SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 9, 1998
SONIC AUTOMOTIVE, INC.
(Exact name of Registrant as Specified in Charter)
Delaware 1-13395 56-2010790
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28218
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (704) 532-3320
--------------
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS.
(A) DEBT OFFERING. On July 9, 1998, the Company issued a press release
that is attached to this report on Form 8-K as Exhibit 99.1.
(B) PENDING ACQUISITIONS. The Company has entered into agreements
regarding the Company's acquisition, as described in this Section (B), of
certain automobile dealership businesses and assets (collectively, but
excluding the Hatfield Acquisition (as defined below), the "Pending
Acquisitions"). The operations being acquired in the Pending Acquisitions
generally consist of selling new and used cars and light trucks, selling
replacement parts, providing vehicle maintenance, warranty, paint, collision and
repair services, and arranging customer financing and insurance. None of the
Pending Acquisitions have been consummated as of the date of this filing. The
Pending Acquisitions are anticipated to be consummated, subject to certain
closing conditions (including but not limited to the receipt of consents to the
acquisitions from the relevant automobile manufacturers that provide vehicle
inventories to the businesses being acquired), in the third quarter of 1998.
The estimated aggregate purchase price payable by the Company for the
Hatfield Acquisition, the Pending Acquisitions and the Higginbotham Acquisition
(as defined in Section (C) below) is approximately $110.1 million. Of this
aggregate purchase price, approximately $75.0 million will be paid in cash and
the balance will be paid by the Company through the issuance to the respective
sellers of shares of the Company's Class A Convertible Preferred Stock, par
value $.10 per share, having an aggregate liquidation value of approximately
$35.1 million. The Company will fund the cash portion of the purchase price
payable at closing of each of the Hatfield Acquisition, the Pending Acquisitions
and the Higginbotham Acquisition by increasing the Company's long-term debt
borrowings. Certain of the Pending Acquisitions will require the Company to pay
contingent purchase prices based on the future performance of the acquired
businesses, which are expected to be funded with cash from future operations or
from long-term debt borrowings. The total amount of consideration to be paid by
the Company in each of the Hatfield Acquisition, the Pending Acquisitions and
the Higginbotham Acquisition was determined through arms'-length negotiations
with each of the respective sellers.
Certain audited financial statements for the Hatfield Acquisition, the
Economy Acquisition and the Casa Ford Acquisition (each as defined below) that
are a part of the Pending Acquisitions are attached to this report on Form 8-K
as Exhibits 99.2, 99.3 and 99.4, respectively.
(I) THE HATFIELD ACQUISITION. The Company has entered into an Asset
Purchase Agreement dated as of February 4, 1998 (the "Hatfield Purchase
Agreement") between the Company, as buyer, Hatfield Jeep Eagle, Inc., Hatfield
Lincoln Mercury, Inc., Trader Bud's Westside Dodge, Inc., Toyota West, Inc., and
Hatfield Hyundai, Inc., as sellers, and Bud C. Hatfield, Dan E. Hatfield and Dan
E. Hatfield, as trustee of The Bud C. Hatfield, Sr. Special Irrevocable Trust,
as shareholders of the sellers, as amended by Amendment No. 1 and Supplement to
Asset Purchase Agreement dated as of May 28, 1998 ("Amendment No. 1") by and
among the parties to the Hatfield Purchase Agreement (the "Hatfield
Acquisition"). The Hatfield Purchase Agreement and Amendment No. 1 are attached
to this report on Form 8-K as Exhibits 99.5 and 99.6, respectively. The Company
closed the Hatfield Acquisition on July 9, 1998 (the date of this filing),
except that the acquisition of the Toyota West dealership was closed in escrow
pending the approval of Toyota to the acquisition of this dealership.
Pursuant to the terms of the Hatfield Purchase Agreement, the Company
acquired substantially all of the assets and assumed certain liabilities of
six individual automobile dealerships located in Columbus, Ohio selling
Chrysler/Plymouth, Dodge, Hyundai, Isuzu, Jeep, KIA, Lincoln/Mercury, Subaru,
Toyota and Volkswagen brands of vehicles. The Company intends
1
<PAGE>
to continue the existing operations at each of the dealerships being acquired in
the Hatfield Acquisition. The Company has obtained consents from all of the
applicable manufacturers to the Hatfield Acquisition, except from Chrysler and
Toyota. The Company expects to obtain the consent of Chrysler in the near
future. The Company also expects to receive the consent of Toyota in the near
future, at which point the escrow of the Toyota West dealership will be
released. There can be no assurance that the consents of Chrysler and/or Toyota
will be obtained. Any manufacturer who does not consent to the Hatfield
Acquisition may seek to terminate its franchise agreement, although relevant
state franchising laws impose limitations on a manufacturer's ability to
terminate a franchise.
(II) THE MONTGOMERY ACQUISITION. The Company has also entered into an
Agreement and Plan of Merger dated as of February 10, 1998 (the "Montgomery
Purchase Agreement") among the Company, Frank E. McGough, Jr., Capitol
Chevrolet, Inc. and Capitol Imports, Ltd. (the "Montgomery Acquisition"). The
Montgomery Purchase Agreement is attached to this report on Form 8-K as Exhibit
99.7. Pursuant to the Montgomery Purchase Agreement, the Company will acquire
all the outstanding stock of two automobile dealerships operating Chevrolet,
KIA, Mitsubishi and Hyundai franchises, each of which is located in Montgomery,
Alabama. The Company intends to continue operating each of the acquired
automobile dealerships following consummation of the Montgomery Acquisition.
(III) THE ECONOMY HONDA ACQUISITION. The Company has also entered into
a Stock Purchase Agreement dated as of March 16, 1998 (the "Economy Honda
Purchase Agreement"), between the Company, Freeman Smith, Melvin Q. Smith, and
James M. Holland (the "Economy Acquisition"). The Economy Honda Purchase
Agreement is attached to this report on Form 8-K as Exhibit 99.8. Pursuant to
the Economy Honda Purchase Agreement, the Company will acquire all of the
outstanding capital stock of Economy Cars, Inc., which owns and operates a Honda
automobile dealership located in Chattanooga, Tennessee. The Company intends to
continue operating the Honda dealership following consummation of the Economy
Acquisition.
2
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(IV) THE CENTURY ACQUISITION. The Company has also entered into an
Asset Purchase Agreement dated April 10, 1998 (the "Century Purchase Agreement")
by and among the Company, Century Auto Sales, Inc., A. Foster McKissick, III and
Murray P. McKissick (the "Century Acquisition"). The Century Purchase Agreement
is attached to this report on Form 8-K as Exhibit 99.9. Pursuant to the Century
Purchase Agreement, the Company will acquire substantially all of the assets,
other than the real property and improvements thereon, and assume certain
liabilities of a BMW dealership in located in Greenville, South Carolina and a
satellite sales location in Spartanburg, South Carolina. The Company intends to
continue operating the BMW dealership and the satellite sales location
following consummation of the acquisition.
As part of the same acquisition, the Company has also entered into a
Contract to Purchase and Sell Real Property dated as of April 10, 1998 (the
"Century Real Property Agreement") by and between the Company, Century Auto
Sales, Inc. and Fairway Investments, LLC. The Century Real Property Agreement is
attached to this report on Form 8-K as Exhibit 99.10. Pursuant to the Century
Real Property Agreement, the Company will purchase the Greenville and
Spartanburg real property upon which the BMW dealership and satellite sales
location are located. The aggregate purchase price for such real property will
be the appraised value of the two parcels, with a minimum price of $4.4 million
and a maximum price of $5.2 million.
(V) THE HERITAGE ACQUISITION. The Company has also entered into an
Asset Purchase Agreement dated April 10, 1998 (the "Heritage Purchase
Agreement") by and among the Company, Fairway Management Company d/b/a Heritage
Lincoln-Mercury-Jaguar, and Fairway Ford, Inc. (the "Heritage Acquisition"). The
Heritage Purchase Agreement is attached to this report on Form 8-K as Exhibit
99.11. Pursuant to the Heritage Purchase Agreement, the Company will acquire
substantially all of the assets and assume certain liabilities of a
Lincoln-Mercury-Jaguar dealership located in Greenville, South Carolina. The
Company intends to continue operating the Lincoln-Mercury-Jaguar dealership
following consummation of the Heritage Acquisition. The seller in the Heritage
Acquisition is affiliated with the seller in the Century Acquisition. Jaguar has
refused to approve the Company's acquisition of the Jaguar dealership in the
Heritage Acquisition. Consequently, the Company does not expect to be able to
acquire this Jaguar franchise, which would result in a purchase price adjustment
that has not yet been determined.
3
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As part of the same acquisition, the Company has also entered into a
Contract to Purchase and Sell Real Property dated as of April 10, 1998 (the
"Heritage Real Property Agreement") by and between the Company and Fairway Ford,
Inc. The Heritage Purchase Agreement is attached to this report on Form 8-K as
Exhibit 99.12. Pursuant to the Heritage Real Property Agreement, the Company
will purchase the real property upon which the Lincoln-Mercury-Jaguar dealership
is located. The purchase price for such real property will be its appraised
value and will be payable in cash at the closing.
(VI) THE CASA FORD ACQUISITION. The Company has also entered into a
Stock Purchase Agreement dated as of April 30, 1998 (the "Casa Ford Purchase
Agreement") by and among the Company, Aldo B. Paret and Casa Ford of Houston,
Inc. ("Casa Ford"). The Casa Ford Purchase Agreement is attached to this report
on Form 8-K as Exhibit 99.13. Pursuant to the terms of the Casa Ford Purchase
Agreement, the Company will acquire all of the outstanding capital stock of Casa
Ford, which owns and operates a Ford dealership located in the Houston, Texas
area (the "Casa Ford Acquisition"). The Company intends to continue operating
Casa Ford following consummation of the Casa Ford acquisition.
(VII) CONSENTS TO PENDING ACQUISITIONS. The Pending Acquisitions are
all expected to be consummated, subject to certain closing conditions, in the
third quarter of 1998, although there can be no assurance that any of the
Pending Acquisitions will be consummated. The Company has obtained manufacturer
consent to all of the Pending Acquisitions other than from BMW, Honda, Jaguar
and Mitsubishi. The Company currently expects to receive the remaining consents
prior to the closing of the relevant acquisitions, other than from Jaguar and
from BMW. There can be no assurance that such consents will be obtained. Any
manufacturer who does not consent to any Pending Acquisition may seek to
terminate its franchise agreement, although relevant state franchising laws
impose limitations on a manufacturer's ability to terminate a franchise.
The Company received a notice from BMW that it was exercising its right
of first refusal with regard to the dealerships that are a part of the Century
Acquisition pursuant to BMW's franchise agreement with the seller. However, the
Company believes that this right of first refusal is subject to another
agreement between BMW and the seller that required notice of BMW's intention to
exercise its right of first refusal within 30 days of BMW being notified of the
sale of the dealerships. BMW's notice was delivered to the Company after the
expiration of this 30 day time period. Consequently, the Company believes that
BMW failed to timely exercise its right of first refusal. The Company is
currently negotiating with BMW for its consent with respect to the Century
Acquisition, and the Company believes that it will be successful in entering
into a favorable arrangement with BMW.
(C) RECENT DEVELOPMENTS. The Company has entered into an Asset Purchase
Agreement dated as of July 7, 1998 (the "Higginbotham Purchase Agreement") by
and among the Company, HMC Finance Corporation, Inc., Halifax Ford-Mercury,
Inc., Higginbotham Automobiles, Inc., Higginbotham Chevrolet-Oldsmobile, Inc.,
Sunrise Auto World, Inc. and Dennis D. Higginbotham (the "Higginbotham
Acquisition"). The Higginbotham Purchase Agreement is attached to this report on
Form 8-K as Exhibit 99.14. Pursuant to the Higginbotham Purchase Agreement, the
Company will acquire substantially all of the assets of three Daytona Beach,
Florida dealerships selling Acura, Chevrolet, Ford, Mercedes, Mercury and
Oldsmobile brands of vehicles, and related assets. The Company has not yet
sought to obtain manufacturer consents for the dealerships being acquired in the
Higginbotham Acquisition. The Company also anticipates purchasing the real
property on which the acquired dealerships are located pursuant to a separate
agreement.
4
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
- -------------------------------------------
(c) EXHIBITS.
Exhibit Number Description
-------------- ------------------------------------
99.1 Press Release dated July 9, 1998.
99.2 Combined Financial Statements of the Hatfield Automotive
Group as of December 31, 1996 and 1997 and for each of
the three years in the period ended December 31, 1997
(Audited) and as of March 31, 1998 and for the three
months then ended (Unaudited).
99.3 Financial Statements of Economy Cars, Inc. as of
December 31, 1997 and for the year then ended (Audited)
and as of March 31, 1998 and for the three months then
ended (Unaudited).
99.4 Financial Statements of Casa Ford of Houston, Inc. as of
December 31, 1997 and for the year then ended (Audited)
and as of March 31, 1998 and for the three months then
ended (Unaudited).
99.5* Asset Purchase Agreement dated as of February 4, 1998
between Sonic Automotive, Inc., as buyer, Hatfield Jeep
Eagle, Inc., Hatfield Lincoln Mercury, Inc., Trader
Bud's Westside Dodge, Inc., Toyota West, Inc., and
Hatfield
5
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Hyundai, Inc., as sellers, and Bud C. Hatfield, Dan E.
Hatfield and Dan E. Hatfield, as trustee of The Bud C.
Hatfield, Sr. Special Irrevocable Trust, as
shareholders of the sellers (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 (the
"March 31, 1998 Form 10-Q")).
99.6 Amendment No. 1 and Supplement to Asset Purchase
Agreement dated as of May 28, 1998 by and among Sonic
Automotive, Inc., Hatfield Jeep Eagle, Inc., Hatfield
Lincoln Mercury, Inc., Westside Dodge, Inc., Toyota
West, Inc., Hatfield Hyundai, Inc., Bud C. Hatfield, Dan
E. Hatfield and Dan E. Hatfield as trustee of The Bud C.
Hatfield, Sr. Special Irrevocable Trust.
99.7* Agreement and Plan of Merger dated as of February 10,
1998 among Sonic Automotive, Inc., as buyer, and
Capitol Chevrolet, Inc., Capitol Imports, Ltd. and Frank
E. McGough, Jr., as sellers (incorporated by reference
to Exhibit 10.4 to the March 31, 1998 Form 10-Q).
99.8* Stock Purchase Agreement dated as of March 16, 1998
between Sonic Automotive, Inc., as buyer, and Freeman
Smith, as stockholder and the other stockholders named
therein (incorporated by reference to Exhibit 10.5 to
the March 31, 1998 Form 10-Q).
99.9 Asset Purchase Agreement dated April 10, 1998 by and
among Sonic Automotive, Inc., Century Auto Sales, Inc.,
and A. Foster McKissick, III and Murray P. McKissick.
99.10 Contract to Purchase and Sell Real Property dated as of
April 10, 1998 by and between the Company, Century
Auto Sales, Inc. and Fairway Investments, LLC.
99.11 Asset Purchase Agreement dated April 10, 1998 by and
among the Company, Fairway Management Company
d/b/a Heritage Lincoln-Mercury-Jaguar, and Fairway
Ford, Inc.
99.12 Contract to Purchase and Sell Real Property dated as of
April 10, 1998 by and between the Company and Fairway
Ford, Inc.
99.13 Stock Purchase Agreement dated as of April 30, 1998 by
and among the Company, Aldo B. Paret and Casa Ford of
Houston, Inc.
99.14 Asset Purchase Agreement dated as of July 7, 1998 by
and among the Company, HMC Finance Corporation,
Inc., Halifax Ford-Mercury, Inc., Higginbotham
6
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Automobiles, Inc., Higginbotham Chevrolet-Oldsmobile,
Inc., Sunrise Auto World, Inc. and Dennis D.
Higginbotham.
*Filed Previously
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SONIC AUTOMOTIVE, INC.
Date: July 9, 1998 By: /s/ Theodore M. Wright
--------------------------
Theodore M. Wright
Chief Financial Officer, Vice
President-Finance, Treasurer,
Secretary and Director
7
Exhibit 99.1
[Sonic Automotive, Inc. Letterhead]
SONIC AUTOMOTIVE ANNOUNCES
PROPOSED PRIVATE PLACEMENT
CONTACT: Theodore M. Wright
(704) 532-3320
-- For Immediate Release
CHARLOTTE, NC (July 9, 1998) -- Sonic Automotive, Inc. (NYSE:SAH) announced that
it intends to offer approximately $125 million of its Senior Subordinated Notes
due 2008. The offering will be made by means of an offering memorandum to
qualified institutional buyers pursuant to Rule 144A promulgated under the
Securities Act of 1933, as amended, and is expected to close in late July. Sonic
Automotive will use the net proceeds from the offering to pay all indebtedness
outstanding under its existing revolving credit facility and certain
indebtedness under its floor plan facility and to finance certain acquisitions.
Amounts repaid under the revolving credit facility and the floor plan facility
may be reborrowed for general corporate purposes. The securities to be offered
in the private placement will not be registered under the Securities Act of
1933, as amended, or applicable state securities laws, and may not be offered or
sold absent registration under the Securities Act and applicable state
securities laws or applicable exemptions from registration requirements.
[Stamp stating "SAH Listed NYSE" at bottom of page.]
8
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDERS OF
HATFIELD AUTOMOTIVE GROUP
Columbus, Ohio
We have audited the accompanying combined balance sheets of Hatfield
Automotive Group (the "Company"), which are under common ownership and
management, as of December 31, 1996 and 1997, and the related combined
statements of income, 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, such financial statements present fairly, in all material
respects, the combined financial position of the Company as of December 31,
1996 and 1997, and the combined results of its operations and its combined cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
May 22, 1998
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HATFIELD AUTOMOTIVE GROUP
COMBINED BALANCE SHEETS
December 31, 1996 and 1997 and March 31, 1998
<TABLE>
<CAPTION>
December 31,
--------------------------------- March 31,
1996 1997 1998
--------------- --------------- --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 11,630,711 $ 12,238,729 $14,990,300
Accounts receivable (no allowance necessary) ......... 3,014,936 3,391,406 3,360,011
Inventories (Note 3) ................................. 30,855,389 34,563,796 34,394,629
Other current assets (Note 6) ........................ 5,526,214 6,592,010 6,609,433
------------ ------------ -----------
Total current assets ............................... 51,027,250 56,785,941 59,354,373
PROPERTY AND EQUIPMENT, NET (Note 4) .................. 817,960 1,064,104 1,003,451
GOODWILL, NET (Notes 1 and 2) ......................... -- 983,333 977,083
------------ ------------ -----------
TOTAL ASSETS .......................................... $ 51,845,210 $ 58,833,378 $61,334,907
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable -- floor plan (Note 3) ................. $ 28,941,767 $ 33,705,904 $33,456,104
Trade accounts payable ............................... 3,182,685 2,035,848 2,659,920
Other accrued liabilities ............................ 1,543,879 1,461,131 1,130,944
Payable to stockholder's -- current (Note 6) ......... 5,986,706 7,162,864 7,196,334
------------ ------------ -----------
Total current liabilities .......................... 39,655,037 44,365,747 44,443,302
------------ ------------ -----------
PAYABLE TO STOCKHOLDERS -- NON-CURRENT
(Note 6) ............................................. 6,815,121 8,176,482 10,569,130
COMMITMENTS AND CONTINGENCIES (Notes 6 and 8)
STOCKHOLDERS' EQUITY (Note 5):
Common stock of combined companies ................... 2,825,000 2,825,000 2,825,000
Paid-in capital ...................................... 804,000 1,744,000 1,744,000
Retained earnings .................................... 1,746,052 1,722,149 1,753,475
------------ ------------ -----------
Total stockholders' equity ......................... 5,375,052 6,291,149 6,322,475
------------ ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $ 51,845,210 $ 58,833,378 $61,334,907
============ ============ ===========
</TABLE>
See notes to combined financial statements.
2
<PAGE>
HATFIELD AUTOMOTIVE GROUP
COMBINED STATEMENTS OF INCOME
For the years ended December 31, 1995, 1996 and 1997
and the three months ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Three months ended
Year ended December 31, March 31,
----------------------------------------------- -----------------------------
1995 1996 1997 1997 1998
--------------- --------------- --------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Vehicle sales ............................. $164,216,610 $213,251,842 $251,980,884 $58,562,407 $57,661,397
Parts, service and collision repair ....... 11,905,030 13,971,959 16,399,819 3,607,781 4,254,886
Finance and insurance (Note 6) ............ 4,748,018 6,113,302 6,898,899 1,255,145 1,746,647
------------ ------------ ------------ ----------- -----------
Total revenues .......................... 180,869,658 233,337,103 275,279,602 63,425,333 63,662,930
COST OF SALES .............................. 159,715,893 205,482,172 243,369,818 56,245,650 56,297,257
------------ ------------ ------------ ----------- -----------
GROSS PROFIT ............................... 21,153,765 27,854,931 31,909,784 7,179,683 7,365,673
SELLING, GENERAL AND ADMINIS-
TRATIVE (Note 6) .......................... 14,375,010 16,969,903 21,152,701 4,692,826 5,052,721
MANAGEMENT BONUS (Note 6) .................. 3,809,573 6,339,005 7,120,875 2,009,396 1,700,000
DEPRECIATION AND AMORTIZATION 38,836 107,461 221,463 51,199 66,903
------------ ------------ ------------ ----------- -----------
OPERATING INCOME ........................... 2,930,346 4,438,562 3,414,745 426,262 546,049
OTHER INCOME AND EXPENSE:
Interest expense -- floor plan ............ 2,926,256 3,036,515 3,662,711 513,819 555,530
Interest income ........................... (102,265) (155,804) (225,802) (23,435) (47,335)
Other (income) expense .................... 37,313 196,030 1,739 (58,122) 6,528
------------ ------------ ------------ ----------- -----------
Total other expense ..................... 2,861,304 3,076,741 3,438,648 432,262 514,723
------------ ------------ ------------ ----------- -----------
NET INCOME (LOSS) .......................... $ 69,042 $ 1,361,821 $ (23,903) $ (6,000) $ 31,326
============ ============ ============ =========== ===========
Pro Forma Provision (Benefit) for Income
Taxes (Note 1) (unaudited) ................ $ 27,000 $ 531,000 $ (9,000) $ (2,000) $ 12,000
============ ============ ============ =========== ===========
Pro Forma Net Income (Loss) (Note 1)
(unaudited) ............................... $ 42,042 $ 830,821 $ (14,903) $ (4,000) $ 19,326
============ ============ ============ =========== ===========
</TABLE>
See notes to combined financial statements.
3
<PAGE>
HATFIELD AUTOMOTIVE GROUP
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 5)
For the years ended December 31, 1995, 1996 and 1997
and the three months ended March 31, 1998
<TABLE>
<CAPTION>
Common Total
Stock of Combined Retained Stockholders'
Companies Paid-in Capital Earnings Equity
------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 ......... $1,525,000 $ 354,000 $ 1,402,130 $ 3,281,130
Issuance of common stock ............ 700,000 -- -- 700,000
Dividends declared .................. -- -- (1,086,941) (1,086,941)
Net income .......................... -- -- 69,042 69,042
---------- ----------- ------------ ------------
BALANCE DECEMBER 31, 1995 ............ 2,225,000 354,000 384,231 2,963,231
Issuance of common stock ............ 600,000 -- -- 600,000
Capital contribution ................ -- 450,000 -- 450,000
Net income .......................... -- -- 1,361,821 1,361,821
---------- ----------- ------------ ------------
BALANCE DECEMBER 31, 1996 ............ 2,825,000 804,000 1,746,052 5,375,052
Capital contribution ................ -- 940,000 -- 940,000
Net loss ............................ -- -- (23,903) (23,903)
---------- ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1997 ......... 2,825,000 1,744,000 1,722,149 6,291,149
Net income (unaudited) .............. -- -- 31,326 31,326
---------- ----------- ------------ ------------
BALANCE AT MARCH 31, 1998
(unaudited) ......................... $2,825,000 $ 1,744,000 $ 1,753,475 $ 6,322,475
========== =========== ============ ============
</TABLE>
See notes to combined financial statements.
4
<PAGE>
HATFIELD AUTOMOTIVE GROUP
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1996 and 1997
and the three months ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Year ended December 31, Three months ended March 31,
----------------------------------------------- ------------------------------
1995 1996 1997 1997 1998
--------------- --------------- --------------- --------------- --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) ............................. $ 69,042 $ 1,361,821 $ (23,903) $ (6,000) $ 31,326
------------ ------------ ------------ ------------ -----------
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Depreciation and amortization ............... 38,836 107,461 221,463 51,199 66,903
Changes in assets and liabilities that
related to operations:
(Increase) decrease in receivables ......... (135,483) (1,503,996) (376,470) 247,890 31,395
Decrease (increase) in inventories ......... 130,645 (8,769,439) (3,624,241) (1,071,569) 169,167
Increase in other current assets ........... (3,000,000) (2,525,214) (1,065,796) (1,039,097) (17,423)
Increase (decrease) in notes
payable -- floor plan ..................... 264,242 7,356,921 4,764,137 3,877,117 (249,800)
Increase (decrease) in accounts payable
and other accrued liabilities ............. 1,041,176 1,106,795 (1,229,584) (684,535) 293,885
------------ ------------ ------------ ------------ -----------
Total adjustments ......................... (1,660,584) (4,227,472) (1,310,491) 1,381,005 294,127
------------ ------------ ------------ ------------ -----------
Net cash (used in) provided by
operating activities .................... (1,591,542) (2,865,651) (1,334,394) 1,375,005 325,453
------------ ------------ ------------ ------------ -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and equipment ........... (138,936) (702,124) (423,048) -- --
Purchase of business .......................... -- -- (1,112,058) -- --
------------ ------------ ------------ ------------ -----------
Net cash used in investing activities (138,936) (702,124) (1,535,106) -- --
------------ ------------ ------------ ------------ -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in amounts payable to
stockholders ................................ 2,306,507 5,144,349 3,037,518 1,636,941 2,426,118
------------ ------------ ------------ ------------ -----------
Capital contribution .......................... -- -- 440,000 -- --
Net cash provided by financing
activities .............................. 2,306,507 5,144,349 3,477,518 1,636,941 2,426,118
------------ ------------ ------------ ------------ -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS ................................... 576,029 1,576,574 608,018 3,011,946 2,751,571
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ........................... 9,478,108 10,054,137 11,630,711 11,630,711 12,238,729
------------ ------------ ------------ ------------ -----------
CASH AND CASH EQUIVALENTS, END
OF PERIOD ..................................... $ 10,054,137 $ 11,630,711 $ 12,238,729 $ 14,642,657 $14,990,300
============ ============ ============ ============ ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for interest ...... $ 1,746,200 $ 1,053,437 $ 1,263,618 $ 295,000 $ 215,579
============ ============ ============ ============ ===========
NON-CASH FINANCING ACTIVITIES:
Dividends declared but not paid ............... $ 1,086,941 -- -- -- --
Issuance of common stock in exchange for
amounts payable to stockholders ............. $ 700,000 $ 600,000 -- -- --
Contribution to paid-in capital in exchange
for amounts payable to stockholders ......... -- $ 450,000 $ 500,000 -- --
</TABLE>
See notes to combined financial statements.
5
<PAGE>
HATFIELD AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business -- Hatfield Automotive Group (the "Company")
operates six automobile dealerships and a body shop in Columbus, Ohio. The
Company sells new and used cars and light trucks, sells replacement parts,
provides maintenance, warranty, paint and repair services and arranges related
financing and insurance. The Company's six dealerships sell new vehicles
manufactured by Toyota, Lincoln, Mercury, Jeep, Eagle, Volkswagen, Hyundai,
Subaru, Isuzu, Chrysler, Plymouth, KIA and Dodge.
The accompanying combined financial statements include the accounts of the
following entities:
Hatfield Jeep Eagle, Inc., d/b/a Volkswagen West, Jeep Eagle West, Hatfield
KIA and Trader Bud's Westside Chrysler Plymouth
Hatfield Lincoln Mercury, Inc., d/b/a Hatfield Lincoln Mercury
Westside Dodge, Inc., d/b/a Westside Dodge
Toyota West, Inc., d/b/a Toyota West
Hatfield Hyundai, Inc., d/b/a Hatfield Hyundai, Hatfield Isuzu and
Hatfield Subaru
The accompanying combined financial statements reflect the financial
position, results of operations, and cash flows of each of the above listed
companies. The combination of these entities has been accounted for at
historical cost in a manner similar to a pooling-of-interest because the
entities are under common management and control. All material intercompany
transactions have been eliminated.
Revenue Recognition -- The Company records revenue when vehicles are
delivered to customers, and when vehicle service work is performed. Finance and
insurance commission revenue is recognized principally at the time the contract
is placed with the financial institution.
Dealer Agreements -- The Company purchases substantially all of its new
vehicles from manufacturers at the prevailing prices charged by the
manufacturer to its franchised dealers. The Company's sales could be
unfavorably impacted by the manufacturer's unwillingness or inability to supply
the dealership with an adequate supply of new vehicle inventory.
Each dealership operates under a dealer agreement with the manufacturer.
The Company's dealer agreement does not give it the exclusive right to sell the
manufacturer's product within a given geographic area. The Company could be
materially adversely affected if the manufacturer awards franchises to others
in the same market where the Company is operating. A similar adverse affect
could occur if existing competing franchised dealers increase their market
share in the Company's market. The ability of the Company to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers. Additionally, ownership of the Company's
stock by third parties may be limited by the terms of the franchise agreements.
Cash and Cash Equivalents -- The Company considers contracts in transit
and all highly liquid debt instruments with an initial maturity of three months
or less to be cash equivalents. Contracts in transit represent cash in transit
to the Company from finance companies related to a vehicle purchase and were
$8,171,520 and $6,270,709 at December 1996 and 1997, respectively.
Inventories -- Vehicle inventories are valued at the lower of specific
cost or market. Parts and accessories are valued at the lower of first-in,
first-out ("FIFO") cost or market.
Goodwill -- Goodwill represents the excess of purchase price over the
estimated fair value of the net assets acquired and is being amortized over a
40 year period. The cumulative amount of goodwill amortized at December 31,
1997 was $16,667. The Company periodically reviews goodwill to assess
recoverability. The Company's policy is to compare the carrying value of
goodwill with the expected undiscounted cash flows from operations.
6
<PAGE>
HATFIELD AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Property and Equipment -- Property and equipment are stated at cost.
Depreciation is computed using straight-line methods over the estimated useful
lives of the assets. The range of estimated useful lives is as follows:
<TABLE>
<CAPTION>
Useful Lives
-------------
<S> <C>
Office equipment and fixtures .......... 5
Parts and service equipment ............ 5
Leasehold improvements ................. 10
Computer equipment ..................... 5
</TABLE>
Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.
Income taxes -- All of the Company's dealerships are organized as S
Corporations for federal and state income tax purposes. As such, the Company's
taxable income is included in the stockholders' annual income tax return.
Accordingly, no provision for federal or state income taxes has been included
in the Company's statements of income.
The pro forma provision for income taxes and the pro forma net income for
the years ended December 31, 1995, 1996 and 1997, and for the three months
ended March 31, 1997 and 1998, reflect amounts that would have been recorded
had the Company's income been taxed for federal and state purposes as if it was
a C Corporation.
Concentration of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash deposits. At times, amounts invested with financial institutions may
exceed FDIC insurance limits.
Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the
large number of customers comprising the trade receivables balance. Trade
receivables are concentrated in the Company's principal market area of
Columbus, Ohio.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect 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. Actual results could differ from those estimates.
Advertising -- The Company expenses advertising costs in the period
incurred. Advertising expenses for 1995, 1996 and 1997 amount to $2,619,348,
$3,941,810 and $4,475,943, respectively.
Interim Financial Information -- The accompanying unaudited interim
financial information for the three months ended March 31, 1997 and 1998 has
been prepared on substantially the same basis as the audited financial
statements, and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information set
forth therein. The results for interim periods are not necessarily indicative
of the results to be expected for the entire year.
2. BUSINESS ACQUISITION
On May 1, 1997, the Company acquired Trader Bud's Westside Chrysler
Plymouth for a total purchase price of $1,112,058. The acquisition has been
accounted for using purchase accounting and the results of operations of this
dealership have been included in the accompanying combined financial statements
from the date of acquisition. The total purchase price has been allocated to
the assets and liabilities acquired at their estimated fair market value at
acquisition date as follows:
<TABLE>
<S> <C>
Inventory ...................... $ 84,166
Property and equipment ......... 27,892
Goodwill ....................... 1,000,000
----------
$1,112,058
==========
</TABLE>
7
<PAGE>
HATFIELD AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued
2. BUSINESS ACQUISITION -- Continued
The following unaudited pro forma financial information is presented as if
Trader Bud's Westside Chrysler Plymouth were acquired on January 1, 1996 and
January 1, 1997, respectively.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
Revenues .................. $259,336,000 $281,718,000
Gross profit .............. 30,612,000 32,684,000
Net income (loss) ......... 1,257,000 (67,000)
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the operating results that would have
occurred had Trader Bud's Westside Chrysler Plymouth been acquired on January
1, 1996 and 1997, respectively. These results are also not necessarily
indicative of the results of future operations.
3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
----------------------------- 1998
1996 1997 (Unaudited)
-------------- -------------- --------------
<S> <C> <C> <C>
New vehicles .................. $24,597,294 $ 29,227,278 $29,499,807
Used vehicles ................. 5,263,444 4,181,804 3,705,042
Parts and accessories ......... 966,895 1,125,050 1,158,590
Other ......................... 27,756 29,664 31,190
----------- ------------ -----------
Total ......................... $30,855,389 $ 34,563,796 $34,394,629
=========== ============ ===========
</TABLE>
All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $28,941,767 and
$33,705,904 at December 31, 1996 and 1997, respectively. The floor plan notes
bear interest that fluctuates with prime. Interest is payable monthly on the
outstanding balance, ranging from 7.94% to 9.25% and 8.00% to 9.50% at December
31, 1996 and 1997, respectively. The notes payable are due when the related
vehicles are sold. As such, these floor plan notes payable are shown as a
current liability in the accompanying combined balance sheets.
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31, March 31,
------------------------------- 1998
1996 1997 (Unaudited)
--------------- --------------- ---------------
<S> <C> <C> <C>
Parts and service equipment ........... $ 1,173,892 $ 1,404,291 $ 1,404,291
Office equipment and fixtures ......... 424,894 504,973 504,973
Leasehold improvements ................ 303,407 422,616 422,616
Computer equipment .................... 35,999 57,252 57,252
------------ ------------ ------------
1,938,192 2,389,132 2,389,132
Less accumulated depreciation ......... (1,120,232) (1,325,028) (1,385,681)
------------ ------------ ------------
Property and equipment, net ........... $ 817,960 $ 1,064,104 $ 1,003,451
============ ============ ============
</TABLE>
8
<PAGE>
HATFIELD AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued
5. COMBINED EQUITY
The capital structure of the entities included in the combined financial
statements of the Company at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Common Stock
------------------------------------------------------------
Shares
Par Shares Issued and Paid-In
Value Authorized Outstanding Amount Capital
------------- ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Hatfield Jeep Eagle, Inc. .............. No Par 5,000 100 $ 225,000 $354,000
Hatfield Lincoln Mercury, Inc. ......... $ 100 10,000 6,000 600,000 450,000
Westside Dodge, Inc. Voting ............ No par 5,000 4,000 800,000 --
Non-voting ............................. No par 5,000 1,000 200,000 --
Toyota West, Inc. Voting .............. No par 250 250 250,000 --
Non-voting ............................. No par 250 250 250,000 --
Hatfield Hyundai, Inc. ................. No par 750 750 500,000 --
---------- --------
Total .................................. $2,825,000 $804,000
========== ========
</TABLE>
The capital structure of the entities included in the combined financial
statements of the Company at December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Common Stock
------------------------------------------------------------
Shares
Par Shares Issued and Paid-In
Value Authorized Outstanding Amount Capital
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Hatfield Jeep Eagle, Inc. .............. No Par 5,000 100 $ 225,000 $1,294,000
Hatfield Lincoln Mercury, Inc. ......... $ 100 10,000 6,000 600,000 450,000
Westside Dodge, Inc. Voting ............ No par 5,000 4,000 800,000 --
Non-voting ............................. No par 5,000 1,000 200,000 --
Toyota West, Inc. Voting ............... No par 250 250 250,000 --
Non-voting ............................. No par 250 250 250,000 --
Hatfield Hyundai, Inc. ................. No par 750 750 500,000 --
---------- ----------
Total .................................. $2,825,000 $1,744,000
========== ==========
</TABLE>
6. RELATED PARTIES
The management bonuses were paid to Company stockholders and certain
management companies owned by a Company stockholder. Unpaid bonuses and
dividends are included in the amounts payable to stockholders -- non-current.
Included in finance and insurance revenues are $433,599, $489,005 and
$480,875 for 1995, 1996 and 1997, respectively, in commissions generated from
selling credit life policies to customers which have been distributed to a
company owned by a stockholder.
Other current assets at December 31, 1996 and 1997 include $5,525,214 and
$6,653,925, respectively, of cash owned by stockholders on deposit in the
Company's cash management account. A liability for this amount is included in
amounts payable to stockholders -- current.
The Company leases all of its operating facilities directly from a Company
stockholder or from a corporation which is owned by that stockholder. Rent
expense under these leases was $1,680,000 in 1995 and 1996 and $2,360,000 in
1997. The Company also paid $166,756, $190,500 and $216,332 to these related
parties for property taxes for the years ended December 31, 1995, 1996 and
1997, respectively. Total rent expense was $1,746,050 in 1995, $1,724,660 in
1996, and $2,469,859 in 1997.
9
<PAGE>
HATFIELD AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- Continued
6. RELATED PARTIES -- Continued
Other leases consist primarily of leases for office and computer
equipment. Future minimum rental payments required under noncancelable
operating leases at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Related Party Other Total
--------------- ----------- -------------
<S> <C> <C> <C>
Year ending December 31:
1998 ................... $2,460,000 $189,835 $2,649,835
1999 ................... 2,460,000 128,435 2,588,435
2000 ................... 2,335,000 109,618 2,444,618
2001 ................... 300,000 29,080 329,080
2002 ................... -- 15,798 15,798
---------- -------- ----------
Total .................. $7,555,000 $472,766 $8,027,766
========== ======== ==========
</TABLE>
7. EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) plan covering substantially all
employees. Company contributions to the plan are equal to 25% of the first 6%
of participant contributions. Company contributions amounted to $47,528,
$63,015 and $76,922 in 1995, 1996, and 1997, respectively.
8. CONTINGENCIES
The Company is involved in various legal proceedings incurred in the
normal course of business. Management believes that the outcome of such
proceedings will not have a materially adverse effect on the Company's
financial position or future results of operations and cash flows.
9. SUBSEQUENT EVENT
In February 1998, the Company signed an asset purchase agreement with
Sonic Automotive, Inc. ("Sonic") whereby Sonic will purchase the Company's
assets for a total price of approximately $48.6 million plus the assumption of
certain liabilities of the Company. The total purchase price is subject to
adjustment based on a final determination of the value of the net current
assets of the Company. Preferred stock with a liquidation preference of
approximately $14.0 million as of the closing date of the acquisition will be
issued to the sellers for a portion of the purchase price.
10
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
ECONOMY CARS, INC.
CHATTANOOGA, TENNESSEE
We have audited the accompanying balance sheet of Economy Cars, Inc.,
d/b/a Economy Honda Cars (the "Company"), as of December 31, 1997, and the
related statements of income, stockholders' equity, and cash flows for the year
then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997, and
the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
May 11, 1998
1
<PAGE>
ECONOMY HONDA CARS
BALANCE SHEETS
December 31, 1997 and March 31, 1998
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 3,834,184 $ 5,396,805
Accounts receivable (net of allowance for doubtful accounts of $13,505
at December 31, 1997) .............................................. 842,907 502,165
Note receivable (Note 2) ............................................. 238,960 231,115
Inventories (Note 3) ................................................. 6,541,972 5,552,280
Other current assets ................................................. 4,477 4,477
----------- -----------
Total current assets ............................................... 11,462,500 11,686,842
PROPERTY AND EQUIPMENT, NET (Note 4) .................................. 1,791,974 1,759,082
----------- -----------
TOTAL ASSETS .......................................................... $13,254,474 $13,445,924
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable ............................................... $ 148,073 $ 175,090
Income taxes payable (Note 6) ........................................ 251,237 78,781
Deferred income taxes (Note 6) ....................................... 173,511 173,511
Other taxes payable .................................................. 215,619 269,489
Accrued payroll and bonuses .......................................... 105,174 298,430
Liability for finance chargebacks .................................... 95,550 82,889
Other accrued liabilities ............................................ 6,879 2,447
----------- -----------
Total current liabilities .......................................... 996,043 1,080,637
----------- -----------
DEFERRED INCOME TAXES (Note 6) ........................................ 78,449 78,449
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock (no par, 2,000 shares authorized, 500 shares issued and
450 shares outstanding) ............................................ 50,000 50,000
Retained earnings .................................................... 12,329,982 12,436,838
Treasury stock (50 shares) ........................................... (200,000) (200,000)
----------- -----------
Total stockholders' equity ......................................... 12,179,982 12,286,838
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................ $13,254,474 $13,445,924
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
ECONOMY HONDA CARS
STATEMENTS OF INCOME
Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Three months
Year ended ended March 31,
December 31, -----------------------------
1997 1997 1998
--------------- -------------- -------------
(Unaudited)
<S> <C> <C> <C>
REVENUES:
Vehicle sales ................................... $41,032,638 $10,367,163 $ 9,896,091
Parts, service and collision repair ............. 5,855,509 1,487,811 1,347,767
Finance and insurance ........................... 1,383,106 428,935 272,379
----------- ----------- -----------
Total revenues ................................ 48,271,253 12,283,909 11,516,237
COST OF SALES .................................... 41,291,627 10,255,797 10,026,232
----------- ----------- -----------
GROSS PROFIT ..................................... 6,979,626 2,028,112 1,490,005
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..... 5,393,705 1,413,387 1,352,217
DEPRECIATION ..................................... 130,996 23,259 35,021
----------- ----------- -----------
OPERATING INCOME ................................. 1,454,925 591,466 102,767
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense -- floor plan (Note 3) ......... (2,791) (842) (1,593)
Interest income ................................. 75,852 614 38,151
Other income .................................... 119,261 10,358 33,053
----------- ----------- -----------
Total other income ............................ 192,322 10,130 69,611
----------- ----------- -----------
INCOME BEFORE INCOME TAXES ....................... 1,647,247 601,596 172,378
PROVISION FOR INCOME TAXES (Note 6) .............. 626,062 228,660 65,522
----------- ----------- -----------
NET INCOME ....................................... $ 1,021,185 $ 372,936 $ 106,856
=========== =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
ECONOMY HONDA CARS
STATEMENTS OF STOCKHOLDERS' EQUITY
Year Ended December 31, 1997 and the three months ended March 31, 1998
<TABLE>
<CAPTION>
Total
Common Retained Treasury Stockholders'
Stock Earnings Stock Equity
---------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 .............. $50,000 $11,308,797 $ (200,000) $11,158,797
Net income ............................... -- 1,021,185 -- 1,021,185
------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1997 .............. 50,000 12,329,982 (200,000) 12,179,982
Net income (unaudited) ................... -- 106,856 -- 106,856
------- ----------- ---------- -----------
BALANCE AT MARCH 31, 1998 (unaudited) ..... $50,000 $12,436,838 $ (200,000) $12,286,838
======= =========== ========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
ECONOMY HONDA CARS
STATEMENTS OF CASH FLOWS
Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Three months ended
Year ended March 31,
December 31, ----------------------------
1997 1997 1998
------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................. $1,021,185 $ 372,936 $ 106,856
---------- ---------- ----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation .......................................................... 130,996 23,259 35,021
Loss on disposal of fixed assets ...................................... 2,258 -- --
Deferred income taxes ................................................. (39,266) -- --
Changes in assets and liabilities that related to operations:
(Increase) decrease in accounts receivables .......................... (432,900) (537,205) 340,742
Decrease in inventories .............................................. 789,447 5,905 989,692
Decrease in prepaids and other current assets ........................ 330,940 258,449 --
Increase in trade accounts payable and accrued liabilities ........... 142,753 440,166 84,595
---------- ---------- ----------
Total adjustments ................................................... 924,228 190,574 1,450,050
---------- ---------- ----------
Net cash provided by operating activities ........................... 1,945,413 563,510 1,556,906
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ..................................... (196,016) (35,521) (2,130)
Proceeds from sale of assets ............................................ 4,685 -- --
Principal collected on notes receivable ................................. 47,358 13,925 7,845
---------- ---------- ----------
Net cash provided by (used in) investing activities ................. (143,973) (21,596) 5,715
---------- ---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................................ 1,801,440 541,914 1,562,621
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........................... 2,032,744 2,032,744 3,834,184
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................. $3,834,184 $2,574,658 $5,396,805
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-- Cash paid during the period for:
Interest ................................................................ $ 89,984 $ 14,028 $ 8,717
Income taxes ............................................................ $ 258,869 $ 13,311 $ 237,978
</TABLE>
See notes to financial statements.
5
<PAGE>
ECONOMY HONDA CARS
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business -- Economy Honda Cars (the "Company") operates
an automotive dealership, service department, body shop and parts and
accessories department in Chattanooga, Tennessee. The Company sells new and
used cars and light trucks, sells replacement parts and accessories, provides
vehicle maintenance, warranty, paint and repair services and arranges related
financing and insurance. The Company sells new vehicles manufactured by Honda.
Revenue Recognition -- The Company records revenue when vehicles are
delivered to customers, and when vehicle service work is performed. Finance and
insurance commission revenue is recognized principally at the time the contract
is placed with the financial institution.
Dealer Agreements -- The Company purchases substantially all of its new
vehicles from the manufacturer at the prevailing prices charged by the
manufacturer to its franchised dealers. The Company's sales could be
unfavorably impacted by the manufacturer's unwillingness or inability to supply
the dealership with an adequate supply of new vehicle inventory.
The Company operates under a dealer agreement with the manufacturer. The
Company's dealer agreement does not give it the exclusive right to sell the
manufacturer's product within a given geographic area. The Company could be
materially adversely affected if the manufacturer awards franchises to others
in the same market where the Company is operating. A similar adverse affect
could occur if existing competing franchised dealers increase their market
share in the Company's market. The ability of the Company to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers. Additionally, the Company's ability to
enter into significant acquisitions may be restricted and the acquisition of
the Company's stock by third parties may be limited by the terms of the
franchise agreement.
Cash and Cash Equivalents -- The Company considers contracts in transit
and all highly liquid debt instruments with an initial maturity of three months
or less to be cash equivalents. Contracts in transit represent cash in transit
to the Company from finance companies related to vehicle purchases and was
$919,251 at December 31, 1997.
Inventories -- Inventories of new and used vehicles, including
demonstrators and parts and accessories, are valued at the lower of specific
cost or market. Cost is determined using the last-in, first-out method ("LIFO")
for new vehicles and parts and accessories.
Property and Equipment -- Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. The range of estimated useful lives is as follows:
<TABLE>
<CAPTION>
Useful Lives
-------------
<S> <C>
Buildings and improvements ............. 7-31.5
Office equipment and fixtures .......... 5-7
Parts and service equipment ............ 5-10
Company vehicles ....................... 5
</TABLE>
Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.
Income Taxes -- The provision for income taxes includes federal and state
taxes currently payable and deferred taxes. Deferred taxes are determined
utilizing an asset and liability approach as required by Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. This method gives
consideration to the future tax consequences associated with differences
between financial accounting and tax basis of assets and liabilities. This
method gives immediate effect to changes in income tax laws upon enactment. A
valuation allowance is established when necessary to reduce deferred tax assets
to the amounts expected to be realized.
Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash deposits. At times, amounts invested with financial institutions may
exceed FDIC insurance limits.
Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the
large number of customers comprising the trade receivables balances. Trade
receivables are concentrated in the Company's market area of Chattanooga,
Tennessee.
6
<PAGE>
ECONOMY HONDA CARS
NOTES TO FINANCIAL STATEMENTS -- Continued
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Fair Value of Financial Instruments -- As of December 31, 1997 the fair
value of the Company's financial instruments including accounts and notes
receivables and trade accounts payable approximate their book values.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect 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. Actual results could differ from those estimates.
Advertising -- The Company expenses advertising costs in the period
incurred. Advertising expense for 1997 amounted to $531,473.
Interim Financial Information -- The accompanying unaudited financial
information for the three months ended March 31, 1997 and 1998 has been
prepared on substantially the same basis as the audited financial statements,
and include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial information set forth
therein. The results of interim periods are not necessarily indicative of
results to be expected for the entire year.
2. NOTE RECEIVABLE
At December 31, 1997, the Company had a note receivable from an unrelated
party totaling $238,960. The note bore interest at 12% per annum and was
payable in monthly installments of $6,293. On April 7, 1998, the note was
purchased for cash by one of the Company's principal stockholders at the
recorded book value of $231,115 at that date.
3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
New vehicles .................. $ 1,798,172 $2,627,048
Used vehicles ................. 4,902,142 3,171,435
Parts and accessories ......... 365,630 357,095
----------- ----------
7,065,944 6,155,578
LIFO reserve .................. (523,972) (603,298)
----------- ----------
Total ......................... $ 6,541,972 $5,552,280
=========== ==========
</TABLE>
Had the Company used the first-in, first-out method of valuing new
vehicles, parts and accessories inventory, pretax earnings would have been
$1,819,742 in 1997.
From time to time certain vehicles are pledged to collateralize floor plan
notes payable to financial institutions. The floor plan notes bear interest,
payable monthly on the outstanding balance at a rate that fluctuates with prime
(8.5% at December 31, 1997). Total floor plan interest expense amounted to
$2,791 in 1997. The notes payable are due when the related vehicle is sold;
however, the Company generally pays floor plan as invoiced for vehicles during
the year. There is no balance outstanding under such floor plan notes at
December 31, 1997.
7
<PAGE>
ECONOMY HONDA CARS
NOTES TO FINANCIAL STATEMENTS -- Continued
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- ---------------
(Unaudited)
<S> <C> <C>
Land .................................. $ 624,430 $ 624,430
Buildings and improvements ............ 1,922,175 1,923,579
Office equipment and fixtures ......... 299,278 300,003
Parts and service equipment ........... 358,961 358,961
Company vehicles ...................... 62,254 62,254
------------ ------------
3,267,098 3,269,227
Less accumulated depreciation ......... (1,475,124) (1,510,145)
------------ ------------
Property and equipment, net ........... $ 1,791,974 $ 1,759,082
============ ============
</TABLE>
5. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan, whereby substantially all of the employees
of the Company meeting certain service requirements are eligible to
participate. Contributions by the Company in 1997 were approximately $39,000.
