretion:
(i) At public sale, including a sale at any broker's
board or exchange; or
(ii) At private sale in any manner which will not
require the Pledged Interests, or any part thereof, to be
registered in accordance with The Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder,
or any other law or regulation, at the best price reasonably
obtainable by Agent at any such private sale or other
disposition in the manner mentioned above. Agent is also
hereby authorized, but not obligated, to take such actions,
give such notices, obtain such consents, and do such other
things as Agent may deem required or appropriate in the event
of sale or disposition of any
EXHIBIT E-v
<PAGE> 6
of the Pledged Interests. Pledgors understand that Agent may
in its discretion approach a restricted number of potential
purchasers and that a sale under such circumstances may yield
a lower price for the Pledged Interests, or any portion
thereof, than would otherwise be obtainable if the same were
registered and sold in the open market. Pledgors agree (A)
that in the event Agent shall so sell the Pledged Interests,
or any portion thereof, at such private sale or sales, Agent
shall have the right to rely upon the advice and opinion of
any member firm of a national securities exchange as to the
best price reasonably obtainable upon such a private sale
thereof (any expense borne by Agent in obtaining such advice
to be paid by Pledgors as an expense related to the exercise
by Agent of its rights hereunder), and (B) that such reliance
shall be conclusive evidence that Agent handled such matter in
a commercially reasonable manner. Pledgees shall be under no
obligation to take any steps to permit the Pledged Interests
to be sold at a public sale or to delay a sale to permit the
Companies to register the Pledged Interests for public sale
under The Securities Act of 1933 or applicable state
securities law.
In case of any sale by the Agent of the Pledged Interests on
credit or for future delivery, the Pledged Interests sold may be retained by
Agent until the selling price is paid by the purchaser, but Agent shall incur no
liability in case of failure of the purchaser to take up and pay for the Pledged
Interests so sold. In case of any such failure, such Pledged Interests so sold
may be again similarly sold.
In connection with the sale of the Pledged Interests, Agent
is authorized, but not obligated, to limit prospective purchasers to the extent
deemed necessary or desirable by Agent to render such sale exempt from the
registration requirements of The Securities Act of 1933, as amended, and any
applicable state securities laws, and no sale so made in good faith by Agent
shall be deemed not to be "commercially reasonable" because so made.
(d) Other Rights After an Event of Default. Upon the
occurrence and during the continuance of an Event of Default, Agent, at its
election, may exercise any and all rights available to a secured party under the
Uniform Commercial Code as enacted in the State of Texas or other applicable
jurisdiction, as amended, in addition to any and all other rights afforded
hereunder, under the Notes, under the other Loan Documents, at law, in equity or
otherwise.
(e) Application of Proceeds. Any and all proceeds ever
received by Pledgees from any disposition of the Pledged Interests, or any part
thereof or the exercise of any other right pursuant hereto shall be applied as
provided in Section 12.1(d) of the Credit Agreement.
10. Notices. Whenever this Pledge Agreement requires or
permits any consent, approval, notice, request or demand from any one party to
another, the consent, approval, notice, request or demand shall be deemed given
if given in accordance with Section 13.1 of the Credit Agreement.
11. Right to File as Financing Statement. Agent shall have the
right at any time to execute and file this Pledge Agreement as a financing
statement, but the failure of Agent to do so shall not impair the validity or
enforceability of this Pledge Agreement or the Security Interest.
12. Waiver of Certain Rights. (a) To the full extent that it
may lawfully so agree Pledgors agree that Pledgors will not at any time plead,
claim or take the benefit of any appraisement, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to prevent or
delay the enforcement of this Pledge Agreement, or the absolute sale of all or
any part of the Pledged Interests or the
EXHIBIT E-vi
<PAGE> 7
possession thereof by any purchaser at any sale hereunder, and Pledgors hereby
waive the benefit of all such laws to the extent Pledgors lawfully may do so.
Each right, power and remedy of Agent or Pledgees provided for in this Pledge
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Pledge Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by Agent or Pledgees of any one or more of
such rights, power or remedies shall not preclude the simultaneous or later
exercise by Agent or Pledgees of any or all such other rights, powers or
remedies. No failure or delay on the part of Agent or Pledgees to exercise any
such right, power or remedy and no notice or demand which may be given to or
made upon Pledgors by Agent or Pledgees with respect to any such remedies shall
operate as a waiver thereof, or limit or impair Agent's or Pledgees' right to
take any action or to exercise any power or remedy hereunder, under the Notes or
under any of the other Loan Documents, without notice or demand, or prejudice
its rights as against Pledgors in any respect.
(b) Except for any notices required hereunder, or
pursuant to specific provisions of the Credit Agreement or any other Loan
Document, each Pledgor hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever in respect of the Notes (including, without
limitation, notice of intent to accelerate and of acceleration) or the Credit
Agreement, as well as any requirement that Agent or Pledgees or any other holder
of the Notes exhaust any right or remedy or take any action in connection with
the Notes or any of the other Loan Documents before exercising any right or
remedy under this Pledge Agreement. The obligations of Pledgors hereunder shall
not be affected or impaired by reason of the happening from time to time of any
of the following, although without notice to or the consent of Pledgors:
(i) the renewal or extension of
the maturity of or the acceptance of partial
payments with respect to any and all amounts
due and owing under the Notes, the Credit
Agreement or any other Loan Document, or any
part thereof;
(ii)the alteration in any manner
of the terms of any of the Loan Documents or
any part thereof either as to the maturities
thereof, rates of interest, methods of
payment, parties thereto or otherwise
(except for any notices to or consents of
Pledgors expressly required pursuant to the
Credit Agreement or any other Loan
Document);
(iii) the waiver by Agent or
Pledgees or any other holder of the Notes of
the performance or observance by any Pledgor
of any of its agreements, covenants, terms
or conditions contained in the Notes or in
any of the other Loan Documents;
(iv)the voluntary or involuntary
liquidation, dissolution, sale of all or
substantially all of the assets, marshalling
of assets and liabilities, receivership,
conservatorship, insolvency, bankruptcy,
assignment for the benefit of creditors,
reorganization, arrangement, winding up, or
other similar proceedings affecting any
Pledgor;
(v) the release by operation of
law or otherwise of any of the other
obligors from the performance or observance
of any of the agreements, covenants, terms
or conditions contained in the Notes or in
any of the other Loan Documents (except to
the extent, if any, that the obligations of
Pledgors hereunder are specifically affected
pursuant to or in connection with any such
release); or
EXHIBIT E-vii
<PAGE> 8
(vi) the release of any security
for the Notes, whether under this Pledge
Agreement or any of the other Loan Documents
(except to the extent, if any, that the
obligations of Pledgors hereunder are
specifically affected pursuant to or in
connection with any such release).
13. Amendments. This Pledge Agreement may be
amended only by an instrument in writing executed jointly by Pledgors, Agent and
the Required Banks (or Agent on behalf of the Required Banks) and supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
14. Multiple Counterparts. This Pledge Agreement
may be executed in a number of identical counterparts, each of which shall be
deemed an original for all purposes and all of which shall constitute,
collectively, one agreement; but, in making proof of this agreement, it shall
not be necessary to produce or account for more than one such counterpart.
15. Parties Bound; Assignment. This Pledge
Agreement shall be binding on Pledgors and Pledgors' successors and assigns and
shall inure to the benefit of Agent and Pledgees and Agent's and Pledgees'
permitted successors and assigns in accordance with the terms of the Credit
Agreement.
16. Invalid Provisions. If any provision of this
Pledge Agreement is held to be illegal, invalid or unenforceable under present
or future laws effective during the term hereof, such provision shall be fully
severable; and this Pledge Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part of this
Pledge Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
17. No Control by Agent or Pledgees.
Notwithstanding anything herein to the contrary, this Pledge Agreement, the
Notes and the other Loan Documents, and the transactions contemplated hereby and
thereby, do not and will not, prior to the occurrence of an Event of Default,
constitute, create or have the effect of constituting or creating, directly or
indirectly, the actual or practical ownership of any of the Companies by Agent
or Pledgees, or control, affirmative or negative, direct or indirect, by Agent
or Pledgees over the management or any other aspect of the day-to-day operation
of the Companies, which ownership and control remains exclusively and at all
times in each of the Companies.
18. Paragraph Headings. The paragraph headings
used in this Pledge Agreement are for convenience of reference only and are not
to affect the construction hereof or be taken into consideration in the
interpretation hereof.