6. INCOME TAXES
The provision for income taxes consists of the following components for
the year ended December 31, 1997:
<TABLE>
<S> <C>
Current:
Federal ................ $ 559,667
State .................. 105,663
---------
665,330
---------
Deferred:
Federal ................ (33,061)
State .................. (6,207)
---------
39,268
---------
Total .................. $ 626,062
=========
</TABLE>
The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income tax rate is as follows for
the year ending December 31, 1997:
<TABLE>
<S> <C>
Statutory federal rate ......... 34.00%
State income taxes ............. 3.98%
Miscellaneous .................. 0.03%
-----
Effective tax rates ............ 38.01%
=====
</TABLE>
Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for tax purposes.
8
<PAGE>
ECONOMY HONDA CARS
NOTES TO FINANCIAL STATEMENTS -- Continued
6. INCOME TAXES -- Continued
Deferred income tax assets and liabilities consist of the following at
December 31, 1997:
<TABLE>
<S> <C>
Deferred tax assets, primarily from differences relating to chargebacks ........... $ 85,528
Deferred tax liabilities, primarily from differences relating to used car inventory
reserve .......................................................................... (337,488)
----------
Net deferred tax liabilities ...................................................... $ 251,960
==========
</TABLE>
7. SUBSEQUENT EVENT
On March 16, 1998, the Company entered into an agreement with Sonic
Automotive, Inc. ("Sonic") whereby Sonic will purchase all of the outstanding
capital stock of the Company for a total purchase price of $7.5 million plus an
amount equal to the net book value of the assets of the Company. This purchase
price will be paid in cash and convertible preferred stock of Sonic. Preferred
stock will be issued for 51% of the total purchase price, not to exceed $5.1
million in liquidation preference as of the closing of the acquisition.
9
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
CASA FORD OF HOUSTON, INC.
Houston, Texas
We have audited the accompanying balance sheet of Casa Ford of Houston,
Inc. (the "Company") as of December 31, 1997, and the related statements of
income, stockholders' equity, and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997, and
the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
June 4, 1998
1
<PAGE>
CASA FORD OF HOUSTON, INC.
BALANCE SHEETS
December 31, 1997 and March 31, 1998
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) .................................. $ 1,386,749 $ 1,685,197
Accounts receivable (net of allowance for doubtful accounts of $1,553
at December 31, 1997) ............................................. 822,335 495,339
Inventories (Note 3) ................................................ 8,743,629 6,430,778
Other current assets ................................................ 283,717 315,144
----------- -----------
Total current assets .............................................. 11,236,430 8,926,458
PROPERTY AND EQUIPMENT, NET (Notes 4 and 5) .......................... 911,615 872,323
DEFERRED INCOME TAXES (Note 8) ....................................... 264,307 264,307
GOODWILL (Note 1) .................................................... 617,518 603,795
----------- -----------
TOTAL ASSETS ......................................................... $13,029,870 $10,666,883
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable -- floor plan (Note 3) ................................ $ 8,681,340 $ 6,149,209
Trade accounts payable .............................................. 432,860 294,196
Current maturities -- long-term debt (Note 5) ....................... 782,098 770,425
Income taxes payable (Note 8) ....................................... 149,725 233,795
Accrued payroll and bonuses ......................................... 188,080 24,255
Other accrued liabilities ........................................... 538,430 837,295
----------- -----------
Total current liabilities ......................................... 10,772,533 8,309,175
----------- -----------
LONG-TERM DEBT (Note 5) .............................................. 1,020,867 857,732
----------- -----------
COMMITMENTS (Notes 6 and 9)
STOCKHOLDERS' EQUITY:
Receivable from stockholder (Note 2) ................................ (428,310) (441,309)
Common stock ($100 par, 12,500 shares authorized, issued and
outstanding) ...................................................... 1,250,000 1,250,000
Retained earnings ................................................... 414,780 691,285
----------- -----------
Total stockholders' equity ........................................ 1,236,470 1,499,976
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................... $13,029,870 $10,666,883
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
CASA FORD OF HOUSTON, INC.
STATEMENTS OF INCOME
Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Three months
Year ended ended March 31,
December 31, -----------------------------
1997 1997 1998
--------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C>
REVENUES:
Vehicle sales ................................... $ 58,239,109 $12,889,721 $15,165,697
Parts, service and collision repair ............. 6,025,033 1,290,680 1,498,063
Finance and insurance ........................... 2,252,297 479,359 534,451
------------ ----------- -----------
Total revenues ................................ 66,516,439 14,659,760 17,198,211
COST OF SALES .................................... 56,873,827 12,595,978 14,549,519
------------ ----------- -----------
GROSS PROFIT ..................................... 9,642,612 2,063,782 2,648,692
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..... 7,219,544 1,489,567 1,858,528
DEPRECIATION AND AMORTIZATION .................... 299,456 74,864 76,014
------------ ----------- -----------
OPERATING INCOME ................................. 2,123,612 499,351 714,150
------------ ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense -- floor plan (Note 3) ......... (885,573) (202,407) (216,937)
Interest expense -- other ....................... (301,995) (71,332) (59,624)
Other income .................................... 129,518 89 9,541
------------ ----------- -----------
Total other expense ........................... (1,058,050) (273,650) (267,020)
------------ ----------- -----------
INCOME BEFORE INCOME TAXES ....................... 1,065,562 225,701 447,130
PROVISION FOR INCOME TAXES (Note 8) .............. 406,579 86,178 170,625
------------ ----------- -----------
NET INCOME ....................................... $ 658,983 $ 139,523 $ 276,505
============ =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
CASA FORD OF HOUSTON, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Year ended December 31, 1997 and the three months ended March 31, 1998
<TABLE>
<CAPTION>
Retained Total
Receivable Common Earnings Stockholders'
from Shareholder Stock (Deficit) Equity
------------------ -------------- --------------- --------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 ........... (352,101) $ 1,250,000 $ (244,203) $ 653,696
Amounts loaned to stockholder ......... (76,209) -- -- (76,209)
Net income ............................ -- -- 658,983 658,983
-------- ----------- ----------- ----------
BALANCE AT DECEMBER 31, 1997 ........... (428,310) 1,250,000 414,780 1,236,470
Amounts loaned to stockholder ......... (12,999) -- -- (12,999)
Net income (unaudited) ................ -- -- 276,505 276,505
-------- ----------- ----------- ----------
BALANCE AT MARCH 31, 1998 (unaudited) $ (441,309) $ 1,250,000 $ 691,285 $1,499,976
========== =========== =========== ==========
</TABLE>
See notes to financial statements.
4
<PAGE>
CASA FORD OF HOUSTON, INC.
STATEMENTS OF CASH FLOWS
Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
Three months ended
Year ended March 31,
December 31, ---------------------------------
1997 1997 1998
--------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................. $ 658,983 $ 139,523 $ 276,505
------------ ------------ ------------
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization ........................................ 354,346 74,864 76,014
Deferred income taxes ................................................ (140,290) (69,860) --
Changes in assets and liabilities that related to operations:
(Increase) decrease in accounts receivables ......................... 60,637 302,948 326,996
(Increase) decrease in inventories .................................. (369,151) 2,520,131 2,312,851
Increase in other current assets .................................... (69,385) (309,711) (31,427)
Increase (decrease) in income tax payable ........................... (40,341) (103,888) 84,070
Payments of floor plan notes payable ................................ (690,969) (2,952,473) (2,532,131)
Increase (decrease) in trade accounts payable and accrued liabilities 29,941 392,792 (3,624)
------------ ------------ ------------
Total adjustments .................................................. (865,212) (145,197) 232,749
------------ ------------ ------------
Net cash (used in) provided by operating activities ................ (206,229) (5,674) 509,254
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment .................................... (290,996) (17,338) (22,999)
------------ ------------ ------------
Net cash used in investing activities .............................. (290,996) (17,338) (22,999)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt ............................................. (529,853) (253,428) (174,808)
------------ ------------ ------------
Amounts (loaned to) received from stockholder .......................... (76,209) 3,065 (12,999)
Net cash used in financing activities .............................. (606,062) (250,363) (187,807)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... (1,103,287) (273,375) 298,448
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......................... 2,490,036 2,490,036 1,386,749
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................ $ 1,386,749 $ 2,216,661 $ 1,685,197
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-- Cash paid during the period for:
Interest ............................................................... $ 64,241 $ 112,862 $ 89,417
============ ============ ============
Income taxes ........................................................... $ 597,500 $ 330,000 $ 86,555
============ ============ ============
</TABLE>
See notes to financial statements.
5
<PAGE>
CASA FORD OF HOUSTON, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business -- Casa Ford of Houston, Inc. (the "Company")
operates an automotive dealership, service department, body shop and parts and
accessories department in Houston, Texas. The Company sells new and used cars
and light trucks, sells replacement parts and accessories, provides vehicle
maintenance, warranty, paint and repair services and arranges related financing
and insurance. The Company sells new vehicles manufactured by Ford.
Revenue Recognition -- The Company records revenue when vehicles are
delivered to customers, and when vehicle service work is performed. Finance and
insurance commission revenue is recognized principally at the time the contract
is placed with the financial institution.
Dealer Agreements -- The Company purchases substantially all of its new
vehicles from the manufacturer at the prevailing prices charged by the
manufacturer to its franchised dealers. The Company's sales could be
unfavorably impacted by the manufacturer's unwillingness or inability to supply
the dealership with an adequate supply of new vehicle inventory.
The Company operates under a dealer agreement with the manufacturer. The
Company's dealer agreement does not give it the exclusive right to sell the
manufacturer's product within a given geographic area. The Company could be
materially adversely affected if the manufacturer awards franchises to others
in the same market where the Company is operating. A similar adverse effect
could occur if existing competing franchised dealers increase their market
share in the Company's market. The ability of the Company to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers. Additionally, the Company's ability to
enter into significant acquisitions may be restricted and the acquisition of
the Company's stock by third parties may be limited by the terms of the
franchise agreement.
Cash and Cash Equivalents -- The Company considers contracts in transit
and all highly liquid debt instruments with an initial maturity of three months
or less to be cash equivalents. Contracts in transit represent cash in transit
to the Company from finance companies related to vehicle purchases and was
$761,776 at December 31, 1997.
Inventories -- Inventories of new and demonstrator vehicles are valued at
the lower of last-in, first-out method ("LIFO") cost or market. Inventories of
used vehicles are stated at the lower of specific cost or market. All other
inventories are generally stated at replacement cost, which approximates cost
on the first-in, first-out method ("FIFO").
Property and Equipment -- Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. The range of estimated useful lives is as follows:
<TABLE>
<CAPTION>
Useful Lives
-------------
<S> <C>
Leasehold improvements ................. 7-31.5
Office equipment and fixtures .......... 5-7
Parts and service equipment ............ 5-10
Company vehicles ....................... 5
</TABLE>
Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.
Income Taxes -- The provision for income taxes includes federal and state
taxes currently payable and deferred taxes. Deferred taxes are determined
utilizing an asset and liability approach as required by Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. This method gives
consideration to the future tax consequences associated with differences
between financial accounting and tax basis of assets and liabilities. This
method gives immediate effect to changes in income tax laws upon enactment. A
valuation allowance is established when necessary to reduce deferred tax assets
to the amounts expected to be realized.
Goodwill -- Goodwill is being amortized on a straight-line basis over a
period of 15 years. Accumulated amortization at December 31, 1997 was $205,839.
The Company periodically reviews goodwill to assess recoverability. The
Company's policy is to compare the carrying value of goodwill with the expected
undiscounted cash flows from operations.
Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash deposits. At times, amounts invested with financial institutions may
exceed FDIC insurance limits.
6
<PAGE>
CASA FORD OF HOUSTON, INC.
NOTES TO FINANCIAL STATEMENTS -- Continued
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the
large number of customers comprising the trade receivables balances. Trade
receivables are concentrated in the Company's market area of Houston, Texas.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect 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. Actual results could differ from those estimates.
Fair Value of Financial Instruments -- As of December 31, 1997 the fair
value of the Company's financial instruments including accounts receivable,
receivable from shareholder, trade accounts payable, and long-term debt
approximate their book values.
Advertising -- The Company expenses advertising costs in the period
incurred. Advertising expense for 1997 amounted to $581,752.
Interim Financial Information -- The accompanying unaudited financial
information for the three months ended March 31, 1997 and 1998 have been
prepared on substantially the same basis as the audited financial statements,
and include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial information set forth
therein. The results of interim periods are not necessarily indicative of
results to be expected for the entire fiscal year.
2. RECEIVABLE FROM STOCKHOLDER
At December 31, 1997, the Company had a receivable due from a related
party totaling $428,310, bearing no stated interest rate. The receivable was
paid in full as of April 1998 pursuant to a dividend.
3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
New and demonstrator vehicles ......... $ 7,969,681 $ 4,980,041
Used vehicles ......................... 996,821 1,484,967
Parts and accessories ................. 412,757 432,264
Other ................................. 77,896 247,032
----------- -----------
9,457,155 7,144,304
LIFO reserve .......................... (713,526) (713,526)
----------- -----------
Total ................................. $ 8,743,629 $ 6,430,778
=========== ===========
</TABLE>
Had the Company used the first-in, first-out method of valuing new
vehicles and parts inventory, pretax earnings would have been $1,304,193 in
1997.
All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $8,681,340 at December
31, 1997. The floor plan notes bear interest, payable monthly on the
outstanding balance at the prime rate plus 1% to 1-1/2% (prime rate was 8.5% at
December 31, 1997). Total floor plan interest expense amounted to $885,573 in
1997. The notes payable are due when the related vehicle is sold. As such,
these floor plan notes payable are shown as a current liability in the
accompanying balance sheet. The maximum credit available under the financing
arrangement is $7,800,000 for 1997.
7
<PAGE>
CASA FORD OF HOUSTON, INC.
NOTES TO FINANCIAL STATEMENTS -- Continued
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- ------------
(Unaudited)
<S> <C> <C>
Leasehold improvements ................ $ 221,132 $ 222,496
Office equipment and fixtures ......... 780,133 785,025
Parts and service equipment ........... 437,504 454,163
Company vehicles ...................... 219,547 219,631
---------- ----------
1,658,317 1,681,315
Less accumulated depreciation ......... (746,701) (808,992)
---------- ----------
Property and equipment, net ........... $ 911,615 $ 872,323
========== ==========
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- ------------
(Unaudited)
<S> <C> <C>
Unsecured note payable to a related party, in monthly installments of $25,500, plus
interest
at prime .............................................................................. $ 864,000 $ 787,500
Unsecured note payable in monthly installments of $14,880, plus interest at prime plus
1 1/2%, through February 2001 ......................................................... 570,960 524,237
Notes payable in monthly installments totaling $7,670, plus interest ranging from 9.7% to
10.7%, through December 2000 .......................................................... 104,433 92,389
Unsecured note payable in monthly installments of $2,083, plus interest at 8.55%, through
March 1999 ............................................................................ 31,250 27,083
Notes payable in monthly installments totaling $5,501, including interest at rates
ranging
from 4.748% to 9.312%, maturities from December 1998 to November 2000,
collateralized by Company vehicles .................................................... 156,921 142,934
Other notes payable ..................................................................... 75,401 54,014
----------- ----------
1,802,965 1,628,157
Less current maturities ................................................................. 782,098 770,425
----------- ----------
Long-term debt .......................................................................... $ 1,020,867 $ 857,732
=========== ==========
</TABLE>
Future maturities of debt at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
- --------------------------
<S> <C>
1998 ................... $ 782,098
1999 ................... 544,503
2000 ................... 441,084
2001 ................... 35,280
-----------
Total .................. $ 1,802,965
===========
</TABLE>
6. OPERATING LEASES
The Company leases its business premises, modular space and various
equipment under non-cancelable operating leases with terms up to 10 years.
Future minimum rental payments required under non-cancelable leases at December
31, 1997 are as follows:
8
<PAGE>
CASA FORD OF HOUSTON, INC.
NOTES TO FINANCIAL STATEMENTS -- Continued
6. OPERATING LEASES -- Continued
<TABLE>
<S> <C>
Year Ending December 31,
1998 ................... $ 305,560
1999 ................... 304,452
2000 ................... 304,452
2001 ................... 304,452
2002 ................... 304,452
Thereafter ............. 989,469
----------
Total .................. $2,512,837
==========
</TABLE>
Rent expense under all operating leases was $297,592 during 1997.
7. EMPLOYEE BENEFIT PLAN
The Company has a qualified 401(k) Profit Sharing Plan (the "Plan"),
whereby substantially all of the employees of the Company meeting certain
service requirements are eligible to participate. Contributions by the Company
in 1997 were $20,733.
8. INCOME TAXES
The provision (benefit) for income taxes consists of the following
components at December 31, 1997:
<TABLE>
<S> <C>
Current:
Federal .............. $ 482,949
State ................ 63,920
----------
546,869
Deferred:
Federal .............. (123,213)
State ................ (17,077)
----------
(140,290)
----------
Total ................ $ 406,579
==========
</TABLE>
The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income tax rate is as follows for
the year ending December 31, 1997:
<TABLE>
<S> <C>
Statutory federal rate ......... 34.00%
State income taxes ............. 2.90%
Miscellaneous .................. 1.26%
-----
Effective tax rate ............. 38.16%
=====
</TABLE>
Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for tax purposes.
Deferred income tax assets and liabilities consist of the following at
December 31, 1997:
<TABLE>
<S> <C>
Deferred tax assets -- primarily from differences relating to amortization of
extended
warranties ....................................................................... $ 522,261
Deferred tax liabilities -- primarily from differences relating to depreciation .... (29,389)
---------
Net deferred tax assets ............................................................ $ 492,872
=========
</TABLE>
9
<PAGE>
CASA FORD OF HOUSTON, INC.
NOTES TO FINANCIAL STATEMENTS -- Continued
9. COMMITMENTS
Ford Motor Company (FMC) owns vehicles which are used as short-term
rentals for which the Company pays FMC monthly fees. A portion of the fees are
applied against the purchase price. The Company must pay for the vehicles when
they are no longer used for rental. The contingent liability to FMC to purchase
the vehicles under this program was $902,057 at December 31, 1997.
10. SUBSEQUENT EVENT
In April 1998, the Company entered into an agreement with Sonic
Automotive, Inc. ("Sonic") whereby Sonic will purchase all of the outstanding
capital stock of the Company for a total purchase price of approximately $11.3
million less certain indebtedness of the Company to employees and affiliates
and to financial institutions. The initial purchase price is subject to
adjustment based upon a final determination of the net working capital of the
Company. The purchase price will be paid in 2,313 shares of Sonic preferred
stock with a liquidation preference of approximately $2.3 million.
10
Exhibit 99.6
AMENDMENT NO. 1 AND SUPPLEMENT
TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 AND SUPPLEMENT TO ASSET PURCHASE
AGREEMENT (this "AMENDMENT") is made and entered into as of this 28th day of
May, 1998, by and among: SONIC AUTOMOTIVE, INC., a Delaware corporation (the
"BUYER"), HATFIELD JEEP EAGLE, INC., an Ohio corporation d/b/a Volkswagen West,
Jeep Eagle West, Hatfield KIA and Trader Bud's Westside Chrysler Plymouth,
HATFIELD LINCOLN MERCURY, INC., an Ohio corporation d/b/a Hatfield Lincoln
Mercury, WESTSIDE DODGE, INC., an Ohio corporation d/b/a Trader Bud's Westside
Dodge, TOYOTA WEST, INC., an Ohio corporation d/b/a Toyota West, and HATFIELD
HYUNDAI, INC., an Ohio corporation d/b/a Hatfield Hyundai, Hatfield Isuzu and
Hatfield Subaru (collectively, the "SELLERS" and each, individually, a
"SELLER"); and Bud C. Hatfield, Dan E. Hatfield and Dan E. Hatfield, as Trustee
of the Bud C. Hatfield, Sr. Special Irrevocable Trust (collectively, the
"SHAREHOLDERS").
WHEREAS, the Buyer, the Sellers and the Shareholders entered into an
Asset Purchase Agreement (the "PURCHASE AGREEMENT") dated as of February 4,
1998; and
WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meanings given to them in the Purchase Agreement; and
WHEREAS, the Buyer and the Sellers desire to amend and supplement the
Purchase Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENTS TO PURCHASE AGREEMENT.
(a) Amendment of Purchase Price. Section 1.3(a) of the Purchase
----------------------------
Agreement is hereby amended to read in its entirety as follows:
(a) PURCHASE PRICE. In addition to the assumption by
the Buyer of the Assumed Liabilities, as the full
consideration to be paid by the Buyer for the Purchased
Assets, the Buyer shall pay to the Sellers the aggregate a
purchase price of $48,550,000, subject to adjustment as
provided in Section 1.3(c) below (the "PURCHASE PRICE").
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(b) Amendment of Closing Payment. Section 1.3(b)(1) of the Purchase
----------------------------
Agreement is hereby amended to read in its entirety as follows:
(1) $34,525,000 of the Purchase Price (the "CLOSING
PAYMENT") shall be payable to the Sellers at Closing by wire
transfer of immediately available funds to the account or
accounts of the Sellers, which shall be designated by Bud
Hatfield, as agent for the Sellers (the "SELLERS' AGENT"), in
writing at least one full Business Day prior to the Closing
Date, in the respective amounts specified in Part I of
Schedule 1.3(d). For purposes of this Agreement, a "BUSINESS
---------------
DAY" is a day other than a Saturday, a Sunday or a day on
which banks are required or authorized to be closed in the
State of North Carolina.
(c) Amendment of Adjustment Procedures.
----------------------------------
(1) the portion of the first sentence of Section 1.3(c)(1) of
the Purchase Agreement which precedes the words "PROVIDED, HOWEVER" is hereby
deleted and the following is hereby inserted in its place:
(1) As used in this Agreement, the term "NET CURRENT
ASSETS" shall mean (i) all of the Purchased Assets as of the
Closing Date which would, in conformity with generally
accepted accounting principles applied in a manner consistent
with those used in the preparation of the Financial Statements
referred to in Section 3.4 below ("GAAP"), be included under
current assets on a balance sheet, MINUS (ii) all of the
Assumed Liabilities as of the Closing Date which would, in
conformity with GAAP, be included under current liabilities on
a balance sheet. Not later than 60 days after the Closing Date
(as defined in Article 2 hereof), the Buyer will prepare and
deliver to the Sellers' Agent an unaudited balance sheet (the
"CLOSING BALANCE SHEET") of the Sellers as of the Closing
Date, consisting of computations of (A) the Net Current
Assets, and (B) the tangible book value as of the Closing Date
of the Purchased Assets (excluding goodwill and other
intangible assets) less the book value as of the Closing Date
of the Assumed Liabilities, all as determined in accordance
with GAAP;
(2) Section 1.3(c)(2) of the Purchase Agreement is hereby
amended to read in its entirety as follows:
(2) To the extent that the Net Current Assets, as
deemed mutually agreed by the parties or as determined by the
Accountants, as aforesaid, is less than $9,800,000 (the "NET
CURRENT ASSETS SHORTFALL"), the Sellers shall be obligated,
jointly and severally, to
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pay the amount of the Net Current Assets Shortfall, together
with interest on such amount at a rate equal to the Buyer's
floor plan financing rate from time to time in effect (the
"INTEREST RATE") from and including the Closing Date through
the date of payment, promptly to the Buyer. In furtherance of
(but not by way of limitation of) the Sellers' obligation in
the immediately preceding sentence, the Sellers' Agent and the
Buyer shall execute and deliver to the Escrow Agent a joint
instruction to deliver up to 500 of the Escrow Shares to the
Buyer, with the balance of such 500 of the Escrow Shares to be
delivered to the Sellers so long as no claim by the Buyer for
indemnification shall then be pending pursuant to this
Agreement. To the extent that the Net Current Assets, as
deemed mutually agreed by the parties or as determined by the
Accountants, as aforesaid, is at least equal to $9,800,00, the
Buyer shall be obligated to execute and deliver to the Escrow
Agent a joint instruction to deliver 500 of the Escrow Shares
to the Sellers pursuant to the Escrow Agreement (except to the
extent of any pending claim by the Buyer for indemnification
pursuant to this Agreement). To the extent that the Net
Current Assets, as deemed mutually agreed by the parties or as
determined by the Accountants, as aforesaid, is greater than
$9,800,000 (the "NET CURRENT ASSETS EXCESS"), the Buyer shall
be obligated to pay the amount of the Net Current Assets
Excess in cash promptly to the Sellers, together with interest
thereon at the Interest Rate from and including the Closing
Date through the date of payment.
(d) Amendment of Closing. Article 2 of the Purchase Agreement is hereby
--------------------
amended to read in its entirety as follows:
ARTICLE 2
CLOSING
The sale and purchase of the Purchased Assets
contemplated hereby shall take place at a closing (the
"CLOSING") at the offices of Kemp, Schaeffer, Rowe & Lardiere
Co., L.P.A., 88 West Mound Street, Columbus, Ohio 43215, at
10:00 a.m. local time on the fifth (5th) Business Day, or such
shorter period as the Buyer may choose, following the date the
Buyer gives notice of the Closing to the Sellers, but in no
event later than June 30, 1998 (the "CLOSING DATE DEADLINE").
The date on which the Closing actually occurs is hereinafter
referred to as the "CLOSING DATE".
(e) Amendment Regarding Certain Prohibitions of Sellers. Section 5.3 of
---------------------------------------------------
the Purchase Agreement is hereby amended to read in its entirety as follows:
3
<PAGE>
5.3 CERTAIN PROHIBITIONS. The Sellers hereby
acknowledge that, after March 31, 1998, they have been
operating their businesses for the economic benefit of the
Buyer. Accordingly, the Sellers warrant that they have not,
and the Sellers further agree that they shall not, without the
written consent of the Buyer, (a) engage or take part in, or
agree to engage or take part in, any reorganization or similar
transaction, (b) enter into any contract, agreement,
undertaking or commitment which would have been required to be
set forth in Schedule 3.6(a) if in effect on the date hereof
---------------
or enter in to any contract, agreement, undertaking or
commitment which cannot be assigned to the Buyer or a
permitted assignee of the Buyer, (c) sell or otherwise dispose
of any of their respective assets, other than sales of
inventory in the ordinary course of business, (d) make any
capital appropriation or expenditure or commitment therefor on
behalf of the Sellers, (e) take, cause, agree to take or
cause, or permit to occur any of the actions or events set
forth in Section 3.5 of this Agreement, or (f) declare or make
payment of any dividend or other distribution of cash or other
property in respect of any of their capital stock, or redeem,
purchase or otherwise acquire any such capital stock;
PROVIDED, HOWEVER, the Buyer's consent to the payment of
dividends by the Sellers will not be withheld so long as the
Sellers shall have demonstrated, to the reasonable
satisfaction of the Buyer, that such dividends (A) are only
out of retained earnings for periods ending prior to April 1,
1998, and (B) will not result in the Net Current Assets
falling below $9,800,000.
(g) Deletion of Section 11.1(f). Section 11.1(f) of the Purchase
---------------------------
Agreement is hereby deleted in its entirety.
2. AGREEMENT ON EXHIBITS AND SCHEDULES.
(a) Agreement on Exhibits. The parties hereto hereby agree on the form
---------------------
and substance of Exhibits A (Preferred Stock Statement of Rights and
Preferences), B (Form of Escrow Agreement), C (Form of Bills of Sale and
Assignment), D (Form of Dealerships Leases), E (Form of Non-Competition
Agreement), F (Form of Legal Opinion of Counsel for the Sellers and the
Shareholders), and G (Form of Legal Opinion of Counsel for the Buyer), all as
attached hereto.
(b) Agreement on Schedules. The parties hereto hereby agree on the form
----------------------
of Schedules 1.3(d), 3.1, 3.2, 3.3, 3.4, 3.5, 3.6(a), 3.6(b), 3.7, 3.8(a), 3.9,
3.12, 3.13, 3.14(a), 3.14(b), 3.16, 3.17, 3.19, 3.20, 3.21, 3.22, 3.23, 3.24,
3.26, 3.29(j), 3.29(l), 3.30, 3.31, 3.32, and 4.2(a), all as attached hereto.
4
<PAGE>
3. EMPLOYMENT AGREEMENTS. At the Closing, the Buyer and Messrs., Bud C. Hatfield
and Dan E. Hatfield will enter into separate employment agreements in
substantially the form of Exhibit H attached hereto.
4. DEALERSHIP LEASES. The monthly "Rent" under each of the Dealership Leases and
the "Purchase Price" for the Buyer's purchase option under each of the
Dealership Leases shall be as set forth on Exhibit I attached hereto.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute one instrument.
6. PURCHASE AGREEMENT CONFIRMED. Except as set forth in this Amendment, the
Purchase Agreement is hereby confirmed and shall remain in full force and
effect.
7. EFFECT ON LETTER AGREEMENT DATED FEBRUARY 4, 1998. The Letter Agreement among
the Sellers, the Shareholders and the Buyer, dated February 4, 1998, regarding
delivery of the Exhibits and Schedules, is superseded by this Agreement;
provided, however, paragraph 7 thereof (regarding indemnification by the Buyer
under certain circumstances) shall remain in full force and effect.
[Signatures begin on the following page]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed all as of the day, month and year first above written.
THE BUYER: SONIC AUTOMOTIVE, INC.
By: /s/
-------------------------------------
Name:
Title:
THE SELLERS:
HATFIELD JEEP EAGLE, INC.
By: /s/
-------------------------------------
Name:
Title:
HATFIELD LINCOLN MERCURY, INC.
By: /s/
-------------------------------------
Name:
Title:
WESTSIDE DODGE, INC.
By: /s/
-------------------------------------
Name:
Title:
TOYOTA WEST, INC.
By: /s/
-------------------------------------
Name:
Title:
6
<PAGE>
HATFIELD HYUNDAI, INC.
By: /s/
--------------------------------------
Name:
Title:
THE SHAREHOLDERS: /s/ Bud C. Hatfield (SEAL)
-------------------------------------
BUD C. HATFIELD
--------------------------------------
/s/ Dan E. Hatfield (SEAL)
--------------------------------------
DAN E. HATFIELD
/s/ Dan E. Hatfield (SEAL)
--------------------------------------
DAN E. HATFIELD, AS TRUSTEE OF
THE BUD C. HATFIELD, SR. SPECIAL
IRREVOCABLE TRUST
Attachments:
- -----------
Exhibits: A through G
- ---------
Exhibit H - Form of Employment Agreement
- ---------
Exhibit I - Rents under Dealership Leases
- ---------
Schedules: 1.3(d), 3.1, 3.2, 3.3, 3.4, 3.5, 3.6(a), 3.6(b), 3.7, 3.8(a),
3.9, 3.12, 3.13, 3.14(a), 3.14(b), 3.16, 3.17, 3.19, 3.20,
3.21, 3.22, 3.23, 3.24, 3.26, 3.29(j), 3.29 (l), 3.30, 3.31,
3.32, and 4.2(a)
7
Exhibit 99.9
ASSET PURCHASE AGREEMENT
(CENTURY)
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 10th day
of April, 1998 by and among CENTURY AUTO SALES, INC., a South Carolina
corporation ("SELLER"), A. FOSTER McKISSICK, III and MURRAY P. McKISSICK
(collectively, the "STOCKHOLDERS") and SONIC AUTOMOTIVE, INC., a Delaware
corporation ("BUYER").
WITNESSETH:
WHEREAS, Seller is the owner of certain assets used in connection with
Seller's BMW automobile dealership business (the "BUSINESS") operated at 2752
Laurens Road, Greenville, South Carolina, and at 2550 Reidville Road,
Spartanburg, South Carolina;
WHEREAS, Seller desires to sell and Buyer desires to buy, or to cause a
subsidiary or affiliate of Buyer to buy, certain assets pertaining to the
Business, subject to the terms and conditions of this Agreement;
WHEREAS, contemporaneously with the execution of this Agreement, Buyer
has entered into a Contract to Purchase and Sell Real Property (the "REAL
PROPERTY PURCHASE AGREEMENT") with Seller and Fairway Investments, LLC, a South
Carolina limited liability company ("FAIRWAY"), whereby Buyer has agreed to buy,
and Seller and Fairway have agreed to sell, the land, buildings and improvements
located at the Real Property (as defined in the Real Property Purchase
Agreement); and
WHEREAS, the consummation of the transactions contemplated by each of
this Agreement and the Real Property Purchase Agreement is subject to the
consummation of the transactions contemplated by the other such Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 "ASSETS" shall mean: the New Vehicles (as defined in Section 3.1
hereof); the Demonstrators (as defined in Section 3.2 hereof); the Parts (as
defined in Section 4.4 hereof); the Miscellaneous Inventories (as defined in
Section 5.1 hereof); the Work in Progress (as defined in Section 5.3 hereof);
the Fixtures and Equipment (as defined in Section 5.4 hereof); the Miscellaneous
Assets (as defined in Section 5.5 hereof); any used vehicles which Buyer agrees
to
1
<PAGE>
buy at the Closing; and all of Seller's rights to the name "Century BMW", and
all goodwill of the Business.
1.2 "CLOSING DATE" shall mean the date, not later than the Closing Date
Deadline (as hereinafter defined), of the closing of the purchase and sale of
the Assets (the "CLOSING") which shall be a date designated by Buyer not later
than fifteen (15) days after the approvals set forth in Section 8.13 hereof and
all other conditions precedent set forth in Articles VIII and IX have been
satisfied, or such other date as is mutually agreed upon by the parties hereto.
The Closing shall be held at the offices of Leatherwood Walker Todd & Mann,
P.C., 100 East Coffee Street, Greenville, South Carolina, 29602, at 9:00 a.m. on
the Closing Date.
1.3 "CLOSING DATE DEADLINE" shall mean May 15, 1998; provided, however,
if as of May 15, 1998, any of the approvals set forth in Section 8.13 hereof
shall not have been obtained and the obtaining of any such approvals is the sole
condition precedent to Buyer's obligations under Article VIII which remains
unsatisfied, Buyer may elect to extend the Closing Date Deadline for up to an
additional thirty (30) days.
1.4 "INVENTORY DATE" shall mean the close of business on March 28,
1998.
1.5 "LIABILITIES" shall mean all obligations of Seller, arising in the
ordinary course of business after the Inventory Date and not as a result of any
breach or default, under those contracts and leases of Seller set forth on
Schedule 1.5 attached hereto.
1.6 "MANAGEMENT AGREEMENT" shall mean that certain Management Agreement
dated the date hereof between Seller, as "Owner", and Buyer as "Manager."
1.7 "BMW" shall mean BMW of North America.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1 Upon the terms and subject to the conditions hereinafter set forth,
at the Closing, Seller will sell, transfer and convey the Assets to Buyer and
Buyer will purchase the Assets from Seller for the consideration set forth in
this Agreement. The sale, transfer and conveyance of the Assets will be made by
execution and delivery at the Closing of a bill of sale in a form reasonably
satisfactory to Buyer's counsel (the "BILL OF SALE") and such other instruments
of assignment, transfer and conveyance as Buyer shall reasonably request. Except
to the extent specifically included within the Assets, Seller will not sell, and
Buyer will not purchase, any other tangible or intangible assets of Seller.
2
<PAGE>
2.2 The aggregate purchase price (the "PURCHASE PRICE") to be paid for
the Assets shall consist of Four Million Dollars ($4,000,000) plus the Warrants
(as defined in Section 2.3 hereof), as the purchase price for the Business and
intangible Assets included in the Assets, plus the sum of: (i) the New Vehicle
Purchase Price (as defined in Section 3.1 hereof); (ii) the Demonstrator
Purchase Price (as defined in Section 3.2 hereof); (iii) the Used Vehicle
Purchase Price, if applicable (as defined in Section 3.6 hereof); (iv) the Parts
Purchase Price (as defined in Section 4.5 hereof); (v) the Miscellaneous
Inventories Purchase Price (as defined in Section 5.1 hereof); (vi) the Work in
Progress Purchase Price (as defined in Section 5.3 hereof); (vii) the F&E
Purchase Price (as defined in Section 5.4 hereof); and (viii) the amount of the
Liabilities. Each party will use the Purchase Price allocation described in this
Section 2.2 in all reporting to, and tax returns filed with, the Internal
Revenue Service.
2.3 Upon the terms and subject to the conditions hereinafter set forth,
Buyer shall pay the Purchase Price as follows:
(a) At the Closing, Buyer shall deliver to Seller a certified
check, or a wire transfer to an account designated by Seller, in an amount equal
to Two Million Dollars ($2,000,000) plus the sum of (i) the New Vehicle Purchase
Price; (ii) the Demonstrator Purchase Price; (iii) the Parts Purchase Price;
(iv) the Miscellaneous Inventories Purchase Price; and (v) the Work in Progress
Purchase Price; and (vi) an amount equal to fifty percent (50%) of the F&E
Purchase Price; provided, however, to the extent that (A) Buyer shall have paid
or discharged, pursuant to the Management Agreement, any liability or obligation
of Seller accrued or outstanding as of the Inventory Date and not included in
the Liabilities or (B) Seller shall have collected and not paid over to Buyer
any accounts receivable from transactions after the Inventory Date, the amount
of such liability or obligation paid or discharged by Buyer, or accounts
receivable collected by Seller, shall be a credit towards the amount payable
under this Section 2.3(a);
(b) At the Closing, Buyer shall issue to Seller warrants (the
"WARRANTS") to purchase Seventy-five Thousand (75,000) shares of Class A Common
Stock, $0.01 par value per share (the "COMMON STOCK"), of Buyer pursuant to a
Warrant Certificate in the form attached hereto as Exhibit A;
(c) At the Closing, Buyer shall issue to Seller that number of
shares (the "PREFERRED SHARES") of Buyer's Convertible Preferred Stock, with
such rights and preferences as are set forth in the Statement of Rights and
Preferences of Preferred Stock attached hereto as Exhibit B (the "STATEMENT OF
RIGHTS AND PREFERENCES"), obtained by dividing the sum of (i) Two Million
Dollars ($2,000,000) plus (ii) fifty percent (50%) of the F&E Purchase Price by
One Thousand Dollars ($1,000);
(d) At the Closing, Buyer shall assume the Liabilities in
accordance with Section 2.4 hereof;
3
<PAGE>
(e) Buyer shall receive a credit against the Purchase Price with
respect to all amounts paid by Buyer to Seller (or on Seller's behalf) after the
Inventory Date and on or prior to the Closing Date under the Management
Agreement with respect to the Assets; and
(f) On the date hereof, Buyer shall deliver to Seller a certified
check, or a wire transfer to an account designated by Seller, in an amount equal
to the Used Vehicle Purchase Price, if applicable. Any such payment of the Used
Vehicle Purchase Price shall constitute earnest money, which shall be refunded
by Seller to Buyer in the event this Agreement is terminated and for which Buyer
shall receive a credit towards the Purchase Price. Seller shall not be required
to hold or maintain the earnest money in any separate account.
2.4 At the Closing, Seller will assign to Buyer and Buyer will assume
and agree to perform and discharge the Liabilities pursuant to an assignment and
assumption agreement in a form reasonably satisfactory to Seller's counsel (the
"ASSUMPTION AGREEMENT"). Notwithstanding anything herein to the contrary, except
as expressly provided in this Section 2.4 and in the Assumption Agreement, Buyer
does not and will not assume or become liable for any obligations or liabilities
of Seller, of any kind whatsoever, fixed or contingent, known or unknown, as a
result of the transactions contemplated in this Agreement. Seller shall retain
and agrees to satisfy and discharge all of its obligations and liabilities,
including the obligations and liabilities set forth on Schedule 2.4, other than
the Liabilities.
2.5 (a) At the Closing, Seller and each of the Stockholders shall
execute and deliver to Buyer the certificate referred to in the Statement of
Rights and Preferences and the representations and warranties set forth in such
certificate shall also apply to the Warrants and the Common Stock issued on
exercise of the Warrants. At Seller's option, exercisable only by written notice
to Buyer at or prior to the Closing (the "REGISTRATION NOTICE"), Buyer shall be
obligated to use its reasonable best efforts to register under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), on or before December 31, 1998,
the shares (the "COMMON SHARES") of Common Stock which are issuable upon
conversion of the Preferred Shares.
(b) If requested by the managing or lead managing underwriter for
any such underwritten registered offering of the Common Shares, the Seller shall
execute and deliver such underwriting agreement with the managing or lead
managing underwriter in such form as is customarily used by such underwriter
with any modifications as the parties thereto shall agree. In connection with
any such registration, Seller and the Stockholders shall supply to Buyer such
information as may be reasonably requested by Buyer in connection with the
preparation and filing of a registration statement with the Securities and
Exchange Commission. Seller and the Stockholders shall not supply any
information to Buyer for inclusion in such registration statement that will,
taken as a whole, at the time the registration statement becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. Provided that Buyer shall have timely completed such
registration of the Common Shares, Seller shall promptly convert the Preferred
Shares into the Common Shares.
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<PAGE>
(c) In the event that Buyer fails to timely complete such
registration of the Common Shares, Seller may, at its option, exercisable by
notice to Buyer not later than January 31, 1999, require Buyer to purchase up to
all of the Preferred Shares at the price of $1,000 per share. Such notice to
Buyer shall specify the number of Preferred Shares required to be purchased and
a closing date for such purchase which shall be not sooner than fifteen (15)
days and not longer than thirty (30) days from the date of delivery of such
notice. At the closing of such purchase, Buyer shall deliver to Seller the
applicable purchase price in the same manner that the cash portion of the
Purchase Price paid at Closing was paid against delivery by Seller of (i) the
certificates for the Preferred Shares being purchased, duly endorsed for
transfer to Buyer, and (ii) a certificate signed by Seller and each of the
Stockholders to the effect that such Preferred Shares are being sold free and
clear of all encumbrances and claims of third persons.
(d) In the event Seller does not timely deliver a Registration
Notice, Buyer shall have no obligation to register the Common Shares.
Thereafter, Buyer's sole obligation with respect to the Preferred Shares and the
Common Shares shall be to use its reasonable best efforts to make available
current public information with respect to Buyer within the meaning of
Subsection (c)(1) of Securities and Exchange Commission Rule 144 ("RULE 144") to
the extent necessary to facilitate public resales by Seller of the Common Share
pursuant to Rule 144.
ARTICLE III
NEW VEHICLES AND DEMONSTRATORS
3.1 At the Closing, Buyer shall purchase all of Seller's untitled new
1997 and 1998 model BMW motor vehicles in Seller's stock and unsold by Seller as
of the Inventory Date and which are listed on Schedule 3.1, to be delivered to
Buyer as promptly as possible after the date hereof (all such vehicles are
collectively referred to hereinafter as the "NEW VEHICLES"). The purchase price
to be paid by Buyer for each New Vehicle shall be the price at which the New
Vehicle was invoiced to Seller by BMW, as adjusted pursuant to this Article III
(the sum of all such amounts to be paid for New Vehicles as determined by this
Article III is herein referred to as the "NEW VEHICLE PURCHASE PRICE"). Schedule
3.1 shall set forth each New Vehicle's model, invoice cost, odometer reading and
all other information necessary to calculate the New Vehicle Purchase Price with
respect to such New Vehicle. At the Inventory Date, Seller shall assign to
Buyer, without any additional consideration therefor, by appropriate documents
reasonably satisfactory to Buyer, all unfilled retail orders and deposits made
thereon.
3.2 At the Closing, Buyer shall purchase all of Seller's untitled 1997
and 1998 model BMW motor vehicles in Seller's stock and unsold by Seller as of
the Inventory Date which are used in the ordinary course of business for the
purpose of demonstration, and which are listed on Schedule 3.2, to be delivered
to Buyer as promptly as possible after the date hereof (all such vehicles are
collectively referred to herein as the "DEMONSTRATORS"). For purposes of this
Agreement, any motor vehicle with more than 9,000 miles shall be deemed to be
"used" rather than a "Demonstrator". The purchase price to be paid by Buyer for
each Demonstrator shall be the price at which the Demonstrator was invoiced to
Seller by BMW, as adjusted pursuant to this Article III
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<PAGE>
and as reduced as follows: (a) if such Demonstrator's odometer reflects total
mileage of six thousand (6,000) miles or less, an amount equal to ten cents
($.10) multiplied by the total mileage on such odometer; and (b) if such
Demonstrator's odometer reflects total mileage of more than six thousand (6,000)
miles but less than nine thousand (9,000) miles, an amount equal to twenty cents
($.20) multiplied by the total mileage on such odometer (the sum of all such
amounts to be paid for Demonstrators hereunder is herein referred to as the
"DEMONSTRATOR PURCHASE PRICE"). Schedule 3.2 shall set forth each Demonstrator's
model, invoice cost, odometer reading and all other information necessary to
calculate the Demonstrator Purchase Price with respect to such Demonstrator.
3.3 The purchase price paid for each New Vehicle and each Demonstrator
purchased under this Article III shall be:
(a) increased by (i) sixty dollars ($60) if Seller has completed
new car delivery preparation on such Vehicle and (ii) out-of-pocket costs
incurred by Seller for dealer-installed equipment and accessories; and/or
(b) decreased by (i) the dealer cost of any equipment and
accessories which have been removed from such vehicles, (ii) all paid or unpaid
rebates, discounts, Holdback for Dealer Account and other factory incentives
(including without limitation rebates applied for and paid but unearned,
incentive monies claimed on pre-reported units and carryover allowances on 1997
models), (iii) any refundable advertising allowances, and (iv) sixty dollars
($60) if such vehicle has not been prepped.
3.4 In the event any New Vehicle or Demonstrator shall have been
damaged prior to the Inventory Date, or is otherwise in a condition such that it
cannot reasonably be presented as being in a first-class saleable condition,
Seller and Buyer will attempt to agree on the cost to cover such repairs or some
other equitable reduction in value to reflect such condition, which amount shall
be deducted from the price to be paid for such New Vehicle or Demonstrator. In
the event Buyer and Seller cannot agree on the cost of repairs or the amount of
reduction, Buyer shall have no obligation to purchase any such damaged New
Vehicle or Demonstrator. With respect to any New Vehicle or Demonstrator which
has been damaged and repaired prior to the Inventory Date, Seller and Buyer will
attempt to agree on an adjustment to the price to reflect any decrease in the
wholesale value of such New Vehicle or Demonstrator resulting from such damage
and repair. In the event Buyer and Seller cannot agree on such adjustment, Buyer
shall have no obligation to purchase such New Vehicle or Demonstrator.
3.5 [Intentionally Left Blank]
3.6 Buyer shall have no obligation to purchase any vehicle from Seller
other than its obligation hereunder to purchase the New Vehicles and the
Demonstrators. When Seller and Buyer perform the vehicle inventory, the parties
shall assign a price to each used vehicle owned by Seller at such time. At the
Inventory Date, Buyer, in its sole discretion, may elect to purchase, at the
Closing, any or all of Seller's used vehicles for the price assigned to each
such used vehicle. If
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Buyer elects to purchase any used vehicles, the sum of all prices assigned to
such used vehicles pursuant to the terms of this Section 3.6 shall be referred
to herein as the "USED VEHICLE PURCHASE PRICE".
ARTICLE IV
PARTS/ACCESSORIES
4.1 Buyer and Seller shall engage a mutually acceptable third party
engaged in the business of appraising, valuing and preparing inventories for
automobile dealerships (hereinafter referred to as the "INVENTORY SERVICE") to
prepare an inventory list (the "INVENTORY") of the parts and accessories, as
well as the Miscellaneous Inventory, used by Seller in the Business as a BMW
dealer at the Real Property. The Inventory shall be posted to the BMW-approved
system of inventory control. The cost of the aforesaid physical inventory shall
be shared equally by Buyer and Seller. Buyer shall have the right to deduct
Seller's portion of such expense from the consideration to be paid to Seller
under the terms of this Agreement and to remit such sum directly to the
Inventory Service. The Inventory shall be completed by March 29, 1998, or such
later date as is mutually convenient and which is as close as possible to the
Closing Date. The Inventory shall identify each part and accessory and its
purchase price.
4.2 The Inventory shall classify parts and accessories as "returnable"
or "nonreturnable". For purposes of this Agreement, the terms "returnable parts"
and "returnable accessories" shall describe and include only those new parts and
new accessories for BMW vehicles which are listed (coded) in the latest current
BMW Master Parts Price List Suggested List Prices and Dealer Prices with
supplements or the equivalent in effect as of the date of the Inventory (the
"MASTER PRICE LIST") as returnable to BMW at not less than the purchase price
reflected in the Master Price List. The purchase price for each "returnable
part" and "returnable accessory"will be the price listed in the Master Price
List. All parts and accessories not falling within the definition of
"returnable" shall be classified as "nonreturnable". The purchase price for each
"nonreturnable" part and accessory, of which type Seller has made no sales
during the ninety (90) day period prior to the date of the Inventory, shall be
sixty percent (60%) of the price listed therefor in the Master Price List. The
purchase price for each "nonreturnable" part and accessory, of which type Seller
has made retail sales to one or more customers during the ninety (90) day period
prior to the date of the Inventory, shall be one hundred percent (100%) of the
price therefor listed in the Master Price List. The purchase price for all
"Jobber" and/or "NPN" parts shall be equal to Seller's original cost of such
parts. The purchase price for all nuts, bolts and any other parts not addressed
in this Section 4.2 shall equal the fair market value thereof as determined by
the Inventory Service.
4.3 [Intentionally Left Blank]
4.4 At the Closing, Buyer shall purchase all parts and accessories
owned by Seller at the Inventory Date and listed on the Inventory (the "PARTS")
provided, however, that Buyer shall not be obligated to purchase any damaged
parts or accessories, parts and accessories with component parts missing,
superseded or obsolete parts or accessories, or used parts or accessories.
Seller agrees that
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if parts and accessories that Buyer is not obligated to purchase hereunder are
not removed from the Real Property within thirty (30) days after the Closing
Date, they shall become the property of Buyer without the payment of any
consideration in addition to the consideration otherwise provided herein.
4.5 The purchase price for the Parts will equal the value of such items
shown on the Inventory (the "PARTS PURCHASE PRICE").
4.6 Seller shall assign to Buyer at Closing any net parts return
privileges under the BMW Parts Return Plan that may have accrued to Seller prior
to the Closing (and any other special parts return authorizations which may have
been granted to Seller by BMW).
ARTICLE V
MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES
AND EQUIPMENT
5.1 At the Closing, Buyer shall purchase all useable gas, oil and
grease, all undercoat material and body materials in unopened cans and such
miscellaneous useable and saleable articles in unbroken lots which (i) are on
the dealership premises, (ii) are owned by Seller on the Inventory Date, (iii)
were purchased during the thirty (30) day period prior to the Inventory Date,
and (iv) are identified in the Inventory taken by the Inventory Service on the
Inventory Date (collectively referred to herein as the "MISCELLANEOUS
INVENTORIES"). The purchase price for the Miscellaneous Inventories shall be
equal to the replacement cost of the Miscellaneous Inventories as determined by
the Inventory Service and set forth on the Inventory (the sum of all prices of
the Miscellaneous Inventories pursuant to the terms of this Section 5.1 shall be
referred to herein as the "MISCELLANEOUS INVENTORIES PURCHASE PRICE").
5.2 Buyer shall have no obligation to purchase any such miscellaneous
items that are not included in the Miscellaneous Inventories. Seller agrees that
any miscellaneous items that are not included in the Miscellaneous Inventories
and are not removed from the Real Property within the thirty (30) days after the
Closing Date, they shall become the property of Buyer without the payment of any
consideration in addition to the consideration otherwise provided herein.
5.3 At the Closing, Buyer shall buy at Seller's cost for parts and
labor such shop labor and sublet repairs as Seller shall have caused to be
performed on any repair orders which are in process at the close of business on
the Inventory Date for which there are adequate credit arrangements (the "WORK
IN PROGRESS") (the sum of all costs for the Work in Progress pursuant to the
terms of this Section 5.3 shall be referred to herein as the "Work in Progress
Purchase Price"). Buyer shall complete such repair work and shall be entitled to
the entire proceeds to be collected for such services.
5.4 At the Closing, Buyer shall purchase all fixtures, machinery,
equipment (including special tools and shop equipment), furniture, "BMW" and
other signs and office equipment owned by Seller and used or held for use in
connection with the Business, including the items listed on the
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Book Depreciation Schedule included as Schedule 5.4 attached hereto
(collectively referred to herein as the "FIXTURES AND EQUIPMENT"). The purchase
price for each item of Fixtures and Equipment shall equal the depreciated book
value of such item based upon Schedule 5.4 (the sum of all prices assigned to
the Fixtures and Equipment pursuant to the terms of this Section 5.4 shall be
referred to herein as the "F&E PURCHASE PRICE"). The Fixtures and Equipment
shall not include the ADP computer system.
5.5 At the Closing, and without payment of any additional
consideration, Buyer shall purchase all of Seller's (i) unused shop repair
orders, parts sales tickets, accounting forms, binders, office and shop supplies
and such shop reference manuals, parts reference catalogs, non-accounting file
copies for all sales of Seller for the three (3) years preceding the Closing
Date, (ii) copies of new and used car sales records and specifically wholesale
parts sales records, new and used parts sales records, and service sales records
for the three (3) years preceding the Closing Date, (iii) product sales training
material and reference books on hand as of the Closing Date, (iv) customer and
registration lists pertaining to the sale of motor vehicles, service files,
repair orders, owner follow-up lists and similar records relating to the
operation of the Business, (v) telephone numbers and listings used by Seller in
connection with the Business, (vi) names and addresses of Seller's service
customers and prospective purchasers and (vii) Seller's rights to the tradename
"Century BMW" or any similar variation thereof (such items collectively referred
to herein as the "MISCELLANEOUS ASSETS").
5.6 Seller may retain all corporate records, financial records and
correspondence which are not necessary for the continued operation of the
Business by Buyer, and all derivations and extensions thereof.
5.7 Buyer shall have no responsibility to perform any services required
under any warranties issued by Seller on the vehicles sold by Seller on or prior
to the Inventory Date, unless authorized in writing by Seller accompanied by
arrangements in writing satisfactory to Buyer to assure Buyer of payment for all
work performed by Buyer, and, if so authorized by Seller, Seller shall reimburse
Buyer for all of Buyer's costs for parts and labor in connection therewith at
established internal rates for parts and labor. At the Inventory Date, Seller
shall supply Buyer with a list to which such warranties and guaranties are
applicable, which list shall include the names of the purchasers, the make and
year model of the vehicles purchased and the date of purchase. Seller shall also
supply to Buyer at or prior to the Inventory Date an address for and a
designation of the person who will be responsible for authorizing Buyer to
perform any services under any warranties issued by Seller on vehicles sold by
it prior to the Inventory Date. Seller shall reimburse Buyer promptly upon
demand for all sums due or payable by Seller to Buyer hereunder.
5.8 Seller shall retain all accounts receivable held by Seller as of
the Inventory Date and Buyer shall retain all accounts receivable arising out of
sales and/or services of the Business after the Inventory Date. Buyer shall have
no responsibilities or obligations with respect to the documentation or
collection of the Seller's accounts receivable, except that Buyer, on Seller's
behalf, shall accept payment of Seller's accounts receivable arising out of the
operation of Seller's business prior to the Inventory Date, at no charge to
Seller, during the term of the Management
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Agreement and for a period of 60 days after the Closing, and Buyer shall forward
to Seller, from time to time during said period, all of the money so accepted on
said accounts receivable.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Stockholders as
follows:
6.1 Buyer is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
its business makes such qualification necessary and has the corporate power to
own its properties and to carry on its business as now being conducted. The
Board of Directors of Buyer has duly approved this Agreement, all other
agreements, certificates and documents executed or to be executed by Buyer in
connection herewith, and the transactions contemplated hereby and thereby. Buyer
has full corporate power and authority to execute and deliver this Agreement and
all other agreements, certificates and documents executed or to be executed by
Buyer in connection herewith, to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and thereunder. This
Agreement, and all other agreements, certificates and documents executed or to
be executed by Buyer in connection herewith, constitute or, when executed and
delivered, will constitute legal, valid and binding agreements of Buyer
enforceable in accordance with their respective terms.
6.2 Except as set forth on Schedule 6.2 attached hereto, the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a breach or default under, any
provision of law, any order of any court or other agency of government, the
charter or bylaws of Buyer or any note, debenture, mortgage, loan agreement or
other instrument to which Buyer is a party or by which it or any of its
properties or assets is bound.
6.3 There are no actions, suits or proceedings pending, or, to the
knowledge of Buyer, threatened against or affecting Buyer which might adversely
affect the power or authority of Buyer to carry out the transactions to be
performed by it hereunder.
6.4 The issuance of the Preferred Shares and the Warrants, as well as
the Common Shares issuable upon conversion of the Preferred Shares and exercise
of the Warrants, has been duly authorized by all necessary corporate action of
Buyer. Upon the issuance of the Preferred Shares pursuant to this Agreement, and
upon the issuance of Common Shares upon conversion of any of the Preferred
Shares or exercise of any of the Warrants, such Preferred Shares and/or Common
Shares, as the case may be, shall be validly issued, fully paid and
non-assessable.
ARTICLE VII
-----------
REPRESENTATIONS AND WARRANTIES AND SELLER AND THE STOCKHOLDERS
--------------------------------------------------------------
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Seller and the Stockholders, jointly and severally, represent and
warrant to Buyer as follows:
7.1 Seller is a corporation duly organized and existing and in good
standing under the laws of the State of South Carolina, is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
its business makes such qualification necessary and has the corporate power to
own its properties and to carry on its business as now being conducted. Except
as set forth on Schedule 7.1 attached hereto, the Stockholders are the only
persons owning shares of Seller. The Board of Directors and the shareholders of
Seller have duly approved this Agreement, all other agreements, certificates and
documents executed or to be executed by Seller in connection herewith, and the
transactions contemplated hereby and thereby. Seller has full corporate power
and authority to execute and deliver this Agreement and all other agreements,
certificates and documents executed or to be executed by Seller in connection
herewith, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. Each stockholder has full
capacity, power and authority to execute and deliver this Agreement and all
other agreements, certificates and documents executed or to be executed by
Seller in connection herewith, to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. This
Agreement, and all other agreements, certificates and documents executed or to
be executed by Seller in connection herewith, constitute or, when executed and
delivered, will constitute legal, valid and binding agreements of Seller
enforceable in accordance with their respective terms. This Agreement, and all
other agreements, certificates and documents executed or to be executed by each
Stockholder in connection herewith, constitute or, when executed and delivered,
will constitute legal, valid and binding agreements of such Stockholder
enforceable in accordance with their respective terms.
7.2 Except as set forth in Schedule 7.2 attached hereto, the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a breach or default under, any
provision of law, any order of any court or other agency of government, the
charter or bylaws of Seller or any note, debenture, mortgage, loan agreement or
other instrument to which Seller or any of the Stockholders is a party, or by
which it or any of the Assets are bound, or result in the creation or imposition
of any Encumbrance of any kind whatsoever on the Assets.
7.3 There are no actions, suits or proceedings pending or, to the
knowledge of Seller and the Stockholders, threatened against Seller or any of
the Stockholders which might adversely affect the power or authority of any of
them to carry out the transactions to be performed by such party hereunder.
There are no actions, suits or proceedings pending, or, to the knowledge of
Seller and the Stockholders, threatened against or affecting Seller, other than
those adequately covered by insurance, and those disclosed on Schedule 7.3
attached hereto, and none of the actions, suits or proceedings described on
Schedule 7.3, if determined adversely to Seller, would have a material adverse
effect on the business, assets or financial condition of Seller.
7.4 Except as disclosed on Schedule 7.4 attached hereto, Seller has
good title to the Assets, free and clear of all liens (including tax liens),
encumbrances, actions, claims, payments or
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demands of any kind and character (collectively, "ENCUMBRANCES"), except
Encumbrances for ad valorem personal property taxes not yet due and payable. All
of the Assets to be transferred hereunder conform, as to condition and
character, to the descriptions of such Assets contained herein and will be
transferred at the Closing free and clear of all Encumbrances, except
Encumbrances for ad valorem personal property taxes not yet due and payable and
the Liabilities assumed by Buyer and described in Schedule 2.4.
7.5 Except as disclosed on Schedule 7.5 attached hereto, there are no
permits or approvals used or obtained for use by Seller which are required under
applicable law in connection with the ownership or operation of its Business,
except where the failure to have or obtain any such permits or approvals would
not have a material adverse effect on Seller or the Business.
7.6 [Intentionally Left Blank]
7.7 [Intentionally Left Blank]
7.8 The financial statements of Seller attached hereto or set forth on
Schedule 7.8 (the "Financial Statements") have been prepared in accordance with
generally accepted accounting principles consistently applied. The balance sheet
of Seller included in the Financial Statements fairly presents the financial
condition of Seller as of the date thereof and reflects all claims against and
all material debts and liabilities of Seller, fixed or contingent, as of the
date thereof, and the related statement of income included in the Financial
Statements fairly presents the results of the operations of Seller and the
changes in its financial position for the period indicated, all in accordance
with generally accepted accounting principles consistently applied. Seller has
no outstanding material claims, liabilities, obligations or indebtedness of any
nature, except as set forth in the Financial Statements, other than liabilities
incurred in the ordinary course of business and of the kind and type reflected
in the Financial Statements. To the knowledge of the Seller and the
Stockholders, the Financial Statements contain adequate reserves for all
reasonably anticipated claims relating to matters with respect to which Seller
is self-insured.
7.9 Neither Seller nor any of the Stockholders has engaged any broker
or any other person or entity who would be entitled to any brokerage commission
or finder's fee in respect of the execution of this Agreement and/or the
consummation of the transactions contemplated hereby.
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7.10 Except as set forth on Schedule 7.10 attached hereto, the Assets
comply with, and the Business has been conducted in all material respects in
compliance with, all laws, rules and regulations (including all worker safety
and all environmental laws, rules and regulations) applicable zoning and other
laws, ordinances, regulations and building codes, and neither Seller nor any of
the Stockholders have received any notice of any violation thereof which has not
been remedied.
7.11 The Fixtures and Equipment are in good condition, ordinary wear
and tear excepted, and constitute all of the fixtures, machinery, equipment,
furniture, signs and office equipment used or intended for use by Seller in the
Business. All vehicles on Schedule 3.2 are used as demonstrators in the ordinary
course of Seller's Business, are operated with dealer tags and have not had
certificates of title issued with respect to them.
7.12 Except for Seller's cash and accounts receivable and Seller's
rights under its dealership agreement with BMW, the Assets, together with the
Real Property and the contracts and leases set forth on Schedule 1.5 hereto,
comprise all of the assets, properties and rights necessary for Buyer to operate
the Business substantially in the manner operated by Seller prior to the
Closing.
7.13 The Warrants are being acquired for the account of the Seller for
the purposes of investment and not with a view to the distribution thereof, as
those terms are used in the Securities Act, and the rules and regulations
promulgated thereunder.
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer to perform this Agreement at Closing are
subject to the following conditions precedent which shall be fully satisfied at
or before the Closing, unless waived in writing by Buyer.
8.1 All of the representations and warranties of Seller and the
Stockholders herein contained shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of the Closing Date, and
Buyer shall have received a certificate from the Stockholders and a duly
authorized officer of Seller, dated the Closing Date, to such effect.
8.2 Each of the agreements or obligations required by this Agreement to
be performed or complied with by Seller or the Stockholders at or before the
Closing shall have been duly performed or complied with, and Buyer shall have
received a certificate from the Stockholders and a duly authorized officer of
Seller, dated the Closing Date, to such effect.
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8.3 No action, suit or proceeding shall have been instituted by a
governmental agency or any other third party (i) to prohibit or restrain the
sale contemplated by this Agreement or otherwise challenge the power and
authority of the parties to enter into this Agreement or to carry out their
obligations hereunder or the legality or validity of the sale contemplated by
this Agreement, or (ii) which would have a materially adverse effect on the
conduct of a BMW automobile dealership business by Buyer at the Real Property.
8.4 The Inventory shall have been completed to the reasonable
satisfaction of Buyer.
8.5 Seller shall have furnished to Buyer (i) evidence to the reasonable
satisfaction of Buyer and its counsel with respect to the corporate organization
and existence of Seller and (ii) UCC-11 search reports or other evidence
reasonably satisfactory to Buyer and its counsel that the Assets are free and
clear of all Encumbrances.
8.6 Seller shall have furnished to Buyer a copy of the resolutions duly
adopted by the Board of Directors and the stockholders of Seller authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, certified by an authorized officer of Seller
as of the Closing Date.
8.7 As of the Inventory Date, there shall not have been any fire,
accident or other casualty or any labor disturbance, civil commotion, riot, act
of God or the public enemy, or any change in the Business or Assets or which
would have a material adverse effect on the conduct of a BMW automobile business
using the Assets at the Real Property or which would interfere with the use by
Buyer of such Assets in connection with the conduct of a BMW automobile
dealership business at the Real Property.
8.8 Buyer shall have been licensed as a Motor Vehicle Dealer under
applicable South Carolina motor vehicle dealer registration laws and shall have
obtained all other authorizations, consents, licenses and permits from
applicable governmental agencies having or asserting jurisdiction, which Buyer
deems necessary or appropriate to conduct business as a BMW dealer at the Real
Property; provided, however, this Section 8.8 shall only be a condition to
Buyer's obligations so long as Buyer is using its reasonable best efforts to
obtain such authorizations, consents, licenses and permits.
8.9 Buyer and Seller shall have obtained all other authorizations,
consents and approvals from third persons and entities as are required to assign
those contracts and leases that Buyer is to assume at Closing.
8.10 Seller shall have transferred to Buyer certificates of title or
origin for all New Vehicles and Demonstrators, and any used vehicles, if
applicable, and all of its registration lists, owner follow-up lists and service
files on hand as of the Closing Date with respect to the Business.
8.11 Seller shall have terminated in writing Seller's Sales and Service
Agreement with BMW.
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8.12 Seller and the Stockholders shall have executed, as appropriate,
and delivered to Buyer the Bill of Sale, other documents of transfer of title
contemplated hereby and any and all other documents necessary or desirable in
connection with the transfer of the Assets, which documents shall warrant title
to Buyer consistent with this Agreement and shall in all respects be in such
form as may be reasonably required by Buyer and its counsel.
8.13 BMW shall have approved Buyer or Buyer's affiliate as an
authorized dealer at each parcel of the Real Property and O. Bruton Smith or O.
Bruton Smith's designee, as the authorized Dealer Operator, and BMW shall have
executed Dealer Agreements on terms reasonably satisfactory to Buyer.
8.14 All conditions to Buyer's obligations under the Real Property
Purchase Agreement shall have been satisfied or fulfilled unless waived in
writing by Buyer.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller and the Stockholders to perform this
Agreement at Closing are subject to the following conditions precedent which
shall be fully satisfied on or before the Closing, unless waived in writing by
Seller:
9.1 All of the representations and warranties of Buyer herein contained
shall be true and correct in all material respects on and as of the Closing Date
as if made on and as of the Closing Date, and Seller shall have received a
certificate from the President or a Vice President of Buyer, dated the Closing
Date, to such effect.
9.2 Each of the agreements or obligations required by this Agreement to
be performed or complied with by Buyer at or before the Closing shall have been
duly performed or complied with, and Seller shall have received a certificate
from the President or a Vice President of Buyer, dated the Closing Date, to such
effect.
9.3 No action, suit or proceeding shall have been instituted by a
governmental agency or any third party to prohibit or restrain the sale
contemplated by this Agreement or otherwise challenge the power and authority of
the parties to enter into this Agreement or to carry out their obligations
hereunder or the legality or validity of the sale contemplated by this
Agreement.
9.4 The Inventory shall have been completed to the reasonable
satisfaction of Seller.
9.5 Buyer shall have furnished Seller and the Stockholders with (i)
evidence to the reasonable satisfaction of Seller and its counsel with respect
to the corporate organization and existence and (ii) a copy of the resolutions
duly adopted by the Board of Directors of Buyer authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, certified by an officer of Buyer as of the Closing Date.
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9.6 Buyer shall have tendered to Seller the cash portion of the
Purchase Price and the Preferred Shares and the Warrants.
9.7 All conditions to the obligations of Seller and Fairway under the
Real Property Purchase Agreement shall have been satisfied or fulfilled, unless
waived in writing by Seller.
ARTICLE X
COVENANTS AND AGREEMENTS
10.1 [Intentionally Left Blank]
10.2 Seller agrees that it will, at any time and from time to time,
after the Closing, upon request of Buyer, do, execute, acknowledge and deliver
all such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances as may be reasonably required to convey and transfer to
and vest in Buyer and protect its rights, title and interest in and enjoyment of
all the Assets.
10.3 The parties hereto shall use their reasonable best efforts to
obtain, and to cooperate with each other in obtaining, all authorizations,
approvals, licenses, permits and other consents contemplated by Articles VIII
and IX.
10.4 During the period from the date of this Agreement through the
Closing Date, Seller will conduct its operation of the Business only in
accordance with the Management Agreement and Seller shall not dispose of any of
the assets of the Business, except as contemplated by the Management Agreement.
10.5 Seller shall afford to Buyer, its attorneys, accountants and such
other representatives of Buyer as Buyer shall designate to Seller, free and full
access at all reasonable times, and upon reasonable prior notice, to the Assets
and the properties, books and records of Seller, and to interview personnel,
suppliers and customers of Seller, in order that Buyer may have full opportunity
to make such investigation as it shall reasonably desire of the Assets, the
Liabilities and the Business. Seller shall allow an environmental consulting
firm selected by Buyer (the "ENVIRONMENTAL AUDITOR") to have prompt access to
the Real Property in order to conduct an environmental investigation,
satisfactory to Buyer in scope (such scope being sufficient to result in a Phase
I environmental audit report and a Phase II environmental audit report, if
desired by Buyer), of, and to prepare a report with respect to, the Real
Property (the "ENVIRONMENTAL AUDIT"). Seller shall provide to the Environmental
Auditor: (i) reasonable access to all of its existing records concerning the
matters which are the subject of the Environmental Audit; and (ii) reasonable
access to the employees of Seller and the last known addresses of former
employees of Seller who are most familiar with the matters which are the subject
of the Environmental Audit (Seller agreeing to use reasonable efforts to have
such former employees respond to any reasonable requests or inquiries by the
Environmental Auditor). Seller shall otherwise cooperate with the Environmental
Auditor
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in connection with the Environmental Audit. Buyer shall bear 100% of the costs,
fees and expenses in connection with the Environmental Audit.
10.6 All representations and warranties of Seller and the Stockholders
shall survive the Closing Date. Seller and the Stockholders, jointly and
severally, agree to indemnify and hold harmless Buyer and its stockholders,
officers, directors, employees and agents, and their respective successors and
assignees, from and against any and all losses, liabilities, obligations,
assessments, suits, actions, proceedings, claims or demands, including costs,
expenses and fees (including reasonable attorneys' fees and expert witness fees)
incurred in connection therewith, suffered by any of them or asserted against
any of them or the Assets, arising out of or based upon (a) the failure of any
representation or warranty of Seller or the Stockholders contained herein, or in
any agreement, certificate or document executed by Seller or any of the
Stockholders in connection herewith, to be true and correct in all material
respects as of the Inventory Date, (b) the breach of any covenant or agreement
of Seller or any of the Stockholders contained in this Agreement, (c) any
liability or obligation of Seller or any of the Stockholders not expressly
assumed by Buyer pursuant to this Agreement, or (d) any arrangements or
agreements made or alleged to have been made by Seller or any of the
Stockholders with any broker, finder or other agent in connection with the
transactions contemplated hereby. Notwithstanding the foregoing, the total
indemnification obligations of the Seller and the Stockholders hereunder shall
not exceed the Purchase Price.
10.7 All representations and warranties of Buyer shall survive the
Closing Date. Buyer agrees to indemnify and hold harmless Seller and its
stockholders, officers, directors, employees and agents, and their respective
successors and assignees, from and against any and all losses, liabilities,
obligations, assessments, suits, actions, proceedings, claims or demands,
including costs, expenses and fees (including reasonable attorneys' fees and
expert witness fees) incurred in connection therewith, suffered by any of them,
or asserted against any of them, arising out of or based upon (a) the failure of
any representation or warranty of Buyer contained herein, or in any agreement,
certificate or document executed by Buyer in connection herewith, to be true and
correct in all material respects as of the Closing Date, (b) the breach of any
covenant or agreement of Buyer contained in this Agreement, or (c) the
Liabilities.
10.8 Personal property, use and intangible taxes and assessments with
respect to the Assets shall be prorated on a per diem basis and apportioned
between Seller and Buyer as of the date of the Closing. Seller shall be liable
for that portion of such taxes and assessments relating to, or arising in
respect of, periods on or prior to the Inventory Date, and Buyer shall be liable
for that portion of such taxes and assessments relating to, or arising in
respect of, any period after the Inventory Date. Any taxes attributable to the
sale or transfer of the Assets to Buyer hereunder shall be paid by Seller.
10.9 Except as may be required by law or the rules of the New York
Stock Exchange or as necessary in connection with the transactions contemplated
hereby, no party hereto shall (i) make any press release or other public
announcement relating to this Agreement or the transactions contemplated hereby,
without the prior approval of the other parties hereto or (ii) otherwise
disclose the existence and nature of negotiations regarding the transactions
contemplated hereby to any
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person or entity other than such party's accountants, attorneys, agents and
representatives, all of whom shall be subject to this nondisclosure obligation
as agents of such party. The parties shall cooperate with each other in the
preparation and dissemination of any public announcements of the transactions
contemplated by this Agreement.
10.10 Neither Seller nor any of the Stockholders shall pursue,
initiate, encourage or engage in, any negotiations or discussions with, or
provide any information to, any person or entity (other than Buyer and its
representatives and affiliates) regarding the sale or possible sale to any such
person or entity of any of the Assets or capital stock of Seller or any merger
or consolidation or similar transaction involving Seller.
10.11 Buyer shall promptly apply for, or cause an affiliate of Buyer to
apply for, the issuance of a franchise to operate a BMW dealership upon the Real
Property. Effective as of the Closing, Seller shall terminate its Dealer Sales
and Service Agreements with BMW. Seller shall fully cooperate with Buyer, and
take all reasonable steps to assist Buyer, in Buyer's efforts to obtain its own
similar Dealer Sales and Service Agreements with BMW. The parties acknowledge
that Buyer's Dealer Agreements are subject to the approval of BMW and that Buyer
would be unable to obtain its own, similar Dealer Sales and Service Agreement
absent Seller's termination of its agreement.
10.12 Prior to Closing, Seller shall furnish to Buyer a list of all
employees and their rates of pay, including, separately, base pay and any
incentive or commission plans. Buyer shall have the right, but not the
obligation, to employ any or all of Seller's employees. If permitted by law and
applicable regulations, Seller shall, in consideration for the sale of
substantially all of Seller's assets in bulk, assign and transfer to Buyer,
without additional charge therefor, the amount of reserve in Seller's State
Unemployment Compensation Fund with respect to the Business and the
corresponding experience rate.
10.13 Termination.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing
Date:
(i) by the written mutual consent of the parties hereto;
(ii) [Intentionally Left Blank]
(iii) by Buyer in the event of any breach by Seller or any of
the Stockholders of any of their respective material covenants, representations
or warranties contained herein;
(iv) by Seller in the event of any breach by Buyer of any of
Buyer's material covenants, representations or warranties contained herein; or
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(v) at any time after the Closing Date Deadline, by written
notice by Buyer or (subject to Buyer's option to elect to extend the Closing
Date Deadline in accordance with Section 1.3) Seller to the other parties hereto
if the Closing shall not have occurred on or before the Closing Date Deadline;
provided, however, no party may terminate this Agreement pursuant to clauses
(iii), (iv) or (v) above if such party is in breach of any of its material
covenants, representations or warranties contained herein.
(b) In the event of termination pursuant to Section 10.13(a),
this Agreement shall be of no further force or effect; PROVIDED, HOWEVER, that,
except as set forth in Section 10.13(c), any termination pursuant to Section
10.13 shall not relieve any party hereto of any liability for breach of any
representation and warranty, covenant or agreement hereunder occurring prior to
such termination.
(c) If, as of the Closing Date Deadline (as the same may have
been extended by Buyer in accordance with the provisions of Section 1.3 hereof),
all conditions to Buyer's obligations to close set forth in Article VIII hereof
shall have been satisfied or fulfilled, and Buyer shall have failed to perform
its material obligations at the Closing by the Closing Date Deadline (as the
same may have been so extended), then Buyer shall, within ten (10) days after
receipt of a written demand from Seller, pay to Seller, in immediately available
funds, as liquidated damages for the loss of the transaction, a termination fee
of Five Hundred Thousand Dollars ($500,000) (the "BUYER'S TERMINATION FEE").
Provided that Buyer shall have paid the Buyer's Termination Fee upon such demand
by Seller, payment of the Buyer's Termination Fee shall be the sole and
exclusive remedy of Seller and the Stockholders for any such failure of Buyer to
perform its material obligations at the Closing, regardless of whether Seller
terminates or does not terminate this Agreement, and Seller and the Stockholders
shall have no right to any other damages or other relief of any kind or nature,
whether at law or in equity (including without limitation, specific performance
by Buyer), for any breach or alleged breach by Buyer of this Agreement.
Notwithstanding the foregoing, Seller may elect not to demand payment of the
Buyer's Termination Fee, in which case Seller shall be free to pursue any other
remedies it may have, at law or in equity, including specific performance.
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ARTICLE XI
MISCELLANEOUS
11.1 Except as provided in this Section, this Agreement shall not be
assignable by any party hereto without the prior written consent of the other
parties. Buyer may assign this Agreement, without the consent of the other
parties hereto, to a corporation, partnership or limited liability company
controlled by Buyer, including a corporation, partnership or limited liability
company to be formed at any time prior to the Closing Date, and to any person or
entity who shall acquire all or substantially all of the assets of Buyer or of
such corporation, partnership or limited liabilities company controlled by
Buyer; provided said assignment shall be in writing and the assignee shall
assume all obligations of Buyer hereunder, whereupon the assignee shall be
substituted in lieu of Buyer named herein for all purposes, provided, however,
that Buyer originally named herein shall continue to be liable with respect to
its obligations hereunder. Buyer may assign this Agreement, without the consent
of the other parties hereto, as collateral security, and the other parties
hereto agree to execute and deliver any acknowledgment of such assignment by
Buyer as may be required by any lender to Buyer.
11.2 The interpretation and construction of this Agreement, and all
matters relating hereto, shall be governed by the laws of the State of South
Carolina.
11.3 All accounting matters required or contemplated by this Agreement
shall be in accordance with generally accepted accounting principles.
11.4 Except as otherwise specifically provided in this Agreement, each
of the parties hereto shall be responsible for the payment of such party's fees,
costs and expenses incurred in connection with the negotiation and consummation
of the transactions contemplated hereby.
11.5 This Agreement, including the schedules and other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement may not be amended except by a writing executed by all
of the parties hereto. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.6 Any party to this Agreement may, by written notice to the other
parties hereto, waive any provision of this Agreement from which such party is
entitled to receive a benefit. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision of this Agreement.
11.7 All notices, claims, certificates, requests, demands and other
communications hereunder shall be given in writing and shall be delivered
personally or sent by facsimile or by a nationally recognized overnight courier,
postage prepaid, and shall be deemed to have been duly given when so delivered
personally or by confirmed facsimile or one (1) business day after the date
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of deposit with such nationally recognized overnight courier. All such notices,
claims, certificates, requests, demands and other communications shall be
addressed to the respective parties at the addresses set forth below or to such
other address as the person to whom notice is to be given may have furnished to
the others in writing in accordance herewith.
If to Buyer, to:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Telecopy No.: (704) 563-5116
Attention: Chief Financial Officer
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Telecopy No.: (704) 334-4706
Attention: Edward W. Wellman, Jr.
If to Seller or the Stockholders, to:
Fairway Investments, L.L.C.
2323 Laurens Road
Greenville, South Carolina 29607
Attention: A. Foster McKissick, III
Telecopy No.: (864) 242-3222
With a copies to:
A. Foster McKissick, III and
Murray P. McKissick
245 McDaniel Avenue
Greenville, South Carolina 29601
Leatherwood Walker Todd & Mann, P.C.
100 East Coffee Street
Greenville, South Carolina 29602-0087
Telecopy No.: (864) 240-2478
Attention: Harvey G. Sanders, Jr.
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11.8 This Agreement may be executed in any number of counterparts. Each
such counterpart hereof shall be deemed to be an original instrument, and all
such counterparts together shall constitute but one agreement.
11.9 Whenever any representation or warranty of Seller or the
Stockholders contained herein or in any other document executed and delivered in
connection herewith is based upon the knowledge of Seller or the Stockholders,
(i) such knowledge shall be deemed to include (A) the best actual knowledge,
information and belief of Seller and the Stockholders and (B) any information
which any Stockholder would reasonably be expected to be aware of in the prudent
discharge of his duties in the ordinary course of business (including
consultation with legal counsel) on behalf of Seller, and (ii) the knowledge of
any Stockholder shall be deemed to be the knowledge of Seller and all the
Stockholders.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
CENTURY AUTO SALES, INC.
By: /s/ A. Foster McKissick, III
-------------------------------------
Its: Chairman
-------------------------------------
ATTEST:
/s/ Murray McKissick
- ---------------------------
Secretary
[CORPORATE SEAL]
/s/ A. Foster McKissick, III (SEAL)
-------------------------------
A. FOSTER MCKISSICK, III
/s/ Murray McKissick (SEAL)
-------------------------------
MURRAY P. MCKISSICK
SONIC AUTOMOTIVE, INC.
By: /s/ O. Bruton Smith
-------------------------------------
Its: Chief Executive Officer
-------------------------------------
ATTEST:
/s/ Theodore M. Wright
- ---------------------------
Secretary
[CORPORATE SEAL]
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INDEX OF SCHEDULES AND EXHIBITS
TO
ASSET PURCHASE AGREEMENT
Schedules
---------
Schedule 1.5 Contracts and Leases
Schedule 2.4 Retained Liabilities
Schedule 3.1 New Vehicles
Schedule 3.2 Demonstrators
Schedule 5.4 Fixtures and Equipment
Schedule 6.2 Compliance re: Buyer
Schedule 7.1 Shareholders
Schedule 7.2 Compliance re: Seller and Stockholders
Schedule 7.3 Pending or Threatened Actions, Suits or Proceedings
Schedule 7.4 Encumbrances on the Assets
Schedule 7.5 Permits and Approvals
Schedule 7.8 Financial Statements
Schedule 7.10 Compliance with Laws
Exhibits
--------
A Warrant Certificate
B Statement of Rights and Preferences
24
Exhibit 99.10
CONTRACT TO PURCHASE AND SELL REAL PROPERTY
(CENTURY BMW)
THIS CONTRACT TO PURCHASE AND SELL REAL PROPERTY (the "Purchase
Contract") is made and entered into as of the 10th day of April, 1998, by and
between CENTURY AUTO SALES, INC., a South Carolina corporation ("Century") and
FAIRWAY INVESTMENTS, LLC, a South Carolina limited liability company ("Fairway")
(Century and Fairway are collectively called "Sellers") and SONIC AUTOMOTIVE,
INC., a Delaware ("Buyer").
W I T N E S S E T H:
WHEREAS, Century is the owner of certain real estate located at 2752
Laurens Road, in the City of Greenville, Greenville County, South Carolina, more
particularly described and/or shown on EXHIBIT A attached (the "Century
Property").
WHEREAS, Fairway is the owner of certain real estate located at 2550
Reidville Road, in the City of Spartanburg, Spartanburg County, South Carolina,
more particularly described and/or shown as Tract 2 on EXHIBIT A attached (the
"Fairway Property").
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to acquire
from Sellers the Real Property (defined below) together with the buildings and
improvements (collectively, the "Improvements") thereon and which are presently
utilized in the automobile dealership operations of Century, d/b/a Century BMW
in accordance with the terms and conditions hereinafter set forth in this
Purchase Contract.
NOW, THEREFORE, in consideration of the agreements and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Sellers do hereby
covenant and agree as follows:
1. DEFINITIONS. In addition to the terms defined above, each of the
following terms, when used herein with an initial capital letter, shall
have the meaning ascribed to it as follows, unless such meanings are
expressly modified, limited or expanded elsewhere in this Purchase
Contract.
a. "APPRAISED VALUE" shall, subject to the limitations set forth
as to the Purchase Price below, mean the value obtained by
agreement of two (2) appraisers, one appointed jointly by
Century and Fairway, and one appointed by the Buyer. Both
appraisers shall have at least five (5) years experience
valuing commercial real estate situate in Greenville and
Spartanburg counties of South Carolina. If the two (2)
appraisers cannot agree on an Appraised Value within thirty
(30) days after they have both been selected, the average of
the two appraisals shall be the Appraised Value if the value
established by the respective appraisals do not vary by more
than ten percent (10%). If the value differs by more than ten
percent (10%), the two appraisers shall appoint
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a third appraiser. The third appraiser shall determine the
value of the Real Property within fifteen (15) days of his
appointment. The Appraised Value for purposes of this
Purchase Contract shall be the value as finally agreed upon by
any two of the three appraisers. If two of the three
appraisers do not agree within fifteen (15) days, the
appraisers shall be dismissed and the appraisal process
repeated. Century and Fairway and Buyer shall each pay the
costs of the appraiser appointed by them, and one-half (1/2)
of the cost of the third appraiser. If any party fails to
appoint an appraiser within the time required herein, the
Purchase Price determined by the appraiser appointed by the
other party shall be conclusive and binding upon the parties,
subject to the limitations set forth as to the amount of the
Purchase Price.
b. "ASSET PURCHASE CONTRACT" shall mean that certain Asset
Purchase Agreement dated the date hereof by and among Century,
the stockholders of Century and Buyer.
c. "CLOSING" shall mean the closing and consummation of the
purchase and sale of the Real Property pursuant to this
Purchase Contract.
d. "CLOSING DATE" shall mean the date of the Closing to be held
on (i) the date of the closing under the Asset Purchase
Contract; or (ii) such other date as mutually agreed upon by
the parties hereto.
e. "DEED" shall mean the duly executed and acknowledged general
warranty deed conveying title to the Real Property from
Sellers to Buyer, the form of which is attached hereto as
EXHIBIT C an original of which conveys the Century Property to
be recorded in Greenville County, South Carolina, and an
original of which conveys the Fairway Property to be recorded
in Spartanburg County, South Carolina.
f. "DEFECT" OR "DEFECTS" shall mean a lien, claim, charge,
security interest, encumbrance, easement, restriction or other
such matter affecting title to the Real Property other than
the Permitted Exceptions.
g. "EFFECTIVE DATE" shall mean the later of: (i) the date in the
heading of this Purchase Contract; and (ii) the date which the
last of the parties to this Purchase Contract executes and
delivers this Purchase Contract to the other party.
h. "ENVIRONMENTAL REVIEW PERIOD" shall mean a period of fifteen
(15) business days after receipt of both a Phase I
Environmental Evaluation and/or a Phase II Environmental
Evaluation, as applicable.
i. "ENVIRONMENTAL LAWS" shall mean any applicable current or
future federal, state or local governmental law, regulation or
ruling applicable to environmental conditions on, under or
about the Real Property, including, without limitation,
federal, state or local solid waste disposal rules, the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, The Hazardous Materials
Transportation Act, the Resource Conservation and Recovery
Act, as amended, the Toxic Substances Act, as amended, the
Water Pollution Control Act,
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as amended, or any other applicable federal, state or local
laws, regulations or ordinances.
j. "EVALUATIONS" shall mean a Phase I Environmental Evaluation
and a Phase II Environmental Evaluation of the Real Property
prepared at Buyer's expense by environmental consultant(s)
selected by Buyer.
k. "HAZARDOUS MATERIALS" means any waste, pollutant, chemical,
hazardous substance, toxic substance, hazardous waste, solid
waste, petroleum or petroleum-derived substance or waste, or
any constituent or decomposition product of any such
pollutant, material, substance or waste, regulated under or as
defined by any Environmental Law(s).
l. "IMPROVEMENTS" shall mean all buildings and improvements
constructed upon the Land together with any fixtures or
improvements related thereto.
m. "INSPECTION PERIOD" shall mean and refer to the period
commencing on later of (i) the day following the Effective
Date or (ii) the day following delivery of the materials
referred to in Section 7.a. below, and continuing for fifteen
(15) days thereafter.
n. "LAND" shall mean those certain parcels or tracts of land
owned by Sellers located in or near the City of Greenville and
the City of Spartanburg, South Carolina, as more particularly
described on EXHIBIT A attached hereto and incorporated herein
by reference, together with all and singular the rights and
appurtenances pertaining thereto, including any right, title
and interest of Sellers in and to adjacent streets, easements
or rights-of-way.
o. "OWNER'S TITLE POLICY" shall mean a standard ALTA form owner's
policy of title insurance for the Real Property issued at
standard rates as compared to comparable Real Property in
Greenville and Spartanburg County, South Carolina.
p. "PERMITTED EXCEPTIONS" shall mean all matters described on
EXHIBIT B attached hereto and incorporated herein by
reference.
q. "PURCHASE PRICE" shall mean the Appraised Value of the Real
Property (however, in no event shall the total Purchase Price
exceed Five Million Two Hundred Thousand Dollars
($5,200,000.00) or be less than Four Million Four Hundred
Thousand Dollars ($4,400,000.00) to be paid by Buyer to
Sellers for the Real Property as provided in Paragraph 2
hereof).
r. "REAL PROPERTY" shall mean the Land (including the Century
Property and the Fairway Property) and the Improvements
thereon.
s. "SURVEY" shall mean a current boundary, topographical and/or
physical survey of the Real Property prepared by a South
Carolina Registered Land Surveyor.
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t. "TITLE COMMITMENT" shall mean a current title binder or
commitment issued by the Title Company for an owner.
u. "TITLE COMPANY" shall mean the title insurer of Buyer's
choice.
2. AGREEMENT TO SELL AND PURCHASE. Sellers hereby agree to sell and convey
to Buyer, and Buyer hereby agrees to purchase from Sellers, the Real
Property pursuant to the terms and conditions of this Purchase
Contract.
3. PURCHASE PRICE; DELIVERY OF POSSESSION.
a. The Purchase Price shall be paid to Sellers in immediately
available funds at Closing, subject to the terms and
conditions of this Purchase Contract.
b. Sellers shall deliver sole possession of the Real Property to
Buyer at Closing.
4. CONVEYANCE OF TITLE. At Closing, Sellers shall by the Deed convey to
Buyer marketable fee simple title to all of the Real Property, free and
clear of any and all liens, encumbrances, easements, assessments,
restrictions, taxes and other conditions except for the Permitted
Exceptions.
5. SURVEY. Buyer, at Buyer's sole cost and expense, prior to Closing may,
at its election, obtain the Survey from which a legal description of
the Real Property will be prepared and inserted in the Deed. Buyer, its
employees and agents may, at any reasonable time prior to Closing,
enter upon the Real Property for the purpose of obtaining the Survey.
6. TITLE AND TITLE INSURANCE FOR THE REAL PROPERTY.
a. Prior to the Closing Date, Buyer shall, at its sole cost and
expense, obtain an owner's Title Commitment issued by the
Title Company providing for the issuance at Closing to Buyer
of an Owner's Title Policy for the Real Property. The Title
Commitment shall set forth the state of title of the Real
Property and all exceptions, including but not limited to,
easements, restrictions, road rights-of-way, floodways,
covenants, reservations and other conditions, if any,
affecting the Real Property which would appear in an Owner's
Title Policy if issued.
b. At Closing, the Real Property shall be conveyed to Buyer by
the Deed free and clear of all Defects and subject only to the
Permitted Exceptions.
7. INSPECTIONS.
a. On or prior to the Effective Date or within three (3) days
thereafter, Sellers shall provide to Buyer true, correct and
complete copies of the following items:
i. Sellers' existing owner's and lender's title insurance
policies for the Real Property (if any) together with
legible copies of any exceptions set forth therein.
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ii. The most recently dated existing surveys of the Real
Property.
iii. Any and all engineering reports, soil reports and
environmental reports prepared by or for Sellers with
respect to the Real Property, if any.
iv. All warranties, if any, related to the Improvements.
v. Attorneys' opinions, if any, on title to the Real
Property and legible copies of deeds, mortgages,
easements or restrictions, if any, affecting Property
which Sellers may possess.
b. Buyer, its agents and contractors shall be entitled to go upon
the Real Property during the Inspection Period to obtain
financing, to inspect the Real Property to perform
investigations, to determine the status of utilities thereon,
to conduct title examinations, zoning investigations,
feasibility studies and other studies or tests necessary to
determine whether the Real Property is suitable for Buyer's
intended use of the Real Property. If Buyer determines, in
Buyer's reasonable discretion, that the Real Property is not
suitable for Buyer's intended use, Buyer may terminate this
Contract and shall be relieved of all obligations hereunder by
giving written notice to Sellers prior to the end of the
Inspection Period. However, Buyer does not waive its right to
terminate this Contract, as set forth above, based on any
restriction which may adversely affect the Real Property that
has been revealed through documentation and/or other due
diligence material in Buyer's possession prior to the
execution of this Contract.
c. Buyer may, at its sole expense, commission the Evaluations.
The Evaluations shall be conducted in accordance with such
standards and procedures as selected by Buyer and Buyer's
consultant, and may include, without limitation, drilling and
installation of ground water testing wells at locations
specified by Buyer's consultant, soil samples at locations
designated to detect environmental conditions and/or impacts
from current or past operations, both ground water and soil
analysis and investigation as to the presence of any asbestos
materials on the Real Property. If, based upon the
Evaluations, Buyer determines, in Buyer's reasonable
discretion, that the Real Property is not free of Hazardous
Materials, and that such Hazardous Materials materially
adversely affect Buyer's intended use of the Real Property for
the operation of an automobile dealership, or the value of the
Real Property, then Buyer may terminate this Purchase Contract
by notice in writing given to Sellers prior to the expiration
of the Environmental Review Period and the parties shall have
no further rights or obligations under this Purchase Contract.
If the Buyer chooses to terminate this Purchase Contract as a
result of its review of the Evaluations, Buyer shall provide
to Sellers copies of all environmental reports relating to the
Real Property which may be obtained by Buyer, and shall repair
any damage to the Real Property resulting from the
Evaluations.
d. In addition to Buyer's rights set forth in PARAGRAPH 7(C)
above, in the event that any underground storage tanks or any
other storage tanks are or have been located upon any portion
of the Real Property, Sellers, at their sole expense, shall:
i. Remove any such tanks which remain on the Real Property;
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ii. Remediate any current or former tank sites and any
surrounding portion of the Real Property and any
adjacent property to the reasonable satisfaction of
Buyer and Buyer's consultant.
Notwithstanding the termination of the Inspection Period or
the Environmental Review Period, if Buyer reasonably
determines that Sellers have failed to meet its obligations
described in this PARAGRAPH 7(D), then Buyer may either:
iii. Terminate this Purchase Contract; or
iv. Remediate any such tank site(s) to the reasonable
satisfaction of Buyer and Buyer's consultant and deduct
the cost of any such remediation from the Purchase
Price. In the event such remediation shall extend beyond
the Closing Date set forth herein, Buyer shall have the
option of extending the Closing Date to such time as may
be necessary to complete any such remediation.
8. COSTS AND PRORATIONS. Sellers shall pay the cost to cancel any mortgage
or other lien of record. Buyer shall pay any and all documentary stamp
taxes, deed taxes or transfer taxes applicable to this transaction and
any and all costs of the Survey, the title examination, the title
insurance premiums, testing or inspections of the Real Property and
recording costs for the Deed or any other documents to be recorded
relating to the transfer of the Real Property. Each party shall pay its
own attorney's fees. Sellers shall pay any "roll-back" taxes or similar
taxes based upon any change in use of the Real Property, whether such
taxes are assessed before or after Closing. Sellers' obligation to pay
such taxes, if any, shall survive Closing. All prorations for real
estate taxes, utilities and other such costs shall be prorated between
Buyer and Sellers as of the Closing Date on the basis of a 365-day
year. Buyer and Sellers hereby agree that if any of the aforesaid
prorations cannot be calculated accurately on the proration date (or as
soon as information sufficient to complete such prorations is
available), then the same shall be calculated within thirty (30) days
after the information necessary to make such prorations becomes
available and either party owing the other party a sum of money based
on such subsequent proration(s) shall promptly pay said sum to the
other party.
9. RISK OF LOSS; EMINENT DOMAIN.
a. If, after the Effective Date and prior to the Closing Date,
the Real Property or any portion thereof is damaged or
destroyed, Sellers shall immediately notify Buyer in writing
and Buyer shall elect, within ten (10) days from and after
such notice, by written notice to Sellers, either:
i. to not close the transaction contemplated hereby, in
which event the Purchase Contract shall be void and of
no further force and effect; provided, however, Buyer
shall not be entitled to elect under this item i. unless
Buyer determines, in its reasonable judgment, that such
damage or destruction cannot be restored within ninety
(90) days; or
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ii. to close the transaction contemplated hereby in
accordance with the terms and conditions contained
herein, in which event the Purchase Price shall remain
the same and Sellers shall transfer and assign to Buyer
at Closing all rights, title and interest to any
insurance proceeds payable in connection with such
damage or destruction. If Buyer elects to purchase the
Real Property after receipt of such notice from Sellers,
all actions taken by Sellers with regard to the repair
or replacement of any such damaged or destroyed portion
of the Real Property, including but not limited to,
negotiations, litigation, settlement, appraisals and
appeals, shall be subject to the approval of Buyer,
which approval shall not be unreasonably withheld. In no
event shall Buyer have any responsibility to repair or
rebuild the Improvements.
b. If, after the Effective Date and prior to the Closing Date,
Sellers shall receive notice of the commencement or threatened
commencement of eminent domain or other like proceedings
against the Real Property or any portion thereof, Sellers
shall immediately notify Buyer in writing, and Buyer shall
elect, within ten (10) days from and after such notice of such
threatened or pending proceedings, by written notice to
Sellers, either:
i. to not close the transaction contemplated hereby, in
which event this Purchase Contract shall be void and of
no further force and effect; provided, however, Buyer
shall not be entitled to elect under this item i. unless
more than 5% of the Real Property is taken and such
taking materially interferes with the operation of an
automobile dealership business substantially as operated
before such taking; or
ii. to close the transaction contemplated hereby in
accordance with the terms and conditions contained
herein, but subject to such proceedings, in which event
the Purchase Price shall remain the same and Sellers
shall transfer and assign to Buyer at Closing all
rights, title and interests to the proceeds of such
eminent domain proceedings. If Buyer elects to purchase
the Real Property after receipt of such notice, all
actions taken by Sellers with regard to such eminent
domain or like proceedings, including but not limited
to, negotiations, litigation, settlement, appraisals and
appeals, shall be subject to the approval of Buyer,
which approval shall not be unreasonably withheld. In no
event shall Buyer have any responsibility to repair or
rebuild the Improvements.
10. NOTICE. Each notice required or permitted to be given hereunder shall
be in writing and shall comply with the requirements of this paragraph.
Any notice by Buyer to Sellers shall be deemed to be duly given if: (a)
either (i) hand delivered to the person(s) listed below for Sellers, or
(ii) delivered or sent by telephone facsimile transmittal to the
facsimile telephone numbers of Sellers listed below, in which event
proof of delivery shall be by telephone records, and (b) a duplicate of
such notice shall be sent by registered or certified mail to Sellers at
the addresses set forth below (or at such other address as may
hereafter be designated by Sellers). Any notice by Sellers to Buyer
shall be deemed to be duly given if:
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(a) either (i) hand delivered to the person(s) listed below for Buyer,
or (ii) delivered or sent by telephone facsimile transmittal to the
facsimile telephone number of Buyer listed below, in which event proof
of delivery shall be by telephone records, and (b) a duplicate of such
notice shall be sent by registered or certified mail to Buyer at the
address set forth below (or at such other address as may hereafter be
designated by Buyer). Notice shall be deemed effective at the time of
hand delivery or transmission of the telephone facsimile and upon
deposit of the notice in the United States Mail for registered or
certified delivery. The parties hereto reserve the right to change the
addresses or telephone numbers to which notices are to be sent by
giving notice to the other as herein provided.
The addresses and facsimile telephone numbers of the parties to which
notices are to be sent shall be those set forth below:
As to Buyer:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Attention: Chief Financial Officer
Telecopy No.: (704) 536-5116
With a Copy to:
Edward W. Wellman, Esq.
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Telecopy No.: (704) 334-4706
As to Sellers:
Fairway Investments, L.L.C.
2323 Laurens Road
Greenville, SC 29607
Attention: A. Foster McKissick, III
Telecopy No.: (864) 242-3222
With a Copy to:
Harvey G. Sanders, Jr., Esq.
Leatherwood Walker Todd & Mann, P.C.
100 East Coffee Street
Greenville, SC 29602-0087
Telecopy No.: 864-240-2478
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Any party shall have the right from time to time to change the
address to which notices to it shall be sent by giving to the other party or
parties at least five (5) days prior notice of the changed address.
11. CLOSING. Unless Buyer or Sellers have otherwise elected hereunder to
terminate this Purchase Contract, and subject to the satisfaction or
written waiver of each of the conditions precedent to Closing set forth
in PARAGRAPH 12 hereof, the Closing of the sale and purchase of the
Real Property shall be held at a mutually agreeable time on the Closing
Date, at the offices of Leatherwood Walker Todd & Mann, P.C. at 9:00
a.m.