19. Conflicts With Credit Agreement. In the event
of any conflict or inconsistency between the terms of this Pledge Agreement and
the terms of the Credit Agreement, the terms of the Credit Agreement will
control.
20. Agreement to Supplement. Pledgors acknowledge
and agree that this Pledge Agreement shall be amended and supplemented from time
to time to specifically include a description of all Pledged Shares subject
hereto subsequent to the date hereof, and Agent shall be entitled to supplement
Exhibit A from time to time, without any action or joinder of Pledgors to
reflect the addition of all such additional Pledges Shares. Administrative Agent
shall have a valid first priority security interest in all additional Pledged
Shares which come into existence after the date hereof, whether or not reflected
on a supplement to Exhibit A. Pledgors hereby agree to execute, deliver and
cause the filing of all stock certificates, stock powers, financing statements
and other documents and to take such further action as deemed necessary in
Administrative Agent's discretion with respect to each such additional Pledged
Shares to ensure Administrative Agent's rights hereunder with respect thereto.
EXHIBIT E-viii
<PAGE> 9
21. TEXAS LAW. THIS PLEDGE AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA.
22. COMPLETE AGREEMENT. THIS PLEDGE AGREEMENT,
THE NOTES, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS COLLECTIVELY
REPRESENT THE FINAL AGREEMENT BY AND AMONG PLEDGEES, AGENT AND PLEDGORS AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF PLEDGORS, AGENT AND PLEDGEES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN PLEDGORS, AGENT AND PLEDGEES.
[SEE NEXT PAGE FOR SIGNATURES]
EXHIBIT E-ix
<PAGE> 10
EXECUTED effective as of December 31, 1997.
ADDRESS FOR ALL PLEDGORS: PLEDGORS:
c/o Group One Automotive, Inc. GROUP 1 AUTOMOTIVE, INC., a Delaware
950 Echo Lane corporation
Suite 350
Houston, Texas 77024 By: /s/ SCOTT THOMPSON
Telecopy No.: (713) 467-6268 ---------------------------------
Scott Thompson, Vice President
SOUTHWEST TOYOTA, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
SMC LUXURY CARS, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
FOYT MOTORS, INC., a Texas corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
SMITH, LIU & CORBIN, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
COURTESY NISSAN, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
EXHIBIT E-x
<PAGE> 11
ROUND ROCK NISSAN, INC., a Texas
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
SMITH, LIU & KUTZ, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
TOWN NORTH NISSAN, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
TOWN NORTH IMPORTS, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
TOWN NORTH SUZUKI, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
MIKE SMITH AUTOPLAZA, INC., a Texas
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
EXHIBIT E-xi
<PAGE> 12
HOWARD PONTIAC-GMC, INC., an Oklahoma
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
BOB HOWARD CHEVROLET, INC., an Oklahoma
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
BOB HOWARD MOTORS, INC., an Oklahoma
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
BOB HOWARD AUTOMOTIVE-H, INC., an Oklahoma
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
BOB HOWARD DODGE, INC., an Oklahoma
corporation
By: /s/ SCOTT THOMPSON
---------------------------------
Scott Thompson, Vice President
EXHIBIT E-xii
<PAGE> 13
ACCEPTED AND AGREED as of the
31ST day of December, 1997
AGENT:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association,
as Agent
By: /s/ CURTIS D. KARGES
-------------------------------------------
Name: Curtis D. Karges
----------------------------------------
Title: Senior Vice President
---------------------------------------
ADDRESS:
707 Travis Street
Houston, Texas 77002
Attn: David Jones
Telecopy No.: (713) 216-4940
EXHIBIT E-xiii
<PAGE> 14
EXHIBIT A
PLEDGED SHARES AND INTERESTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. Group 1 Automotive, Inc.
a. Pledged Shares
NO. OF TYPE OF
COMPANY SHARES SHARES CERT. NO.
--------- --------- ---------
b. Other Equity Interests
2. Repeat 1 for each other Borrower
</TABLE>
EXHIBIT E-xiv
<PAGE> 1
EXHIBIT 10.55
[CHASE LETTERHEAD]
Group 1 Automotive, Inc.