12. CONDITIONS PRECEDENT TO CLOSING.
a. Buyer's Conditions. Buyer's obligation to close the purchase
of the Real Property is subject to the satisfactory
performance, occurrence or written waiver by Buyer, in Buyer's
sole discretion, of each of the following conditions:
i. Sellers shall have delivered to Buyer all of the
documents, properly executed, as required by PARAGRAPH
13(A) hereof;
ii. No adverse change in the status of the title to the Real
Property as set forth in the Title Commitment shall have
occurred prior to the Closing Date;
iii. No default by Sellers shall exist under this Purchase
Contract, this Purchase Contract shall not have
terminated and Sellers shall be ready, willing and able
to close under the terms hereof;
iv. The representations of Sellers contained in this
Purchase Contract shall be true, complete and correct in
all material respects as of the Closing Date, without
the necessity of any material amendment or modification,
with the same force and effect as if made as of the
Closing Date;
v. The Inspection Period and Evaluation Review Period shall
have expired;
vi. Sellers' obligations pursuant to PARAGRAPH 7(D) shall
have been met;
vii. Buyer's confirmation, by a Phase I environmental
inspection performed at Buyer's expense, and by a Phase
II inspection if Buyer deems such inspection necessary,
that the properties are free of environmentally
hazardous or toxic substances that would materially
adversely affect Buyer's use and possession of the
respective properties for the operation of an automobile
dealership, or the value of the Real Property;
viii. Buyer's confirmation that as of the Closing Date there
will be no contracts, leases or liabilities which will
affect Buyer's ownership of the Real Property or right
to use and possession thereof;
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ix. Buyer's confirmation that both the Century Property and
the Fairway Property are properly zoned for use as an
automobile dealership;
x. Buyer's confirmation that both the Century Property and
the Fairway Property are free and clear of mortgages,
security agreements or other encumbrances; other than
any Permitted Exception shown on Exhibit B;
xi. Receipt by Buyer of all required waivers or approvals to
Buyer's acquisition of the Real Property and approval by
BMW of North America for Buyer's operation of a
franchised BMW dealership on each of the Century
Property and the Fairway Property;
xii. All required consents and approvals of the shareholders
and directors of Century and all required consents and
approvals of the members of Fairway shall have been
obtained and provided to Buyer;
xiii. All conditions to Buyer's obligations at closing under
the Asset Purchase Contract shall have been fully
satisfied, unless waived in writing by Buyer; and
xiv. The closing of the Century Property by Buyer and the
closing of the Fairway Property by Buyer are each a
condition to the other closing.
If any of the foregoing conditions have not been satisfied or
waived within the times and in the manner required by this
Purchase Contract, Buyer may terminate this Purchase Contract
and seek any remedies available at law or equity, including
without limitation, specific performance.
b. Sellers' Conditions. Sellers' obligation to close the sale of
the Real Property is subject to the satisfactory performance,
occurrence or written waiver by Sellers, in Sellers' sole
discretion, of each of the following conditions:
i. Buyer shall pay the Purchase Price to Sellers and shall
have delivered to Sellers all of the documents, properly
executed, as required by PARAGRAPH 13(B) hereof;
ii. No default by Buyer shall exist under this Purchase
Contract, this Purchase Contract shall not have been
terminated, and Buyer shall be ready, willing and able
to close under the terms hereof;
iii. The representations of Buyer contained in this Purchase
Contract shall be true, complete and correct in all
material respects as of the Closing Date, without the
necessity of any material amendment or modification,
with the same force and effect as if made as of the
Closing Date;
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iv. All conditions to Century's obligations at closing under
the Asset Purchase Contract shall have been fully
satisfied unless waived in writing by Century;
v. The closing of the Century Property by Century and the
closing of the Fairway Property by Fairway are each a
condition to the other closing.
If any of the foregoing conditions have not been satisfied or
waived within the times and in the manner required by this
Purchase Contract, Sellers may terminate this Purchase
Contract and seek any remedies which are available at law or
equity, including, without limitation, specific performance;
provided, however, in the event of payment by Buyer of the
"Buyer's Termination Fee" under the Asset Purchase Contract,
neither of the Sellers shall have any right to any other
damages or relief of any kind or nature, whether at law or in
equity (including, without limitation, specific performance).
13. DOCUMENTS AT CLOSING.
a. Sellers' Documents. Sellers shall execute and/or deliver the
following to Buyer at Closing:
i. The Deed, duly executed by Sellers and acknowledged.
ii. A lien affidavit, duly executed by Sellers, acceptable
to the Title Company.
iii. Affidavits and other documents, duly executed by
Sellers, to satisfy federal, state and local tax
reporting and withholding requirements.
iv. An affidavit, duly executed by Sellers that Sellers are
not a "foreign person" within the meaning of Section
1445 of the Internal Revenue Code.
v. A certificate, duly executed by Sellers and notarized,
that the representations of Sellers contained in this
Purchase Contract remain true, complete and correct in
all material respects as of the Closing Date.
vi. A settlement statement setting forth the amounts paid by
or on behalf of and/or credited to each of Buyer and
Sellers pursuant to this Purchase Contract.
vii. Such other customary documents and assurances as shall
be reasonably required by Buyer's counsel.
b. Buyer's Documents. Buyer shall pay the Purchase Price to
Sellers at Closing and the Buyer shall execute and/or deliver
the following to Sellers at Closing:
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i. A certificate, duly executed by Buyer and notarized,
that the representations of Buyer contained in this
Purchase Contract remain true, complete and correct in
all material respects as of the Closing Date.
ii. A settlement statement setting forth the amounts paid by
or on behalf of and/or credited to each of Buyer and
Sellers pursuant to this Purchase Contract.
iii. Such other customary documents and assurances as shall
be reasonably required by Sellers' counsel.
14. REPRESENTATIONS AND WARRANTIES.
a. Representations and Warranties by Sellers. Sellers hereby
represent and warrant to Buyer that as of the Effective Date:
i. Sellers have no notice of any pending or threatened
condemnation or similar proceeding or assessment
affecting the Real Property, or any part thereof, nor to
the best of its knowledge, is any such proceeding or
assessment contemplated by any governmental authority,
nor to the best of its knowledge, is there any
litigation pending or threatened which affects or could
affect the Real Property.
ii. Except as set forth on Schedule 14(a)(ii) attached
hereto, (a) except in the ordinary course of business
and in compliance with applicable law, Sellers have not
at any time generated, used, treated or stored Hazardous
Materials on, or transported Hazardous Material to or
from the Real Property or any property adjoining or
adjacent to the Real Property and, to the knowledge of
Sellers, no party other than Sellers have taken such
actions on the Real Property, (b) Sellers have not at
any time released or disposed of Hazardous Materials on
the Real Property or any property adjoining or adjacent
to the Real Property, and to the knowledge of the
Sellers, no party other than Sellers have taken any such
actions on the Real Property, (c) Sellers have not
transported or arranged for the transportation of any
Hazardous Materials to any site other than the Real
Property, (d) Sellers are in compliance with all
Environmental Laws and the requirements of any permits
issued under such Environmental Laws with respect to the
Real Property, except where failure to comply would not
have a material adverse effect on Sellers Real Property,
(e) there are no past, pending or, to the knowledge of
Sellers, threatened environmental claims against Sellers
or the Real Property, (f) to the knowledge of Sellers,
there are no facts or circumstances, conditions or
occurrences regarding the Real Property that could
reasonably be anticipated (A) to form the basis of an
environmental claim against Sellers or (B) to cause the
Real Property to be subject to any restrictions on its
ownership, occupancy, use or transferability under any
Environmental Law, and (g) there
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are not now, and to the knowledge of Sellers, never have
been any underground storage tanks located on the Real
Property.
iii. To the best of Sellers' knowledge, Sellers have complied
in all material respects with all applicable laws,
ordinances, regulations and statutes relating to the
Real Property or any part thereof and is not in
violation of any such laws as they relate to the Real
Property.
iv. This Purchase Contract and all documents executed by
Sellers which are to be delivered to Buyer at Closing
are or at the time of delivery will be duly executed and
delivered by Sellers, and are or at the time of Closing,
will be legal, valid, binding obligations of Sellers,
and do not and at Closing will not violate any
provisions of any agreement or any applicable
governmental law or regulation to which either of the
Sellers are a party or to which Sellers are subject.
v. There are no restrictions or applicable regulations
which prevent the use of the Real Property for
automobile dealership and servicing purposes.
vi. The restrictive covenants encumbering the Real Property
(if any) have not been violated and there are no
assessments owed pursuant to such restrictions.
vii. Other than ad valorem real property taxes, there are no
other taxes or assessments pending or periodically
charged to Sellers with respect to the Real Property.
b. Representations and Warranties by Buyer. Buyer hereby
represents and warrants to Sellers that as of the Effective
Date:
i. Buyer is a duly organized and validly existing
corporation under the laws of the State of Delaware and
is authorized to acquire property in the State of South
Carolina, and Buyer has the power and authority to enter
into this Purchase Contract.
ii. This Purchase Contract and all documents executed by
Buyer which are to be delivered to Sellers at Closing
are or at the time of delivery will be duly authorized,
executed and delivered by Buyer, and are or at the time
of Closing, will be legal, valid, binding obligations of
Buyer, and do not and at Closing will not violate any
provisions of any agreement or any applicable
governmental law or regulation to which Buyer is a party
or to which it is subject.
c. INDEMNITIES.
i. Buyer and Sellers hereby agree that they have relied
upon the representations and warranties given by the
respective parties in PARAGRAPH 14(A) and 14(B)
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of this Purchase Agreement. Buyer hereby agrees to
indemnify and hold Sellers harmless from and against any
and all liabilities, losses, costs, damages, expenses,
including reasonable attorneys' fees and costs of
litigation, arising or resulting from the untruth of any
of Buyer's representations and warranties set forth in
PARAGRAPH 14(B). Sellers, jointly and severally, hereby
indemnify and hold Buyer harmless from and against any
and all liabilities, losses, costs, damages and
expenses, including reasonable attorneys' fees and costs
of litigation, arising or resulting from the untruth of
any of Sellers' representations and warranties set forth
in PARAGRAPH 14(A).
ii. To the extent caused by or resulting from the acts of
Sellers, its agents, servants, employees or contractors,
Sellers agree to immediately clean up any Hazardous
Materials found on or within any portion of the Real
Property and to remediate the Real Property, to comply
with any and all Environmental Laws, and to pay for all
clean up and remediation costs at no cost to Buyer. To
the extent caused by or resulting from the acts of
Buyer, its agents, servants, employees, or contractors,
Buyer agrees to immediately clean up any Hazardous
Materials found on or within any portion of the Real
Property and, with respect to such matters as described
herein for which Buyer is responsible, to remediate the
Real Property, to comply with any Environmental Laws,
and to pay for all clean-up and remediation costs at no
cost to Sellers. Each parties' respective clean-up
and/or remediation efforts as described herein shall
mean and refer to those actions which are necessary and
required under the Environmental Laws.
iii. To the extent that Sellers are responsible for the same
in accordance with Subparagraph (ii) above, Sellers
hereby agree to indemnify, release and hold Buyer, its
successors, assigns, tenants, subtenants, officers,
directors, shareholders and employees, harmless from and
against all Liabilities (defined below) incurred in
connection therewith, suffered by, incurred by or
assessed against such parties, their agents or other
representatives, whether incurred as a result of legal
action taken by any governmental entity or agency, taken
by any private claimant, or taken by Buyer, before or
after Closing as a result of the presence, disturbance,
discharge, release, removal or cleanup of any Hazardous
Materials upon or under, on or off site, associated with
or flowing or originating from the Real Property. To the
extent that Buyer is responsible for the same in
accordance with Subparagraph (ii) above, Buyer hereby
agrees to indemnify, release and hold Sellers, its
successors, assigns, officers, directors, shareholders
and employees, harmless from and against all
Liabilities, suffered by, incurred by or assessed
against such parties, their agents or other
representatives, whether incurred as a result of legal
action taken by any governmental entity or agency, taken
by any private claimant, or taken by Sellers, before or
after Closing as a result of the presence, disturbance,
discharge, release, removal or clean-up of any Hazardous
Materials upon or under, on or off site, associated with
or flowing or originating from the Real Property. The
term
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"Liabilities" as used in this paragraph is hereby
defined as any and all liabilities, expenses, demands,
damages, punitive or exemplary damages, consequential
damages, costs, cleanup costs, response costs, losses,
causes of action, claims for relief, attorneys and other
legal fees, other professional fees, penalties, fines,
assessments and charges.
iv. All representations, warranties, indemnities and
covenants of Sellers in this Purchase Contract are made
on a joint and several basis.
15. BROKER'S COMMISSION. Buyer and Sellers represent and warrant to the
other that neither of them have engaged or contracted with any person,
firm or entity to serve or act as a broker, agent or finder for the
purpose of the sale and purchase of the Real Property, and that no
broker's or real estate or other similar commissions or fees are or
shall be due in respect of the transaction contemplated by this
Purchase Contract. The Buyer and Sellers each agree to indemnify,
defend and save harmless the other from and against any cost and
expense, including reasonable attorney's fees, incurred by the other as
a result of the untruth of any of the foregoing representations made by
it.
16. ENTIRE AGREEMENT. This Purchase Contract constitutes the entire
agreement between Buyer and Sellers with respect to the Real Property
and may not be amended except by written instrument executed by Buyer
and Sellers. Any other agreements, written or oral, between Buyer and
Sellers with respect to the Real Property are hereby superseded in
their entirety by this Purchase Contract.
17. CAPTIONS. The paragraph captions are inserted for convenience only and
are in no way intended to describe, interpret, define or limit the
scope or content of this Purchase Contract or any provision hereof.
18. CONSTRUCTION. Words of any gender used in this Purchase Contract shall
be held and construed to include any other gender, and words in the
singular number shall be held to include the plural, and vice versa,
unless the context requires otherwise. Any disputes regarding the
interpretation of any portion of this Purchase Contract shall not be
presumptively construed against the drafting party.
19. REMEDIES CUMULATIVE. Except as specifically set forth above all rights,
powers and privileges conferred hereunder upon the parties hereto shall
be cumulative and in addition to those other rights, powers and
remedies hereunder and those available at law or in equity. All such
rights, powers and remedies may be exercised separately or at once, and
no exercise of any right, power or remedy shall be construed to be an
election of remedies or shall preclude the future exercise of any or
all other rights, powers and remedies granted hereunder or available at
law or in equity, except as expressly provided herein.
20. NO WAIVER. Neither the failure of either party to exercise any power
given such party hereunder nor to insist upon strict compliance with
its obligations hereunder, nor any custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of either
party's right to demand exact compliance with the terms hereof.
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21. APPLICABLE LAW. This Purchase Contract shall be construed and
interpreted in accordance with the laws of the State of South Carolina.
22. SUCCESSORS AND ASSIGNS. This Purchase Contract shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs, successors and assigns. Buyer shall have the right and privilege
to assign and transfer its interest hereunder to MAR MAR REALTY TRUST,
A TO-BE-FORMED MARYLAND REAL ESTATE INVESTMENT TRUST, OR MAR MAR REALTY
L.P., A TO-BE-FORMED MARYLAND LIMITED PARTNERSHIP (EACH TO BE FORMED BY
AFFILIATES OF BUYER) OR TO an existing corporation, partnership,
limited liability company or other business entity, or to a
corporation, partnership, limited liability company or business entity
formed for the purpose of consummating this transaction in which Buyer
has an ownership interest or is affiliated by common ownership.
23. COUNTERPARTS. This Purchase Contract may be executed in two (2) or more
counterparts.
24. SURVIVAL. Sellers' and Buyer's representations and warranties and
indemnities set forth in PARAGRAPHS 14 and 15 shall survive Closing.
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IN WITNESS WHEREOF, the parties have executed the Purchase Contract
pursuant to authority duly given the day and year first above written.
SONIC AUTOMOTIVE, INC.
By: /s/ O. Bruton Smith
-----------------------------------
Its: Chief Executive Officer
-----------------------------------
CENTURY AUTO SALES, INC.
By: /s/ A. Foster McKissick, III
-----------------------------------
Its: Chairman
-----------------------------------
FAIRWAY INVESTMENTS, LLC
By: /s/ A. Foster McKissick, III
-----------------------------------
Its: President
-----------------------------------
17
Exhibit 99.11
ASSET PURCHASE AGREEMENT
[HERITAGE]
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made this 10th day
of April, 1998 by and among FAIRWAY MANAGEMENT COMPANY, a South Carolina
corporation d/b/a Heritage Lincoln-Mercury-Jaguar ("SELLER"), FAIRWAY FORD,
INC., a South Carolina corporation (the "STOCKHOLDER"), and SONIC AUTOMOTIVE,
INC., a Delaware corporation ("BUYER").
WITNESSETH:
WHEREAS, Seller is the owner of certain assets used in connection with
Seller's Lincoln- Mercury-Jaguar automobile dealership business (the "BUSINESS")
operated at 2424 Laurens Road, Greenville, South Carolina;
WHEREAS, Seller desires to sell and Buyer desires to buy, or to cause a
subsidiary or affiliate of Buyer to buy, certain assets pertaining to the
Business, subject to the terms and conditions of this Agreement;
WHEREAS, contemporaneously with the execution of this Agreement, Buyer
has entered into a Contract to Purchase and Sell Real Property (the "REAL
PROPERTY PURCHASE AGREEMENT") with Fairway Ford, Inc., a South Carolina
corporation ("Fairway"), whereby Buyer has agreed to buy, and Fairway has agreed
to sell, the land, buildings and improvements located at the Real Property (as
defined in the Real Property Purchase Agreement); and
WHEREAS, the consummation of the transactions contemplated by each of
this Agreement and the Real Property Purchase Agreement is subject to the
consummation of the transactions contemplated by the other such Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 "ASSETS" shall mean: the New Vehicles (as defined in Section 3.1
hereof); the Demonstrators (as defined in Section 3.2 hereof); the Parts (as
defined in Section 4.4 hereof); the Miscellaneous Inventories (as defined in
Section 5.1 hereof); the Work in Progress (as defined in
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Section 5.3 hereof); the Fixtures and Equipment (as defined in Section 5.4
hereof); the Miscellaneous Assets (as defined in Section 5.5 hereof); any used
vehicles which Buyer agrees to buy at the Closing; and all of Seller's rights to
the name "Heritage Lincoln-Mercury-Jaguar", and all goodwill of the Business.
1.2 "CLOSING DATE" shall mean the date, not later than the Closing Date
Deadline (as hereinafter defined), of the closing of the purchase and sale of
the Assets (the "CLOSING") which shall be a date designated by Buyer not later
than fifteen (15) days after the approvals set forth in Section 8.13 hereof and
all other conditions precedent set forth in Articles VIII and IX have been
satisfied, or such other date as is mutually agreed upon by the parties hereto.
The Closing shall be held at the offices of Leatherwood Walker Todd & Mann,
P.C., 100 East Coffee Street, Greenville, South Carolina, 29602, at 9:00 a.m. on
the Closing Date.
1.3 "CLOSING DATE DEADLINE" shall mean May 15, 1998; provided, however,
if as of May 15, 1998, any of the approvals set forth in Section 8.13 hereof
shall not have been obtained and the obtaining of any such approvals is the sole
condition precedent to Buyer's obligations under Article VIII which remains
unsatisfied, Buyer may elect to extend the Closing Date Deadline for up to an
additional thirty (30) days.
1.4 "INVENTORY DATE" shall mean the close of business on March 28,
1998.
1.5 "LIABILITIES" shall mean all obligations of Seller, arising in the
ordinary course of business after the Inventory Date and not as a result of any
breach or default, under those contracts and leases of Seller set forth on
Schedule 1.5 attached hereto.
1.6 "MANAGEMENT AGREEMENT" shall mean that certain Management Agreement
dated the date hereof between Seller, as "Owner", and Buyer as "Manager."
1.7 "MANUFACTURERS" shall mean the Lincoln-Mercury division of the Ford
Motor Company and Jaguar Cars.
ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1 Upon the terms and subject to the conditions hereinafter set forth,
at the Closing, Seller will sell, transfer and convey the Assets to Buyer and
Buyer will purchase the Assets from Seller for the consideration set forth in
this Agreement. The sale, transfer and conveyance of the Assets will be made by
execution and delivery at the Closing of a bill of sale in a form reasonably
satisfactory to Buyer's counsel (the "BILL OF SALE") and such other instruments
of assignment, transfer and conveyance as Buyer shall reasonably request. Except
to the extent specifically included within the Assets, Seller will not sell, and
Buyer will not purchase, any other tangible or intangible assets of Seller.
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2.2 The aggregate purchase price (the "PURCHASE PRICE") to be paid for
the Assets shall consist of Six Hundred Thousand Dollars ($600,000), as the
purchase price for the Business and intangible Assets included in the Assets,
plus the sum of: (i) the New Vehicle Purchase Price (as defined in Section 3.1
hereof); (ii) the Demonstrator Purchase Price (as defined in Section 3.2
hereof); (iii) the Used Vehicle Purchase Price, if applicable (as defined in
Section 3.6 hereof); (iv) the Parts Purchase Price (as defined in Section 4.5
hereof); (v) the Miscellaneous Inventories Purchase Price (as defined in Section
5.1 hereof); (vi) the Work in Progress Purchase Price (as defined in Section 5.3
hereof); (vii) the F&E Purchase Price (as defined in Section 5.4 hereof); and
(viii) the amount of the Liabilities. Each party will use the Purchase Price
allocation described in this Section 2.2 in all reporting to, and tax returns
filed with, the Internal Revenue Service.
2.3 Upon the terms and subject to the conditions hereinafter set forth,
Buyer shall pay the Purchase Price as follows:
(a) At the Closing, Buyer shall deliver to Seller a certified
check, or a wire transfer to an account designated by Seller, in an amount equal
to the sum of (i) the New Vehicle Purchase Price; (ii) the Demonstrator Purchase
Price; (iii) the Parts Purchase Price; (iv) the Miscellaneous Inventories
Purchase Price; (v) the Work in Progress Purchase Price; and (vi) the F&E
Purchase Price; provided, however, to the extent that (A) Buyer shall have paid
or discharged, pursuant to the Management Agreement, any liability or obligation
of Seller accrued or outstanding as of the Inventory Date and not included in
the Liabilities or (B) Seller shall have collected and not paid over to Buyer
any accounts receivable from transactions after the Inventory Date, the amount
of such liability or obligation paid or discharged by Buyer, or accounts
receivable collected by Seller, shall be a credit towards the amount payable
under this Section 2.3(a);
(b) At the Closing, Buyer shall issue to Seller six hundred (600)
shares (the "PREFERRED SHARES") of Buyer's Convertible Preferred Stock, with
such rights and preferences as are set forth in the Statement of Rights and
Preferences of Preferred Stock attached hereto as Exhibit A (the "STATEMENT OF
RIGHTS AND PREFERENCES");
(c) At the Closing, Buyer shall assume the Liabilities in
accordance with Section 2.4 hereof;
(d) Buyer shall receive a credit against the Purchase Price with
respect to all amounts paid by Buyer to Seller (or on Seller's behalf) after the
Inventory Date and on or prior to the Closing Date under the Management
Agreement with respect to the Assets; and
(e) On the date hereof, Buyer shall deliver to Seller a certified
check, or a wire transfer to an account designated by Seller, in an amount equal
to the Used Vehicle Purchase Price, if applicable. Any such payment of the Used
Vehicle Purchase Price shall constitute earnest money, which shall be refunded
by Seller to Buyer in the event this Agreement is terminated and for which Buyer
shall receive a credit towards the Purchase Price. Seller shall not be required
to hold or maintain the earnest money in any separate account.
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2.4 At the Closing, Seller will assign to Buyer and Buyer will assume
and agree to perform and discharge the Liabilities pursuant to an assignment and
assumption agreement in a form reasonably satisfactory to Seller's counsel (the
"ASSUMPTION AGREEMENT"). Notwithstanding anything herein to the contrary, except
as expressly provided in this Section 2.4 and in the Assumption Agreement, Buyer
does not and will not assume or become liable for any obligations or liabilities
of Seller, of any kind whatsoever, fixed or contingent, known or unknown, as a
result of the transactions contemplated in this Agreement. Seller shall retain
and agrees to satisfy and discharge all of its obligations and liabilities,
including the obligations and liabilities set forth on Schedule 2.4.
2.5 (a) At the Closing, Seller and the Stockholder shall execute and
deliver to Buyer the certificate referred to in the Statement of Rights and
Preferences. At Seller's option, exercisable only by written notice to Buyer at
or prior to the Closing (the "REGISTRATION NOTICE"), Buyer shall be obligated to
use its reasonable best efforts to register under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), on or before December 31, 1998, the shares (the
"COMMON SHARES") of the Buyer's Class A Common Stock, $0.01 par value per above
(the "Common Stock"), which are issuable upon conversion of the Preferred
Shares.
(b) If requested by the managing or lead managing underwriter for
any such underwritten registered offering of the Common Shares, the Seller shall
execute and deliver such underwriting agreement with the managing or lead
managing underwriter in such form as is customarily used by such underwriter
with any modifications as the parties thereto shall agree. In connection with
any such registration, Seller and the Stockholder shall supply to Buyer such
information as may be reasonably requested by Buyer in connection with the
preparation and filing of a registration statement with the Securities and
Exchange Commission. Seller and the Stockholder shall not supply any information
to Buyer for inclusion in such registration statement that will, taken as a
whole, at the time the registration statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. Provided that Buyer shall have timely completed such
registration of the Common Shares, Seller shall promptly convert the Preferred
Shares into the Common Shares.
(c) In the event that Buyer fails to timely complete such
registration of the Common Shares, Seller may, at its option, exercisable by
notice to Buyer not later than January 31, 1999, require Buyer to purchase up to
all of the Preferred Shares at the price of $1,000 per share. Such notice to
Buyer shall specify the number of Preferred Shares required to be purchased and
a closing date for such purchase which shall be not sooner than fifteen (15)
days and not longer than thirty (30) days from the date of delivery of such
notice. At the closing of such purchase, Buyer shall deliver to Seller the
applicable purchase price in the same manner that the cash portion of the
Purchase Price paid at Closing was paid against delivery by Seller of (i) the
certificates for the Preferred Shares being purchased, duly endorsed for
transfer to Buyer, and (ii) a certificate signed
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by Seller and the Stockholder to the effect that such Preferred Shares are being
sold free and clear of all encumbrances and claims of third persons.
(d) In the event Seller does not timely deliver a Registration
Notice, Buyer shall have no obligation to register the Common Shares.
Thereafter, Buyer's sole obligation with respect to the Preferred Shares and the
Common Shares shall be to use its reasonable best efforts to make available
current public information with respect to Buyer within the meaning of
Subsection (c)(1) of Securities and Exchange Commission Rule 144 ("Rule 144") to
the extent necessary to facilitate public resales by Seller of the Common Share
pursuant to Rule 144.
ARTICLE III
-----------
NEW VEHICLES AND DEMONSTRATORS
------------------------------
3.1 At the Closing, Buyer shall purchase all of Seller's untitled new
1997 and 1998 model Lincoln, Mercury and Jaguar motor vehicles in Seller's stock
and unsold by Seller as of the Inventory Date and which are listed on Schedule
3.1, to be delivered to Buyer as promptly as possible after the date hereof (all
such vehicles are collectively referred to hereinafter as the "NEW VEHICLES").
The purchase price to be paid by Buyer for each New Vehicle shall be the price
at which the New Vehicle was invoiced to Seller by the applicable Manufacturer,
as adjusted pursuant to this Article III (the sum of all such amounts to be paid
for New Vehicles as determined by this Article III is herein referred to as the
"NEW VEHICLE PURCHASE PRICE"). Schedule 3.1 shall set forth each New Vehicle's
model, invoice cost, odometer reading and all other information necessary to
calculate the New Vehicle Purchase Price with respect to such New Vehicle. At
the Inventory Date, Seller shall assign to Buyer, without any additional
consideration therefor, by appropriate documents reasonably satisfactory to
Buyer, all unfilled retail orders and deposits made thereon.
3.2 At the Closing, Buyer shall purchase all of Seller's untitled 1997
and 1998 model Lincoln, Mercury and Jaguar motor vehicles in Seller's stock and
unsold by Seller as of the Inventory Date which are used in the ordinary course
of business for the purpose of demonstration, and which are listed on Schedule
3.2, to be delivered to Buyer as promptly as possible after the date hereof (all
such vehicles are collectively referred to herein as the "Demonstrators"). For
purposes of this Agreement, any motor vehicle with more than 9,000 miles shall
be deemed to be "used" rather than a "Demonstrator". The purchase price to be
paid by Buyer for each Demonstrator shall be the price at which the Demonstrator
was invoiced to Seller by the applicable Manufacturer, as adjusted pursuant to
this Article III and as reduced as follows: (a) if such Demonstrator's odometer
reflects total mileage of six thousand (6,000) miles or less, an amount equal to
ten cents ($.10) multiplied by the total mileage on such odometer; and (b) if
such Demonstrator's odometer reflects total mileage of more than six thousand
(6,000) miles but less than nine thousand (9,000) miles, an amount equal to
twenty cents ($.20) multiplied by the total mileage on such odometer (the sum of
all such amounts to be paid for Demonstrators hereunder is herein referred to as
the "Demonstrator Purchase Price"). Schedule 3.2 shall set forth each
Demonstrator's model, invoice cost, odometer reading and all other information
necessary to calculate the Demonstrator Purchase Price with respect to such
Demonstrator.
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3.3 The purchase price paid for each New Vehicle and each Demonstrator
purchased under this Article III shall be:
(a) increased by (i) sixty dollars ($60) if Seller has completed
new car delivery preparation on such Vehicle and (ii) out-of-pocket costs
incurred by Seller for dealer-installed equipment and accessories; and/or
(b) decreased by (i) the dealer cost of any equipment and
accessories which have been removed from such vehicles, (ii) all paid or unpaid
rebates, discounts, Holdback for Dealer Account and other factory incentives
(including without limitation rebates applied for and paid but unearned,
incentive monies claimed on pre-reported units and carryover allowances on 1997
models), (iii) any refundable advertising allowances, and (iv) sixty dollars
($60) if such vehicle has not been prepped.
3.4 In the event any New Vehicle or Demonstrator shall have been
damaged prior to the Inventory Date, or is otherwise in a condition such that it
cannot reasonably be presented as being in a first-class saleable condition,
Seller and Buyer will attempt to agree on the cost to cover such repairs or some
other equitable reduction in value to reflect such condition, which amount shall
be deducted from the price to be paid for such New Vehicle or Demonstrator. In
the event Buyer and Seller cannot agree on the cost of repairs or the amount of
reduction, Buyer shall have no obligation to purchase any such damaged New
Vehicle or Demonstrator. With respect to any New Vehicle or Demonstrator which
has been damaged and repaired prior to the Inventory Date, Seller and Buyer will
attempt to agree on an adjustment to the price to reflect any decrease in the
wholesale value of such New Vehicle or Demonstrator resulting from such damage
and repair. In the event Buyer and Seller cannot agree on such adjustment, Buyer
shall have no obligation to purchase such New Vehicle or Demonstrator.
3.5 [Intentionally Left Blank]
3.6 Buyer shall have no obligation to purchase any vehicle from Seller
other than its obligation hereunder to purchase the New Vehicles and the
Demonstrators. When Seller and Buyer perform the vehicle inventory, the parties
shall assign a price to each used vehicle owned by Seller at such time. At the
Inventory Date, Buyer, in its sole discretion, may elect to purchase, at the
Closing, any or all of Seller's used vehicles for the price assigned to each
such used vehicle. If Buyer elects to purchase any used vehicles, the sum of all
prices assigned to such used vehicles pursuant to the terms of this Section 3.6
shall be referred to herein as the "Used Vehicle Purchase Price".
ARTICLE IV
----------
PARTS/ACCESSORIES
-----------------
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4.1 Buyer and Seller shall engage a mutually acceptable third party
engaged in the business of appraising, valuing and preparing inventories for
automobile dealerships (hereinafter referred to as the "Inventory Service") to
prepare an inventory list (the "INVENTORY") of the parts and accessories, as
well as the Miscellaneous Inventory, used by Seller in the Business as a
Lincoln- Mercury-Jaguar dealer at the Real Property. The Inventory shall be
posted to the respective Manufacturer's approved system of inventory control.
The cost of the aforesaid physical inventory shall be shared equally by Buyer
and Seller. Buyer shall have the right to deduct Seller's portion of such
expense from the consideration to be paid to Seller under the terms of this
Agreement and to remit such sum directly to the Inventory Service. The Inventory
shall be completed by March 29, 1998, or such later date as is mutually
convenient and which is as close as possible to the Closing Date. The Inventory
shall identify each part and accessory and its purchase price.
4.2 The Inventory shall classify parts and accessories as "returnable"
or "nonreturnable". For purposes of this Agreement, the terms "returnable parts"
and "returnable accessories" shall describe and include only those new parts and
new accessories for Lincoln, Mercury or Jaguar vehicles which are listed (coded)
in the latest current Master Parts Price List Suggested List Prices and Dealer
Prices of the respective Manufacturers, with supplements or the equivalent in
effect as of the date of the Inventory (the "MASTER PRICE LIST") as returnable
to the respective Manufacturer at not less than the purchase price reflected in
the Master Price List. The purchase price for each "returnable part" and
"returnable accessory"will be the price listed in the Master Price List. All
parts and accessories not falling within the definition of "returnable" shall be
classified as "nonreturnable". The purchase price for each "nonreturnable" part
and accessory, of which type Seller has made no sales during the ninety (90) day
period prior to the date of the Inventory, shall be sixty percent (60%) of the
price listed therefor in the Master Price List. The purchase price for each
"nonreturnable" part and accessory, of which type Seller has made retail sales
to one or more customers during the ninety (90) day period prior to the date of
the Inventory, shall be one hundred percent (100%) of the price therefor listed
in the Master Price List. The purchase price for all "Jobber" and/or "NPN" parts
shall be equal to Seller's original cost of such parts. The purchase price for
all nuts, bolts and any other parts not addressed in this Section 4.2 shall
equal the fair market value thereof as determined by the Inventory Service.
4.3 [Intentionally Left Blank]
4.4 At the Closing, Buyer shall purchase all parts and accessories
owned by Seller at the Inventory Date and listed on the Inventory (the "PARTS")
provided, however, that Buyer shall not be obligated to purchase any damaged
parts or accessories, parts and accessories with component parts missing,
superseded or obsolete parts or accessories, or used parts or accessories.
Seller agrees that if parts and accessories that Buyer is not obligated to
purchase hereunder are not removed from the Real Property within thirty (30)
days after the Closing Date, they shall become the property of Buyer without the
payment of any consideration in addition to the consideration otherwise provided
herein.
4.5 The purchase price for the Parts will equal the value of such items
shown on the Inventory (the "PARTS PURCHASE PRICE").
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4.6 Seller shall assign to Buyer at Closing any net parts return
privileges under the respective Manufacturers' Parts Return Plans that may have
accrued to Seller prior to the Closing (and any other special parts return
authorizations which may have been granted to Seller by the respective
Manufacturers).
ARTICLE V
---------
MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES
-----------------------------------------------------
AND EQUIPMENT
-------------
5.1 At the Closing, Buyer shall purchase all useable gas, oil and
grease, all undercoat material and body materials in unopened cans and such
miscellaneous useable and saleable articles in unbroken lots which (i) are on
the dealership premises, (ii) are owned by Seller on the Inventory Date, (iii)
were purchased during the thirty (30) day period prior to the Inventory Date,
and (iv) are identified in the Inventory taken by the Inventory Service on the
Inventory Date (collectively referred to herein as the "Miscellaneous
Inventories"). The purchase price for the Miscellaneous Inventories shall be
equal to the replacement cost of the Miscellaneous Inventories as determined by
the Inventory Service and set forth on the Inventory (the sum of all prices of
the Miscellaneous Inventories pursuant to the terms of this Section 5.1 shall be
referred to herein as the "Miscellaneous Inventories Purchase Price").
5.2 Buyer shall have no obligation to purchase any such miscellaneous
items that are not included in the Miscellaneous Inventories. Seller agrees that
any miscellaneous items that are not included in the Miscellaneous Inventories
and are not removed from the Real Property within the thirty (30) days after the
Closing Date, they shall become the property of Buyer without the payment of any
consideration in addition to the consideration otherwise provided herein.
5.3 At the Closing, Buyer shall buy at Seller's cost for parts and
labor such shop labor and sublet repairs as Seller shall have caused to be
performed on any repair orders which are in process at the close of business on
the Inventory Date for which there are adequate credit arrangements (the "WORK
IN PROGRESS") (the sum of all costs for the Work in Progress pursuant to the
terms of this Section 5.3 shall be referred to herein as the "Work in Progress
Purchase Price"). Buyer shall complete such repair work and shall be entitled to
the entire proceeds to be collected for such services.
5.4 At the Closing, Buyer shall purchase all fixtures, machinery,
equipment (including special tools and shop equipment), furniture, "Lincoln,"
"Mercury," and "Jaguar" and other signs and office equipment owned by Seller and
used or held for use in connection with the Business, including the items listed
on the Book Depreciation Schedule included as Schedule 5.4 attached hereto
(collectively referred to herein as the "Fixtures and Equipment"). The purchase
price for each item of Fixtures and Equipment shall equal the depreciated book
value of such item based upon Schedule 5.4 (the sum of all prices assigned to
the Fixtures and Equipment pursuant to the terms of
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this Section 5.4 shall be referred to herein as the "F&E Purchase Price"). The
Fixtures and Equipment shall include the UCS computer system.
5.5 At the Closing, and without payment of any additional
consideration, Buyer shall purchase all of Seller's (i) unused shop repair
orders, parts sales tickets, accounting forms, binders, office and shop supplies
and such shop reference manuals, parts reference catalogs, non-accounting file
copies for all sales of Seller for the three (3) years preceding the Closing
Date, (ii) copies of new and used car sales records and specifically wholesale
parts sales records, new and used parts sales records, and service sales records
for the three (3) years preceding the Closing Date, (iii) product sales training
material and reference books on hand as of the Closing Date, (iv) customer and
registration lists pertaining to the sale of motor vehicles, service files,
repair orders, owner follow-up lists and similar records relating to the
operation of the Business, (v) telephone numbers and listings used by Seller in
connection with the Business, (vi) names and addresses of Seller's service
customers and prospective purchasers and (vii) Seller's rights to the tradename
"Heritage Lincoln- Mercury-Jaguar" or any similar variation thereof (such items
collectively referred to herein as the "Miscellaneous Assets").
5.6 Seller may retain all corporate records, financial records and
correspondence which are not necessary for the continued operation of the
Business by Buyer, and all derivations and extensions thereof.
5.7 Buyer shall have no responsibility to perform any services required
under any warranties issued by Seller on the vehicles sold by Seller on or prior
to the Inventory Date, unless authorized in writing by Seller accompanied by
arrangements in writing satisfactory to Buyer to assure Buyer of payment for all
work performed by Buyer, and, if so authorized by Seller, Seller shall reimburse
Buyer for all of Buyer's costs for parts and labor in connection therewith at
established internal rates for parts and labor. At the Inventory Date, Seller
shall supply Buyer with a list to which such warranties and guaranties are
applicable, which list shall include the names of the purchasers, the make and
year model of the vehicles purchased and the date of purchase. Seller shall also
supply to Buyer at or prior to the Inventory Date an address for and a
designation of the person who will be responsible for authorizing Buyer to
perform any services under any warranties issued by Seller on vehicles sold by
it prior to the Inventory Date. Seller shall reimburse Buyer promptly upon
demand for all sums due or payable by Seller to Buyer hereunder.
5.8 Seller shall retain all accounts receivable held by Seller as of
the Inventory Date and Buyer shall retain all accounts receivable arising out of
sales and/or services of the Business after the Inventory Date. Buyer shall have
no responsibilities or obligations with respect to the documentation or
collection of the Seller's accounts receivable, except that Buyer, on Seller's
behalf, shall accept payment of Seller's accounts receivable arising out of the
operation of Seller's business prior to the Inventory Date, at no charge to
Seller, during the term of the Management Agreement and for a period of 60 days
after the Closing, and Buyer shall forward to Seller, from time to time during
said period, all of the money so accepted on said accounts receivable.
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ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller and the Stockholder as follows:
6.1 Buyer is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
its business makes such qualification necessary and has the corporate power to
own its properties and to carry on its business as now being conducted. The
Board of Directors of Buyer has duly approved this Agreement, all other
agreements, certificates and documents executed or to be executed by Buyer in
connection herewith, and the transactions contemplated hereby and thereby. Buyer
has full corporate power and authority to execute and deliver this Agreement and
all other agreements, certificates and documents executed or to be executed by
Buyer in connection herewith, to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and thereunder. This
Agreement, and all other agreements, certificates and documents executed or to
be executed by Buyer in connection herewith, constitute or, when executed and
delivered, will constitute legal, valid and binding agreements of Buyer
enforceable in accordance with their respective terms.
6.2 Except as set forth on Schedule 6.2 attached hereto, the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a breach or default under, any
provision of law, any order of any court or other agency of government, the
charter or bylaws of Buyer or any note, debenture, mortgage, loan agreement or
other instrument to which Buyer is a party or by which it or any of its
properties or assets is bound.
6.3 There are no actions, suits or proceedings pending, or, to the
knowledge of Buyer, threatened against or affecting Buyer which might adversely
affect the power or authority of Buyer to carry out the transactions to be
performed by it hereunder.
6.4 The issuance of the Preferred Shares, as well as the Common Shares
issuable upon conversion of the Preferred Shares, has been duly authorized by
all necessary corporate action of Buyer. Upon the issuance of the Preferred
Shares pursuant to this Agreement, and upon the issuance of Common Shares upon
conversion of any of the Preferred Shares, such Preferred Shares and/or Common
Shares, as the case may be, shall be validly issued, fully paid and
non-assessable.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES AND SELLER AND THE STOCKHOLDER
Seller and the Stockholder, jointly and severally, represent and
warrant to Buyer as follows:
7.1 Seller is a corporation duly organized and existing and in good
standing under the laws of the State of South Carolina, is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
its business makes such qualification necessary and has the corporate power to
own its properties and to carry on its business as now being conducted. Except
as set forth on Schedule 7.1 attached hereto, the Stockholder is the only person
or entity owning shares of Seller. The Board of Directors and the shareholder of
Seller have duly approved this Agreement, all other agreements, certificates and
documents executed or to be executed by Seller in connection herewith, and the
transactions contemplated hereby and thereby. Seller has full corporate power
and authority to execute and deliver this Agreement and all other agreements,
certificates and documents executed or to be executed by Seller in connection
herewith, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The Stockholder is a
corporation duly organized and existing and in good standing under the laws of
the State of South Carolina, is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business makes such
qualification necessary and has the corporate power to own its properties and to
carry on its business as now being conducted. The Board of Directors of the
Stockholder has duly approved this Agreement, all other agreements, certificates
and documents executed or to be executed by the Stockholder in connection
herewith, and the transactions contemplated hereby and thereby. The Stockholder
has full corporate power and authority to execute and deliver this Agreement and
all other agreements, certificates and documents executed or to be executed by
the Stockholder in connection herewith, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement, and all other agreements, certificates and documents
executed or to be executed by Seller in connection herewith, constitute or, when
executed and delivered, will constitute legal, valid and binding agreements of
Seller enforceable in accordance with their respective terms. This Agreement,
and all other agreements, certificates and documents executed or to be executed
by the Stockholder in connection herewith, constitute or, when executed and
delivered, will constitute legal, valid and binding agreements of the
Stockholder enforceable in accordance with their respective terms.
7.2 Except as set forth in Schedule 7.2 attached hereto, the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a breach or default under, any
provision of law, any order of any court or other agency of government, the
charter or bylaws of Seller or the Stockholder or any note, debenture, mortgage,
loan agreement or other instrument to which Seller or the Stockholder is a
party, or by which it or any of the Assets are bound, or result in the creation
or imposition of any Encumbrance of any kind whatsoever on the Assets.
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7.3 There are no actions, suits or proceedings pending or, to the
knowledge of Seller and the Stockholder, threatened against Seller or the
Stockholder which might adversely affect the power or authority of any of them
to carry out the transactions to be performed by such party hereunder. There are
no actions, suits or proceedings pending, or, to the knowledge of Seller and the
Stockholder, threatened against or affecting Seller, other than those adequately
covered by insurance, and those disclosed on Schedule 7.3 attached hereto, and
none of the actions, suits or proceedings described on Schedule 7.3, if
determined adversely to Seller, would have a material adverse effect on the
business, assets or financial condition of Seller.
7.4 Except as disclosed on Schedule 7.4 attached hereto, Seller has
good title to the Assets, free and clear of all liens (including tax liens),
encumbrances, actions, claims, payments or demands of any kind and character
(collectively, "ENCUMBRANCES"), except Encumbrances for ad valorem personal
property taxes not yet due and payable. All of the Assets to be transferred
hereunder conform, as to condition and character, to the descriptions of such
Assets contained herein and will be transferred at the Closing free and clear of
all Encumbrances, except Encumbrances for ad valorem personal property taxes not
yet due and payable and the Liabilities assumed by Buyer and described in
Schedule 2.4.
7.5 Except as disclosed on Schedule 7.5 attached hereto, there are no
permits or approvals used or obtained for use by Seller which are required under
applicable law in connection with the ownership or operation of its Business,
except where the failure to have or obtain any such permits or approvals would
not have a material adverse effect on Seller or the Business.
7.6 [Intentionally Left Blank]
7.7 [Intentionally Left Blank]
7.8 The financial statements of Seller attached hereto or set forth on
Schedule 7.8 (the "Financial Statements") have been prepared in accordance with
generally accepted accounting principles consistently applied. The balance sheet
of Seller included in the Financial Statements fairly presents the financial
condition of Seller as of the date thereof and reflects all claims against and
all material debts and liabilities of Seller, fixed or contingent, as of the
date thereof, and the related statement of income included in the Financial
Statements fairly presents the results of the operations of Seller and the
changes in its financial position for the period indicated, all in accordance
with generally accepted accounting principles consistently applied. Seller has
no outstanding material claims, liabilities, obligations or indebtedness of any
nature, except as set forth in the Financial Statements, other than liabilities
incurred in the ordinary course of business and of the kind and type reflected
in the Financial Statements. To the knowledge of the Seller and the Stockholder,
the Financial Statements contain adequate reserves for all reasonably
anticipated claims relating to matters with respect to which Seller is
self-insured.
7.9 Neither Seller nor the Stockholder has engaged any broker or any
other person or entity who would be entitled to any brokerage commission or
finder's fee in respect of the execution of this Agreement and/or the
consummation of the transactions contemplated hereby.
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7.10 Except as set forth on Schedule 7.10 attached hereto, the Assets
comply with, and the Business has been conducted in all material respects in
compliance with, all laws, rules and regulations (including all worker safety
and all environmental laws, rules and regulations) applicable zoning and other
laws, ordinances, regulations and building codes, and neither Seller nor the
Stockholder has received any notice of any violation thereof which has not been
remedied.
7.11 The Fixtures and Equipment are in good condition, ordinary wear
and tear excepted, and constitute all of the fixtures, machinery, equipment,
furniture, signs and office equipment used or intended for use by Seller in the
Business. All vehicles on Schedule 3.2 are used as demonstrators in the ordinary
course of Seller's Business, are operated with dealer tags and have not had
certificates of title issued with respect to them.
7.12 Exept for the Seller's cash and accounts receivable and Seller's
rights under its dealership agreements with the Manufacturers, the Assets,
together with the Real Property and the contracts and leases set forth on
Schedule 1.5 hereto, comprise all of the assets, properties and rights necessary
for Buyer to operate the Business substantially in the manner operated by Seller
prior to the Closing.
ARTICLE VIII
------------
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
The obligations of Buyer to perform this Agreement at Closing are
subject to the following conditions precedent which shall be fully satisfied at
or before the Closing, unless waived in writing by Buyer.
8.1 All of the representations and warranties of Seller and the
Stockholder herein contained shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of the Closing Date, and
Buyer shall have received a certificate from a duly authorized officer of each
of the Stockholder and Seller, dated the Closing Date, to such effect.
8.2 Each of the agreements or obligations required by this Agreement to
be performed or complied with by Seller or the Stockholder at or before the
Closing shall have been duly performed or complied with, and Buyer shall have
received a certificate from a duly authorized officer of each of the Stockholder
and Seller, dated the Closing Date, to such effect.
8.3 No action, suit or proceeding shall have been instituted by a
governmental agency or any other third party (i) to prohibit or restrain the
sale contemplated by this Agreement or otherwise challenge the power and
authority of the parties to enter into this Agreement or to carry out their
obligations hereunder or the legality or validity of the sale contemplated by
this Agreement, or (ii) which would have a materially adverse effect on the
conduct of a Lincoln-Mercury-Jaguar automobile dealership business by Buyer at
the Real Property.
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8.4 The Inventory shall have been completed to the reasonable
satisfaction of Buyer.
8.5 Seller shall have furnished to Buyer (i) evidence to the reasonable
satisfaction of Buyer and its counsel with respect to the corporate organization
and existence of Seller and (ii) UCC-11 search reports or other evidence
reasonably satisfactory to Buyer and its counsel that the Assets are free and
clear of all Encumbrances.
8.6 Seller shall have furnished to Buyer a copy of the resolutions duly
adopted by the Board of Directors and the Stockholder authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, certified by an authorized officer of Seller as of the
Closing Date.
8.7 As of the Inventory Date, there shall not have been any fire,
accident or other casualty or any labor disturbance, civil commotion, riot, act
of God or the public enemy, or any change in the Business or Assets or which
would have a material adverse effect on the conduct of a Lincoln- Mercury-Jaguar
automobile business using the Assets at the Real Property or which would
interfere with the use by Buyer of such Assets in connection with the conduct of
a Lincoln-Mercury-Jaguar automobile dealership business at the Real Property.
8.8 Buyer shall have been licensed as a Motor Vehicle Dealer under
applicable South Carolina motor vehicle dealer registration laws and shall have
obtained all other authorizations, consents, licenses and permits from
applicable governmental agencies having or asserting jurisdiction, which Buyer
deems necessary or appropriate to conduct business as a Lincoln-Mercury- Jaguar
dealer at the Real Property; provided, however, this Section 8.8 shall only be a
condition to Buyer's obligations so long as Buyer is using its reasonable best
efforts to obtain such authorizations, consents, licenses and permits.
8.9 Buyer and Seller shall have obtained all other authorizations,
consents and approvals from third persons and entities as are required to assign
those contracts and leases that Buyer is to assume at Closing.
8.10 Seller shall have transferred to Buyer certificates of title or
origin for all New Vehicles and Demonstrators, and any used vehicles, if
applicable, and all of its registration lists, owner follow-up lists and service
files on hand as of the Closing Date with respect to the Business.
8.11 Seller shall have terminated in writing Seller's Sales and Service
Agreements with the Manufacturers.
8.12 Seller and the Stockholder shall have executed, as appropriate,
and delivered to Buyer the Bill of Sale, other documents of transfer of title
contemplated hereby and any and all other documents necessary or desirable in
connection with the transfer of the Assets, which documents shall warrant title
to Buyer consistent with this Agreement and shall in all respects be in such
form as may be reasonably required by Buyer and its counsel.
15
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8.13 Each of the Manufacturers shall have approved Buyer or Buyer's
affiliate as an authorized dealer at each parcel of the Real Property and O.
Bruton Smith or O. Bruton Smith's designee, as the authorized Dealer Operator,
and the respective Manufacturers shall have executed Dealer Agreements on terms
reasonably satisfactory to Buyer.
8.14 All conditions to Buyer's obligations under the Real Property
Purchase Agreement shall have been satisfied or fulfilled unless waived in
writing by Buyer.
ARTICLE IX
----------
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
--------------------------------------------
The obligations of Seller and the Stockholder to perform this Agreement
at Closing are subject to the following conditions precedent which shall be
fully satisfied on or before the Closing, unless waived in writing by Seller:
9.1 All of the representations and warranties of Buyer herein contained
shall be true and correct in all material respects on and as of the Closing Date
as if made on and as of the Closing Date, and Seller shall have received a
certificate from the President or a Vice President of Buyer, dated the Closing
Date, to such effect.
9.2 Each of the agreements or obligations required by this Agreement to
be performed or complied with by Buyer at or before the Closing shall have been
duly performed or complied with, and Seller shall have received a certificate
from the President or a Vice President of Buyer, dated the Closing Date, to such
effect.
9.3 No action, suit or proceeding shall have been instituted by a
governmental agency or any third party to prohibit or restrain the sale
contemplated by this Agreement or otherwise challenge the power and authority of
the parties to enter into this Agreement or to carry out their obligations
hereunder or the legality or validity of the sale contemplated by this
Agreement.
9.4 The Inventory shall have been completed to the reasonable
satisfaction of Seller.
16
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9.5 Buyer shall have furnished Seller and the Stockholder with (i)
evidence to the reasonable satisfaction of Seller and its counsel with respect
to the corporate organization and existence and (ii) a copy of the resolutions
duly adopted by the Board of Directors of Buyer authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, certified by an officer of Buyer as of the Closing Date.
9.6 Buyer shall have tendered to Seller the cash portion of the
Purchase Price and the Preferred Shares.
9.7 All conditions to the obligations of Fairway under the Real
Property Purchase Agreement shall have been satisfied or fulfilled, unless
waived in writing by Fairway.
ARTICLE X
COVENANTS AND AGREEMENTS
10.1 [Intentionally Left Blank]
10.2 Seller agrees that it will, at any time and from time to time,
after the Closing, upon request of Buyer, do, execute, acknowledge and deliver
all such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances as may be reasonably required to convey and transfer to
and vest in Buyer and protect its rights, title and interest in and enjoyment of
all the Assets.
10.3 The parties hereto shall use their reasonable best efforts to
obtain, and to cooperate with each other in obtaining, all authorizations,
approvals, licenses, permits and other consents contemplated by Articles VIII
and IX.
10.4 During the period from the date of this Agreement through the
Closing Date, Seller will conduct its operation of the Business only in
accordance with the Management Agreement and Seller shall not dispose of any of
the assets of the Business, except as contemplated by the Management Agreement.
10.5 Seller shall afford to Buyer, its attorneys, accountants and such
other representatives of Buyer as Buyer shall designate to Seller, free and full
access at all reasonable times, and upon reasonable prior notice, to the Assets
and the properties, books and records of Seller, and to interview personnel,
suppliers and customers of Seller, in order that Buyer may have full opportunity
to make such investigation as it shall reasonably desire of the Assets, the
Liabilities and the Business. Seller shall allow an environmental consulting
firm selected by Buyer (the "ENVIRONMENTAL AUDITOR") to have prompt access to
the Real Property in order to conduct an environmental investigation,
satisfactory to Buyer in scope (such scope being sufficient to result in a Phase
I environmental audit report and a Phase II environmental audit report, if
desired by Buyer), of, and to prepare a report with respect to, the Real
Property (the "ENVIRONMENTAL AUDIT"). Seller shall provide to the Environmental
Auditor: (i) reasonable access to all of its existing records
17
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concerning the matters which are the subject of the Environmental
Audit; and (ii) reasonable access to the employees of Seller and the last known
addresses of former employees of Seller who are most familiar with the matters
which are the subject of the Environmental Audit (Seller agreeing to use
reasonable efforts to have such former employees respond to any reasonable
requests or inquiries by the Environmental Auditor). Seller shall otherwise
cooperate with the Environmental Auditor in connection with the Environmental
Audit. Buyer shall bear 100% of the costs, fees and expenses in connection with
the Environmental Audit.
10.6 All representations and warranties of Seller and the Stockholder
shall survive the Closing Date. Seller and the Stockholder, jointly and
severally, agree to indemnify and hold harmless Buyer and its stockholders,
officers, directors, employees and agents, and their respective successors and
assignees, from and against any and all losses, liabilities, obligations,
assessments, suits, actions, proceedings, claims or demands, including costs,
expenses and fees (including reasonable attorneys' fees and expert witness fees)
incurred in connection therewith, suffered by any of them or asserted against
any of them or the Assets, arising out of or based upon (a) the failure of any
representation or warranty of Seller or the Stockholder contained herein, or in
any agreement, certificate or document executed by Seller or the Stockholder in
connection herewith, to be true and correct in all material respects as of the
Inventory Date, (b) the breach of any covenant or agreement of Seller or the
Stockholder contained in this Agreement, (c) any liability or obligation of
Seller or the Stockholder not expressly assumed by Buyer pursuant to this
Agreement, or (d) any arrangements or agreements made or alleged to have been
made by Seller or the Stockholder with any broker, finder or other agent in
connection with the transactions contemplated hereby. Notwithstanding the
foregoing, the total indemnification obligations of the Seller and the
Stockholder hereunder shall not exceed the Purchase Price.
10.7 All representations and warranties of Buyer shall survive the
Closing Date. Buyer agrees to indemnify and hold harmless Seller and its
stockholder, officers, directors, employees and agents, and their respective
successors and assignees, from and against any and all losses, liabilities,
obligations, assessments, suits, actions, proceedings, claims or demands,
including costs, expenses and fees (including reasonable attorneys' fees and
expert witness fees) incurred in connection therewith, suffered by any of them,
or asserted against any of them, arising out of or based upon (a) the failure of
any representation or warranty of Buyer contained herein, or in any agreement,
certificate or document executed by Buyer in connection herewith, to be true and
correct in all material respects as of the Closing Date, (b) the breach of any
covenant or agreement of Buyer contained in this Agreement, or (c) the
Liabilities.
10.8 Personal property, use and intangible taxes and assessments with
respect to the Assets shall be prorated on a per diem basis and apportioned
between Seller and Buyer as of the date of the Closing. Seller shall be liable
for that portion of such taxes and assessments relating to, or arising in
respect of, periods on or prior to the Inventory Date, and Buyer shall be liable
for that portion of such taxes and assessments relating to, or arising in
respect of, any period after the Inventory Date. Any taxes attributable to the
sale or transfer of the Assets to Buyer hereunder shall be paid by Seller.
18
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10.9 Except as may be required by law or the rules of the New York
Stock Exchange or as necessary in connection with the transactions contemplated
hereby, no party hereto shall (i) make any press release or other public
announcement relating to this Agreement or the transactions contemplated hereby,
without the prior approval of the other parties hereto or (ii) otherwise
disclose the existence and nature of negotiations regarding the transactions
contemplated hereby to any person or entity other than such party's accountants,
attorneys, agents and representatives, all of whom shall be subject to this
nondisclosure obligation as agents of such party. The parties shall cooperate
with each other in the preparation and dissemination of any public announcements
of the transactions contemplated by this Agreement.
10.10 Neither Seller nor the Stockholder shall pursue, initiate,
encourage or engage in, any negotiations or discussions with, or provide any
information to, any person or entity (other than Buyer and its representatives
and affiliates) regarding the sale or possible sale to any such person or entity
of any of the Assets or capital stock of Seller or any merger or consolidation
or similar transaction involving Seller.
10.11 Buyer shall promptly apply for, or cause an affiliate of Buyer to
apply for, the issuance of franchises to operate a Lincoln-Mercury-Jaguar
dealership upon the Real Property. Effective as of the Closing, Seller shall
terminate its Dealer Sales and Service Agreements with the Manufacturers. Seller
shall fully cooperate with Buyer, and take all reasonable steps to assist Buyer,
in Buyer's efforts to obtain its own similar Dealer Sales and Service Agreements
with the Manufacturers. The parties acknowledge that Buyer's Dealer Agreements
are subject to the approval of the Manufacturers and that Buyer would be unable
to obtain its own, similar Dealer Sales and Service Agreement absent Seller's
termination of its agreement.
10.12 Prior to Closing, Seller shall furnish to Buyer a list of all
employees and their rates of pay, including, separately, base pay and any
incentive or commission plans. Buyer shall have the right, but not the
obligation, to employ any or all of Seller's employees. If permitted by law and
applicable regulations, Seller shall, in consideration for the sale of
substantially all of Seller's assets in bulk, assign and transfer to Buyer,
without additional charge therefor, the amount of reserve in Seller's State
Unemployment Compensation Fund with respect to the Business and the
corresponding experience rate.
10.13 Termination.
(a) Notwithstanding any other provision herein contained to the
contrary, this Agreement may be terminated at any time prior to the Closing
Date:
(i) by the written mutual consent of the parties hereto;
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(ii) [Intentionally Left Blank]
(iii) by Buyer in the event of any breach by Seller or the
Stockholder of any of their respective material covenants, representations or
warranties contained herein;
(iv) by Seller in the event of any breach by Buyer of any of
Buyer's material covenants, representations or warranties contained herein; or
(v) at any time after the Closing Date Deadline, by written
notice by Buyer or (subject to Buyer's option to elect to extend the Closing
Date Deadline in accordance with Section 1.3) Seller to the other parties hereto
if the Closing shall not have occurred on or before the Closing Date Deadline;
provided, however, no party may terminate this Agreement pursuant to clauses
(iii), (iv) or (v) above if such party is in breach of any of its material
covenants, representations or warranties contained herein.
(b) In the event of termination pursuant to Section 10.13(a),
this Agreement shall be of no further force or effect; PROVIDED, HOWEVER, that,
except as set forth in Section 10.13(c), any termination pursuant to Section
10.13 shall not relieve any party hereto of any liability for breach of any
representation and warranty, covenant or agreement hereunder occurring prior to
such termination.
(c) If, as of the Closing Date Deadline (as the same may have
been extended by Buyer in accordance with the provisions of Section 1.3 hereof),
all conditions to Buyer's obligations to close set forth in Article VIII hereof
shall have been satisfied or fulfilled, and Buyer shall have failed to perform
its material obligations at the Closing by the Closing Date Deadline (as the
same may have been so extended), then Buyer shall, within ten (10) days after
receipt of a written demand from Seller, pay to Seller, in immediately available
funds, as liquidated damages for the loss of the transaction, a termination fee
of Fifty Thousand Dollars ($50,000) (the "BUYER'S TERMINATION FEE"). Provided
that Buyer shall have paid the Buyer's Termination Fee upon such demand by
Seller, payment of the Buyer's Termination Fee shall be the sole and exclusive
remedy of Seller and the Stockholder for any such failure of Buyer to perform
its material obligations at the Closing, regardless of whether Seller terminates
or does not terminate this Agreement, and Seller and the Stockholder shall have
no right to any other damages or other relief of any kind or nature, whether at
law or in equity (including without limitation, specific performance by Buyer),
for any breach or alleged breach by Buyer of this Agreement. Notwithstanding the
foregoing, Seller may elect not to demand payment of the Buyer's Termination
Fee, in which case Seller shall be free to pursue any other remedies it may
have, at law or in equity, including specific performance.
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ARTICLE XI
MISCELLANEOUS
11.1 Except as provided in this Section, this Agreement shall not be
assignable by any party hereto without the prior written consent of the other
parties. Buyer may assign this Agreement, without the consent of the other
parties hereto, to a corporation, partnership or limited liability company
controlled by Buyer, including a corporation, partnership or limited liability
company to be formed at any time prior to the Closing Date, and to any person or
entity who shall acquire all or substantially all of the assets of Buyer or of
such corporation, partnership or limited liabilities company controlled by
Buyer; provided said assignment shall be in writing and the assignee shall
assume all obligations of Buyer hereunder, whereupon the assignee shall be
substituted in lieu of Buyer named herein for all purposes, provided, however,
that Buyer originally named herein shall continue to be liable with respect to
its obligations hereunder. Buyer may assign this Agreement, without the consent
of the other parties hereto, as collateral security, and the other parties
hereto agree to execute and deliver any acknowledgment of such assignment by
Buyer as may be required by any lender to Buyer.
11.2 The interpretation and construction of this Agreement, and all
matters relating hereto, shall be governed by the laws of the State of South
Carolina.
11.3 All accounting matters required or contemplated by this Agreement
shall be in accordance with generally accepted accounting principles.
11.4 Except as otherwise specifically provided in this Agreement, each
of the parties hereto shall be responsible for the payment of such party's fees,
costs and expenses incurred in connection with the negotiation and consummation
of the transactions contemplated hereby.
11.5 This Agreement, including the schedules and other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement may not be amended except by a writing executed by all
of the parties hereto. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.6 Any party to this Agreement may, by written notice to the other
parties hereto, waive any provision of this Agreement from which such party is
entitled to receive a benefit. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision of this Agreement.
11.7 All notices, claims, certificates, requests, demands and other
communications hereunder shall be given in writing and shall be delivered
personally or sent by facsimile or by a nationally recognized overnight courier,
postage prepaid, and shall be deemed to have been duly given when so delivered
personally or by confirmed facsimile or one (1) business day after the date
21
<PAGE>
of deposit with such nationally recognized overnight courier. All such notices,
claims, certificates, requests, demands and other communications shall be
addressed to the respective parties at the addresses set forth below or to such
other address as the person to whom notice is to be given may have furnished to
the others in writing in accordance herewith.
If to Buyer, to:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Telecopy No.: (704) 563-5116
Attention: Chief Financial Officer
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Telecopy No.: (704) 334-4706
Attention: Edward W. Wellman, Jr.
If to Seller or the Stockholder, to:
Fairway Ford, Inc.
2323 Laurens Road
Greenville, South Carolina 29607
Attention: A. Foster McKissick, III
Telecopy No.: (864) 242-3222
With a copy to:
Leatherwood Walker Todd & Mann, P.C.
100 East Coffee Street
Greenville, South Carolina 29602-0087
Telecopy No.: (864) 240-2478
Attention: Harvey G. Sanders, Jr.
11.8 This Agreement may be executed in any number of counterparts. Each
such counterpart hereof shall be deemed to be an original instrument, and all
such counterparts together shall constitute but one agreement.
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11.9 Whenever any representation or warranty of Seller or the
Stockholder contained herein or in any other document executed and delivered in
connection herewith is based upon the knowledge of Seller or the Stockholder,
(i) such knowledge shall be deemed to include (A) the best actual knowledge,
information and belief of Seller and the Stockholder and (B) any information
which the Stockholder would reasonably be expected to be aware of in the prudent
discharge of its duties in the ordinary course of business (including
consultation with legal counsel) on behalf of Seller, and (ii) the knowledge of
the Stockholder shall be deemed to be the knowledge of Seller.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
FAIRWAY MANAGEMENT COMPANY
By: /s/ A. Foster McKissick, III
---------------------------------
Its: President
---------------------------------
ATTEST:
/s/ Murray McKissick
- -----------------------------
Asst. Secretary
[CORPORATE SEAL]
FAIRWAY FORD, INC.
By: /s/ A. Foster McKissick, III
---------------------------------
Its: President
---------------------------------
ATTEST:
/s/ Murray McKissick
- -----------------------------
Asst. Secretary
[CORPORATE SEAL]
SONIC AUTOMOTIVE, INC.
By: /s/ O. Bruton Smith
---------------------------------
Its: Chief Executive Officer
---------------------------------
ATTEST:
/s/ Theodore M. Wright
- -----------------------------
Secretary
[CORPORATE SEAL]
24
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INDEX OF SCHEDULES AND EXHIBITS
TO
ASSET PURCHASE AGREEMENT
Schedules
Schedule 1.5 Contracts and Leases
Schedule 2.4 Retained Liabilities
Schedule 3.1 New Vehicles
Schedule 3.2 Demonstrators
Schedule 5.4 Fixtures and Equipment
Schedule 6.2 Compliance re: Buyer
Schedule 7.1 Shareholders
Schedule 7.2 Compliance re: Seller and Stockholders
Schedule 7.3 Pending or Threatened Actions, Suits or Proceedings
Schedule 7.4 Encumbrances on the Assets
Schedule 7.5 Permits and Approvals
Schedule 7.8 Financial Statements
Schedule 7.10 Compliance with Laws
Exhibits
A Statement of Rights and Preferences
25
Exhibit 99.12
CONTRACT TO PURCHASE AND SELL REAL PROPERTY
(Heritage Lincoln-Mercury-Jaguar)
THIS CONTRACT TO PURCHASE AND SELL REAL PROPERTY (the "Purchase
Contract") is made and entered into as of the 10th day of April, 1998, by and
between FAIRWAY FORD, INC., a South Carolina Corporation ("Seller") and SONIC
AUTOMOTIVE, INC., a Delaware ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is the owner of certain real estate located at 2424
Laurens Road, in the City of Greenville, Greenville County, South Carolina, more
particularly described and/or shown on Exhibit A attached (the "Land").
WHEREAS, Seller desires to sell to Buyer and Buyer desires to acquire
from Seller the Real Property (defined below) together with the buildings and
improvements (collectively, the "Improvements") thereon and which are presently
utilized in the automobile dealership operations of Fairway Management Company,
d/b/a Heritage Lincoln-Mercury-Jaguar in accordance with the terms and
conditions hereinafter set forth in this Purchase Contract.
NOW, THEREFORE, in consideration of the agreements and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller do hereby
covenant and agree as follows:
1. Definitions. In addition to the terms defined above, each of the
following terms, when used herein with an initial capital letter, shall
have the meaning ascribed to it as follows, unless such meanings are
expressly modified, limited or expanded elsewhere in this Purchase
Contract.
1. "Appraised Value" shall mean the value obtained by agreement
of two (2) appraisers, one appointed by Seller, and one
appointed by Buyer. Both appraisers shall have at least five
(5) years experience valuing commercial real estate situated
in Greenville, South Carolina. If the two (2) appraisers
cannot agree on an Appraised Value within thirty (30) days
after they have both been selected, the average of the two
appraisals shall be the Appraised Value if the value
established by the respective appraisals do not vary by more
than ten percent (10%). If the value differs by more than ten
percent (10%), the two appraisers shall appoint a third
appraiser. The third appraiser shall determine the value of
the Real Property within fifteen (15) days of his appointment.
The Appraised Value for purposes of this Purchase Contract
shall be the value as finally agreed upon by any two of the
three appraisers. If two of the three appraisers do not agree
within fifteen (15) days, the appraisers shall be dismissed
and the appraisal process repeated. Seller and Buyer shall
each pay the costs of the appraiser appointed by them, and
one-half (1/2) of the
<PAGE>
cost of the third appraiser. If any party fails to appoint an
appraiser within the time required herein, the Purchase Price
determined by the appraiser appointed by the other party shall
be conclusive and binding upon the parties.
2. "Asset Purchase Contract" shall mean that certain Asset
Purchase Agreement dated the date hereof by and between
Fairway Management Company and Buyer.
3. "Closing" shall mean the closing and consummation of the
purchase and sale of the Real Property pursuant to this
Purchase Contract.
d. "Closing Date" shall mean the date of the Closing to be held
on (i) the date of the closing under the Asset Purchase
Contract; or (ii) such other date as mutually agreed upon by
the parties hereto.
e. "Deed" shall mean the duly executed and acknowledged general
warranty deed conveying title to the Real Property from Seller
to Buyer, the form of which is attached hereto as Exhibit C an
original of which conveys the Real Property to be recorded in
Greenville County, South Carolina.
f. "Defect" or "Defects" shall mean a lien, claim, charge,
security interest, encumbrance, easement, restriction or other
such matter affecting title to the Real Property other than
the Permitted Exceptions.
g. "Effective Date" shall mean the later of: (i) the date in the
heading of this Purchase Contract; and (ii) the date which the
last of the parties to this Purchase Contract executes and
delivers this Purchase Contract to the other party.
h. "Environmental Review Period" shall mean a period of fifteen
(15) business days after receipt of both a Phase I
Environmental Evaluation and/or a Phase II Environmental
Evaluation, as applicable.
i. "Environmental Laws" shall mean any applicable current or
future federal, state or local governmental law, regulation or
ruling applicable to environmental conditions on, under or
about the Real Property, including, without limitation,
federal, state or local solid waste disposal rules, the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, The Hazardous Materials
Transportation Act, the Resource Conservation and Recovery
Act, as amended, the Toxic Substances Act, as amended, the
Water Pollution Control Act, as amended, or any other
applicable federal, state or local laws, regulations or
ordinances.
j. "Evaluations" shall mean a Phase I Environmental Evaluation
and a Phase II Environmental Evaluation of the Real Property
prepared at Buyer's expense by environmental consultant(s)
selected by Buyer.
2
<PAGE>
k. "Hazardous Materials" means any waste, pollutant, chemical,
hazardous substance, toxic substance, hazardous waste, solid
waste, petroleum or petroleum-derived substance or waste, or
any constituent or decomposition product of any such
pollutant, material, substance or waste, regulated under or as
defined by any Environmental Law(s).
l. "Improvements" shall mean all buildings and improvements
constructed upon the Land together with any fixtures or
improvements related thereto.
m. "Inspection Period" shall mean and refer to the period
commencing on later of (i) the day following the Effective
Date or (ii) the day following delivery of the materials
referred to in Section 7.a. below, and continuing for fifteen
(15) days thereafter.
n. "Land" shall mean that certain parcel or tract of land owned
by Seller located in or near the City of Greenville, South
Carolina, as more particularly described on Exhibit A attached
hereto and incorporated herein by reference, together with all
and singular the rights and appurtenances pertaining thereto,
including any right, title and interest of Seller in and to
adjacent streets, easements or rights-of-way.
o. "Owner's Title Policy" shall mean a standard ALTA form owner's
policy of title insurance for the Real Property issued at
standard rates as compared to comparable Real Property in
Greenville County, South Carolina.
p. "Permitted Exceptions" shall mean all matters described on
Exhibit B attached hereto and incorporated herein by
reference.
q. "Purchase Price" shall mean the Appraised Value of the Real
Property.
r. "Real Property" shall mean the Land (including the Century
Property and the Fairway Property) and the Improvements
thereon.
s. "Survey" shall mean a current boundary, topographical and/or
physical survey of the Real Property prepared by a South
Carolina Registered Land Surveyor.
t. "Title Commitment" shall mean a current title binder or
commitment issued by the Title Company for an owner.
u. "Title Company" shall mean the title insurer of Buyer's
choice.
2. Agreement to Sell and Purchase. Seller hereby agrees to sell and convey
to Buyer, and Buyer hereby agrees to purchase from Seller, the Real
Property pursuant to the terms and conditions of this Purchase
Contract.
3
<PAGE>
3. Purchase Price; Delivery of Possession.
a. The Purchase Price shall be paid to Seller in immediately
available funds at Closing, subject to the terms and
conditions of this Purchase Contract.
b. Seller shall deliver sole possession of the Real Property to
Buyer at Closing.
4. Conveyance of Title. At Closing, Seller shall by the Deed convey to
Buyer marketable fee simple title to all of the Real Property, free and
clear of any and all liens, encumbrances, easements, assessments,
restrictions, taxes and other conditions except for the Permitted
Exceptions.
5. Survey. Buyer, at Buyer's sole cost and expense, prior to Closing may,
at its election, obtain the Survey from which a legal description of
the Real Property will be prepared and inserted in the Deed. Buyer, its
employees and agents may, at any reasonable time prior to Closing,
enter upon the Real Property for the purpose of obtaining the Survey.
6. Title and Title Insurance for the Real Property.
a. Prior to the Closing Date, Buyer shall, at its sole cost and
expense, obtain an owner's Title Commitment issued by the
Title Company providing for the issuance at Closing to Buyer
of an Owner's Title Policy for the Real Property. The Title
Commitment shall set forth the state of title of the Real
Property and all exceptions, including but not limited to,
easements, restrictions, road rights-of-way, floodways,
covenants, reservations and other conditions, if any,
affecting the Real Property which would appear in an Owner's
Title Policy if issued.
b. At Closing, the Real Property shall be conveyed to Buyer by
the Deed free and clear of all Defects and subject only to the
Permitted Exceptions.
7. Inspections.
a. On or prior to the Effective Date or within three (3) days
thereafter, Seller shall provide to Buyer true, correct and
complete copies of the following items:
i. Seller's existing owner's and lender's title
insurance policies for the Real Property (if any)
together with legible copies of any exceptions set
forth therein.
ii. The most recently dated existing survey of the Real
Property.
iii. Any and all engineering reports, soil reports and
environmental reports prepared by or for Seller with
respect to the Real Property, if any.
iv. All warranties, if any, related to the Improvements.
4
<PAGE>
v. Attorneys' opinions, if any, on title to the Real
Property and legible copies of deeds, mortgages,
easements or restrictions, if any, affecting Property
which Seller may possess.
b. Buyer, its agents and contractors shall be entitled to go upon
the Real Property during the Inspection Period to obtain
financing, to inspect the Real Property to perform
investigations, to determine the status of utilities thereon,
to conduct title examinations, zoning investigations,
feasibility studies and other studies or tests necessary to
determine whether the Real Property is suitable for Buyer's
intended use of the Real Property. If Buyer determines, in
Buyer's reasonable discretion, that the Real Property is not
suitable for Buyer's intended use, Buyer may terminate this
Contract and shall be relieved of all obligations + hereunder
by giving written notice to Seller prior to the end of the
Inspection Period. However, Buyer does not waive its right to
terminate this Contract, as set forth above, based on any
restriction which may adversely affect the Real Property that
has been revealed through documentation and/or other due
diligence material in Buyer's possession prior to the
execution of this Contract.
c. Buyer may, at its sole expense, commission the Evaluations.
The Evaluations shall be conducted in accordance with such
standards and procedures as selected by Buyer and Buyer's
consultant, and may include, without limitation, drilling and
installation of ground water testing wells at locations
specified by Buyer's consultant, soil samples at locations
designated to detect environmental conditions and/or impacts
from current or past operations, both ground water and soil
analysis and investigation as to the presence of any asbestos
materials on the Real Property. If, based upon the
Evaluations, Buyer determines, in Buyer's reasonable
discretion, that the Real Property is not free of Hazardous
Materials, and that such Hazardous Materials materially
adversely affect Buyer's intended use of the Real Property for
the operation of an automobile dealership, or the value of the
Real Property, then Buyer may terminate this Purchase Contract
by notice in writing given to Seller prior to the expiration
of the Environmental Review Period and the parties shall have
no further rights or obligations under this Purchase Contract.
If the Buyer chooses to terminate this Purchase Contract as a
result of its review of the Evaluations, Buyer shall provide
to Seller copies of all environmental reports relating to the
Real Property which may be obtained by Buyer, and shall repair
any damage to the Real Property resulting from the
Evaluations.
d. In addition to Buyer's rights set forth in Paragraph 7(c)
above, in the event that any underground storage tanks or any
other storage tanks are or have been located upon any portion
of the Real Property, Seller, at its sole expense, shall:
i. Remove any such tanks which remain on the Real
Property;
ii. Remediate any current or former tank sites and any
surrounding portion of the Real Property and any
adjacent property to the reasonable satisfaction of
Buyer and Buyer's consultant.
Notwithstanding the termination of the Inspection Period or
the Environmental Review Period, if Buyer reasonably
determines that Seller has failed to meet its obligations
described in this Paragraph 7(d), then Buyer may either:
iii. Terminate this Purchase Contract; or
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iv. Remediate any such tank site(s) to the reasonable
satisfaction of Buyer and Buyer's consultant and
deduct the cost of any such remediation from the
Purchase Price. In the event such remediation shall
extend beyond the Closing Date set forth herein,
Buyer shall have the option of extending the Closing
Date to such time as may be necessary to complete any
such remediation.
8. Costs and Prorations. Seller shall pay the cost to cancel any mortgage
or other lien of record. Buyer shall pay any and all documentary stamp
taxes, deed taxes or transfer taxes applicable to this transaction and
any and all costs of the Survey, the title examination, the title
insurance premiums, testing or inspections of the Real Property and
recording costs for the Deed or any other documents to be recorded
relating to the transfer of the Real Property. Each party shall pay its
own attorney's fees. Seller shall pay any "roll-back" taxes or similar
taxes based upon any change in use of the Real Property, whether such
taxes are assessed before or after Closing. Seller's obligation to pay
such taxes, if any, shall survive Closing. All prorations for real
estate taxes, utilities and other such costs shall be prorated between
Buyer and Seller as of the Closing Date on the basis of a 365-day year.
Buyer and Seller hereby agree that if any of the aforesaid prorations
cannot be calculated accurately on the proration date (or as soon as
information sufficient to complete such prorations is available), then
the same shall be calculated within thirty (30) days after the
information necessary to make such prorations becomes available and
either party owing the other party a sum of money based on such
subsequent proration(s) shall promptly pay said sum to the other party.
9. Risk of Loss; Eminent Domain.
a. If, after the Effective Date and prior to the Closing Date,
the Real Property or any portion thereof is damaged or
destroyed, Seller shall immediately notify Buyer in writing
and Buyer shall elect, within ten (10) days from and after
such notice, by written notice to Seller, either:
i. to not close the transaction contemplated hereby, in
which event the Purchase Contract shall be void and
of no further force and effect; provided, however,
Buyer shall not be entitled to elect under this item
i. unless Buyer determines, in its reasonable
judgment, that such damage or destruction cannot be
restored within ninety (90) days; or
ii. to close the transaction contemplated hereby in
accordance with the terms and conditions contained
herein, in which event the Purchase Price shall
remain the same and Seller shall transfer and assign
to Buyer at Closing all rights, title and interest to
any insurance proceeds payable in connection with
such damage or destruction. If Buyer elects to
purchase the Real Property after receipt of such
notice from Seller, all actions taken by Seller with
regard to the repair or replacement of any such
damaged or destroyed portion of the Real Property,
including but not limited to, negotiations,
litigation, settlement, appraisals and appeals, shall
be subject to the approval of Buyer,
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which approval shall not be unreasonably withheld. In
no event shall Buyer have any responsibility to
repair or rebuild the Improvements.
b. If, after the Effective Date and prior to the Closing Date,
Seller shall receive notice of the commencement or threatened
commencement of eminent domain or other like proceedings
against the Real Property or any portion thereof, Seller shall
immediately notify Buyer in writing, and Buyer shall elect,
within ten (10) days from and after such notice of such
threatened or pending proceedings, by written notice to
Seller, either:
i. to not close the transaction contemplated hereby, in
which event this Purchase Contract shall be void and
of no further force and effect; provided, however,
Buyer shall not be entitled to elect under this item
i. unless more than 5% of the Real Property is taken
and such taking materially interferes with the
operation of an automobile dealership business
substantially as operated before such taking; or
ii. to close the transaction contemplated hereby in
accordance with the terms and conditions contained
herein, but subject to such proceedings, in which
event the Purchase Price shall remain the same and
Seller shall transfer and assign to Buyer at Closing
all rights, title and interests to the proceeds of
such eminent domain proceedings. If Buyer elects to
purchase the Real Property after receipt of such
notice, all actions taken by Seller with regard to
such eminent domain or like proceedings, including
but not limited to, negotiations, litigation,
settlement, appraisals and appeals, shall be subject
to the approval of Buyer, which approval shall not be
unreasonably withheld. In no event shall Buyer have
any responsibility to repair or rebuild the
Improvements.
10. Notice. Each notice required or permitted to be given hereunder shall
be in writing and shall comply with the requirements of this paragraph.
Any notice by Buyer to Seller shall be deemed to be duly given if: (a)
either (i) hand delivered to the person(s) listed below for Seller, or
(ii) delivered or sent by telephone facsimile transmittal to the
facsimile telephone numbers of Seller listed below, in which event
proof of delivery shall be by telephone records, and (b) a duplicate of
such notice shall be sent by registered or certified mail to Seller at
the address set forth below (or at such other address as may hereafter
be designated by Seller). Any notice by Seller to Buyer shall be deemed
to be duly given if: (a) either (i) hand delivered to the person(s)
listed below for Buyer, or (ii) delivered or sent by telephone
facsimile transmittal to the facsimile telephone number of Buyer listed
below, in which event proof of delivery shall be by telephone records,
and (b) a duplicate of such notice shall be sent by registered or
certified mail to Buyer at the address set forth below (or at such
other address as may hereafter be designated by Buyer). Notice shall be
deemed effective at the time of hand delivery or transmission of the
telephone facsimile and upon deposit of the notice in the United States
Mail for registered or certified delivery. The parties hereto reserve
the right to change the addresses or telephone numbers to which notices
are to be sent by giving notice to the other as herein provided.
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The addresses and facsimile telephone numbers of the parties to which
notices are to be sent shall be those set forth below:
As to Buyer:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Attention: Chief Financial Officer
Telecopy No.: (704) 536-5116
With a Copy to:
Edward W. Wellman, Jr., Esq.
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Telecopy No.: (704) 334-4706
As to Seller:
Fairway Ford, Inc.
2424 Laurens Road
Greenville, SC 29607
Attention: A. Foster McKissick, III
Telecopy No.: (864) 242-3222
With a Copy to:
Harvey G. Sanders, Jr., Esq.
Leatherwood Walker Todd & Mann, P.C.
100 East Coffee Street
Greenville, SC 29602-0087
Telecopy No.: 864-240-2478
Any party shall have the right from time to time to change the
address to which notices to it shall be sent by giving to the other party or
parties at least five (5) days prior notice of the changed address.
11. Closing. Unless Buyer or Seller have otherwise elected hereunder to
terminate this Purchase Contract, and subject to the satisfaction or
written waiver of each of the conditions precedent to Closing set forth
in Paragraph 12 hereof, the Closing of the sale and purchase of the Real
Property shall be held at a mutually agreeable time on the Closing Date,
at the offices of Leatherwood Walker Todd & Mann, P.C. at 9:00 a.m.
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12. Conditions Precedent to Closing.
a. Buyer's Conditions. Buyer's obligation to close the purchase of
the Real Property is subject to the satisfactory performance,
occurrence or written waiver by Buyer, in Buyer's sole
discretion, of each of the following conditions:
i. Seller shall have delivered to Buyer all of the
documents, properly executed, as required by Paragraph
13(a) hereof;
ii. No adverse change in the status of the title to the
Real Property as set forth in the Title Commitment
shall have occurred prior to the Closing Date;
iii. No default by Seller shall exist under this Purchase
Contract, this Purchase Contract shall not have
terminated and Seller shall be ready, willing and able
to close under the terms hereof;
iv. The representations of Seller contained in this
Purchase Contract shall be true, complete and correct
in all material respects as of the Closing Date,
without the necessity of any material amendment or
modification, with the same force and effect as if made
as of the Closing Date;
v. The Inspection Period and Evaluation Review Period
shall have expired;
vi. Seller's obligations pursuant to Paragraph 7(d) shall
have been met;
vii. Buyer's confirmation, by a Phase I environmental
inspection performed at Buyer's expense, and by a Phase
II inspection if Buyer deems such inspection necessary,
that the properties are free of environmentally
hazardous or toxic substances that would materially
adversely affect Buyer's use and possession of the
respective properties for the operation of an
automobile dealership, or the value of the Real
Property;
viii. Buyer's confirmation that as of the Closing Date there
will be no contracts, leases or liabilities which will
affect Buyer's ownership of the Real Property or right
to use and possession thereof;
ix. Buyer's confirmation that the Real Property is properly
zoned for use as an automobile dealership;
x. Buyer's confirmation that the Real Property is free
and clear of mortgages, security agreements or other
encumbrances; other than any Permitted Exception shown
on Exhibit B;
xi. Receipt by Buyer of all required waivers or approvals
to Buyer's acquisition of the Real Property and
approval by the Lincoln-Mercury Division of Ford
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Motor Company and Jaguar Cars for Buyer's operation of
a franchised Lincoln-Mercury and Jaguar dealership on
the Real Property;
xii. All required consents and approvals of the
shareholders and directors of Seller shall have been
obtained and provided to Buyer; and
xiii. All conditions to Buyer's obligations at closing under
the Asset Purchase Contract shall have been fully
satisfied, unless waived in writing by Buyer.
If any of the foregoing conditions have not been satisfied or
waived within the times and in the manner required by this
Purchase Contract, Buyer may terminate this Purchase Contract
and seek any remedies available at law or equity, including
without limitation, specific performance.
b. Seller's Conditions. Seller's obligation to close the sale of
the Real Property is subject to the satisfactory performance,
occurrence or written waiver by Seller, in Seller's sole
discretion, of each of the following conditions:
i. Buyer shall pay the Purchase Price to Seller and shall
have delivered to Seller all of the documents,
properly executed, as required by Paragraph 13(b)
hereof;
ii. No default by Buyer shall exist under this Purchase
Contract, this Purchase Contract shall not have been
terminated, and Buyer shall be ready, willing and able
to close under the terms hereof;
iii. The representations of Buyer contained in this
Purchase Contract shall be true, complete and correct
in all material respects as of the Closing Date,
without the necessity of any material amendment or
modification, with the same force and effect as if
made as of the Closing Date; and
iv. All conditions to Fairway Management Company's
obligations at closing under the Asset Purchase
Contract shall have been fully satisfied unless waived
in writing by Fairway Management Company.
If any of the foregoing conditions have not been satisfied or
waived within the times and in the manner required by this
Purchase Contract, Seller may terminate this Purchase Contract
and seek any remedies which are available at law or equity,
including, without limitation, specific performance; provided,
however, in the event of payment by Buyer of the "Buyer's
Termination Fee" under the Asset Purchase Contract, Seller shall
have no right to any other damages or relief of any kind or
nature, whether at law or in equity (including, without
limitation, specific performance).
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13. Documents at Closing.
a. Seller's Documents. Seller shall execute and/or deliver the
following to Buyer at Closing:
i. The Deed, duly executed by Seller and acknowledged.
ii. A lien affidavit, duly executed by Seller, acceptable
to the Title Company.
iii. Affidavits and other documents, duly executed by
Seller, to satisfy federal, state and local tax
reporting and withholding requirements.
iv. An affidavit, duly executed by Seller that Seller is
not a "foreign person" within the meaning of Section
1445 of the Internal Revenue Code.
v. A certificate, duly executed by Seller and notarized,
that the representations of Seller contained in this
Purchase Contract remain true, complete and correct in
all material respects as of the Closing Date.
vi. A settlement statement setting forth the amounts paid
by or on behalf of and/or credited to each of Buyer
and Seller pursuant to this Purchase Contract.
vii. Such other customary documents and assurances as shall
be reasonably required by Buyer's counsel.
b. Buyer's Documents. Buyer shall pay the Purchase Price to Seller
at Closing and the Buyer shall execute and/or deliver the
following to Seller at Closing:
i. A certificate, duly executed by Buyer and notarized,
that the representations of Buyer contained in this
Purchase Contract remain true, complete and correct in
all material respects as of the Closing Date.
ii. A settlement statement setting forth the amounts paid
by or on behalf of and/or credited to each of Buyer
and Seller pursuant to this Purchase Contract.
iii. Such other customary documents and assurances as shall
be reasonably required by Seller's counsel.
14. Representations and Warranties.
a. Representations and Warranties by Seller. Seller hereby
represents and warrants to Buyer that as of the Effective Date:
i. Seller has no notice of any pending or threatened
condemnation or similar proceeding or assessment
affecting the Real Property, or any part thereof, nor
to the best of its knowledge, is any such proceeding
or assessment
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contemplated by any governmental authority, nor to the
best of its knowledge, is there any litigation pending
or threatened which affects or could affect the Real
Property.
ii. Except as set forth on Schedule 14(a)(ii) attached
hereto, (a) except in the ordinary course of business
and in compliance with applicable law, Seller has not
at any time generated, used, treated or stored
Hazardous Materials on, or transported Hazardous
Material to or from the Real Property or any property
adjoining or adjacent to the Real Property and, to the
knowledge of Seller, no party other than Seller has
taken such actions on the Real Property, (b) Seller
has not at any time released or disposed of Hazardous
Materials on the Real Property or any property
adjoining or adjacent to the Real Property, and to the
knowledge of the Seller, no party other than Seller
has taken any such actions on the Real Property, (c)
Seller has not transported or arranged for the
transportation of any Hazardous Materials to any site
other than the Real Property, (d) Seller is in
compliance with all Environmental Laws and the
requirements of any permits issued under such
Environmental Laws with respect to the Real Property,
except where failure to comply would not have a
material adverse effect on Seller's Real Property, (e)
there are no past, pending or, to the knowledge of
Seller, threatened environmental claims against Seller
or the Real Property, (f) to the knowledge of Seller,
there are no facts or circumstances, conditions or
occurrences regarding the Real Property that could
reasonably be anticipated (A) to form the basis of an
environmental claim against Seller or (B) to cause the
Real Property to be subject to any restrictions on its
ownership, occupancy, use or transferability under any
Environmental Law, and (g) there are not now, and to
the knowledge of Seller, never have been any
underground storage tanks located on the Real
Property.
iii. To the best of Seller's knowledge, Seller has complied
in all material respects with all applicable laws,
ordinances, regulations and statutes relating to the
Real Property or any part thereof and is not in
violation of any such laws as they relate to the Real
Property.
iv. This Purchase Contract and all documents executed by
Seller which are to be delivered to Buyer at Closing
are or at the time of delivery will be duly executed
and delivered by Seller, and are or at the time of
Closing, will be legal, valid, binding obligations of
Seller, and do not and at Closing will not violate any
provisions of any agreement or any applicable
governmental law or regulation to which the Seller is
a party or to which Seller is subject.
v. There are no restrictions or applicable regulations
which prevent the use of the Real Property for
automobile dealership and servicing purposes.
vi. The restrictive covenants encumbering the Real
Property (if any) have not been violated and there are
no assessments owed pursuant to such restrictions.
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vii. Other than ad valorem real property taxes, there are
no other taxes or assessments pending or periodically
charged to Seller with respect to the Real Property.
b. Representations and Warranties by Buyer. Buyer hereby represents
and warrants to Seller that as of the Effective Date:
i. Buyer is a duly organized and validly existing
corporation under the laws of the State of Delaware
and is authorized to acquire property in the State of
South Carolina, and Buyer has the power and authority
to enter into this Purchase Contract.
ii. This Purchase Contract and all documents executed by
Buyer which are to be delivered to Seller at Closing
are or at the time of delivery will be duly
authorized, executed and delivered by Buyer, and are
or at the time of Closing, will be legal, valid,
binding obligations of Buyer, and do not and at
Closing will not violate any provisions of any
agreement or any applicable governmental law or
regulation to which Buyer is a party or to which it is
subject.
c. Indemnities.
i. Buyer and Seller hereby agree that they have relied
upon the representations and warranties given by the
respective parties in Paragraph 14(a) and 14(b) of
this Purchase Agreement. Buyer hereby agrees to
indemnify and hold Seller harmless from and against
any and all liabilities, losses, costs, damages,
expenses, including reasonable attorneys' fees and
costs of litigation, arising or resulting from the
untruth of any of Buyer's representations and
warranties set forth in Paragraph 14(b). Seller hereby
indemnifies and holds Buyer harmless from and against
any and all liabilities, losses, costs, damages and
expenses, including reasonable attorneys' fees and
costs of litigation, arising or resulting from the
untruth of any of Seller's representations and
warranties set forth in Paragraph 14(a).
ii. To the extent caused by or resulting from the acts of
Seller, its agents, servants, employees or
contractors, Seller agrees to immediately clean up any
Hazardous Materials found on or within any portion of
the Real Property and to remediate the Real Property,
to comply with any and all Environmental Laws, and to
pay for all clean up and remediation costs at no cost
to Buyer. To the extent caused by or resulting from
the acts of Buyer, its agents, servants, employees, or
contractors, Buyer agrees to immediately clean up any
Hazardous Materials found on or within any portion of
the Real Property and, with respect to such matters as
described herein for which Buyer is responsible, to
remediate the Real Property, to comply with any
Environmental Laws, and to pay for all clean-up and
remediation costs at
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no cost to Seller. Each parties' respective clean-up
and/or remediation efforts as described herein shall
mean and refer to those actions which are necessary
and required under the Environmental Laws.
iii. To the extent that Seller is responsible for the same
in accordance with Subparagraph (ii) above, Seller
hereby agrees to indemnify, release and hold Buyer,
its successors, assigns, tenants, subtenants,
officers, directors, shareholders and employees,
harmless from and against all Liabilities (defined
below) incurred in connection therewith, suffered by,
incurred by or assessed against such parties, their
agents or other representatives, whether incurred as a
result of legal action taken by any governmental
entity or agency, taken by any private claimant, or
taken by Buyer, before or after Closing as a result of
the presence, disturbance, discharge, release, removal
or cleanup of any Hazardous Materials upon or under,
on or off site, associated with or flowing or
originating from the Real Property. To the extent that
Buyer is responsible for the same in accordance with
Subparagraph (ii) above, Buyer hereby agrees to
indemnify, release and hold Seller, its successors,
assigns, officers, directors, shareholders and
employees, harmless from and against all Liabilities,
suffered by, incurred by or assessed against such
parties, their agents or other representatives,
whether incurred as a result of legal action taken by
any governmental entity or agency, taken by any
private claimant, or taken by Seller, before or after
Closing as a result of the presence, disturbance,
discharge, release, removal or clean-up of any
Hazardous Materials upon or under, on or off site,
associated with or flowing or originating from the
Real Property. The term "Liabilities" as used in this
paragraph is hereby defined as any and all
liabilities, expenses, demands, damages, punitive or
exemplary damages, consequential damages, costs,
cleanup costs, response costs, losses, causes of
action, claims for relief, attorneys and other legal
fees, other professional fees, penalties, fines,
assessments and charges.
15. Broker's Commission. Buyer and Seller represent and warrant to the other
that neither of them have engaged or contracted with any person, firm or
entity to serve or act as a broker, agent or finder for the purpose of
the sale and purchase of the Real Property, and that no broker's or real
estate or other similar commissions or fees are or shall be due in
respect of the transaction contemplated by this Purchase Contract. The
Buyer and Seller each agree to indemnify, defend and save harmless the
other from and against any cost and expense, including reasonable
attorney's fees, incurred by the other as a result of the untruth of any
of the foregoing representations made by it.
16. Entire Agreement. This Purchase Contract constitutes the entire
agreement between Buyer and Seller with respect to the Real Property and
may not be amended except by written instrument executed by Buyer and
Seller. Any other agreements, written or oral, between Buyer and Seller
with respect to the Real Property are hereby superseded in their
entirety by this Purchase Contract.
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17. Captions. The paragraph captions are inserted for convenience only and
are in no way intended to describe, interpret, define or limit the scope
or content of this Purchase Contract or any provision hereof.
18. Construction. Words of any gender used in this Purchase Contract shall
be held and construed to include any other gender, and words in the
singular number shall be held to include the plural, and vice versa,
unless the context requires otherwise. Any disputes regarding the
interpretation of any portion of this Purchase Contract shall not be
presumptively construed against the drafting party.
19. Remedies Cumulative. Except as specifically set forth above all rights,
powers and privileges conferred hereunder upon the parties hereto shall
be cumulative and in addition to those other rights, powers and remedies
hereunder and those available at law or in equity. All such rights,
powers and remedies may be exercised separately or at once, and no
exercise of any right, power or remedy shall be construed to be an
election of remedies or shall preclude the future exercise of any or all
other rights, powers and remedies granted hereunder or available at law
or in equity, except as expressly provided herein.
20. No Waiver. Neither the failure of either party to exercise any power
given such party hereunder nor to insist upon strict compliance with its
obligations hereunder, nor any custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of either
party's right to demand exact compliance with the terms hereof.
21. Applicable Law. This Purchase Contract shall be construed and
interpreted in accordance with the laws of the State of South Carolina.
22. Successors and Assigns. This Purchase Contract shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns. Buyer shall have the right and privilege to
assign and transfer its interest hereunder to Mar Mar Realty Trust, a
to-be-formed Maryland real estate investment trust, Mar Mar Realty L.P.,
a to-be-formed Maryland limited partnership (each to be formed by
affiliates of Buyer), or to an existing corporation, partnership,
limited liability company or other business entity, or to a corporation,
partnership, limited liability company or business entity formed for the
purpose of consummating this transaction in which Buyer has an ownership
interest or is affiliated by common ownership.
23. Counterparts. This Purchase Contract may be executed in two (2) or more
counterparts.
24. Survival. Seller's and Buyer's representations and warranties and
indemnities set forth in Paragraphs 14 and 15 shall survive Closing.
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IN WITNESS WHEREOF, the parties have executed the Purchase Contract
pursuant to authority duly given the day and year first above written.
SONIC AUTOMOTIVE, INC.
By: /s/ O. Bruton Smith
Its: Chief Executive Officer
FAIRWAY FORD, INC.
By: /s/ A. Foster McKissick, III
Its: President
Exhibit 99.13
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of April 30, 1998 (this
"AGREEMENT") among SONIC AUTOMOTIVE, INC., a Delaware corporation (the "BUYER"),
and ALDO B. PARET (the "SELLER"), and CASA FORD OF HOUSTON, INC., a Texas
corporation (the "CORPORATION").
WITNESSETH:
WHEREAS, the Seller owns in the aggregate 6,125 shares of common stock,
par value $1.00 per share (the "SHARES"), of the Corporation, which shares
represent all of the issued and outstanding shares of capital stock of the
Corporation and are owned of record and beneficially by the Seller; and
WHEREAS, the Buyer desires to purchase the Shares from the Seller, and
the Seller is willing to sell the Shares to the Buyer, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and representations hereinafter stated, and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 AGREEMENT OF PURCHASE AND SALE. On the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties of the parties herein, at the closing referred to in Article 2 hereof
(the "CLOSING"), the Seller shall sell, transfer, convey and deliver to the
Buyer, and the Buyer shall purchase from the Seller, the Shares.