950 Echo Lane, Suite 350
Houston, Texas 77024
Attn: Scott L. Thompson
Re: SWAP TRANSACTION (OUR REFERENCE NO. 898)
Ladies and Gentlemen:
The purpose of this letter agreement is to set forth the terms and conditions
of the Swap Transaction entered into between us on the Trade Date below (the
"Swap Transaction"). It constitutes a "Confirmation" as referred to in the
Master Agreement described below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swap Dealers Association, Inc., now known as the
International Swaps and Derivatives Association, Inc. ("ISDA")) are incorporated
into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will
govern. Each party represents and warrants to the other that (i) it is duly
authorized to enter into this Swap Transaction and to perform its obligations
hereunder and (ii) the person executing this Confirmation is duly authorized to
execute and deliver it.
1. This Confirmation supplements, forms part of, and is subject to, the
Master Agreement in the form published by ISDA (the "Agreement"), as if
you and we had executed that agreement (but without any Schedule
thereto) and the Agreement shall be governed by and construed in
accordance with the laws of the State of Texas. All provisions
contained or incorporated by reference in the Agreement shall govern
this Confirmation except as expressly modified below. In addition, you
and we agree to use our best efforts promptly to negotiate, execute and
deliver a Master Agreement (in the form published by ISDA). Upon
execution and delivery by you and us of that agreement (i) this
Confirmation shall supplement, form a part of, and be subject to that
agreement and (ii) all provisions contained or incorporated by reference
in that agreement shall govern this Confirmation except as expressly
modified below.
2. The terms of the particular Rate Swap Transaction to which this
Confirmation relates are as follows:
<TABLE>
<S> <C>
Notional Amount: USD 75,000,000
Trade Date: January 23, 1998
Effective Date: January 27, 1998
Termination Date: December 15, 2000
</TABLE>
<TABLE>
FIXED AMOUNTS:
--------------
<S> <S>
Fixed Rate Payer: Group 1 Automotive ("Counterparty")
Fixed Rate Payer Payment Dates: The 15th day of each month of
each year,
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
commencing February 15, 1998
to and including the
Termination Date, subject to
adjustment in accordance with
the Modified Following
Business Day Convention.
Fixed Rate: 5.66 percent
Fixed Rate Day Count Fraction: Actual/360
</TABLE>
<TABLE>
FLOATING AMOUNTS:
-----------------
<S> <C>
Floating Rate Payer: Chase Bank of Texas National
Association ("CBT")
Floating Rate Payer Payment Dates: Same as the Fixed Rate Payer
Payment Dates
Floating Rate for the Initial
Calculation Period: 5.60547 percent
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One month
Floating Rate Day Count Fraction: Actual/360
Reset Dates: The first day of each
Calculation Period
</TABLE>
<TABLE>
<CAPTION>
Compounding: Inapplicable
<S> <C>
Business Days: New York Business Days and
London Business Days
Calculation Agent: CBT
Payments to TCB: Chase Bank of Texas - Houston
ABA No. 113-000-609
Capital Markets Dept. - Rate
Swaps CR Acct. No. 00100381608
Attn: Ginger Vollert
Payments to Counterparty: Comerica
ABA No. 072-000-096
Account No. 1850-796648
Favor of: Rate Swap
Governing Law: The laws of the State of Texas
</TABLE>
Each party has entered into this Swap Transaction solely in reliance on its own
judgment. Neither party has any fiduciary obligation to the other party
relating to this Swap Transaction. In addition, neither party has held itself
out as advising, or has held out any of its employees or agents as having the
authority to advise, the other party as to whether or not the other party
should enter into this Swap Transaction, any subsequent actions relating to
this Swap Transaction or any other matters relating to this Swap Transaction.
Neither party shall have any responsibility or liability whatsoever in respect
of any advice of this nature given, or views expressed, by it or any of such
<PAGE> 3
persons to the other party relating to this Swap Transaction, whether or not
such advice is given or such views are expressed at the request of the other
party.
THE AGREEMENT AND THIS WRITTEN CONFIRMATION REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Please confirm that the foregoing correctly sets forth the terms and conditions
of our agreement by responding within one (2) Business Days by returning via
facsimile an executed copy of this Confirmation to the attention of JIM SHIELDS
(facsimile no. (713) 216-4919; telephone no. (713) 216-5482.)