1.2 PURCHASE PRICE.
(a) INITIAL PURCHASE PRICE. As the initial purchase price to be
paid by the Buyer for the Shares, the Buyer shall pay to the Seller the sum of
(i) $11,250,000 less (ii) the aggregate total of the Affiliate Payables and
Excluded Indebtedness (each as defined in Section 1.2(c) below) both outstanding
as of the Closing Date (as defined in Article 2 below) as well as paid after the
Effective Closing Date (as defined in Section 1.2(c) below), subject to
adjustment as provided in Section 1.2(c) below (as so adjusted, the "INITIAL
PURCHASE PRICE").
(b) PAYMENT OF INITIAL PURCHASE PRICE. The Initial Purchase Price
shall be paid as follows:
(1) At the Closing, the Seller shall deliver to the Buyer a
certificate signed by the Seller setting forth the aggregate total of the
Affiliate Payables and Excluded Indebtedness both outstanding as of the Closing
Date as well as paid after the Effective Closing Date. At the Closing, the sum
of $8,937,000, minus the amount of any Affiliate Payables and
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Excluded Indebtedness both outstanding as of the Closing Date as well as paid
after the Effective Closing Date, shall be payable by the Buyer to the Seller by
wire transfer of immediately available funds to the account or accounts of the
Seller, which shall be designated by the Seller in writing at least one full
Business Day prior to the Closing Date. For purposes of this Agreement, a
"BUSINESS DAY" is a day other than a Saturday, a Sunday or a day on which banks
are required to be closed in the State of North Carolina.
(2) (A) At the Closing, the Buyer shall issue to the Seller
2,313 shares of the Buyer's Class A Convertible Preferred Stock, Series III (the
"PREFERRED STOCK"). The Preferred Stock will be convertible into shares of the
Buyer's Class A Common Stock as provided in the Statement of Rights and
Preferences attached as Exhibit A hereto. At the Closing, 1,813 shares of the
Preferred Stock will be delivered to the Seller and 500 shares of the Preferred
Stock (the "ESCROW SHARES") shall be placed in escrow with NationsBank of Texas,
N.A. or another entity mutually acceptable to the Buyer and the Seller (the
"ESCROW AGENT") by the Buyer in accordance with the escrow agreement in the form
of Exhibit B hereto, with such other changes thereto as the Escrow Agent shall
reasonably request (the "ESCROW AGREEMENT").
(B) The term of the Escrow Agreement shall be until
February 1, 1999 (or such longer period of time as shall be necessary to
complete the determination of Net Current Assets pursuant to Section 1.2(c)
below). If, as of February 1, 1999 (or such later date as shall be necessary to
complete the determination of the Net Current Assets), the Buyer shall have made
no claims in respect of any Net Current Assets Shortfall (as defined in Section
1.2(c) below) or for indemnification pursuant to the terms of this Agreement,
the Buyer will execute a joint instruction pursuant to the Escrow Agreement to
instruct the Escrow Agent to deliver all of the Escrow Shares to the Seller
pursuant to the terms of the Escrow Agreement.
(C) At the Seller's option, exercisable by written notice
to the Buyer by the Seller, at or prior to the Closing (the "REGISTRATION
NOTICE"), the Buyer shall be obligated to use its reasonable best efforts to
register under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on
or before December 31, 1998, the shares (the "COMMON SHARES") of the Buyer's
Class A Common Stock which are issuable upon conversion of the Preferred Stock.
(D) If requested by the managing or lead managing
underwriter for any such registered offering of the Common Shares which is an
underwritten public offering, the Seller shall execute and deliver such
underwriting agreement with the managing or lead managing underwriter in such
form as is customarily used by such underwriter with any modifications as the
parties thereto shall agree. In connection with any such registration, the
Seller shall supply to the Buyer such information as may be reasonably requested
by the Buyer in connection with the preparation and filing of a registration
statement with the Securities and Exchange Commission. The Seller shall not
supply any information to the Buyer for inclusion in such registration statement
that will, taken as a whole, at the time the registration statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. Provided that the Buyer shall have
timely completed such registration of the Common Shares, the Seller shall
promptly convert the Preferred Stock into the Common Shares.
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(E) In the event that the Buyer fails to timely complete
such registration of the Common Shares, the Seller may, at his option
exercisable by written notice to the Buyer not later than January 31, 1999,
require the Buyer to purchase up to all of the Preferred Stock held by the
Seller at the price of $1,000 per share. Such notice to the Buyer shall specify
the number of shares of Preferred Stock held by the Seller required to be
purchased and a closing date for such purchase which shall be not sooner than
fifteen (15) days and not longer than thirty (30) days from the date of delivery
of such notice. At the closing of such purchase, the Buyer shall deliver to the
Seller the applicable purchase price in the same manner that the cash portion of
the Purchase Price paid at Closing was paid against delivery by the Seller of
(i) the certificates for the shares of Preferred Stock of the Seller being
purchased, duly endorsed for transfer to the Buyer, and (ii) a certificate
signed by the Seller to the effect that such Preferred Stock of the Seller is
being sold free and clear of all encumbrances and claims of third persons. The
foregoing "put" right of the Seller shall also apply to the shares of the
Preferred Stock which are included in the Escrow Shares; PROVIDED, HOWEVER, the
obligation of the Buyer to purchase such shares of Preferred Stock shall arise
only if, as and when such shares of the Preferred Stock are delivered to the
Seller pursuant to the Escrow Agreement.
(F) In the event the Seller does not timely deliver a
Registration Notice, the Buyer shall have no obligation to register the Common
Shares. Thereafter, the Buyer's sole obligation with respect to the Preferred
Stock and the Common Shares, other than to honor any "put" by the Seller under
Paragraph (E) immediately above, shall be to use its reasonable best efforts to
make available current public information with respect to the Buyer within the
meaning of Subsection (c)(1) of Securities and Exchange Commission Rule 144
("RULE 144") to the extent necessary to facilitate public resales by the Seller
of the Common Shares pursuant to Rule 144.
(c) ADJUSTMENT PROCEDURES.
(1) As used in this Agreement, the term "NET CURRENT
ASSETS" shall mean (i) all of the assets of the Corporation as of the Effective
Closing Date which would, in conformity with generally accepted accounting
principles consequently applied ("GAAP"), be included under current assets on a
balance sheet as of such Date, MINUS (ii) all of the liabilities of the
Corporation as of the Effective Closing Date which would, in conformity with
GAAP, be included under current liabilities on a balance sheet as of such Date.
Not later than 60 days after the Closing Date, the Buyer will prepare and
deliver to the Seller an unaudited balance sheet (the "CLOSING BALANCE SHEET")
of the Corporation as of the close of business on April 30, 1998 (the "EFFECTIVE
CLOSING DATE") consisting of computations of (A) the Net Current Assets and (B)
the net book value of the other tangible assets and liabilities of the
Corporation as of the Effective Closing Date, all as determined in accordance
with GAAP; PROVIDED, HOWEVER, that (A) used vehicle inventories shall be valued
as mutually agreed by the Buyer and the Seller, based upon a physical inventory
to be conducted by them not later than the Business Day immediately preceding
the Effective Closing Date, with any used vehicles as to which the Buyer and the
Seller cannot reach agreement as to value being valued by a mutually acceptable
third party engaged in the business of appraising and valuing inventories for
automobile dealerships not later than the Business Day immediately preceding the
Effective Closing Date, (B) parts inventories shall include only Ford returnable
parts, which shall be valued based on the value of
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such returnable parts under applicable returnable parts plans with Ford, and
salable non-Ford parts shall be valued at net book value, (C) no amounts owing
to the Corporation from the Seller or any Affiliate (as hereinafter defined)
thereof, or from any of the Corporation's officers or employees, shall be
included, (D) no amounts payable to the Seller or to any officers and directors
or other Affiliates (as hereinafter defined) of the Corporation (all the
foregoing amounts payable being, collectively, "AFFILIATE PAYABLES") shall be
included, (E) no liabilities or obligations (including, without limitation,
principal, interest, penalties, fees or other expenses) under lines of credit
(including, without limitation the Corporation's working capital line with Ford
Motor Credit) and other long and short term indebtedness to financial
institutions and other similar financings (all the foregoing liabilities and
obligations being, collectively, "EXCLUDED INDEBTEDNESS") shall be included,
except for new, used and rental vehicle "floor planning" lines, which shall be
included, and (F) there shall be included appropriate write-offs for doubtful
accounts receivable and bad debts and for damaged, spoiled, obsolete or
slow-moving inventory. For purposes of this Agreement, the term "AFFILIATE"
shall mean any entity directly or indirectly controlling, controlled by or under
common control with the specified person, whether by stock ownership, agreement
or otherwise, or any parent, child or sibling of such specified person and the
concept of "CONTROL" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such person or
entity, whether through the ownership of voting securities, by contract or
otherwise.
(2) If within 30 days following delivery of the Closing
Balance Sheet (or the next Business Day if such 30th day is not a Business Day),
the Seller has not given the Buyer notice of the Seller's objection to the
computation of the Net Current Assets as set forth in the Closing Balance Sheet
(such notice to contain a statement in reasonable detail of the nature of the
Seller's objection), then the Net Current Assets reflected in the Closing
Balance Sheet will be deemed mutually agreed by the Buyer and the Seller. If the
Seller shall have given such notice of objection in a timely manner, then the
issues in dispute will be submitted to a "Big Six" accounting firm mutually
acceptable to the Buyer and the Seller (the "ACCOUNTANTS") for resolution. If
issues in dispute are submitted to the Accountants for resolution: (A) each
party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to the party or its subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the determination with
the Accountants; (B) the Accountants will be instructed to determine the Net
Current Assets based upon their resolution of the issues in dispute; (C) such
determination by the Accountants of the Net Current Assets, as set forth in a
notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (D) the Buyer and the Seller shall each bear 50%
of the fees and expenses of the Accountants for such determination.
(3) To the extent that Net Current Assets, as deemed
mutually agreed by the parties or as determined by the Accountants, as
aforesaid, equals or exceeds $1,800,000 (any such excess being called the "NET
CURRENT ASSETS EXCESS"), the Buyer shall be obligated to (A) execute and deliver
to the Escrow Agent a joint instruction to deliver the Escrow Shares to the
Seller pursuant to the Escrow Agreement (except to the extent of any pending
indemnification claim by the Buyer pursuant to this Agreement), and (B) pay any
Net Current Assets Excess promptly to the Seller, together with interest on the
amount of the Net Current Assets Excess at the Buyer's floor plan financing rate
from time to time in effect (the "INTEREST
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RATE") from the Closing Date to the date of such payment. To the extent that the
Net Current Assets, as deemed mutually agreed by the parties or as determined by
the Accountants, as aforesaid, is less than $1,800,000 (the "NET CURRENT ASSETS
SHORTFALL"), the Seller shall be obligated to pay the amount of the Net Current
Assets Shortfall promptly to the Buyer. In furtherance of such obligation of the
Seller, the parties shall execute and deliver to the Escrow Agent a joint
instruction to deliver up to all of the Escrow Shares to the Buyer at the rate
of one Escrow Share for each $1,000 of Net Current Assets Shortfall. To
facilitate administration of the Escrow Shares, no fractional shares of the
Preferred Stock shall be delivered. To the extent that the Net Current Assets
Shortfall exceeds the value (at $1,000 per share) of the Escrow Shares so
delivered to the Buyer, the Seller shall be obligated to pay the amount of such
excess promptly to the Buyer, together with interest on the amount of such
excess at the Interest Rate from the Closing Date to the date of such payment.
(d) CONTINGENT PURCHASE PRICE.
(1) As used in this Agreement, (i) the term "CONTINGENT
PURCHASE PRICE" shall mean an amount equal to the amounts payable pursuant to
paragraph (2) below; (ii) the term "FIRST CALCULATION PERIOD " shall mean
calendar year 1998; (iii) the term "SECOND CALCULATION PERIOD" shall mean
calendar year 1999; (iv) the term "SUBJECT BUSINESS" shall mean the business of
the Corporation acquired by the Buyer pursuant to this Agreement; (v) the term
"EARNINGS BEFORE TAXES" shall mean the earnings before taxes of the Subject
Business for the First Calculation Period or the Second Calculation Period, as
the case may be, as more fully provided in paragraph (3) below; (vi) the term
"PRO FORMA EARNINGS BEFORE TAXES" shall mean Earnings Before Taxes for the First
Calculation Period subject to the following adjustments to reflect compensation
to Aldo B. Paret pursuant to the Employment Agreement in the form of Exhibit E
hereto as if such Employment Agreement were the sole source and basis for any
and all payments to him from January 1, 1998; and (vii) the term "MARKET PRICE"
shall mean the average closing price per share of the Buyer's Class A Common
Stock on the New York Stock Exchange for the twenty (20) consecutive trading
days immediately preceding the date of determination.
(2) Subject to the provisions of Section 9.7 below, not
later than 90 days after the end of the First Calculation Period or the Second
Calculation Period, as the case may be, the Buyer shall pay to the Seller an
installment of the Contingent Purchase Price calculated as follows:
(i) The installment of the Contingent Purchase Price
for the First Calculation Period shall be an amount equal to five (5) times the
excess, if any, of Pro Forma Earnings Before Taxes in excess of $2,500,000; and
(ii) The installment of the Contingent Purchase Price
for the Second Calculation Period shall be an amount equal to five (5) times the
excess, if any, of Earnings Before Taxes for the Second Calculation Period in
excess of the greater of (A) $2,500,000, or (B) the Pro Forma Earnings Before
Taxes.
An amount equal to 100% of each installment of the Contingent Purchase
Price, up to $2,500,000, shall be paid to the Seller by the issuance and
delivery to the Seller of shares of
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Preferred Stock at the rate of one share of Preferred Stock for every $1,000 of
such Contingent Purchase Price or, at the sole discretion of Buyer, registered
shares of the Buyer's Class A Common Stock having an aggregate Market Price on
the date of payment of $2,500,000. Payment of each installment of the Contingent
Purchase Price in excess of $2,500,000 will be paid to the Seller 65% in cash
and 35% in shares of Preferred Stock at the rate of one share of Preferred Stock
for every $1,000 of such Contingent Purchase Price, or, at the sole discretion
of Buyer shares of such registered Class A Common Stock of the Buyer having an
aggregate Market Price on the date of payment equal to the applicable number of
shares of Preferred Stock (valued at $1,000 per share of such Preferred Stock).
Fractional shares of Preferred Stock may be issued in connection with the
payment of the Contingent Purchase Price; HOWEVER, no fractional shares of the
Buyer's Class A Common Stock shall be issued upon conversion of the Preferred
Stock.
(3) Earnings Before Taxes shall be calculated by the Buyer
in accordance with GAAP and subject to the following special rules:
(i) No deduction shall be taken for federal and state
income taxes, or for state franchise taxes based on corporate income, owed by
the Corporation;
(ii) No deduction shall be taken for any interest
expenses (including acquisition debt) of the Corporation other than floor plan
financing interest attributable to the Subject Business and other interest
expenses directly attributable to the operations of the Subject Business;
(iii) Earnings Before Taxes shall be determined before
any expense chargeable with respect to the Non-Competition Agreement (as defined
in Section 1.4(a) below) or any management fee expense allocation from the Buyer
in respect of management fees payable to the Buyer;
(iv) No deduction shall be taken for any amortization
of goodwill included in the Initial Purchase Price;
(v) Overhead expenses or other expenses which have been
incurred by the Corporation which are allocated to the Corporation but do not
directly relate to the operation of the Subject Business, or that portion so
allocated which is not reasonably related to the operation of the Subject
Business, shall not be deducted in determining Earnings Before Taxes;
(vi) Earnings Before Taxes shall be determined prior to
calculation of the Contingent Purchase Price; and
(vii) Income on warranty and insurance products shall
not be deducted in determining Earnings Before Taxes.
At the time of the making of the payment of an installment of the
Contingent Purchase Price, the Buyer shall deliver to the Seller a statement in
writing setting forth in reasonable detail the manner in which the respective
installment of Contingent Purchase Price was determined.
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1.3 DELIVERY OF THE SHARES.
(a) At the Closing, the Seller shall deliver to the Buyer a
certificate or certificates representing the Shares, duly endorsed in blank or
with a fully executed stock power attached, all in proper form for transfer with
all transfer taxes, if any, paid by the Seller.
(b) The Shares shall be delivered to the Buyer free and clear of
all liens, pledges, encumbrances, claims, security interests, charges, voting
trusts, voting agreements, other agreements, rights, options, warrants or
restrictions or claims of any kind, nature or description (collectively,
"ENCUMBRANCES").
1.4 NON-COMPETITION AGREEMENT; EMPLOYMENT AGREEMENT.
(a) NON-COMPETITION AGREEMENT. At the Closing, the Seller will
enter into a non-competition agreement with the Buyer and the Corporation
substantially in the form of Exhibit C hereto (the "NON-COMPETITION AGREEMENT").
(b) EMPLOYMENT AGREEMENT. At the Closing, the Seller and the
Corporation will enter into an employment agreement substantially in the form of
Exhibit D hereto (the "EMPLOYMENT AGREEMENT").
ARTICLE 2
CLOSING
The Closing shall take place at the offices of Parker, Poe, Adams &
Bernstein, L.L.P., 201 S. College Street, Suite 2500, Charlotte, North Carolina,
at 9:30 a.m., local time, on the Closing Date. The Closing Date shall be the
fifth (5th) Business Day, or such shorter period as the Buyer may choose,
following the date the Buyer gives notice of the Closing to the Seller, but in
no event later than July 1, 1998 (the "CLOSING DATE DEADLINE"); PROVIDED,
HOWEVER, if as of the Closing Date Deadline, the consents or approvals of all
applicable automobile manufacturers and distributors contemplated in Section
7.10 shall not have been obtained and/or the audited financial statements
contemplated in Section 7.14 shall not have been completed, the Buyer may, so
long as it is using its reasonable best efforts to obtain such consents or
approvals and/or complete such financial statements, elect to extend the Closing
Date Deadline for up to an additional 60 days. The date upon which the Closing
shall take place is hereinafter called the "CLOSING DATE."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
3.1 OWNERSHIP OF SHARES. The Seller owns of record and beneficially all
of the Shares. The Seller has, and will have at the time of the Closing, good
and valid title to the Shares, free and clear of all Encumbrances.
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3.2 SELLER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS.
(a) The Seller has full capacity, right, power and authority to
execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Seller in connection herewith,
to consummate the transactions contemplated hereby and thereby and to perform
his obligations hereunder and thereunder.
(b) Except as set forth on Schedule 3.2(b) hereto, no
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party, is required in
connection with the execution and delivery by the Seller of this Agreement and
the other agreements, documents and instruments to be executed and delivered by
the Seller in connection herewith, the consummation of the transactions
contemplated hereby and thereby and the performance by the Seller of his
obligations hereunder and thereunder.
3.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other
agreements, documents and instruments to be executed by the Seller in connection
herewith, and the consummation by the Seller of the transactions contemplated
hereby and thereby, have been duly authorized, executed and delivered by the
Seller and constitute, and the other agreements, documents and instruments
contemplated hereby, when executed and delivered by the Seller, shall
constitute, the legal, valid and binding obligations of the Seller, enforceable
against the Seller in accordance with their respective terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally.
3.4 LITIGATION REGARDING SELLER. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the Seller's knowledge, threatened or probable of assertion, against the
Seller relating to the Shares, this Agreement or the transactions contemplated
hereby before any court, governmental or administrative agency or other body.
The Seller does not know of any basis for the institution of any such suit or
proceeding. No judgment, order, writ, injunction, decree or other similar
command of any court or governmental or administrative agency or other body has
been entered against or served upon the Seller relating to the Shares, this
Agreement or the transactions contemplated hereby.
3.5 INTEREST IN COMPETITORS AND RELATED ENTITIES; CERTAIN TRANSACTIONS.
(a) Except as set forth on Schedule 3.5 hereto, neither the Seller
nor any Affiliate of the Seller (i) has any direct or indirect interest in any
person or entity engaged or involved in any business which is competitive with
the business of the Corporation, (ii) has any direct or indirect interest in any
person or entity which is a lessor of assets or properties to, material supplier
of, or provider of services to, the Corporation, or (iii) has a beneficial
interest in any contract or agreement to which the Corporation is a party;
PROVIDED, HOWEVER, that the foregoing representation and warranty shall not
apply to any person or entity, or any interest or agreement with any person or
entity, which is a publicly held corporation in which the Seller individually
owns less than 3% of the issued and outstanding voting stock.
(b) Except as set forth in Schedule 3.5 hereto, there are no
transactions between the Corporation and the Seller (including the Seller's
Affiliates), or any of the directors, officers
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or salaried employees of the Corporation, or the family members or Affiliates of
any of the above (other than for services as employees, officers and directors),
including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from, the
Seller, or any such officer, director or salaried employee, family member, or
Affiliate or any corporation, partnership, trust or other entity in which such
family member, Affiliate, officer, director or employee has a substantial
interest or is a shareholder, officer, director, trustee or partner.
3.6 SELLER NOT FOREIGN PERSON. The Seller is a "United States person"
as that term is defined in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended (the "CODE"), and the regulations promulgated thereunder.
3.7 ORGANIZATION; GOOD STANDING; QUALIFICATIONS; AND POWER. The
Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Corporation is qualified to do business as a foreign
corporation and is in good standing in each of the jurisdictions listed on
Schedule 3.7 hereto, which are the only jurisdictions where the nature of its
business and assets requires such qualification.
3.8 CAPITALIZATION. The authorized capital stock of the Corporation
consists of 6,125 shares of common stock, par value $1.00 per share, of which
6,125 are issued and outstanding and constitute the Shares. All of the Shares
are duly authorized, validly issued, fully paid and non-assessable and are held
by the Seller. Except as set forth on Schedule 3.8 hereto, there are no
preemptive rights, whether at law or otherwise, to purchase any of the
securities of the Corporation and there are no outstanding options, warrants,
"phantom" stock plans, subscriptions, agreements, plans or other commitments
pursuant to which the Corporation is or may become obligated to sell or issue
any shares of its capital stock or any other debt or equity security, and there
are no outstanding securities convertible into shares of such capital stock or
any other debt or equity security.
3.9 SUBSIDIARIES AND INVESTMENTS. The Corporation does not own or
maintain, directly or indirectly, any capital stock of or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity and does not have any
commitment to contribute to the capital of, make loans to, or share in the
losses of, any such entity.
3.10 NO VIOLATION; CONFLICTS. Except as set forth on Schedule 3.10
hereto, the execution and delivery by the Seller of this Agreement and the other
agreements, documents and instruments to be executed and delivered by the Seller
in connection herewith, the consummation by the Seller of the transactions
contemplated hereby and thereby and the performance by the Seller of his
obligations hereunder and thereunder do not and will not (a) conflict with or
violate any of the terms of the Articles of Incorporation or By-Laws of the
Corporation, (b) violate or conflict with any law, ordinance, rule or
regulation, or any judgment, order, writ, injunction, decree or similar command
of any court, administrative or governmental agency or other body,
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applicable to the Corporation, (c) violate or conflict with the terms of, or
result in the acceleration of, any indebtedness or obligation of the Corporation
under, or violate or conflict with or result in a breach of, or constitute a
default under, any indenture, mortgage, deed of trust, agreement or instrument
to which the Corporation is a party or by which the Corporation or any of its
assets or properties is bound or affected, (d) result in the creation or
imposition of any Encumbrance of any nature upon any of the assets or properties
of the Corporation, (e) constitute an event permitting termination of any
agreement, license or other right of the Corporation, or (f) require any
authorization, approval or consent of, or any notice to or filing or
registration with, any governmental agency or body, or any other third party,
applicable to the Corporation or any of its properties or assets.
3.11 TITLE TO ASSETS; RELATED MATTERS. The Corporation has good and
valid title to all assets, rights, interests and other properties, real,
personal and mixed, tangible and intangible, owned by it (collectively, the
"ASSETS"), free and clear of all Encumbrances, except those specified on
Schedule 3.11 and liens for taxes not yet due and payable. The Assets (a)
include all properties and assets (real, personal and mixed, tangible and
intangible) owned by the Corporation; (b) do not include (i) any contracts for
future services, prepaid items or deferred charges the full value or benefit of
which will not be usable by or transferable to the Buyer, or (ii) any goodwill,
organizational expense or other similar intangible asset.
3.12 POSSESSION. The tangible assets included within the Assets are in
the possession or control of the Corporation and no other person or entity has a
right to possession or claims possession of all or any part of such Assets,
except the rights of lessors of Leased Equipment and Leased Premises (each as
defined in Section 3.16 hereof) under their respective contracts and leases.
3.13 FINANCIAL STATEMENTS.
(a) The Seller has delivered to the Buyer prior to the date hereof
the financial statements listed on Schedule 3.13 hereto (hereinafter
collectively referred to as the "FINANCIAL STATEMENTS");
(b) The Financial Statements (i) are in accordance with the books
and records of the Corporation, which books and records are true, correct and
complete, (ii) fully and fairly present the financial position of the
Corporation as of the dates indicated and the results of operation,
stockholders' equity and changes in cash flows of the Corporation for the
periods indicated, and (iii) except as set forth in Schedule 3.13, have been
prepared in accordance with GAAP on an FIFO basis.
3.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Corporation
are collectible at the aggregate recorded amounts thereof, subject to the
reserve for doubtful accounts maintained by the Corporation in the ordinary
course of business, and are not subject to any known counterclaims or setoffs.
An adequate reserve for doubtful accounts for the Corporation has been
established and such reserve is consistent with both the operation of the
Corporation in the ordinary course of business and past practice.
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3.15 INVENTORIES. All inventories of the Corporation consist of items
of a quality and quantity usable and saleable in the ordinary course of business
of the Corporation, and the levels of inventories are consistent with the levels
maintained by the Corporation in the ordinary course consistent with past
practice and the Corporation's obligations under its agreements with all
applicable vehicle manufacturers and distributors. The values at which such
inventories are carried are based on the FIFO method and are stated in
accordance with generally accepted accounting principles consistently applied by
the Seller at the lower of historic cost or market. An adequate reserve has been
established by the Corporation for damaged, spoiled, obsolete, defective, or
slow-moving goods and such reserve is consistent with both the operation of the
Corporation in the ordinary course of business and past practice.
3.16 LEASED PREMISES; MACHINERY AND EQUIPMENT.
(a) OWNED REAL PROPERTY. The Corporation does not own any real
property of any kind.
(b) LEASED PREMISES. Schedule 3.16(b) hereto contains a complete
list and description (including buildings and other structures thereon) of all
real property of which the Corporation is a tenant (herein collectively referred
to as the "LEASED PREMISES" and sometimes collectively referred to as the "REAL
PROPERTY"). True, correct and complete copies of all leases of all Leased
Premises (the "LEASES") have been delivered to the Buyer. The Leased Premises
are in good physical condition and, with respect to each Lease, no event or
condition currently exists which would give rise to a material repair or
restoration obligation if such Lease were to terminate. The Seller has no
knowledge of any event or condition which currently exists which would create a
legal or other impediment to the use of the Leased Premises as currently used,
or would increase the additional charges or other sums payable by the tenant
under any of the Leases (including, without limitation, any pending tax
reassessment or other special assessment affecting the Leased Premises). The
improvements and building systems which comprise a part of the Leased Premises
as to which the Corporation is responsible for the maintenance and repair
thereof are in good condition, maintenance and repair.
(c) CLAIMS. There has been no work performed, services rendered or
materials furnished in connection with repairs, improvements, construction,
alteration, demolition or similar activities with respect to the Real Property
for at least ninety (90) days before the date hereof; there are no outstanding
claims or persons entitled to any claim or right to a claim for a mechanics' or
materialman's lien against the Real Property; and there is no person or entity
other than the Corporation in or entitled to possession of the Real Property.
(d) EASEMENTS, ETC. The Corporation has all easements and rights,
including, but not limited to, easements for power lines, water lines, sewers,
roadways and other means of ingress and egress, necessary to conduct the
business the Corporation now conducts, all such easements and rights are
perpetual, unconditional appurtenant rights to the Real Property, and none of
such easements or rights are subject to any forfeiture or divestiture rights.
(e) CONDEMNATION. Neither the whole nor any portion of any of the
Real Property has been condemned, expropriated, ordered to be sold or otherwise
taken by any public
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authority, with or without payment or compensation therefor, and the Seller does
not know of any such condemnation, expropriation, sale or taking, or have any
grounds to anticipate that any such condemnation, expropriation, sale or taking
is threatened or contemplated. The Seller has no knowledge of any pending
assessments which would affect the Real Property.
(f) ZONING, ETC. None of the Real Property is in violation of any
public or private restriction or any law or any building, zoning, health,
safety, fire or other law, ordinance, code or regulation, and no notice from any
governmental body has been served upon the Corporation or upon any of the Real
Property claiming any violation of any such law, ordinance, code or regulation
or requiring or calling to the attention of the Corporation the need for any
work, repair, construction, alterations or installation on or in connection with
said properties which has not been complied with. All improvements which
comprise a part of the Real Property are located within the record lines of the
Real Property and none of the improvements located on the Real Property encroach
upon any adjoining property or any easements or rights of way and no
improvements located on any adjoining property encroach upon any of the Real
Property or any easements or rights of way servicing the Real Property.
(g) OWNED EQUIPMENT. Schedule 3.16(g) hereto sets forth a list of
all material machinery, equipment, motor vehicles, furniture and fixtures owned
by the Corporation (collectively, the "OWNED EQUIPMENT").
(h) LEASED EQUIPMENT. Schedule 3.16(h) hereto contains a list of
all leases or other agreements, whether written or oral, under which the
Corporation is lessee of or holds or operates any items of machinery, equipment,
motor vehicles, furniture and fixtures or other property (other than real
property) owned by any third party (collectively, the "LEASED EQUIPMENT").
(i) MAINTENANCE OF EQUIPMENT. The Owned Equipment and the Leased
Equipment are in good operating condition, maintenance and repair in accordance
with industry standards taking into account the age thereof.
3.17 PATENTS; TRADEMARKS; TRADE NAMES; COPYRIGHTS; LICENSES, ETC.
(a) Except as set forth on Schedule 3.17 hereto, there are no
patents, trademarks, trade names, service marks, service names and copyrights,
and there are no applications therefor or licenses thereof, inventions, trade
secrets, computer software, logos, slogans, proprietary processes and formulae
and all other proprietary information, know-how and intellectual property
rights, whether patentable or unpatentable, that are owned or leased by the
Corporation or used in the conduct of the Corporation's business. The
Corporation is not a party to, nor pays a royalty to anyone under, any license
or similar agreement. There is no existing claim, or, to the knowledge of the
Seller, any basis for any claim, against the Corporation that any of its
operations, activities or products infringe the patents, trademarks, trade
names, copyrights or other property rights of others or that the Corporation is
wrongfully or otherwise using the property rights of others.
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(b) The Corporation has the right to use the names "Casa Ford"
and/or "Casa Ford of Houston" in the Houston, Texas Metropolitan Statistical
Area (as defined by the Office of Management and Budget) and, to the knowledge
of the Seller, no person uses, or has the right to use, in such Area, such name
or any derivation thereof in connection with the manufacture, sale, marketing or
distribution of products or services commonly associated with an automobile
dealership.
3.18 CERTAIN LIABILITIES.
(a) All accounts payable by the Corporation to third parties as of
the date hereof arose in the ordinary course of business and none are delinquent
or past-due.
(b) Schedule 3.18 hereto sets forth a list of all indebtedness of
the Corporation, other than accounts payable, as of the close of business on the
day preceding the date hereof, including, without limitation, money borrowed,
indebtedness of the Corporation owed to stockholders and former stockholders,
the deferred purchase price of assets, letters of credit and capitalized leases,
indicating, in each case, the name or names of the lender, the date of maturity,
the rate of interest, any prepayment penalties or premiums and the unpaid
principal amount of such indebtedness as of such date.
3.19 NO UNDISCLOSED LIABILITIES. The Corporation does not have any
material liabilities or obligations of any nature, known or unknown, fixed or
contingent, matured or unmatured, other than those (a) reflected in the
Financial Statements, (b) incurred in the ordinary course of business since the
date of the Financial Statements and of the type and kind reflected in the
Financial Statements, or (c) disclosed specifically on Schedule 3.19 hereto.
3.20 ABSENCE OF CHANGES. Since December 31, 1997, the business of the
Corporation has been operated in the ordinary course, consistent with past
practices and, except as set forth on Schedule 3.20 hereto, there has not been
incurred, nor has there occurred:
(a) Any damage, destruction or loss (whether or not covered by
insurance), adversely affecting the business or assets of the Corporation in
excess of $50,000; (b) Any strikes, work stoppages or other labor disputes
involving the employees of the Corporation; (c) Any sale, transfer, pledge or
other disposition of any of the Assets of the Corporation having an aggregate
book value of $50,000 or more (except sales of vehicles and parts inventory in
the ordinary course of business); (d) Any declaration or payment of any dividend
or other distribution in respect of its capital stock or any redemption,
repurchase or other acquisition of its capital stock, (e) any amendment,
termination, waiver or cancellation of any Material Agreement (as defined in
Section 3.29 hereof) or any termination, amendment, waiver or cancellation of
any material right or claim of the Corporation under any Material Agreement
(except in each case in the ordinary course of business and consistent with past
practice); (f) Any (1) general uniform increase in the compensation of the
employees of the Corporation (including, without limitation, any increase
pursuant to any bonus, pension, profit-sharing, deferred compensation or other
plan or commitment), (2) increase in any such compensation payable to any
individual officer, director, consultant or agent thereof, or (3) loan or
commitment therefor made by the Corporation to any officer, director,
stockholder, employee, consultant or agent of the Corporation; (g) Any change in
the accounting methods, procedures
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or practices followed by the Corporation or any change in depreciation or
amortization policies or rates theretofore adopted by the Corporation; (h) Any
material change in policies, operations or practices of the Corporation with
respect to business operations followed by the Corporation, including, without
limitation, with respect to selling methods, returns, discounts or other terms
of sale, or with respect to the policies, operations or practices of the
Corporation concerning the employees of the Corporation; (i) Any capital
appropriation or expenditure or commitment therefor on behalf of the Corporation
in excess of $50,000 individually or $100,000 in the aggregate; (j) Any
write-down or write-up of the value of any inventory or equipment of the
Corporation or any increase in inventory levels in excess of historical levels
for comparable periods; (k) Any account receivable in excess of $50,000 or note
receivable in excess of $50,000 owing to the Corporation which (1) has been
written off as uncollectible, in whole or in part, (2) has had asserted against
it any claim, refusal or right of setoff, or (3) the account or note debtor has
refused to, or threatened not to, pay for any reason, or such account or note
debtor has become insolvent or bankrupt; (l) Any other change in the condition
(financial or otherwise), business operations, assets, earnings, business or
prospects of the Corporation which, in the judgment of the Seller, has, or could
reasonably be expected to have, a material adverse effect on the assets,
business or operations of the Corporation; or (m) Any agreement, whether in
writing or otherwise, for the Corporation to take any of the actions enumerated
in this Section 3.20.
3.21 TAX MATTERS.
(a) All federal, state and local tax returns and tax reports
required as of the date hereof to be filed by the Corporation for taxable
periods ending prior to the date hereof have been duly and timely filed prior to
the due date thereof (as such due date may have been lawfully extended) by the
Corporation with the appropriate governmental agencies, and all such returns and
reports are true, correct and complete.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated and other taxes of any nature, including interest, penalties and other
additions to such taxes ("TAXES"), payable by, or due from, the Corporation for
all periods prior to the date hereof have been fully paid or adequately reserved
for by the Corporation or, with respect to Taxes required to be accrued, the
Corporation has properly accrued or will properly accrue such Taxes in the
ordinary course of business consistent with past practice of the Corporation.
(c) Set forth on Schedule 3.21 hereto are the tax years for which
the federal income tax returns of the Corporation have been examined by the
Internal Revenue Service ("IRS") and accepted. Except as set forth on Schedule
3.21 hereto, the Corporation has not received any notice of any assessed or
proposed claim or deficiency against it in respect of, or of any present dispute
between it and any governmental agency concerning, any Taxes. Except as set
forth on Schedule 3.21 hereto, no examination or audit of any tax return or
report of the Corporation by any applicable taxing authority is currently in
progress and there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return or report of the
Corporation. Copies of all federal, state and local tax returns and reports
required to be filed by the Corporation since the date of its incorporation
(i.e., for the years ended 1997, 1996, 1995 and 1994), together with all
schedules and attachments thereto, have been delivered by the Seller to the
Buyer.
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(d) The Corporation is not now, and has never been, a member of a
consolidated group for federal income tax purposes or a consolidated, combined
or similar group for state tax purposes. No consent under Code Section 341 has
been made affecting the Corporation. The Corporation is not a party to any
agreement or arrangement that would result in the payment of any "excess
parachute payments" under Code Section 280G. The Corporation is not required to
make any adjustment under Code Section 481(a). No power of attorney relating to
Taxes is currently in effect affecting the Corporation.
3.22 COMPLIANCE WITH LAWS, ETC. The Corporation has conducted its
operations and business in compliance with, and all of the Assets (including all
of the Real Property) comply with, (i) all applicable laws, rules, regulations
and codes (including, without limitation, any laws, rules, regulations and codes
relating to anticompetitive practices, contracts, discrimination, employee
benefits, employment, health, safety, fire, building and zoning, but excluding
Environmental Laws which are the subject of Section 3.36 hereof) and (ii) all
applicable orders, rules, writs, judgments, injunctions, decrees and ordinances.
The Corporation has not received any notification of any asserted present or
past failure by it to comply with such laws, rules or regulations, or such
orders, writs, judgments, injunctions, decrees or ordinances. Set forth on
Schedule 3.22 hereto are all orders, writs, judgments, injunctions, decrees and
other awards of any court or governmental agency applicable to the Corporation
or its business or operations. The Seller has delivered to the Buyer copies of
all reports, if any, of the Corporation required to be submitted under the
Federal Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations. The deficiencies, if
any, noted on such reports have been corrected by the Corporation and any
deficiencies noted by inspection through the Closing Date will have been
corrected by the Corporation by the Closing Date.
3.23 LITIGATION REGARDING THE CORPORATION. Except as set forth on
Schedule 3.23 hereto, there are no actions, suits, claims, investigations or
legal, administrative or arbitration proceedings pending, or, to the Seller's
knowledge, threatened or probable of assertion, against the Corporation or
relating to its assets, business or operations or the transactions contemplated
by this Agreement, and the Seller does not know of any basis for the institution
of any such suit or proceeding. No order, writ, judgment, injunction, decree or
similar command of any court or any governmental or administrative agency or
other body has been entered against or served upon the Corporation relating to
the Corporation or its assets, business or operations.
3.24 PERMITS, ETC. Set forth on Schedule 3.24 hereto is a list of all
governmental licenses, permits, approvals, certificates of inspection and other
authorizations, filings and registrations that are necessary for the Corporation
to own and operate its business as presently conducted (collectively, the
"PERMITS"). All such Permits have been duly and lawfully secured or made by the
Corporation and are in full force and effect. There is no proceeding pending,
or, to the Seller's knowledge, threatened or probable of assertion, to revoke or
limit any such Permit. None of the transactions contemplated by this Agreement
will terminate, violate or limit the effectiveness of any such Permit.
3.25 EMPLOYEES; LABOR RELATIONS. As of the date hereof, the Corporation
employed a total of approximately 110 employees. As of the date hereof, (a) the
Corporation is not delinquent in the payment (i) to or on behalf of its past or
present employees of any wages, salaries, commissions, bonuses, benefit plan
contributions or other compensation for all periods
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prior to the date hereof, or (ii) of any amount which is due and payable to any
state or state fund pursuant to any workers' compensation statute, rule or
regulation or any amount which is due and payable to any workers' compensation
claimant; (b) there are no collective bargaining agreements currently in effect
between the Corporation and labor unions or organizations representing any
employees of the Corporation; (c) no collective bargaining agreement is
currently being negotiated by the Corporation; (d) to the knowledge of the
Seller, there are no union organizational drives in progress and there has been
no formal or informal request to the Corporation for collective bargaining or
for an employee election from any union or from the National Labor Relations
Board; and (e) no dispute exists between the Corporation and any of its sales
representatives or, to the knowledge of the Seller, between any such sales
representatives with respect to territory, commissions, products or any other
terms of their representation.
3.26 COMPENSATION. Schedule 3.26 contains a schedule of all employees
(including sales representatives) and consultants of the Corporation whose
individual cash compensation for the year ended December 31, 1997, is in excess
of $100,000, together with the amount of total compensation paid to each such
person for the twelve month period ended December 31, 1997 and the current
aggregate base salary or hourly rate (including any bonus or commission) for
each such person.
3.27 EMPLOYEE BENEFITS.
(a) The Seller has listed on Schedule 3.27 and has delivered to
the Buyer true and complete copies of all Employee Plans (as defined below) and
related documents, established, maintained or contributed to by the Corporation
(which shall include for this purpose and for the purpose of all of the
representations in this Section 3.27, the Seller and all employers, whether or
not incorporated, that are treated together with the Corporation as a single
employer with the meaning of Section 414 of the Code). The term "EMPLOYEE PLAN"
shall include all plans described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and also shall include,
without limitation, any deferred compensation, stock, employee or retiree
pension benefit, welfare benefit or other similar fringe or employee benefit
plan, program, policy, contract or arrangement, written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, covering employees or
former employees of the Corporation and maintained or contributed to by the
Corporation.
(b) Where applicable, each Employee Plan (i) has been administered
in material compliance with the terms of such Employee Plan and the requirements
of ERISA and the Code; and (ii) is in material compliance with the reporting and
disclosure requirements of ERISA and the Code. The Corporation does not maintain
or contribute to, and has never maintained or contributed to, an Employee Plan
subject to Title IV of ERISA or a "multiemployer plan." There are no facts
relating to any Employee Plan that (i) have resulted in a "prohibited
transaction" of a material nature or have resulted or is reasonably likely to
result in the imposition of a material excise tax, penalty or liability pursuant
to Section 4975 of the Code, (ii) have resulted in a material breach of
fiduciary duty or violation of Part 4 of Title I of ERISA, or (iii) have
resulted or could result in any material liability (whether or not asserted as
of the date hereof) of the Corporation or any ERISA affiliate pursuant to
Section 412 of the Code arising under or related to any event, act or omission
occurring on or prior to the date hereof. Each Employee Plan that is intended to
qualify under Section 401(a) or to be exempt under Section
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501(c)(g) of the Code is so qualified or exempt as of the date hereof in each
case as such Employee Plan has received favorable determination letters from the
Internal Revenue Service with respect thereto. To the knowledge of the Seller,
the amendments to and operation of any Employee Plan subsequent to the issuance
of such determination letters do not adversely affect the qualified status of
any such Employee Plan. No Employee Plan has an "accumulated funding deficiency"
as of the date hereof, whether or not waived, and no waiver has been applied
for. The Corporation has made no promises or incurred any liability under any
Employee Plan or otherwise to provide health or other welfare benefits to former
employees of the Corporation, except as specifically required by law. There are
no pending or, to the best knowledge of the Seller, threatened claims (other
than routine claims for benefit) or lawsuits with respect to any of the
Corporation's Employee Plans. As used in this Section 3.27, all technical terms
enclosed in quotation marks shall have the meaning set forth in ERISA.
3.28 POWERS OF ATTORNEY. There are no persons, firms, associations,
corporations or business organizations or entities holding general or special
powers of attorney from the Corporation.
3.29 MATERIAL AGREEMENTS.
(a) LIST OF MATERIAL AGREEMENTS. Set forth on Schedule 3.29(a)
hereto is a list or, where indicated, a brief description of all leases and all
other contracts, agreements, documents, instruments, guarantees, plans,
understandings or arrangements, written or oral, which are material to the
Corporation or its business or assets (collectively, the "MATERIAL AGREEMENTS").
True copies of all written Material Agreements and written summaries of all oral
Material Agreements described or required to be described on Schedule 3.29(a)
have been furnished to the Buyer.
(b) PERFORMANCE, DEFAULTS, ENFORCEABILITY. The Corporation has in
all material respects performed all of its obligations required to be performed
by it to the date hereof, and is not in default or alleged to be in default in
any material respect, under any Material Agreement, and there exists no event,
condition or occurrence which, after notice or lapse of time or both, would
constitute such a default. To the knowledge of the Seller, no other party to any
Material Agreement is in default in any respect of any of its obligations
thereunder. Each of the Material Agreements is valid and in full force and
effect and enforceable against the parties thereto in accordance with their
respective terms, and, except as set forth in Schedule 3.29(b) hereto, the
consummation of the transactions contemplated by this Agreement will not (i)
require the consent of any party thereto or (ii) constitute an event permitting
termination thereof.
3.30 BROKERS' OR FINDERS' FEES, ETC. No agent, broker, investment
banker, person or firm acting on behalf of the Corporation or the Seller or any
person, firm or corporation affiliated with the Seller or under his authority is
or will be entitled to any brokers' or finders' fee or any other commission or
similar fee directly or indirectly from any of the parties hereto in connection
with the sale of the Shares contemplated hereby, other than the fee or
commission, to be paid solely by the Seller, to NCM Associates, Inc.
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3.31 BANK ACCOUNTS, CREDIT CARDS, SAFE DEPOSIT BOXES AND CELLULAR
TELEPHONES. Schedule 3.31 hereto lists all bank accounts, credit cards and safe
deposit boxes in the name of, or controlled by, the Corporation, and all
cellular telephones provided and/or paid for by the Corporation, and details
about the persons having access to or authority over such accounts, credit
cards, safe deposit boxes and cellular telephones.
3.32 INSURANCE.
(a) Schedule 3.32(a) hereto contains a list of all policies of
liability, theft, fidelity, life, fire, product liability, workmen's
compensation, health and any other insurance and bonds maintained by, or on
behalf of, the Corporation on its properties, operations, inventories, assets,
business or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000 thereunder).
Each such insurance policy identified therein is and shall remain in full force
and effect on and as of the Closing Date and the Corporation is not in default
with respect to any provision contained in any such insurance policy and has not
failed to give any notice or present any claim under any such insurance policy
in a due and timely fashion. The insurance maintained by, or on behalf of, the
Corporation is adequate in accordance with the standards of business of
comparable size in the industry in which the Corporation operates and no notice
of cancellation or termination has been received with respect to any such
policy. The Corporation has not, during the last three (3) fiscal years, been
denied or had revoked or rescinded any policy of insurance.
(b) Set forth on Schedule 3.32(b) hereto is a summary of
information pertaining to material property damage and personal injury claims in
excess of $5,000 against the Corporation during the past five (5) years, all of
which are fully satisfied or are being defended by the insurance carrier and
involve no exposure to the Corporation.
3.33 WARRANTIES. Set forth on Schedule 3.33 hereto are descriptions or
copies of the forms of all express warranties and disclaimers of warranty made
by the Corporation (separate and distinct from any applicable manufacturers',
suppliers' or other third-parties' warranties or disclaimers of warranties)
during the past five (5) years to customers or users of the vehicles, parts,
products or services of the Corporation. There have been no breach of warranty
or breach of representation claims against the Corporation during the past five
(5) years which have resulted in any cost, expenditure or exposure to the
Corporation of more than $100,000 individually or in the aggregate.
3.34 DIRECTORS AND OFFICERS. Set forth on Schedule 3.34 hereto is a
true and correct list of the names and titles of each director and officer of
the Corporation.
3.35 SUPPLIERS AND CUSTOMERS. The Corporation is not required to
provide bonding or any other security arrangements in connection with any
transactions with any of its respective customers and suppliers. To the
knowledge of the Seller, no such supplier, customer or creditor intends or has
threatened, or reasonably could be expected, to terminate or modify any of its
relationships with the Corporation.
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3.36 ENVIRONMENTAL MATTERS.
(a) For purposes of this Section 3.36, the following terms shall
have the following meaning: (i) "ENVIRONMENTAL LAW" means all present and future
federal, state and local laws, statutes, regulations, rules, ordinances and
common law, and all judgments, decrees, orders, agreements, or permits, issued,
promulgated, approved or entered thereunder by any government authority relating
to pollution, Hazardous Materials, worker safety or protection of human health
or the environment. (ii) "HAZARDOUS MATERIALS" means any waste, pollutant,
chemical, hazardous material, hazardous substance, toxic substance, hazardous
waste, special waste, solid waste, petroleum or petroleum-derived substance or
waste (regardless of specific gravity), or any constituent or decomposition
product of any such pollutant, material, substance or waste, including, but not
limited to, any hazardous substance or constituent contained within any waste
and any other pollutant, material, substance or waste regulated under or as
defined by any Environmental Law.
(b) The Corporation has obtained all permits, licenses and other
authorizations or approvals required under Environmental Laws for the conduct
and operation of the Assets and the business of the Corporation ("ENVIRONMENTAL
PERMITS"). All such Environmental Permits are in good standing, the Corporation
is and has been in compliance with the terms and conditions of all such
Environmental Permits, and no appeal or any other action is pending or
threatened to revoke any such Environmental Permit.
(c) The Corporation and its business, operations and assets are
and have been in compliance with all Environmental Laws.
(d) Neither the Corporation nor the Seller has received any
written or oral order, notice, complaint, request for information, claim, demand
or other communication from any government authority or other person, whether
based in contract, tort, implied or express warranty, strict liability, or any
other common law theory, or any criminal or civil statute, arising from or with
respect to (i) the presence, release or threatened release of any Hazardous
Material or any other environmental condition on, in or under the Real Property
or any other property formerly owned, used or leased by the Corporation, (ii)
any other circumstances forming the basis of any actual or alleged violation by
the Corporation or the Seller of any Environmental Law or any liability of the
Corporation or the Seller under any Environmental Law, (iii) any remedial or
removal action required to be taken by the Corporation or the Seller under any
Environmental Law, or (iv) any harm, injury or damage to real or personal
property, natural resources, the environment or any person alleged to have
resulted from the foregoing, nor is the Seller aware of any facts which might
reasonably give rise to such notice or communication. Neither the Corporation
nor the Seller has entered into any agreements concerning any removal or
remediation of Hazardous Materials.
(e) No lawsuits, claims, civil actions, criminal actions,
administrative proceedings, investigations or enforcement or other actions are
pending or threatened under any Environmental Law with respect to the
Corporation, the Seller or the Real Property.
(f) No Hazardous Materials are or have been released, discharged,
spilled or disposed of onto, or migrated onto, the Real Property or any other
property previously owned,
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operated or leased by the Corporation, and no environmental condition exists
(including, without limitation, the presence, release, threatened release or
disposal of Hazardous Materials) related to the Real Property, to any property
previously owned, operated or leased by the Corporation, or to the Corporation's
past or present operations, which would constitute a violation of any
Environmental Law or otherwise give rise to costs, liabilities or obligations
under any Environmental Law.
(g) Neither the Corporation nor the Seller, nor any of their
respective predecessors in interest, has transported or disposed of, or arranged
for the transportation or disposal of, any Hazardous Materials to any location
(i) which is listed on the National Priorities List, the CERCLIS list under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar federal, state or local list, (ii) which is the subject
of any federal, state or local enforcement action or other investigation, or
(iii) about which either the Corporation or the Seller has received or has
reason to expect to receive a potentially responsible party notice or other
notice under any Environmental Law.
(h) No environmental lien has attached or is threatened to be
attached to the Real Property.
(i) No employee of the Corporation in the course of his or her
employment with the Corporation has been exposed to any Hazardous Materials or
other substance, generated, produced or used by the Corporation which could give
rise to any claim (whether or not such claim has been asserted) against the
Corporation.
(j) Except as set forth on Schedule 3.36 hereto, the Real Property
does not contain any: (i) septic tanks into which process wastewater or any
Hazardous Materials have been disposed; (ii) asbestos; (iii) polychlorinated
biphenyls (PCBs); (iv) underground injection or monitoring wells; or (v)
underground storage tanks.
(k) Except as set forth on Schedule 3.36, there have been no
environmental studies or reports made relating to the Real Property or any other
property or facility previously owned, operated or leased by the Corporation.
(l) The Corporation has not agreed to assume, defend, undertake,
guarantee, or provide indemnification for, any liability, including, without
limitation, any obligation for corrective or remedial action, of any other
person under any Environmental Law for environmental matters or conditions.
3.37 BUSINESS GENERALLY. The Seller is not aware of the existence of
any conditions, including, without limitation, any actual or potential
competitive factors in the markets in which the Corporation participates, which
have not been disclosed in writing to the Buyer and which could reasonably be
expected to have an adverse effect on the business and operations of the
Corporation, other than general business and economic conditions generally
affecting the industry and markets in which the Corporation participates.
3.38 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the
Seller contained in this Agreement, and no statement contained in any
certificate or Schedule furnished
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or to be furnished by the Seller to the Buyer in connection with this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make such
representation and warranty or such statement not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware.
4.2 BUYER'S POWER AND AUTHORITY; CONSENTS AND APPROVALS.
(a) The Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by the Buyer in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder.
(b) Except as set forth in Schedule 4.2(b) hereto, no
authorization, approval or consent of, or notice to or filing or registration
with, any governmental agency or body, or any other third party, is required in
connection with the execution and delivery by the Buyer of this Agreement and
the other agreements, documents and instruments to be executed by the Buyer in
connection herewith, the consummation by the Buyer of the transactions
contemplated hereby or thereby or the performance by the Buyer of its
obligations hereunder and thereunder.
4.3 EXECUTION AND ENFORCEABILITY. This Agreement and the other
agreements, documents and instruments to be executed and delivered by the Buyer
in connection herewith, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, have been duly and validly authorized, executed
and delivered by all necessary corporate action on the part of the Buyer and
this Agreement constitutes, and the other agreements, documents and instruments
to be executed and delivered by the Buyer in connection herewith, when executed
and delivered by the Buyer, shall constitute the legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in accordance with their
respective terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors' rights generally and general equity principles.
4.4 LITIGATION REGARDING BUYER. There are no actions, suits, claims,
investigations or legal, administrative or arbitration proceedings pending or,
to the Buyer's knowledge, threatened or probable of assertion against the Buyer
relating to this Agreement or the transactions contemplated hereby before any
court, governmental or administrative agency or other body, and no judgment,
order, writ, injunction, decree or other similar command of any court or
governmental or administrative agency or other body has been entered against or
served upon the Buyer relating to this Agreement or the transactions
contemplated hereby.
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4.5 NO VIOLATION; CONFLICTS. The execution and delivery by the Buyer of
this Agreement and the other agreements, documents and instruments to be
executed and delivered by the Buyer in connection herewith, the consummation by
the Buyer of the transactions contemplated hereby and thereby and the
performance by the Buyer of its obligations hereunder and thereunder do not and
will not (a) conflict with or violate any of the terms of the Certificate of
Incorporation or By-Laws of the Buyer, or (b) violate or conflict with any
domestic law, ordinance, rule or regulation, or any judgement, order, writ,
injunction or decree of any court, administrative or governmental agency or
other body, material to the Buyer.
4.6 BROKERS' OR FINDERS' FEES, ETC. No agent, broker, investment
banker, person or firm acting on behalf of the Buyer or any person, firm or
corporation affiliated with the Buyer or under its authority is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with the
sale of the Shares contemplated hereby.
4.7 MISSTATEMENTS AND OMISSIONS. No representation and warranty by the
Buyer contained in this Agreement, and no statement contained in any certificate
or Schedule furnished or to be furnished by the Buyer to the Seller in
connection with this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make such representation and warranty or such statement not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS OF THE SELLER
The Seller hereby covenants and agrees that, from and after the date
hereof until the Closing:
5.1 PROVIDE ACCESS TO INFORMATION; COOPERATION WITH BUYER.
(a) ACCESS. The Seller shall afford, and cause the Corporation to
afford, to the Buyer, its attorneys, accountants, and representatives, free and
full access at all reasonable times, and upon reasonable prior notice, to the
properties, books and records of the Corporation, and to interview personnel,
suppliers and customers of the Corporation, in order that the Buyer may have a
full opportunity to make such investigation (including the Environmental Audit
contemplated by Section 5.11 below) as it shall reasonably desire of the assets,
business and operations of the Corporation (including, without limitation, any
appraisals or inspections thereof), and provide to the Buyer and its
representatives such additional financial and operating data and other
information as to the business and properties of the Corporation as the Buyer
shall from time to time reasonably request.
(b) COOPERATION IN OBTAINING CONSENTS. The Seller shall use
reasonable best efforts in cooperating with the Buyer in the preparation of and
delivery to all applicable automobile manufacturers or distributors, as soon as
practicable after the date hereof, of an application and other information
necessary to obtain such automobile manufacturer's or distributor's consent to
or the approval of the transactions contemplated by this Agreement.
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5.2 OPERATION OF BUSINESS OF THE CORPORATION. The Seller shall cause
the Corporation to (a) maintain its corporate existence in good standing, (b)
operate its business substantially as presently operated and only in the
ordinary course and consistent with past operations and its obligations under
any existing agreements with all applicable automobile manufacturers or
distributors, (c) use its best efforts to preserve intact its present business
organizations and employees and its relationships with persons having business
dealings with them, including, but not limited to, all applicable automobile
manufacturers or distributors and any floor plan financing creditors, (d) comply
in all respects with all applicable laws, rules and regulations, (e) maintain
its insurance coverages, (f) pay all Taxes, charges and assessments when due,
subject to any valid objection or contest of such amounts asserted in good faith
and adequately reserved against, (g) make all debt service payments when
contractually due and payable, (h) pay all accounts payable and other current
liabilities when due, (i) maintain the Employee Plans and each plan, agreement
and arrangement listed on Schedule 3.27, and (j) maintain its property, plant
and equipment in good operating condition in accordance with industry standards
taking into account the age thereof.
5.3 BOOKS OF ACCOUNT. The Seller shall cause the Corporation to
maintain its books and records of account in the usual, regular and ordinary
manner.
5.4 EMPLOYEES. The Seller shall (i) use his reasonable best efforts to
encourage such personnel of the Corporation as the Buyer may designate in
writing to remain employees of the Corporation after the date of the Closing,
and (ii) not take any action, or permit the Corporation to take any action, to
encourage any of the personnel of the Corporation to leave their positions with
the Corporation.
5.5 CERTAIN PROHIBITIONS. The Seller shall not permit the Corporation
to (i) issue any equity or debt security or any options or warrants, (ii) enter
into any subscriptions, agreements, plans or other commitments pursuant to which
the Corporation is or may become obligated to issue any of its debt or equity
securities, (iii) otherwise change or modify its capital structure, (iv) engage
in any reorganization or similar transaction, (v) sell or otherwise dispose of
any of its assets, other than sales of inventory in the ordinary course of
business, (vi) declare or make payment of any dividend or other distribution in
respect of its capital stock or redeem, repurchase or otherwise acquire any of
its capital stock, or (vii) agree to take any of the foregoing actions.
5.6 OTHER CHANGES. The Seller shall not permit the Corporation to take,
cause, agree to take or cause to occur any of the actions or events set forth in
Section 3.20 of this Agreement.
5.7 ADDITIONAL INFORMATION. The Seller shall furnish and cause the
Corporation to furnish to the Buyer such additional information with respect to
any matters or events arising or discovered subsequent to the date hereof which,
if existing or known on the date hereof, would have rendered any representation
or warranty made by the Seller or any information contained in any Schedule
hereto or in other information supplied in connection herewith then inaccurate
or incomplete. The receipt of such additional information by the Buyer shall not
operate as a waiver by the Buyer of the obligations of the Seller to satisfy the
conditions to Closing set forth in Section 7.1 hereof.
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5.8 PUBLICITY. Except as may be required by law or the applicable rules
or regulations of any securities exchange, the Seller shall not (i) make or
permit the Corporation to make any press release or other public announcement
relating to this Agreement or the transactions contemplated hereby, without the
prior written approval of the Buyer, and (ii) otherwise disclose the existence
and nature of their discussions or negotiations regarding the transactions
contemplated hereby to any person or entity other than their accountants,
attorneys and similar professionals, all of whom shall be subject to this
nondisclosure obligation as agents of the Seller, as the case may be. The Seller
shall cooperate with the Buyer in the preparation and dissemination of any
public announcements of the transactions contemplated by this Agreement.
5.9 OTHER NEGOTIATIONS. The Seller shall not pursue, initiate,
encourage or engage in, nor shall any of their respective Affiliates or agents
pursue, initiate, encourage or engage in, and the Seller shall cause the
Corporation and its Affiliates, directors, officers and agents not to pursue,
initiate, encourage or engage in, any negotiations or discussions with, or
provide any information to, any other person or entity (other than the Buyer and
its representatives and Affiliates) regarding the sale of the assets or capital
stock of the Corporation or any merger or similar transaction involving the
Corporation.
5.10 CLOSING CONDITIONS. The Seller shall use all reasonable best
efforts to satisfy promptly the conditions to Closing set forth in Article 7
hereof required herein to be satisfied by the Seller prior to the Closing.
5.11 ENVIRONMENTAL AUDIT. The Seller shall cause the Corporation to
allow an environmental consulting firm selected by the Buyer (the "ENVIRONMENTAL
AUDITOR") to have prompt access to the Real Property in order to conduct an
environmental investigation, satisfactory to the Buyer in scope (such scope
being sufficient to result in a Phase I environmental audit report and a Phase
II environmental audit report, if desired by the Buyer), of, and to prepare a
report with respect to, the Real Property (the "ENVIRONMENTAL AUDIT"). The
Seller shall cause the Corporation to provide to the Environmental Auditor: (i)
reasonable access to all its existing records concerning the matters which are
the subject of the Environmental Audit; and (ii) reasonable access to the
employees of the Corporation and the last known addresses of former employees of
the Corporation who are most familiar with the matters which are the subject of
the Environmental Audit (the Seller agreeing to use reasonable efforts to have
such former employees respond to any reasonable requests or inquiries by the
Environmental Auditor). The Seller shall otherwise cooperate and cause the
Corporation to cooperate with the Environmental Auditor in connection with the
Environmental Audit. The Buyer and the Seller shall each bear 50% of the costs,
fees and expenses incurred in connection with the preparation of the
Environmental Audit.
5.12 AUDITED FINANCIAL STATEMENTS. The Seller shall allow, cooperate
with and assist Buyer's accountants, and shall instruct the Corporation's
accountants to cooperate, in the preparation of audited financial statements of
the Corporation as necessary for any required filings by the Buyer with the
Securities and Exchange Commission or with the Buyer's lenders; PROVIDED that
the expense of such audit shall be borne by the Buyer.
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5.13 HART-SCOTT-RODINO. Subject to the determination by the Buyer that
any of the following actions is not required, the Seller shall promptly prepare
and file Notification and Report Forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "ANTITRUST DIVISION"), and respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation.
ARTICLE 6
PRE-CLOSING COVENANTS OF BUYER
The Buyer hereby covenants and agrees that, from and after the date
hereof until the Closing:
6.1 PUBLICITY. Except as may be required by law or by the rules of the
New York Stock Exchange, or as necessary in connection with the transactions
contemplated hereby, the Buyer shall not (i) make any press release or other
public announcement relating to this Agreement or the transactions contemplated
hereby, without the prior written approval of the Seller, or (ii) otherwise
disclose the existence and nature of its discussions or negotiations regarding
the transactions contemplated hereby to any person or entity other than its
accountants, attorneys and similar professionals, all of whom shall be subject
to this nondisclosure obligation as agents of the Buyer.
6.2 CLOSING CONDITIONS. The Buyer shall use all reasonable best efforts
to satisfy promptly the conditions to Closing set forth in Article 8 hereof
required herein to be satisfied by the Buyer prior to the Closing.
6.3 APPLICATION TO AUTOMOBILE MANUFACTURERS AND DISTRIBUTORS. Subject
to the reasonable cooperation of the Seller, the Buyer shall provide to all
applicable automobile manufacturers and distributors as promptly as practicable
after the execution and delivery of this Agreement any application or other
information with respect to such application necessary in connection with the
seeking of the consents of such manufacturers and distributors to the
transactions contemplated by this Agreement.
6.4 HART-SCOTT-RODINO. Subject to the determination by the Buyer that
any of the following actions is not required, the Buyer shall promptly prepare
and file Notification and Report Forms under the HSR Act with the FTC and the
Antitrust Division, respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division for additional information or
documentation, and the Buyer shall pay all filing fees in connection therewith.
6.5 ACCESS. The Buyer shall afford to the Seller, his attorneys,
accountants, and representatives, free and full access at all reasonable times,
and upon reasonable prior notice, to the properties, books and records of the
Buyer, and to interview personnel, suppliers and customers of the Buyer, in
order that the Seller may have a full opportunity to make such investigation as
he shall reasonably desire of the assets, business and operations of the Buyer.
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ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING
The obligations of the Buyer to perform this Agreement at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Buyer:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Seller in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
7.2 PERFORMANCE OF OBLIGATIONS OF THE SELLER. The Seller shall have
performed all obligations required to be performed by the Seller under this
Agreement, and complied with all covenants for which compliance by the Seller is
required under this Agreement, prior to or at the Closing, including, without
limitation, delivery of the stock certificates and stock powers for the Shares
described in Section 1.3 hereof.
7.3 CLOSING DOCUMENTATION. The Buyer shall have received the following
documents, agreements and instruments from the Seller:
(a) a certificate signed by the Seller and dated the date of the
Closing certifying as to the satisfaction of the conditions set forth in
Sections 7.1 and 7.2 hereof;
(b) such duly signed resignations of directors and officers of the
Corporation as the Buyer shall have previously requested;
(c) an opinion of Daniel C. Pappas, P.C., counsel for the Seller,
dated the date of the Closing and addressed to the Buyer, in form and substance
reasonably acceptable to the Buyer and its counsel;
(d) copies of all authorizations, approvals, consents, notices,
registrations and filings referred to in Schedules 3.2(b), 3.10 and 3.29(b)
hereof including, without limitation, any required consents of the landlords
under the Leases necessary to enable the Corporation to continue as the tenant
thereunder at the same lease rentals and on the same terms as existed prior to
the Closing;
(e) a certificate dated as of a recent date from (i) the Secretary
of State of the State of Texas to the effect that the Corporation is duly
incorporated and in good standing in such state and stating that the Corporation
owes no franchise taxes in such state and listing all documents of the
Corporation on file with said Secretary of State, and (ii) one or more
certificates of officials from the jurisdictions listed on Schedule 3.7 hereto
to the effect that the Corporation is duly qualified as a foreign corporation
and is in good standing in such jurisdictions;
(f) a copy of the Corporation's Articles of Incorporation,
including all amendments thereto, certified as of a recent date by the Secretary
of State of the State of Texas;
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(g) evidence, reasonably satisfactory to the Buyer, of the
authority and incumbency of the persons acting on behalf of the Corporation in
connection with the execution of any document delivered in connection with this
Agreement;
(h) Uniform Commercial Code Search Reports on Form UCC-11 with
respect to the Corporation from the states and local jurisdictions where the
principal places of business of the Corporation and its assets are located;
(i) a certificate of the Seller as to the Seller's non-foreign
status in appropriate form;
(j) the corporate minute books and stock record books of the
Corporation, and all other books and records of, or pertaining to, the business
and operations of the Corporation;
(k) estoppel letter[s] of lender[s] to the Corporation, in form
and substance reasonably satisfactory to the Buyer, with respect to amounts
owing by the Corporation as of the Closing; and
(l) such other instruments and documents as the Buyer shall
reasonably request not inconsistent with the provisions hereof.
7.4 APPROVAL OF LEGAL MATTERS. The form of all instruments,
certificates and documents to be executed and delivered by the Seller to the
Buyer pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Buyer and its counsel, none of whose approval shall be unreasonably withheld or
delayed.
7.5 NO LITIGATION. No action, suit or other proceeding shall be
pending or threatened before any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain damages in
respect thereof, or involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction, and no order, decree or ruling of any
governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement or
the transactions contemplated hereby, or prohibiting, restraining or otherwise
preventing the consummation of the transactions contemplated hereby.
7.6 NO MATERIAL ADVERSE CHANGE OR UNDISCLOSED LIABILITY. There shall
have been no material adverse change or development in the business, prospects,
properties, earnings, results of operations or financial condition of the
Corporation, or any of its assets.
7.7 NO ADVERSE LAWS. There shall not have been enacted, adopted or
promulgated any statute, rule, regulation or order which materially adversely
affects the business or assets of the Corporation.
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7.8 AFFILIATE AND OTHER TRANSACTIONS. All amounts owing to the
Corporation from the Seller or any Affiliate thereof or from any of the
Corporation's officers and employees shall have either been paid in full or
written off by the Corporation, in either case, prior to the Effective Closing
Date.
7.9 ESCROW AGREEMENT. The Seller and the Escrow Agent shall have duly
executed and delivered to the Buyer the Escrow Agreement.
7.10 FORD MOTOR COMPANY APPROVALS. Ford Motor Company shall have given
any required approval of the transfer of the Shares to the Buyer and shall have
given any required approval of O. Bruton Smith or his designee as the authorized
dealer operator of the Corporation's Ford dealership franchise, and Ford Motor
Company shall have executed any required dealer agreements and/or amendments or
supplements thereto in connection with the foregoing.
7.11 NON-COMPETITION AGREEMENT. The Seller shall have duly executed and
delivered to the Buyer and the Corporation the Non-Competition Agreement.
7.12 EMPLOYMENT AGREEMENT. The Seller shall have duly executed and
delivered to the Buyer the Employment Agreement.
7.13 CANCELLATION OF STOCK OPTIONS. All outstanding options, warrants,
"phantom" stock options and other plans, agreements or arrangements of the
Corporation with respect to the purchase, or the issuance of, any capital stock
or other securities of the Corporation shall have been canceled and terminated
prior to the Closing at no expense to the Buyer, and the Buyer shall have
received reasonably satisfactory evidence thereof.
7.14 AUDITED FINANCIAL STATEMENTS. The Buyer shall have completed
preparation of such audited financial statements of the Corporation as may be
required by applicable regulations of the Securities and Exchange Commission or
by any of the Buyer's lenders.
7.15 HART-SCOTT-RODINO WAITING PERIOD. All applicable waiting periods
under the HSR Act shall have expired without any indication by the Antitrust
Division or the Federal Trade Commission that either of them intends to
challenge the transactions contemplated hereby or, if any such challenge or
investigation is made or commenced, the conclusion of such challenge or
investigation permits the transactions contemplated hereby in all material
respects.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING
The obligation of the Seller to perform this Agreement at the Closing
is subject to the satisfaction at or prior to the Closing of the following
conditions, unless waived in writing by the Seller:
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8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Buyer in this Agreement shall be true and correct in all material
respects at and as of the date of this Agreement and at and as of the Closing as
though made at and as of the Closing.
8.2 PERFORMANCE OF OBLIGATIONS OF THE BUYER. The Buyer shall have
performed all obligations required to be performed by it under this Agreement,
and complied with all covenants for which compliance by it is required under
this Agreement, prior to or at the Closing, including, without limitation,
payment of the Initial Purchase Price pursuant to Section 1.2(b) hereof.
8.3 CLOSING DOCUMENTATION. The Seller shall have received the following
documents, agreements and instruments from the Buyer:
(a) a certificate signed by a duly authorized signatory of the
Buyer and dated as of the Closing Date certifying as to the satisfaction of the
conditions set forth in Sections 8.1 and 8.2 hereof;
(b) an opinion of Parker, Poe, Adams & Bernstein L.L.P., counsel
for the Buyer, dated as of the Closing Date and addressed to the Seller, in form
and substance reasonably satisfactory to the Seller and his counsel;
(c) such resolutions of the Buyer, as sole shareholder of the
Corporation, and the directors of the Corporation electing directors and
appointing officers, respectively, of the Corporation, effective upon the
Closing;
(d) certificates dated as of a recent date from the Secretary of
State of the State of Delaware to the effect that the Buyer is duly incorporated
and in good standing in such state;
(e) a copy of the Buyer's Certificate of Incorporation, including
all amendments thereto, certified by the Secretary of State of the State of
Delaware;
(f) evidence, reasonably satisfactory to the Seller, of the
authority and incumbency of the persons acting on behalf of the Buyer in
connection with the execution of any document delivered in connection with this
Agreement; and
(g) such other instruments and documents as the Seller shall
reasonably request not inconsistent with the provisions hereof.
8.4 APPROVAL OF LEGAL MATTERS. The form of all certificates,
instruments and documents to be executed or delivered by the Buyer to the Seller
pursuant to this Agreement and all legal matters in respect of the transactions
as herein contemplated shall be reasonably satisfactory to the Seller and his
counsel, none of whose approval shall be unreasonably withheld or delayed.
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8.5 NO LITIGATION. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction, and no order, decree or ruling of any
governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement or
the transactions contemplated hereby, or prohibiting, restraining or otherwise
preventing the consummation of the transactions contemplated hereby.
8.6 ESCROW AGREEMENT. The Buyer and the Escrow Agent shall have duly
executed and delivered to the Seller the Escrow Agreement.
8.7 EMPLOYMENT AGREEMENT. The Corporation shall have duly executed and
delivered to the Seller the Employment Agreement.
8.8 HART-SCOTT-RODINO WAITING PERIOD. All applicable waiting periods
under the HSR Act shall have expired without any indication of the Antitrust
Division or the Federal Trade Commission that either of them intends to
challenge the transactions contemplated hereby, or, if any such challenge or
investigation is made or commenced, the conclusion of such challenge or
investigation permits the transactions contemplated hereby in all material
respects.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
9.1 SURVIVAL. All statements contained in any Schedule or certificate
delivered hereunder or in connection herewith by or on behalf of any of the
parties pursuant to this Agreement shall be deemed representations and
warranties by the respective parties hereunder unless otherwise expressly
provided herein. The representations and warranties of the Seller or the Buyer
contained in this Agreement, including those contained in any Schedule or
certificate delivered hereunder or in connection herewith, shall survive the
Closing for a period of three years with the exception of (i) the
representations and warranties of the Seller contained in Section 3.21, which
shall survive the Closing until the expiration of the applicable tax statutes of
limitation plus a period of sixty (60) days, and (ii) the representations and
warranties of the Seller contained in Sections 3.11, 3.19 and 3.36, which shall
survive the Closing indefinitely. As to each representation and warranty of the
parties hereto, the date to which such representation and warranty shall survive
is hereinafter referred to as the "SURVIVAL DATE".
9.2 AGREEMENT TO INDEMNIFY BY SELLER. Subject to the terms and
conditions of Sections 9.4 and 9.5 hereof, the Seller hereby agrees to indemnify
and save the Buyer, the Corporation and their respective shareholders, officers,
directors, employees, successors and assigns (each, a "BUYER INDEMNITEE")
harmless from and against, for and in respect of, any and all damages, losses,
obligations, liabilities, demands, judgments, injuries, penalties, claims,
actions or causes of action, encumbrances, costs, and expenses (including,
without limitation, reasonable attorneys' fees and expert witness fees),
suffered, sustained, incurred or required to
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be paid by any Buyer Indemnitee (collectively, "BUYER'S DAMAGES") arising out
of, based upon, in connection with, or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Seller contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith, excluding any breach of representation and warranty contained in
Section 3.19 or in the certificate of the Seller (regarding Affiliate Payables
and Excluded Indebtedness contemplated by Section 1.2(b)(1) hereof); PROVIDED,
HOWEVER, that with respect to the foregoing indemnification obligation of the
Seller contained in this paragraph (a), the Seller shall not have any
indemnification obligation until (and only to the extent that) Buyer's Damages
in respect of all claims for indemnity pursuant to this paragraph (a) shall
exceed a cumulative aggregate total of $50,000;
(b) the untruth, inaccuracy or breach of any representation and
warranty of the Seller contained in or made pursuant to Section 3.19, including
in any Schedule or certificate delivered hereunder in connection therewith;
(c) the Affiliate Payables and/or the Excluded Indebtedness;
(d) the breach or nonfulfillment of any covenant or agreement of
the Seller contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;
(e) any loss of life, injury to persons or property, or damage to
natural resources caused by the actual, alleged, or threatened release, storage,
transportation, treatment or generation, of Hazardous Materials generated,
stored, used, disposed of, treated, handled or shipped by the Corporation on or
before the Closing Date;
(f) any cleanup of Hazardous Materials released, disposed of or
discharged: (i) on, beneath or adjacent to the Real Property prior to or on the
date of the Closing; or (ii) at any other location if such substances were
generated, used, stored, treated, transported or released by the Corporation
prior to or on the Closing Date;
(g) all known or unknown environmental liabilities and claims of
the Corporation or arising out of the ownership the Shares prior to the Closing,
including, without limitation, the presence, release or threatened release of
Hazardous Materials and any liabilities or obligations arising under any
Environmental Law, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), as amended; or
(h) any and all costs of installing pollution control equipment or
other equipment to bring any of the Real Property into compliance with any
Environmental Law if such equipment is installed because any of the Real
Property was not in compliance with any Environmental Laws as of the date of the
Closing.
With respect to the Seller's obligations to pay Buyer's Damages
pursuant to Section 9.2 of this Agreement, the Buyer shall be entitled (but
shall not be obligated) to make
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demand for payment under the Escrow Agreement and/or to postpone, offset and
reduce the Contingent Purchase Price as provided in Section 9.7 below.
9.3 AGREEMENT TO INDEMNIFY BY BUYER. Subject to the terms and
conditions of Sections 9.4 and 9.5 hereof, the Buyer hereby agrees to indemnify
and save the Seller and his successors and assigns (each, a "SELLER INDEMNITEE")
harmless from or against, for and in respect of, any and all damages, losses,
obligations, liabilities, demands, judgments, injuries, penalties, claims,
actions or causes of action, encumbrances, costs, and expenses (including,
without limitation, reasonable attorneys' fees and expert witness fees)
suffered, sustained, incurred or required to be paid by any Seller Indemnitee
arising out of, based upon or in connection with or as a result of:
(a) the untruth, inaccuracy or breach of any representation and
warranty of the Buyer contained in or made pursuant to this Agreement, including
in any Schedule or certificate delivered hereunder or in connection herewith; or
(b) the breach or nonfulfillment of any covenant or agreement of
the Buyer contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto.
9.4 CLAIMS FOR INDEMNIFICATION. No claim for indemnification with
respect to a breach of a representation and warranty shall be made under this
Agreement after the applicable Survival Date unless prior to such Survival Date
the Buyer Indemnitee or the Seller Indemnitee, as the case may be, shall have
given the Seller or the Buyer, as the case may be, written notice of such claim
for indemnification based upon actual loss sustained, or potential loss
anticipated, as a result of the existence of any claim, demand, suit, or cause
of action against such Buyer Indemnitee or Seller Indemnitee, as the case may
be.
9.5 PROCEDURES REGARDING THIRD PARTY CLAIMS. The procedures to be
followed by the Buyer and the Seller with respect to indemnification hereunder
regarding claims by third persons which could give rise to an indemnification
obligation hereunder shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action or
proceeding (including, without limitation, any notice relating to a tax audit)
or the assertion of any claim by a third person which the person receiving such
notice has reason to believe may result in a claim by it for indemnity pursuant
to this Agreement, such person (the "INDEMNIFIED PARTY") shall give a written
notice of such action, proceeding or claim to the party against whom
indemnification pursuant hereto is sought (the "INDEMNIFYING PARTY"), setting
forth in reasonable detail the nature of such action, proceeding or claim,
including copies of any documents and written correspondence from such third
person to such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at its own expense,
to participate in the defense of such action, proceeding or claim, and, if (i)
the action, proceeding or claim involved seeks (and continues to seek) solely
monetary damages, (ii) the Indemnifying Party confirms, in writing, its
obligation hereunder to indemnify and hold harmless the Indemnified
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Party with respect to such damages in their entirety pursuant to Sections 9.2 or
9.3 hereof, as the case may be, and (iii) the Indemnifying Party shall have made
provision which, in the reasonable judgment of the Indemnified Party, is
adequate to satisfy any adverse judgment as a result of its indemnification
obligation with respect to such action, proceeding or claim, then the
Indemnifying Party shall be entitled to assume and control such defense with
counsel chosen by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld or delayed. The Indemnified
Party shall be entitled to participate therein after such assumption, the costs
of such participation following such assumption to be at its own expense. Upon
assuming such defense, the Indemnifying Party shall have full rights to enter
into any monetary compromise or settlement which is dispositive of the matters
involved; PROVIDED, that such settlement is paid in full by the Indemnifying
Party and will not have any direct or indirect continuing material adverse
effect upon the Indemnified Party.
(c) With respect to any action, proceeding or claim as to which
(i) the Indemnifying Party does not have the right to assume the defense or (ii)
the Indemnifying Party shall not have exercised its right to assume the defense,
the Indemnified Party shall assume and control the defense of and contest such
action, proceeding or claim with counsel chosen by it and approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. The
Indemnifying Party shall be entitled to participate in the defense of such
action, proceeding or claim, the cost of such participation to be at its own
expense. The Indemnifying Party shall be obligated to pay the reasonable
attorneys' fees and expenses of the Indemnified Party to the extent that such
fees and expenses relate to claims as to which indemnification is due under
Sections 9.2 or 9.3 hereof, as the case may be. The Indemnified Party shall have
full rights to dispose of such action, proceeding or claim and enter into any
monetary compromise or settlement; PROVIDED, HOWEVER, in the event that the
Indemnified Party shall settle or compromise any action, proceeding or claim for
which indemnification is due under Sections 9.2 or 9.3 hereof, as the case may
be, it shall act reasonably and in good faith in doing so.
(d) Both the Indemnifying Party and the Indemnified Party shall
cooperate fully with one another in connection with the defense, compromise or
settlement of any such action, proceeding or claim, including, without
limitation, by making available to the other all pertinent information and
witnesses within its control.
9.6 EFFECTIVENESS. The provisions of this Article 9 shall be effective
upon consummation of the Closing, and prior to the Closing, shall have no force
and effect.
9.7 POSTPONEMENT, OFFSET AND REDUCTION OF CONTINGENT PURCHASE PRICE.
If, as of the date of the payment of an installment of the Contingent Purchase
Price (hereinafter called a "CONTINGENT PAYMENT DATE"), any Buyer Indemnitee
shall have previously made a claim or claims for Buyer's Damages and such claim
or claims shall not have been resolved prior to such Contingent Payment Date,
either by mutual written agreement between the Seller and the Buyer or by a
decision of the arbitrators pursuant to Section 12.13 below, then the amount of
such installment of Contingent Purchase Price shall only be paid to the extent
that such amount (together with the amount of any prior installment of
Contingent Purchase Price which has been postponed pursuant to this Section 9.7)
exceeds the aggregate total of Buyer's Damages as to which claims for
indemnification shall have been made on or prior to such Contingent Payment Date
and not resolved on or prior thereto, and payment of the remainder of the
Contingent
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Purchase Price which would otherwise be payable on or before such Contingent
Payment Date shall be postponed until the resolution of all such claims for
indemnification. The Seller hereby acknowledges and agrees that the Buyer shall
be entitled to set off against and to reduce the amount of the Contingent
Purchase Price by the amount of Buyer's Damages which is either agreed to in
writing by the Seller and the Buyer or determined pursuant to a decision of the
arbitrators referred to in Section 12.13 below. To the extent that such
arbitrators shall determine that the postponement of any portion of the
Contingent Purchase Price by the Buyer was not warranted, the Buyer shall
promptly pay such portion to the Seller, together with interest thereon at the
Interest Rate (as defined in Section 1.2(c) above) from the applicable
Contingent Payment Date. Any amount of postponement, setoff and reduction of the
Contingent Purchase Price contemplated by this Section 9.7 shall be allocated
first to the cash portion of such Contingent Purchase Price and second to the
Preferred Stock (or Common Stock) portion of such Contingent Purchase Price.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision herein contained
to the contrary, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by the written mutual consent of the Buyer and the Seller;
(b) At any time after the Closing Date Deadline (as the same may
have been extended pursuant to Article 2 hereof), by written notice by the Buyer
or the Seller to the other party hereto if the Closing shall not have been
completed on or before the Closing Date Deadline (as the same may have been
extended pursuant to Article 2 hereof); PROVIDED, HOWEVER, no party may
terminate this Agreement pursuant to this Section 10.1(b) if such party is in
breach of any material representation, warranty or covenant of such party
contained in this Agreement;
(c) By the Buyer if, after any initial HSR Act filing, the FTC
makes a "second request" for information, or the FTC or the Antitrust Division
challenges the transactions contemplated hereby; PROVIDED, that the Buyer
delivers a written notice to the Seller of its termination hereunder within 30
days of the Buyer's receipt of such second request or of notice of such
challenge;
(d) By the Buyer, by written notice to the Seller, in the event
that approval by any applicable automobile manufacturer or distributor of the
transactions contemplated by this Agreement is not received by the Closing Date
Deadline (as the same may have been extended pursuant to Article 2 hereof);
(e) By the Buyer, by written notice to the Seller, in the event
that any applicable automobile manufacturer or distributor (or any person
claiming by, through or under it) shall exercise any right of first refusal,
preemptive right or other similar right, with respect to the dealership business
of the Corporation; or
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(f) By the Buyer, on written notice to the Seller within 30 days
after the date hereof, if, and only if, the Buyer is not satisfied, in its
discretion, with the results of the Buyer's due diligence investigation
contemplated by Section 5.1(a) hereof.
10.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination
of this Agreement pursuant to Section 10.1, this Agreement shall be of no
further force or effect; PROVIDED, HOWEVER, that any termination pursuant to
Section 10.1 shall not relieve (i) the Buyer of any liability under Section 10.3
below, (ii) the Seller of any liability under Section 10.4 below, (iii) the
Buyer or the Seller of any liability or obligation under Section 12.14 below,
(iv) the Corporation of any liability under Section 10.6 below, or (v) any party
hereto of any liability for breach of any representation and warranty, covenant
or agreement hereunder occurring prior to such termination. In addition, in the
event of any such termination, all filings, applications and other submissions
made pursuant to this Agreement or prior to the execution of this Agreement in
contemplation thereof shall, to the extent practicable, be withdrawn from the
agency or other entity to which made.
10.3 PAYMENT OF BUYER'S TERMINATION FEE . If this Agreement is
terminated by the Seller pursuant to Section 10.1(b) above and the failure to
complete the Closing on or before the Closing Date Deadline shall have been due
to the Buyer's breach of its material representations and warranties or its
material covenants or obligations under this Agreement, then the Buyer shall,
upon demand of the Seller, promptly pay to the Seller in immediately available
funds, as liquidated damages for the loss of the transaction, a termination fee
of $150,000 (the "BUYER'S TERMINATION FEE").
10.4 PAYMENT OF SELLER'S TERMINATION FEE. If this Agreement is
terminated by the Buyer pursuant to Section 10.1(b) above and the failure to
complete the Closing on or before the Closing Date Deadline shall have been due
to the Seller's breach of any of their material representations and warranties
or any of their material covenants or obligations under this Agreement, then the
Seller shall, upon demand of the Buyer, promptly pay to the Buyer in immediately
available funds, as liquidated damages for the loss of the transaction, a
termination fee of $150,000 (the "SELLER'S TERMINATION FEE").
10.5 TERMINATION FEES EXCLUSIVE REMEDIES FOR DAMAGES. The respective
rights of the parties to terminate this Agreement under Section 10.1(b) and to
be paid the Seller's Termination Fee or the Buyer's Termination Fee, as the case
may be, shall be the respective parties' sole and exclusive remedies for
damages; in the event of such termination by either party, such party shall have
no right to equitable relief for any breach or alleged breach of this Agreement,
other than for specific performance for the payment of the Seller's Termination
Fee or the Buyer's Termination Fee, as the case may be. Nothing contained in
this Agreement shall prevent any party from electing not to exercise any right
it may have to terminate this Agreement and, instead, seeking any equitable
relief to which it would otherwise be entitled in the event of breach by any
other party hereto.
10.6 SPECIAL TERMINATION PAYMENT. As an inducement to the Buyer to
negotiate and enter into this Agreement and to undertake the further cost and
expense of conducting its due diligence investigation and preparing to satisfy
its obligations at the Closing, the Corporation
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hereby agrees to pay to the Buyer the sum of $150,000 in the event that this
Agreement is terminated by the Buyer pursuant to Section 10.1(e) above. Such
payment shall be made promptly upon demand by the Buyer therefor in immediately
available funds. The Corporation is a party to this Agreement solely for the
purpose of this Section 10.6.
ARTICLE 11
CERTAIN TAXES AND EXPENSES
11.1 CERTAIN TAXES AND EXPENSES.
(a) All sales, use, transfer, intangible, excise, documentary
stamp, recording, gross income, gross receipts and other similar taxes or fees
which may be due or payable in connection with the consummation of the
transactions contemplated hereby shall be paid by the Seller.
(b) Except as otherwise herein provided, the Seller and the Buyer
shall be responsible for the payment of their respective fees, costs and
expenses incurred in connection with the negotiation and consummation of the
transactions contemplated hereby and shall not be liable to the other party or
parties for the payment of any such fees, costs and expenses.
ARTICLE 12
MISCELLANEOUS
12.1 CERTAIN TAX RETURNS. The Seller shall cooperate with and provide
assistance to the Buyer and the Corporation in connection with the preparation
and filing of all federal, state, local and foreign income tax returns which
relate to the Corporation and to periods prior to Closing but which are not
required to be filed until after the Closing.
12.2 PARTIES IN INTEREST; NO THIRD-PARTY BENEFICIARIES. Subject to
Section 12.4 hereof, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the respective successors and assigns of the parties
hereto. Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any employee of the Corporation or the
Buyer, or any other person, firm, corporation or legal entity, other than the
parties hereto and their successors and assigns, any rights, remedies or other
benefits under or by reason of this Agreement.
12.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including all
Exhibits and Schedules hereto) and the other writings referred to herein or
delivered pursuant hereto contain the entire understanding of the parties hereto
with respect to its subject matter. There are no representations, promises,
warranties, covenants or undertakings other than as expressly set forth herein
or therein. This Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to its subject matter. This Agreement
may be amended or modified only by a written instrument duly executed by the
parties hereto.
12.4 ASSIGNMENT. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties; PROVIDED,
HOWEVER, the Buyer may assign its rights
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and obligations hereunder to any Affiliate of the Buyer presently existing or
hereafter formed and to any person or entity that shall acquire all or
substantially all of the assets of the Buyer or the Corporation (including any
such acquisition by merger or consolidation); PROVIDED, FURTHER, that no such
assignment shall release the Buyer from its obligations hereunder without the
consent of the Seller. Nothing contained in this Agreement shall prohibit its
assignment by the Buyer as collateral security and the Seller hereby agrees to
execute any acknowledgment of such assignment by the Buyer as may be required by
any lender to the Buyer.
12.5 REMEDIES. Except as expressly provided in this Agreement to the
contrary, each of the parties to this Agreement is entitled to all remedies in
the event of breach provided at law or in equity, specifically including, but
not limited to, specific performance.
12.6 HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be given in writing and shall be delivered
personally or sent by a nationally recognized overnight courier, postage
prepaid, and shall be deemed to have been duly given when so delivered
personally or one (1) business day after the date of deposit with such
nationally recognized overnight courier. All such notices, claims, certificates,
requests, demands and other communications shall be addressed to the respective
parties at the addresses set forth below or to such other address as the person
to whom notice is to be given may have furnished to the others in writing in
accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Attention: Theodore M. Wright, Chief Financial Officer
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Attention: Edward W. Wellman, Jr., Esq.
37
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If to the Seller or the Corporation, to:
Aldo B. Paret
Casa Ford of Houston, Inc.
c/o Daniel C. Pappas, P.C.
4615 Southwest Freeway, Suite 600
Houston, Texas 77027
Attn: Monte S. Donaldson, Esq.
12.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, and all such counterparts together shall constitute but one
agreement.
12.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina, without giving
effect to its rules governing conflict of laws.
12.10 WAIVERS. Any party to this Agreement may, by written notice to
the other parties hereto, waive any provision of this Agreement from which such
party is entitled to receive a benefit. The waiver by any party hereto of a
breach by another party of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach by such other party of such
provision or any other provision of this Agreement.
12.11 SEVERABILITY. In the event that any provision, or part thereof,
in this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions, or parts
thereof, shall not in any way be affected or impaired thereby.
12.12 KNOWLEDGE. Whenever any representation or warranty of the Seller
contained herein (other than the representations and warranties set forth in
Sections 3.1 through 3.6 hereof) or in any other document executed and delivered
in connection herewith is based upon the knowledge of the Seller, such knowledge
shall be deemed to include (i) the best actual knowledge, information and belief
of the Seller and (ii) any information which the Seller would reasonably be
expected to be aware of in the prudent discharge of his duties in the ordinary
course of business (including consultation with legal counsel) on behalf of the
Corporation.
12.13 JURISDICTION; ARBITRATION.
(a) Subject to the other provisions of this Section 12.13, any
judicial proceeding brought with respect to this Agreement must be brought in
any court of competent jurisdiction in the State of North Carolina, and, by
execution and delivery of this Agreement, each party hereto (i) accepts,
generally and unconditionally, the exclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, and (ii) irrevocably waives
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such court or that such court is an inconvenient
forum.
38
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(b) Any dispute, claim or controversy arising out of or relating
to this Agreement (except for accounting matters provided for in Section 1.2(c)
hereto), or the interpretation or breach hereof (including, without limitation,
any of the foregoing based upon a claim to any termination fee hereunder), shall
be resolved by binding arbitration under the commercial arbitration rules of the
American Arbitration Association (the "AAA RULES") to the extent such AAA Rules
are not inconsistent with this Agreement. Judgment upon the award of the
arbitrators may be entered in any court having jurisdiction thereof or such
court may be asked to judicially confirm the award and order its enforcement, as
the case may be. The demand for arbitration shall be made by any party hereto
within a reasonable time after the claim, dispute or other matter in question
has arisen, and in any event shall not be made after the date when institution
of legal proceedings, based on such claim, dispute or other matter in question,
would be barred by the applicable statute of limitations. The arbitration panel
shall consist of three (3) arbitrators, one of whom shall be appointed by each
party hereto within thirty (30) days after any request for arbitration
hereunder. The two arbitrators thus appointed shall choose the third arbitrator
within thirty (30) days after their appointment; PROVIDED, HOWEVER, that if the
two arbitrators are unable to agree on the appointment of the third arbitrator
within 30 days after their appointment, either arbitrator may petition the
American Arbitration Association to make the appointment. The place of
arbitration shall be Charlotte, North Carolina. The arbitrators shall be
instructed to render their decision within sixty (60) days after their selection
and to allocate all costs and expenses of such arbitration (including legal and
accounting fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits (including the
successful assertion of any defenses).
(c) Nothing contained in this Section 12.13 shall prevent any
party hereto from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
12.14 CONFIDENTIALITY.
(a) The Buyer agrees that it will keep confidential and not
disclose without the prior written consent of the Seller, and will not use for
any reason other than the conduct of its due diligence investigation
contemplated by Section 5.1 of this Agreement, all information regarding the
Corporation and its business received from the Seller or the Corporation. The
foregoing prohibition shall not apply to information which (i) is generally
available to the public other than due to an act or omission of the Buyer, (ii)
is available to the Buyer on a non- confidential basis from a source other than
the Seller or the Corporation, provided that such source is not bound by a
confidentiality agreement with, or other duty of non-disclosure to, the Seller
or the Corporation, or (iii) was already known by the Buyer at the time of the
receipt thereof. The provisions of this Section 12.14(a) shall survive the
termination of this Agreement.
(b) The Seller agrees that it will keep confidential and not
disclose without the prior written consent of the Buyer, and will not use for
any reason other than the conduct of its due diligence investigation
contemplated by Section 6.5 of this Agreement, all information regarding the
Buyer and its business received from the Buyer. The foregoing prohibition shall
not apply to information which (i) is generally available to the public other
than due to an act or omission of the Seller, (ii) is available to the Seller on
a non-confidential basis from a source other than the Buyer, provided that such
source is not bound by a confidentiality agreement with,
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or other duty of non-disclosure to, the Buyer, or (iii) was already known by the
Seller at the time of the receipt thereof. The provisions of this Section
12.14(b) shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
SONIC AUTOMOTIVE, INC.
By: /s/ O. Bruton Smith
------------------------------------
Name: O. Bruton Smith
Title: Chief Executive Officer
/s/ Aldo B. Paret
------------------------------------
Aldo B. Paret
CASA FORD OF HOUSTON, INC.
(solely for purposes of Section 10.6)
By: /s/ Aldo B. Paret
------------------------------------
Name: Aldo B. Paret
Title: President
40
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EXHIBITS
Exhibit A - Statement of Rights and Preferences of Preferred Stock
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Non-Competition Agreement
Exhibit D - Form of Employment Agreement
41
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SCHEDULES
Schedule 3.2(b) Consents and Approvals for the Seller
Schedule 3.5 Interest in other Entities
Schedule 3.7 Qualification
Schedule 3.8 Capitalization
Schedule 3.10 No Violation; Conflicts
Schedule 3.11 Encumbrances
Schedule 3.13 Financial Statements
Schedule 3.16(b) Leased Premises
Schedule 3.16(g) Owned Equipment
Schedule 3.16(h) Leased Equipment
Schedule 3.17 Intellectual Property
Schedule 3.18 Certain Liabilities
Schedule 3.19 No Undisclosed Liabilities
Schedule 3.20 Absence of Changes
Schedule 3.21 Tax Matters
Schedule 3.22 Compliance with Laws
Schedule 3.23 Litigation Regarding Corporation
Schedule 3.24 Permits, Etc.
Schedule 3.26 Compensation
Schedule 3.27 Employee Benefits
Schedule 3.29(a) Material Agreements
Schedule 3.29(b) Required Consents for Transfers of Material Agreements
Schedule 3.31 Bank Accounts, Credit Cards and Safe Deposit Boxes
Schedule 3.32(a) Insurance Policies
Schedule 3.32(b) Property Damage and Personal Injury Claims
Schedule 3.33 Warranties
Schedule 3.34 Directors and Officers
Schedule 3.36 Environmental Matters
Schedule 4.2(b) Consents and Approvals for the Buyer
42
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STOCK PURCHASE AGREEMENT
AMONG
SONIC AUTOMOTIVE, INC.
AND
CASA FORD OF HOUSTON, INC.