Chase Bank of Texas is pleased to have concluded this transaction with you.
Very truly yours,
CHASE BANK OF TEXAS
NATIONAL ASSOCIATION
By: /s/ CAROLYN BETTI
---------------------------------
Carolyn Betti
Vice President
Accepted and confirmed as
of the date first written:
GROUP 1 AUTOMOTIVE
By: /s/ SCOTT THOMPSON
---------------------------
Scott Thompson
Senior Vice President
<PAGE> 1
EXHIBIT 21.1
10-K SUBSIDIARY LIST
Bob Howard Automotive-H, Inc.
Oklahoma corporation
d/b/a Bob Howard Acura, Bob Howard Honda
Bob Howard Chevrolet, Inc.
Oklahoma corporation
d/b/a Bob Howard Chevrolet, Howard Chevrolet, Bob Howard Chevrolet-Geo,
Bob Howard Subaru
Bob Howard Dodge, Inc.
Oklahoma corporation
Bob Howard Motors, Inc.
Oklahoma corporation
d/b/a Bob Howard Toyota
Bob Howard Nissan, Inc.
Oklahoma corporation
Howard Pontiac-GMC, Inc.
Oklahoma corporation
d/b/a Bob Howard Automall, Bob Howard KIA, Bob Howard Gmc Truck,
Bob Howard Pontiac, Bob Howard Chrysler-Plymouth, Bob Howard Jeep-Eagle,
Bob Howard Isuzu, Bob Howard Mazda
Courtesy Nissan, Inc.
Texas corporation
Foyt Motors, Inc.
Texas corporation
d/b/a A.J. Foyt Honda, A.J. Foyt Isuzu, A.J. Foyt Used Cars, Southwest Auto
Credit Corp.
Group 1 Ford, Inc.
Texas corporation
d/b/a Elgin Ford
<PAGE> 2
Mike Smith Autoplaza, Inc.
Texas corporation
d/b/a Mike Smith Honda, Mike Smith Oldsmobile, Mike Smith GMC Truck,
Mike Smith Kia, Mike Smith Lincoln-Mercury, Mike Smith Mitsubishi
Round Rock Nissan, Inc.
Texas corporation
SMC Luxury Cars, Inc.
Texas corporation
d/b/a Sterling Mccall Lexus
Smith, Liu & Corbin, Inc.
Texas corporation
d/b/a Acura Southwest
Smith, Liu & Kutz, Inc.
Texas corporation
Town North Nissan, Inc.
Texas corporation
Town North Suzuki, Inc.
Texas corporation
Town North Imports, Inc.
Texas corporation
d/b/a Town North Mitsubishi
Southwest Toyota, Inc.
Texas corporation
d/b/a Sterling Mccall Toyota
Koons Ford, Inc.
Florida corporation
d/b/a World Ford/Hollywood, Pines Leasing
Courtesy Ford, Inc.
Florida corporation
d/b/a World Ford/Kendall
Perimeter Ford, Inc.
Delaware corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated March 6, 1998, included herein in this Form 10-K into the Company's
previously filed Registration Statement on Form S-8 No. 333-42165 filed on
December 12, 1997.
ARTHUR ANDERSEN LLP
Houston, Texas
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 35,091,188
<SECURITIES> 0
<RECEIVABLES> 11,130,977
<ALLOWANCES> 520,207
<INVENTORY> 105,421,371
<CURRENT-ASSETS> 161,681,659
<PP&E> 24,989,509
<DEPRECIATION> 3,403,108
<TOTAL-ASSETS> 213,149,153
<CURRENT-LIABILITIES> 111,472,603
<BONDS> 7,053,467
0
0
<COMMON> 146,730
<OTHER-SE> 89,224,776
<TOTAL-LIABILITY-AND-EQUITY> 213,149,153
<SALES> 393,556,747
<TOTAL-REVENUES> 403,966,897
<CGS> 349,366,318
<TOTAL-COSTS> 349,366,318
<OTHER-EXPENSES> 44,223,988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,985,621
<INCOME-PRETAX> 6,390,970
<INCOME-TAX> 573,254
<INCOME-CONTINUING> 5,817,716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,817,716
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