AND
ALDO B. PARET
DATED AS OF APRIL 30, 1998
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE............................................................................1
1.1 Agreement of Purchase and Sale..........................................................1
1.2 Purchase Price..........................................................................1
1.3 Delivery of the Shares..................................................................7
1.4 Non-Competition Agreement; Employment Agreement.........................................7
ARTICLE 2 CLOSING......................................................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER.................................................8
3.1 Ownership of Shares.....................................................................8
3.2 Seller's Power and Authority; Consents and Approvals....................................8
3.3 Execution and Enforceability............................................................8
3.4 Litigation Regarding Seller.............................................................8
3.5 Interest in Competitors and Related Entities; Certain Transactions......................8
3.6 Seller Not Foreign Person...............................................................9
3.7 Organization; Good Standing; Qualifications; and Power..................................9
3.8 Capitalization..........................................................................9
3.9 Subsidiaries and Investments............................................................9
3.10 No Violation; Conflicts................................................................10
3.11 Title to Assets; Related Matters.......................................................10
3.12 Possession.............................................................................10
3.13 Financial Statements...................................................................10
3.14 Accounts Receivable....................................................................11
3.15 Inventories............................................................................11
3.16 Leased Premises; Machinery and Equipment...............................................11
3.17 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc............................12
3.18 Certain Liabilities....................................................................13
3.19 No Undisclosed Liabilities.............................................................13
3.20 Absence of Changes.....................................................................13
3.21 Tax Matters............................................................................14
3.22 Compliance with Laws, Etc..............................................................15
3.23 Litigation Regarding the Corporation...................................................15
3.24 Permits, Etc...........................................................................15
3.25 Employees; Labor Relations.............................................................16
3.26 Compensation...........................................................................16
3.27 Employee Benefits......................................................................16
3.28 Powers of Attorney.....................................................................17
3.29 Material Agreements....................................................................17
3.30 Brokers' or Finders' Fees, Etc.........................................................18
3.31 Bank Accounts, Credit Cards, Safe Deposit Boxes and Cellular
Telephones ............................................................................18
<PAGE>
<CAPTION>
3.32 Insurance..............................................................................18
3.33 Warranties.............................................................................18
3.34 Directors and Officers.................................................................18
3.35 Suppliers and Customers................................................................19
3.36 Environmental Matters..................................................................19
3.37 Business Generally.....................................................................20
3.38 Misstatements and Omissions............................................................21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER.................................................21
4.1 Organization and Good Standing.........................................................21
4.2 Buyer's Power and Authority; Consents and Approvals....................................21
4.3 Execution and Enforceability...........................................................21
4.4 Litigation Regarding Buyer.............................................................21
4.5 No Violation; Conflicts................................................................22
4.6 Brokers' or Finders' Fees, Etc.........................................................22
4.7 Misstatements and Omissions............................................................22
ARTICLE 5 PRE-CLOSING COVENANTS OF THE SELLER.........................................................22
5.1 Provide Access to Information; Cooperation with Buyer..................................22
5.2 Operation of Business of the Corporation...............................................23
5.3 Books of Account.......................................................................23
5.4 Employees..............................................................................23
5.5 Certain Prohibitions...................................................................23
5.6 Other Changes..........................................................................23
5.7 Additional Information.................................................................23
5.8 Publicity..............................................................................24
5.9 Other Negotiations.....................................................................24
5.10 Closing Conditions.....................................................................24
5.11 Environmental Audit....................................................................24
5.12 Audited Financial Statements...........................................................25
5.13 Hart-Scott-Rodino......................................................................25
ARTICLE 6 PRE-CLOSING COVENANTS OF BUYER..............................................................25
6.1 Publicity..............................................................................25
6.2 Closing Conditions.....................................................................25
6.3 Application to Automobile Manufacturers and Distributors...............................25
6.4 Hart-Scott-Rodino......................................................................25
6.5 Access.................................................................................26
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE BUYER AT THE CLOSING.......................................26
7.1 Representations and Warranties.........................................................26
7.2 Performance of Obligations of the Seller...............................................26
7.3 Closing Documentation..................................................................26
7.4 Approval of Legal Matters..............................................................27
7.5 No Litigation..........................................................................27
7.6 No Material Adverse Change or Undisclosed Liability....................................28
7.7 No Adverse Laws........................................................................28
<PAGE>
<CAPTION>
7.8 Affiliate and Other Transactions.......................................................28
7.9 Escrow Agreement.......................................................................28
7.10 Ford Motor Company Approvals. ........................................................28
7.11 Non-Competition Agreement..............................................................28
7.12 Employment Agreement...................................................................28
7.13 Cancellation of Stock Options..........................................................28
7.14 Audited Financial Statements...........................................................28
7.15 Hart-Scott-Rodino Waiting Period.......................................................28
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE SELLER AT THE CLOSING......................................29
8.1 Representations and Warranties.........................................................29
8.2 Performance of Obligations of the Buyer................................................29
8.3 Closing Documentation..................................................................29
8.4 Approval of Legal Matters..............................................................30
8.5 No Litigation..........................................................................30
8.6 Escrow Agreement.......................................................................30
8.7 Employment Agreement...................................................................30
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION,
ETC...................................................................................................30
9.1 Survival...............................................................................30
9.2 Agreement to Indemnify by Seller.......................................................31
9.3 Agreement to Indemnify by Buyer........................................................32
9.4 Claims for Indemnification.............................................................32
9.5 Procedures Regarding Third Party Claims................................................32
9.6 Effectiveness..........................................................................33
ARTICLE 10 TERMINATION................................................................................34
10.1 Termination............................................................................34
10.2 Procedure and Effect of Termination....................................................35
10.3 Payment of Buyer's Termination Fee ....................................................35
10.4 Payment of Seller's Termination Fee....................................................35
10.5 Termination Fees Exclusive Remedies for Damages........................................35
10.6 Special Termination Payment. .........................................................36
ARTICLE 11 CERTAIN TAXES AND EXPENSES.................................................................36
11.1 Certain Taxes and Expenses.............................................................36
ARTICLE 12 MISCELLANEOUS..............................................................................36
12.1 Certain Tax Returns....................................................................36
12.2 Parties in Interest; No Third-Party Beneficiaries......................................36
12.3 Entire Agreement; Amendments...........................................................36
12.4 Assignment.............................................................................37
12.5 Remedies...............................................................................37
12.6 Headings...............................................................................37
12.7 Notices................................................................................37
12.8 Counterparts...........................................................................38
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<CAPTION>
12.9 Governing Law..........................................................................38
12.10 Waivers................................................................................38
12.11 Severability...........................................................................38
12.12 Knowledge..............................................................................38
12.13 Jurisdiction; Arbitration..............................................................38
</TABLE>
Exhibit 99.14
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 7th day of July, 1998, by and among SONIC AUTOMOTIVE, INC., a
Delaware corporation (the "Buyer"), and HMC FINANCE CORPORATION, INC. a Florida
corporation ("HMC"), HALIFAX FORD-MERCURY, INC., a Florida corporation
("Halifax"), HIGGINBOTHAM AUTOMOBILES, INC., a Florida corporation ("HAI"),
HIGGINBOTHAM CHEVROLET-OLDSMOBILE, INC., a Florida corporation ("HCO"), and
SUNRISE AUTO WORLD, INC., a Florida corporation ("Sunrise" and, together with
HMC, HALIFAX, HAI, and HCO, collectively, the "Sellers" and each, individually,
a "Seller"), and DENNIS D. HIGGINBOTHAM (the "Stockholder").
WITNESSETH:
WHEREAS, the Sellers are the owners of certain assets used in
connection with the Sellers' automobile dealership businesses (collectively, the
"Businesses" and, individually as to each Seller, as applicable, the
"Business"), operated at the Real Property (as defined below);
WHEREAS, the Sellers desire to sell and the Buyer desires to buy, or to
cause one or more subsidiaries or affiliates of the Buyer to buy, certain assets
pertaining to the Businesses, subject to the terms and conditions of this
Agreement;
WHEREAS, contemporaneously with the execution of this Agreement, the
Buyer has entered into Contracts to Purchase and Sell Real Property (the "Real
Property Purchase Agreements") with the various owners thereof named therein
(the "Owners"), whereby the Buyer has agreed to buy, and the Owners have agreed
to sell, the land, buildings and improvements located at the Real Property (as
defined in the respective Real Property Purchase Agreements); and
WHEREAS, the consummation of the transactions contemplated by each of
this Agreement and the Real Property Purchase Agreements is subject to the
consummation of the transactions contemplated by each of such other Agreements;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the receipt and legal sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
"Assets" shall mean: the New Vehicles (as defined in Section
3.1 hereof); the Demonstrators (as defined in Section 3.2 hereof); the Used
Vehicles (as defined in Section 3.5
<PAGE>
hereof); the Parts (as defined in Section 4.3 hereof); the Miscellaneous
Inventories (as defined in Section 5.1 hereof); the Work in Progress (as defined
in Section 5.3 hereof); the Fixtures and Equipment (as defined in Section 5.4
hereof); the Miscellaneous Assets (as defined in Section 5.5 hereof); the HMC
Receivables (as defined in Section 5.9 hereof); and all goodwill of the
Businesses.
"Closing Date" shall mean the date, not later than the Closing
Date Deadline (as hereinafter defined), of the closing of the purchase and sale
of the Assets (the "Closing") which shall be a date designated by the Buyer not
later than fifteen (15) days after the approvals set forth in Section 8.13
hereof and all other conditions precedent set forth in Articles VIII and IX have
been satisfied (or waived by the Buyer or the Sellers, as applicable), or such
other date as is mutually agreed upon by the parties hereto. The Closing shall
be held at the offices of Cobb, Cole & Bell, 150 Magnolia Avenue, Daytona Beach,
Florida, at 9:00 a.m. on the Closing Date.
"Closing Date Deadline" shall mean September 1, 1998;
provided, however, if as of August 20, 1998, any of the approvals set forth in
Section 8.13 hereof shall not have been obtained and/or the audited financial
statements contemplated by Section 10.14 hereof shall not have been completed,
the Buyer may, by written notice to the Sellers' Agent not later than August 25,
1998, elect to extend the Closing Date Deadline for up to an additional thirty
(30) days.
"Inventory Date" shall mean the date of completion of the
Inventory (as defined in Section 4.1 hereof), which shall be not sooner than
five (5) days prior to the Closing Date, or such later date prior to the Closing
as is mutually agreed by the Sellers' Agent and the Buyer.
"Liabilities" shall mean (i) all continuing obligations of the
Sellers, arising in the ordinary course of business after the Closing Date and
not as a result of any breach or default, under those contracts and leases of
Sellers set forth in Part I of Schedule 2.4 attached hereto, (ii) the HMC
Payable as defined and described in Section 2.5 hereof, and (iii) the Inducement
Fee as provided for in Section 2.7 hereof.
"Manufacturers" shall mean Ford Motor Company, the Chevrolet
Motor Division of General Motors Corporation, Mercedes-Benz of North America,
Inc., and American Honda Motor Co., Inc.
"Retained Liabilities" shall have the meaning assigned to it
in Section 2.4 hereof.
"Sellers' Agent" shall mean Dennis D. Higginbotham, as agent
for the Sellers hereunder.
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ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1 Upon the terms and subject to the conditions hereinafter set forth,
at the Closing, the Sellers will sell, transfer and convey the Assets to the
Buyer and the Buyer will purchase the Assets from the Sellers for the
consideration set forth in this Agreement. The sale, transfer and conveyance of
the Assets will be made by execution and delivery at the Closing of bills of
sale in substantially the form of Exhibit A hereto (the "Bills of Sale") and
such other instruments of assignment, transfer and conveyance as the Buyer shall
reasonably request. Except to the extent specifically included within the Assets
or as mutually agreed between the Buyer and the Sellers, the Sellers will not
sell, and the Buyer will not purchase, any other tangible or intangible assets
of the Sellers.
2.2 The aggregate purchase price (the "Purchase Price") to be paid for
the Assets shall consist of Eighteen Million Seven Hundred Thousand Dollars
($18,700,000), as the purchase price for the Businesses and intangible assets
included in the Assets (the "Business and Intangible Assets Purchase Price"),
which shall be allocated among the Sellers in accordance with Part I of Schedule
2.2 hereto, plus the sum of: (i) the New Vehicle Purchase Price (as defined in
Section 3.1 hereof); (ii) the Demonstrator Purchase Price (as defined in Section
3.2 hereof); (iii) the Used Vehicle Purchase Price, (as defined in Section 3.5
hereof); (iv) the Parts Purchase Price (as defined in Section 4.3 hereof); (v)
the Miscellaneous Inventories Purchase Price (as defined in Section 5.1 hereof);
(vi) the Work in Progress Purchase Price (as defined in Section 5.3 hereof);
(vii) the F&E Purchase Price (as defined in Section 5.4 hereof); and (viii) the
HMC Receivables Purchase Price (as defined in Section 5.9 hereof). Each of the
components of the Purchase Price, other than the Business and Intangible Assets
Purchase Price, shall be allocated among the Sellers in accordance with their
respective Assets hereto, upon which such components are based, as reflected in
a revised Part I of Schedule 2.2 hereto, to be completed by the Buyer and the
Sellers at least three (3) days prior to the Closing Date. The parties
acknowledge that the New Vehicle Purchase Price, the Parts Purchase Price and
the Miscellaneous Inventories Purchase Price, and the HMC Receivables Purchased
Price will be based upon information contained in Schedule 3.1, the Inventory
(as defined in Section 4.1) and Schedule 5.9, respectively, all of which are to
be delivered prior to the Closing Date. The parties also acknowledge that
adjustments to those categories of Assets will have to be made to reflect
ordinary course increases or decreases in those assets between the time of
delivery of such Schedules and the Inventory and the Closing Date, and that the
related components of the Purchase Price will have to be adjusted to reflect any
such adjustments to those Assets. All of the foregoing adjustments (with
appropriate payments by the parties) will be made as promptly as possible after
the Closing. Each party will use the Purchase Price and Liabilities allocations
described in Part II of Schedule 2.2 hereto in all reporting to, and tax returns
filed with, the Internal Revenue Service and other state and local taxing
authorities.
2.3 Upon the terms and subject to the conditions hereinafter set forth,
at the Closing, the Buyer shall pay the Purchase Price as follows:
3
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(a) At the Closing, the Buyer shall wire transfer to an
account or accounts designated by the Sellers' Agent at least one (1) day prior
to the Closing, an amount equal to the Purchase Price minus Eight Million Two
Hundred Fifty Thousand Dollars ($8,250,000), such amount to be allocated to the
Sellers in the respective amounts set forth opposite their names on Part III of
Schedule 2.2 hereto, to be delivered to the Buyer by the Sellers' Agent at least
three (3) days prior to the Closing Date.
(b) (1) At the Closing, the Buyer shall issue and deliver to
the Sellers, in the respective amounts set forth opposite their names on Part
III of Schedule 2.2 hereto, to be delivered by the Sellers' Agent at least three
(3) days prior to the Closing Date, 8,250 shares (the "Preferred Shares") of the
Buyer's Class A Convertible Preferred Stock, Series III (the "Preferred Stock").
The Preferred Shares shall have such rights and preferences as are set forth in
the Statement of Rights and Preferences of Preferred Stock attached hereto as
Exhibit B (the "Statement of Rights and Preferences").
(2) At the option of the Sellers' Agent, exercisable
by written notice to the Buyer within thirty (30) days after the closing (the
"Registration Notice"), the Buyer shall be obligated to use its reasonable best
efforts to register under the Securities Act of 1933, as amended (the
"Securities Act"), on or before December 31, 1998, that percentage (up to and
including 100%) of the shares of Class A Common Stock (the "Common Shares")
which are issuable upon conversion of the Preferred Shares as specified in the
Registration Notice (such percentage of the Common Shares being hereinafter
called the "Registrable Common Shares").
(3) If requested by the managing or lead managing
underwriter for any such registration which is an underwritten registered public
offering, the Sellers and the Stockholder shall execute and deliver an
underwriting agreement with the managing or lead managing underwriter in such
form as is customarily used by such underwriter with any modifications as the
parties thereto shall agree. In connection with any such registration, the
Sellers and the Stockholder shall supply to the Buyer such information as may be
reasonably requested by the Buyer in connection with the preparation and filing
of a registration statement with the Securities and Exchange Commission. The
Sellers and the Stockholder shall not supply any information to the Buyer for
inclusion in such registration statement that will, taken as a whole, at the
time the registration statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any 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. Provided that the Buyer shall have timely completed such
registration, the Sellers shall promptly convert the applicable number of the
Preferred Shares into the Registrable Common Shares.
(4) In the event that the Buyer fails to timely
complete the registration contemplated by the preceding paragraph, the Sellers
and the Stockholder shall be entitled to have "piggyback" registration rights
with respect to the Registrable Common Shares. In such case, the provisions of
paragraph (3) immediately above shall be applicable. Furthermore, such piggyback
registration rights shall be subject to customary provisions, including those
regarding expenses and
4
<PAGE>
underwriter cut-backs, and shall terminate at such time as the holder of such
registration rights shall be free to sell all of such holder's Registrable
Common Shares under Rule 144 (as defined in paragraph (5) below).
(5) In the event that the Sellers' Agent does not
timely deliver a Registration Notice, the Buyer shall have no obligation to
register any of the Common Shares. Notwithstanding the foregoing, the Buyer
shall use its reasonable best efforts to make available current public
information with respect to the Buyer within the meaning of Subsection (c)(1) of
Securities and Exchange Commission Rule 144 ("Rule 144") to the extent necessary
to facilitate public resales by the Sellers or the Stockholder of the Common
Shares, pursuant to Rule 144. The Buyer shall remove any and all stop transfer
instructions and shall remove any restrictive legend on the certificates with
respect to any Common Shares then owned by the Sellers or the Stockholder to the
extent that either (i) such Common Shares may hereafter be registered under the
Securities Act and under any applicable state securities or blue sky laws, or
(ii) the Buyer has received an opinion of counsel reasonably satisfactory to the
Buyer, in form and substance reasonably satisfactory to the Buyer, that such
registration is not required for the sale of such Common Shares under Rule 144.
2.4 At the Closing, the Sellers will assign to the Buyer and the Buyer
will assume and agree to perform and discharge the Liabilities pursuant to
separate assignment and assumption agreements with the respective Sellers in a
form reasonably satisfactory to the Sellers' counsel (the "Assumption
Agreements"). Notwithstanding anything herein to the contrary, except as
expressly provided in this Section 2.4 and in Sections 2.5 and 2.7 and in the
Assumption Agreements, the Buyer does not and will not assume or become liable
for any obligations or liabilities of the Sellers of any kind whatsoever, fixed
or contingent, known or unknown (collectively, the "Retained Liabilities"), as a
result of the transactions contemplated by this Agreement. The Sellers shall
retain, and hereby agree to satisfy and discharge, all of the Retained
Liabilities, including those set forth on Part II of Schedule 2.4.
2.5 At the Closing, the Buyer will pay in full all amounts outstanding
as of the Closing under that certain promissory note from HMC to Dennis D.
Higginbotham, a copy of which is attached as Schedule 2.5 hereto (the "HMC
Payable"). HMC hereby represents and warrants that as of the date of this
Agreement, the HMC Payable totals, and as of the Closing will not exceed, Two
Million Eight Hundred Fifty-Seven Thousand Seven Hundred Ninety-Two Dollars
($2,857,792).
2.6 At the Closing, (a) each of the Sellers and Dennis D. Higginbotham
shall enter into a non-competition agreement with the Buyer in substantially the
form of Exhibit C hereto (the "Non-Competition Agreement"), and (b) the Buyer
and Dennis D. Higginbotham will enter into an Employment Agreement in
substantially the form of Exhibit D hereto (the "Employment Agreement").
2.7 As an inducement to the Buyer to negotiate and enter into this
Agreement and to undertake the further cost and expense of conducting its due
diligence investigation and preparing
5
<PAGE>
to satisfy its obligations at the Closing, the Sellers hereby agree, jointly and
severally, to pay to the Buyer not later than November 1, 1998, the sum of
$500,000 (the "Inducement Fee"). The Inducement Fee will be included in the
Liabilities and will become an obligation of the Buyer or any other person
(including any holder of a right of first refusal, preemptive right or other
similar right, with respect to any of the Assets) who purchases the Assets, or
any portion thereof, as a result of the execution and delivery by the Sellers of
this Agreement. The Inducement Fee will be canceled if this Agreement is
terminated for any reason other than the exercise of a right of first refusal,
preemptive right or other similar right, by an applicable automobile
manufacturer or distributor or any person claiming by, through or under it.
ARTICLE III
NEW VEHICLES; DEMONSTRATORS AND USED VEHICLES
3.1 At the Closing, the Buyer shall purchase all of the Sellers'
untitled new 1998 motor vehicles, and up to five (5) 1997 new Chevrolet motor
vehicles, in the Sellers' inventories as of the Closing Date and which are
listed on Schedule 3.1 hereto, which the Sellers' Agent shall deliver to the
Buyer not later than three (3) days prior to the Closing (all such vehicles are
collectively referred to hereinafter as the "New Vehicles"). The purchase price
to be paid by Buyer for each New Vehicle shall be the price at which the New
Vehicle was invoiced to the respective Seller by the applicable Manufacturer, as
adjusted pursuant to this Article III (the sum of all such amounts to be paid
for New Vehicles as determined by this Article III is herein referred to as the
"New Vehicle Purchase Price"). Schedule 3.1 shall set forth each New Vehicle's
model, invoice cost, odometer reading and all other information necessary to
calculate the New Vehicle Purchase Price with respect to such New Vehicle. At
the Closing, the Sellers shall assign to the Buyer, without any additional
consideration therefor, by appropriate documents reasonably satisfactory to the
Buyer, all unfilled retail orders and deposits made thereon.
3.2 At the Closing, the Buyer shall purchase all of the Sellers'
untitled new 1998 motor vehicles in Sellers' inventories as of the Closing Date
which are used in the ordinary course of business for the purpose of
demonstration and which are listed on Schedule 3.2 hereto, which the Sellers'
Agent shall deliver to the Buyer not later than three (3) days prior to the
Closing (all such vehicles are collectively referred to herein as the
"Demonstrators"). For purposes of this Agreement, any motor vehicle with more
than 9,000 miles on its odometer shall be deemed to be "used" rather than a
"Demonstrator". The purchase price to be paid by the Buyer for each Demonstrator
shall be the price at which the Demonstrator was invoiced to the respective
Seller by the applicable Manufacturer, as adjusted pursuant to this Article III
and as reduced as follows: if such Demonstrator's odometer reflects total
mileage of more than six thousand (6,000) miles but less than nine thousand
(9,000) miles, an amount equal to ten cents ($.10) multiplied by the total
mileage on such odometer (the sum of all such amounts to be paid for
Demonstrators hereunder is herein referred to as the "Demonstrator Purchase
Price"). Schedule 3.2 shall set forth each Demonstrator's model, invoice cost,
odometer reading and all other information necessary to calculate the
Demonstrator Purchase Price with respect to such Demonstrator.
6
<PAGE>
3.3 The purchase price paid for each New Vehicle and each Demonstrator
purchased under this Article III shall be (a) increased by the respective
Seller's actual cost of (i) dealer-installed equipment and accessories and (ii)
any "VIP" package added to such New Vehicle or Demonstrator, and (b) decreased
by (i) the Seller's actual cost of any equipment and accessories which have been
removed from such vehicles, and (ii) all paid or unpaid rebates, discounts,
holdback for dealer account and other factory incentives (including without
limitation rebates applied for and paid but unearned, incentive monies claimed
on pre-reported units and carryover allowances on 1997 models).
3.4 In the event any New Vehicle or Demonstrator shall have been
damaged prior to the Inventory Date, or is otherwise in a condition such that it
cannot reasonably be presented as being in a first-class saleable condition, the
Sellers' Agent and the Buyer will attempt to agree on the cost to cover such
repairs or some other equitable reduction in value to reflect such condition,
which amount shall be deducted from the price to be paid for such New Vehicle or
Demonstrator. In the event that the Buyer and the Sellers' Agent cannot agree on
the cost of repairs or the amount of reduction, the Buyer shall have no
obligation to purchase any such damaged New Vehicle or Demonstrator. With
respect to any New Vehicle or Demonstrator which has been damaged and repaired
prior to the Inventory Date, the Sellers' Agent and the Buyer will attempt to
agree on an adjustment to the price to reflect any decrease in the wholesale
value of such New Vehicle or Demonstrator resulting from such damage and repair.
In the event that the Buyer and the Sellers' Agent cannot agree on such
adjustment, the Buyer shall have no obligation to purchase such New Vehicle or
Demonstrator.
3.5 The Sellers' Agent and the Buyer shall perform an inventory of the
Sellers' used vehicles as of the Inventory Date and, in connection with such
inventory, the Sellers' Agent and the Buyer shall attempt to assign a mutually
agreed price to each used vehicle owned by the Sellers as of the Inventory Date.
All such used vehicles as to which the Sellers' Agent and the Buyer shall agree
upon a price are collectively referred to herein as the "Used Vehicles." At the
Closing, the Buyer shall purchase from the Sellers all Used Vehicles owned by
the Sellers as of the Closing Date. The sum of all prices assigned to such Used
Vehicles purchased by the Buyer pursuant to the terms of this Section 3.5 shall
be referred to herein as the "Used Vehicle Purchase Price".
ARTICLE IV
PARTS/ACCESSORIES
4.1 The Buyer and the Sellers' Agent shall engage a mutually acceptable
third party engaged in the business of appraising, valuing and preparing
inventories for automobile dealerships (hereinafter referred to as the
"Inventory Service") to prepare an inventory list (the "Inventory") of the parts
and accessories, as well as the Miscellaneous Inventories, used by the Sellers
in the Businesses. The Inventory (insofar as it relates to parts and
accessories) shall be posted to the respective Manufacturers' approved systems
of inventory control. The cost of the Inventory shall be borne entirely by the
Buyer. The Inventory shall be completed by the Inventory Date.
7
<PAGE>
4.2 The Inventory shall classify parts and accessories as "returnable"
or "nonreturnable". For purposes of this Agreement, the terms "returnable parts"
and "returnable accessories" shall describe and include only those new parts and
new accessories for vehicles which are listed (coded) in the latest current
Master Parts Price List Suggested List Prices and Dealer Prices, or other
applicable similar price lists, of the respective Manufacturers, with any
applicable supplements, in effect as of the Inventory Date (as applicable to
each Manufacturer, the "Master Price List") as returnable to the respective
Manufacturer at not less than the purchase price reflected in the Master Price
List. The purchase price for each "returnable part" and "returnable
accessory"will be the price listed in the Master Price List. All parts and
accessories not falling within the definition of "returnable" shall be
classified as "nonreturnable". The purchase price for each "nonreturnable" part
and accessory, of which type a Seller has made no sales during the ninety (90)
day period prior to the Inventory Date, shall be sixty percent (60%) of the
price listed therefor in the most recent applicable price list in which such
part appears. The purchase price for each "nonreturnable" part and accessory, of
which type a Seller has made retail sales to one or more customers during the
ninety (90) day period prior to the Inventory Date, shall be one hundred percent
(100%) of the price therefor listed in the most recent applicable price list in
which such part appears. The purchase price for all "Jobber" and/or "NPN" parts
shall be equal to the respective Seller's original cost of such parts. The
purchase price for all nuts, bolts and any other parts not addressed in this
Section 4.2 shall equal the fair market value thereof as determined by the
Inventory Service.
4.3 At the Closing, the Buyer shall purchase all parts and accessories
owned by the respective Sellers at the Closing Date and listed on the Inventory
(the "Parts") provided, however, that Buyer shall not be obligated to purchase
any damaged parts or accessories, parts and accessories with component parts
missing, superseded or obsolete parts or accessories, or used parts or
accessories. The Sellers agree that if parts and accessories that the Buyer is
not obligated to purchase hereunder are not removed from the Real Property
within thirty (30) days after the Closing Date, they shall become the property
of the Buyer without the payment of any consideration in addition to the
consideration otherwise provided herein. The purchase price for the Parts will
equal the value of such items shown on the Inventory (the "Parts Purchase
Price").
4.4 The Sellers shall assign to the Buyer at the Closing any net parts
return privileges under the respective Manufacturers' parts return plans that
may have accrued to the Sellers prior to the Closing (and any other special
parts return authorizations which may have been granted to the Sellers by the
respective Manufacturers).
ARTICLE V
MISCELLANEOUS INVENTORIES; WORK IN PROGRESS; FIXTURES
AND EQUIPMENT
5.1 At the Closing, the Buyer shall purchase all useable gas, oil and
grease, all undercoat material and body materials in unopened cans and such
miscellaneous useable and saleable articles in unbroken lots which (i) are on
the Sellers' dealership premises, (ii) are owned by the Sellers on
8
<PAGE>
the Closing Date, and (iii) are identified in the Inventory taken by the
Inventory Service on the Inventory Date (collectively referred to herein as the
"Miscellaneous Inventories"). The purchase price for the Miscellaneous
Inventories shall be equal to the replacement cost of the Miscellaneous
Inventories as determined by the Inventory Service and set forth on the
Inventory (the sum of all prices of the Miscellaneous Inventories pursuant to
the terms of this Section 5.1 shall be referred to herein as the "Miscellaneous
Inventories Purchase Price").
5.2 The Buyer shall have no obligation to purchase any such
miscellaneous items that are not included in the Miscellaneous Inventories. The
Sellers agree that any miscellaneous items that are not included in the
Miscellaneous Inventories and are not removed from the Real Property within the
thirty (30) days after the Closing Date, shall become the property of the Buyer
without the payment of any consideration in addition to the consideration
otherwise provided herein.
5.3 At the Closing, the Buyer shall buy at the Sellers' cost for parts
and labor such shop labor and sublet repairs as the respective Sellers shall
have caused to be performed on any repair orders which are in process at the
close of business on the Closing Date (the "Work in Progress") (the sum of all
costs of the Sellers for the Work in Progress pursuant to the terms of this
Section 5.3 shall be referred to herein as the "Work in Progress Purchase
Price"). The Buyer shall complete such repair work and shall be entitled to the
entire proceeds to be collected for such services.
5.4 At the Closing, the Buyer shall purchase all fixtures, machinery,
equipment (including special tools and shop equipment), furniture, signs and
office equipment owned by the Sellers as of the Closing Date and used or held
for use in connection with the Businesses, including the items listed on the
Book Depreciation Schedule included as Schedule 5.4 hereto, which the Sellers'
Agent shall deliver to the Buyer not later than five (5) days prior to the
Closing (collectively referred to herein as the "Fixtures and Equipment"). The
purchase price for each item of Fixtures and Equipment shall equal the
depreciated book value of such item, determined in accordance with generally
accepted accounting principles, and based upon Schedule 5.4 (the sum of all
prices assigned to the Fixtures and Equipment pursuant to the terms of this
Section 5.4 shall be referred to herein as the "F&E Purchase Price").
5.5 At the Closing, and without payment of any additional
consideration, the Buyer shall acquire all of the Sellers' (i) unused shop
repair orders, parts sales tickets, accounting forms, binders, office and shop
supplies and such shop reference manuals, parts reference catalogs,
non-accounting file copies for all sales of the Sellers for the three (3) years
preceding the Closing Date, (ii) copies of new and used car sales records and
specifically wholesale parts sales records, new and used parts sales records,
and service sales records for the three (3) years preceding the Closing Date,
(iii) product sales training material and reference books on hand as of the
Closing Date, (iv) customer and registration lists pertaining to the sale of
motor vehicles, service files, repair orders, owner follow-up lists and similar
records relating to the operation of the Businesses, (v) telephone numbers and
listings used by the Sellers in connection with the Businesses, (vi) names and
addresses of the Sellers' service customers and prospective purchasers, (vii)
the Sellers' rights to the Sellers' names and to the trade names "Car Mart" and
"Truck Mart," or any similar variation of any thereof, and (viii) such other
licenses, contracts, agreements, files, instruments and papers
9
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as are required for the conduct of the Businesses (all the foregoing items
collectively referred to herein as the "Miscellaneous Assets").
5.6 The Sellers may retain all original Florida Department of Revenue
blanket resale certificates (but shall provide copies thereof to the Buyer) and
all other corporate records, financial records and correspondence which are not
necessary for the continued operation of the Businesses by the Buyer, and all
derivations and extensions thereof.
5.7 The Buyer shall have no responsibility to perform any services
required under any warranties issued by the Sellers on the vehicles sold by the
Sellers on or prior to the Closing Date, unless authorized in writing by the
respective Sellers accompanied by arrangements in writing satisfactory to the
Buyer to assure the Buyer of payment for all work performed by the Buyer, and,
if so authorized by a Seller, such Seller shall reimburse the Buyer for all of
the Buyer's costs for parts and labor in connection therewith at established
internal rates for parts and labor. At the Closing Date, the Sellers shall
supply the Buyer with a list to which such warranties and guaranties are
applicable, which list shall include the names of the purchasers, the make and
year model of the vehicles purchased and the date of purchase. The Sellers shall
also supply to the Buyer at or prior to the Closing Date an address for and a
designation of the person or persons who will be responsible for authorizing
Buyer to perform any services under any warranties issued by the Sellers on
vehicles sold by them prior to the Closing Date. The respective Sellers shall
reimburse the Buyer promptly upon demand for all sums due or payable by the
respective Sellers to the Buyer hereunder.
5.8 Except as provided in Section 5.9 below, the Sellers shall retain
all accounts receivable of the Sellers as of the Closing Date and the Buyer
shall retain all accounts receivable arising out of sales and/or services of the
Businesses from and after the Closing Date. The Buyer shall send out the
invoices for, and otherwise reasonably assist the Sellers with respect to the
invoicing of, the Seller's accounts receivable arising out of sales and/or
services of the Business prior to the Closing Date, based upon information
supplied by the Sellers. Otherwise, except for the additional accounting
assistance contemplated in Section 11.14, the Buyer shall have no
responsibilities or obligations with respect to the documentation or collection
of the Sellers' accounts receivable, except that the Buyer, on the Sellers'
behalf, shall accept payment of the Sellers' accounts receivable arising out of
the operation of the Businesses prior to the Closing Date, at no charge to the
Sellers, and the Buyer shall forward to the Sellers' Agent, or to such of the
Sellers designated by him, from time to time, all of the money so accepted on
said accounts receivable.
5.9 (a) At the Closing, the Buyer shall purchase from HMC all of HMC's
trade accounts receivable as of the Closing Date (other than those receivable
from employees of the Sellers and their affiliates, and their respective
officers, directors or shareholders) and which are listed on Schedule 5.9
hereto, which HMC shall deliver to the Buyer not later than one (1) day prior to
the Closing (collectively, the "HMC Receivables"). The purchase price for the
HMC Receivables (the "HMC Receivables Purchase Price") shall be (a) the
aggregate face amount of the HMC Receivables, as reflected on said Schedule 5.9,
less a reserve for doubtful accounts of
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fifteen percent (15%) of such aggregate face amount (the "HMC Reserve"), MINUS
(b) the amount of the HMC Payable paid by the Buyer pursuant to Section 2.5
hereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Sellers as follows:
6.1 The Buyer is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
its business makes such qualification necessary and has the corporate power to
own its properties and to carry on its business as now being conducted. The
Board of Directors of the Buyer has duly approved this Agreement, all other
agreements, certificates and documents executed or to be executed by the Buyer
in connection herewith, and the transactions contemplated hereby and thereby.
The Buyer has full corporate power and authority to execute and deliver this
Agreement and all other agreements, certificates and documents executed or to be
executed by the Buyer in connection herewith, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement, and all other agreements, certificates and documents
executed or to be executed by the Buyer in connection herewith, constitute or,
when executed and delivered, will constitute legal, valid and binding agreements
of the Buyer enforceable against the Buyer in accordance with their respective
terms.
6.2 Except as set forth on Schedule 6.2 attached hereto, the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a breach or default under, any
provision of law, any order of any court or other agency of government, the
charter or bylaws of the Buyer or any note, debenture, mortgage, loan agreement
or other instrument to which the Buyer is a party or by which it or any of its
properties or assets is bound.
6.3 There are no actions, suits or proceedings pending, or, to the
knowledge of the Buyer, threatened against or affecting the Buyer which might
adversely affect the power or authority of the Buyer to carry out the
transactions to be performed by it hereunder.
6.4 The issuance of the Preferred Shares, as well as the Common Shares
issuable upon conversion of the Preferred Shares, has been duly authorized by
all necessary corporate action of the Buyer. Upon the issuance of the Preferred
Shares pursuant to this Agreement, and upon the issuance of Common Shares upon
conversion of any of the Preferred Shares, such Preferred Shares and/or Common
Shares, as the case may be, shall be validly issued, fully paid and
non-assessable.
6.5 The authorized capital stock of the Buyer consists of:
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(a) 3,000,000 shares of Preferred Stock, par value $0.10 per
share, of which 300,000 shares are designated Class A Convertible Preferred
Stock and are, in turn, divided into 100,000 shares of Series I (the "Series I
Preferred Stock"), 100,000 shares of Series II (the "Series II Preferred Stock")
and 100,000 shares of Series III (the "Series III Preferred Stock"); as of June
1, 1998, approximately [19,125] shares of Series I Preferred Stock are issued
and outstanding and/or are committed to be issued by the Buyer, approximately
[10,000] shares of Series II Preferred Stock are issued and outstanding and/or
are committed to be issued by the Buyer, and approximately [6,500] shares of
Series III Preferred Stock are issued and outstanding and/or are committed to be
issued by the Buyer;
(b) 50,000,000 shares of Class A Common Stock, par value $0.01
per share, of which 5,000,000 shares are issued and outstanding; and
(c) 15,000,000 shares of Class B Common Stock, par value $0.01
per share, of which 6,250,000 shares are issued and outstanding.
All outstanding capital stock of the Buyer is duly authorized, validly issued,
fully paid and non-assessable and has been issued in conformity with all
applicable federal and state securities laws.
6.6 The Buyer has delivered to the Sellers' Agent copies of (i) the
Prospectus dated November 10, 1997 (the "Prospectus"), (ii) the Buyer's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1997, (iii) the
Buyer's Quarterly Report on Form 10-Q for the three-month period ended March 31,
1998, and (iv) any Current Reports on Form 8-K, filed in 1998, each in the form
(excluding exhibits) filed with the Securities and Exchange Commission ("SEC")
(collectively, such Forms 10-K, 10-Q and 8-K being hereinafter referred to as
its "Reports"). Neither the Prospectus nor any of the Reports contained, at the
time of filing thereof with the SEC, any untrue statement of any material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers, jointly and severally, represent and warrant to the Buyer
as follows:
7.1 Each Seller is a corporation duly organized and existing and in
good standing under the laws of the State of Florida, is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
its business makes such qualification necessary and has the corporate power to
own its properties and to carry on its business as now being conducted. Except
as set forth on Schedule 7.1 attached hereto, the Stockholder is the only person
owning shares of the Sellers. The Board of Directors and the shareholders of
each Seller have duly approved this Agreement, all other agreements,
certificates and documents executed or to be executed by such
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Seller in connection herewith, and the transactions contemplated hereby and
thereby. Each Seller has full corporate power and authority to execute and
deliver this Agreement and all other agreements, certificates and documents
executed or to be executed by such Seller in connection herewith, to consummate
the transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. This Agreement, and all other agreements, certificates
and documents executed or to be executed by each Seller in connection herewith,
constitute or, when executed and delivered, will constitute legal, valid and
binding agreements of such Seller enforceable against such Seller in accordance
with their respective terms. This Agreement, and all other agreements,
certificates and documents executed or to be executed by the Stockholder in
connection herewith, constitute or, when executed and delivered, will constitute
legal, valid and binding agreements of the Stockholder enforceable against the
Stockholder in accordance with their respective terms.
7.2 Except as set forth in Schedule 7.2 attached hereto, the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a breach or default under, any
provision of law, any order of any court or other agency of government, the
charter or bylaws of any Seller or any note, debenture, mortgage, loan agreement
or other instrument to which any Seller or the Stockholder is a party, or by
which any Seller or the Stockholder, or any of their respective properties or
assets, are bound, or result in the creation or imposition of any Encumbrance of
any kind whatsoever on the Assets.
7.3 There are no actions, suits or proceedings pending or, to the
knowledge of the Seller and the Stockholder, threatened against any Seller or
the Stockholder which might adversely affect the power or authority of any of
them to carry out the transactions to be performed by such party hereunder.
There are no actions, suits or proceedings pending, or, to the knowledge of the
Sellers and the Stockholder, threatened, against or affecting any Seller, other
than those adequately covered by insurance and those disclosed on Schedule 7.3
attached hereto, and none of the actions, suits or proceedings described on
Schedule 7.3, if determined adversely to any Seller, would have a material
adverse effect on the business, assets or financial condition of such Seller.
7.4 Except as disclosed on Schedule 7.4 attached hereto, the Sellers
have good title to the Assets, free and clear of all liens (including tax
liens), encumbrances, actions, claims, payments or demands of any kind and
character (collectively, "Encumbrances"), except Encumbrances for ad valorem
personal property taxes not yet due and payable and Encumbrances which secure
only the Liabilities. All of the Assets to be transferred hereunder conform, as
to condition and character, to the descriptions of such Assets contained herein
and will be transferred at the Closing free and clear of all Encumbrances,
except Encumbrances for ad valorem personal property taxes not yet due and
payable and Encumbrances which secure only the Liabilities.
7.5 Except as disclosed on Schedule 7.5 attached hereto, there are no
permits or approvals used or obtained for use by any of the Sellers which are
required under applicable law in connection with the ownership or operation of
its Businesses.
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7.6 Each of the Sellers has filed all federal, state and local
governmental tax returns required to be filed by it in accordance with the
provisions of law pertaining thereto and has paid all taxes and assessments
(including, without limitation of the foregoing, income, excise, unemployment,
social security, occupation, franchise, property and import taxes, duties or
charges and all penalties and interest in respect thereof) required by it to
have been paid to date.
7.7 Except as disclosed on Schedule 7.7, the Sellers have no bonus,
deferred compensation, pension, profit-sharing, stock option, employee stock
purchase or other employee benefit plan (all of the foregoing being the
"Employee Plans"), or any secrecy agreements or covenants not to compete with
any employee.
7.8 (a) The Sellers have delivered to the Buyer the following financial
statements of the Sellers (the "Financial Statements"): (a) the balance sheets
of the respective Sellers as of December 31, 1997, and the related statements of
income and stockholder's equity for the years then ended, in each case with an
unaudited reviewed opinion by Brent Millikan & Company, P.A., and (b) the
unaudited balance sheets of the respective Sellers as of May 31, 1998 and the
related unaudited statements of income and stockholder's equity for the five (5)
month period then ended. The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied.
The balance sheet of each Seller included in the Financial Statements fairly
presents the financial condition of such Seller as of the date thereof, and the
related statement of income of each Seller included in the Financial Statements
fairly presents the results of the operations of such Seller and the changes in
its financial position for the period indicated, all in accordance with
generally accepted accounting principles consistently applied.
(b) Each of the Sellers has no outstanding material claims,
liabilities, obligations or indebtedness of any nature, fixed or contingent,
except as set forth in the Financial Statements or in the Schedules to this
Agreement, and except for liabilities incurred in the ordinary course of
business and of the kind and type reflected in the Financial Statements. To the
knowledge of the Sellers and the Stockholder, the Financial Statements contain
adequate reserves for all reasonably anticipated claims relating to matters with
respect to which Seller is self-insured.
7.9 None of the Sellers or the Stockholder has engaged any broker or
any other person or entity who would be entitled to any brokerage commission or
finder's fee in respect of the execution of this Agreement and/or the
consummation of the transactions contemplated hereby.
7.10 Except as set forth on Schedule 7.10 attached hereto, the Assets
comply with, and the Business has been conducted in all material respects in
compliance with, all laws, rules and regulations (including all worker safety
and all environmental laws, rules and regulations), applicable zoning and other
laws, ordinances, regulations and building codes, and none of the Sellers or the
Stockholder has received any notice of any violation thereof which has not been
adequately remedied.
7.11 The Fixtures and Equipment are in good condition, ordinary wear
and tear excepted, and constitute all of the fixtures, machinery, equipment,
furniture, signs and office equipment used
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or intended for use by the Sellers in the Businesses. All Demonstrators have
been operated in the ordinary course of business with dealer tags and have not
had certificates of title issued with respect to them.
7.12 Except for the Sellers' cash and accounts receivable and Sellers'
rights under their respective dealership agreements with the Manufacturers, the
Assets, together with the Real Property and the contracts and leases set forth
on Part I of Schedule 2.4 hereto, comprise all of the assets, properties and
rights necessary for the Buyer to operate the Businesses substantially in the
manner operated by the Sellers prior to the Closing.
7.13 The representations and warranties of the Owners contained in the
Real Property Purchase Agreements are true and correct as of the date hereof.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
The obligations of the Buyer to perform this Agreement at the Closing
are subject to the following conditions precedent which shall be fully satisfied
at or before the Closing, unless waived in writing by the Buyer.
8.1 All of the representations and warranties of the Sellers herein
contained shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of the Closing Date (except to the extent that
any such representation and warranty, by its terms, relates to a stated date),
and the Buyer shall have received a certificate from a duly authorized officer
of each of the Sellers, dated the Closing Date, to such effect.
8.2 Each of the agreements or obligations required by this Agreement to
be performed or complied with by the Sellers or the Stockholder at or before the
Closing shall have been duly performed or complied with, and the Buyer shall
have received a certificate from a duly authorized officer of each of the
Sellers and the Stockholder, dated the Closing Date, to such effect.
8.3 No action, suit or proceeding shall have been instituted by a
governmental agency or any other third party (a) to prohibit or restrain the
sale contemplated by this Agreement or otherwise challenge the power and
authority of the parties to enter into this Agreement or to carry out their
obligations hereunder or the legality or validity of the sale contemplated by
this Agreement, or (b) which would have a materially adverse effect on the
conduct of an automobile dealership business by the Buyer at any of the Real
Property.
8.4 The Inventory shall have been completed.
8.5 The Sellers shall have furnished to the Buyer (a) evidence to the
reasonable satisfaction of the Buyer and its counsel with respect to the
corporate organization and existence of
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the Sellers, and (b) UCC-11 search reports or other evidence reasonably
satisfactory to the Buyer and its counsel that the Assets are free and clear of
all Encumbrances.
8.6 Each of the Sellers shall have furnished to the Buyer a copy of the
resolutions duly adopted by such Seller's Board of Directors and the Stockholder
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, certified by an authorized officer of such
Seller as of the Closing Date.
8.7 As of the Closing Date, there shall not have been any fire,
accident or other casualty or any labor disturbance, civil commotion, riot, act
of God or the public enemy, or any change in the Businesses or the Assets or
which would have a material adverse effect on the conduct of an automobile
dealership business using the Assets at any of the Real Property or which would
interfere with the use by the Buyer of such Assets in connection with the
conduct of an automobile dealership business at any of the Real Property.
8.8 The Buyer shall have been licensed as a Motor Vehicle Dealer under
applicable Florida motor vehicle dealer registration laws and shall have
obtained all other authorizations, consents, licenses and permits from
applicable governmental agencies having or asserting jurisdiction, which the
Buyer deems necessary or appropriate to conduct business as an automobile dealer
at the Real Property; provided, however, this Section 8.8 shall only be a
condition to the Buyer's obligations so long as the Buyer is using its
reasonable best efforts to obtain such authorizations, consents, licenses and
permits.
8.9 The Sellers shall have obtained all other authorizations, consents
and approvals from third persons and entities as are required to assign those
contracts and leases that are included in the Liabilities at the Closing.
8.10 The Sellers shall have transferred to the Buyer certificates of
title or origin for all New Vehicles, Demonstrators and Used Vehicles, and all
of their respective registration lists, owner follow-up lists and service files
on hand as of the Closing Date with respect to the Businesses.
8.11 The Sellers shall have terminated in writing the Sellers'
respective Dealer Agreements with the Manufacturers.
8.12 The Sellers and the Stockholder shall have executed, as
appropriate, and delivered to the Buyer the Bills of Sale, other documents of
transfer of title contemplated hereby and any and all other documents necessary
or desirable in connection with the transfer of the Assets, which documents
shall warrant title to the Buyer consistent with this Agreement and shall in all
respects be in such form as may be reasonably required by the Buyer and its
counsel.
8.13 Each of the Manufacturers shall have approved the Buyer or the
Buyer's affiliate as an authorized dealer at each parcel of the Real Property
and O. Bruton Smith or O. Bruton Smith's designee, as the authorized Dealer
Operator, and the respective Manufacturers shall have executed
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Dealer Agreements on terms which are not less favorable to the Buyer than the
respective Dealer Agreements of the Sellers.
8.14 All conditions to Buyer's obligations under the Real Property
Purchase Agreements shall have been satisfied or fulfilled unless waived in
writing by the Buyer hereunder.
8.15 The Buyer shall have received an opinion of Cobb Cole & Bell,
counsel to the Sellers and the Stockholder, dated the Closing Date, in form and
substance reasonably satisfactory to the Buyer and its counsel.
8.16 The Buyer shall have received the Non-Competition Agreement, duly
executed by the parties thereto other than the Buyer, and the Employment
Agreement, duly executed by Dennis D. Higginbotham.
8.17 The Sellers shall have delivered to the Buyer all documents,
including, without limitation, resolutions of the respective Board of Directors
and the shareholders of each of the Sellers, necessary to effect a change of
names of each of the Sellers after the Closing to names other than the corporate
names and the trade names referred to in Section 5.5 hereof or any variation
thereof.
8.18 There shall have been no material adverse change or development in
the business, prospects, properties, earnings, results of operations or
financial condition of any of the Sellers or any of the Assets or the
Liabilities.
8.19 The form of all instruments, certificates and documents to be
executed and delivered by the Sellers to the Buyers pursuant to this Agreement
and all legal matters in respect of the transactions as herein contemplated
shall be reasonably satisfactory to the Buyer and its counsel, none of whose
approval shall be unreasonably withheld or delayed.
8.20 All applicable waiting periods under the HSR Act (as defined in
Section 10.13 hereof) shall have expired without any indication by the Antitrust
Division or the FTC (each as defined in Section 10.13 hereof) that either of
them intends to challenge the transactions contemplated hereby or, if any such
challenge or investigation is made or commenced, the conclusion of such
challenge or investigation permits the transactions contemplated hereby in all
material respects.
8.21 The Buyer shall have completed preparation of such audited
financial statements of the Sellers as may be required by applicable regulations
of the Securities and Exchange Commission.
8.22 Subject to payment by the Buyer of the HMC Payable in accordance
with Section 2.5 hereof, Dennis D. Higginbotham shall have delivered to the
Buyer the promissory note which evidences the HMC Payable.
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ARTICLE IX
CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS
The obligations of the Sellers to perform this Agreement at the Closing
are subject to the following conditions precedent which shall be fully satisfied
on or before the Closing, unless waived in writing by the Sellers' Agent:
9.1 All of the representations and warranties of the Buyer herein
contained shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of the Closing Date (except to the extent that
any such representation and warranty, by its terms, relates to a stated date),
and the Sellers shall have received a certificate from a duly authorized officer
of the Buyer, dated the Closing Date, to such effect.
9.2 Each of the agreements or obligations required by this Agreement to
be performed or complied with by the Buyer at or before the Closing shall have
been duly performed or complied with, and the Sellers shall have received a
certificate from a duly authorized officer of the Buyer, dated the Closing Date,
to such effect.
9.3 No action, suit or proceeding shall have been instituted by a
governmental agency or any third party to prohibit or restrain the sale
contemplated by this Agreement or otherwise challenge the power and authority of
the parties to enter into this Agreement or to carry out their obligations
hereunder or the legality or validity of the sale contemplated by this
Agreement.
9.4 The Inventory shall have been completed.
9.5 The Buyer shall have furnished the Sellers and the Stockholder with
(a) evidence to the reasonable satisfaction of the Sellers' Agent and its
counsel with respect to the corporate organization and existence and (b) a copy
of the resolutions duly adopted by the Board of Directors of the Buyer
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, certified by an officer of the Buyer as of
the Closing Date.
9.6 The Buyer shall have (a) tendered to the Sellers the cash portion
of the Purchase Price and the Preferred Shares, (b) duly executed and delivered
to the respective Sellers the Assumption Agreements, and (c) paid in full the
HMC Payable, based upon a certificate of Dennis D. Higginbotham as to its amount
as of the Closing Date.
9.7 All conditions to the obligations of the Owners under the Real
Property Purchase Agreements shall have been satisfied or fulfilled, unless
waived in writing by the Sellers' Agent.
9.8 The Sellers shall have received an opinion of Parker, Poe, Adams &
Bernstein L.L.P., counsel to the Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to the Sellers and their counsel.
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9.9 The form of all certificates, instruments and documents to be
executed and/or delivered by the Buyer to the Sellers pursuant to this Agreement
and all legal matters in respect of the transactions as herein contemplated
shall be reasonably satisfactory to the Sellers and its counsel, none of whose
approval shall be unreasonably withheld or delayed.
9.10 The Sellers' Agent shall have received the Employment Agreement,
duly executed by the Buyer.
9.11 All applicable waiting periods under the HSR Act shall have
expired without any indication by the Antitrust Division or the FTC that either
of them intends to challenge the transactions contemplated hereby, or, if any
such challenge or investigation is made or commenced, the conclusion of such
challenge or investigation permits the transactions contemplated hereby in all
material respects.
9.12 Dennis D. Higginbotham shall have been released from his personal
guarantees of those Liabilities specified in Schedule 9.12 hereto, or the Buyer
shall have made provision reasonably satisfactory to Dennis D. Higginbotham to
protect and indemnify him from and against any liabilities he may have under
such guarantees.
ARTICLE X
COVENANTS AND AGREEMENTS
10.1 Each of the Sellers agrees that it will, at any time and from time
to time, after the Closing, upon request of the Buyer, do, execute, acknowledge
and deliver all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be reasonably required to convey and
transfer to and vest in the Buyer and protect its rights, title and interest in
and enjoyment of all the Assets.
10.2 The parties hereto shall use their reasonable best efforts to
obtain, and to cooperate with each other in obtaining, all authorizations,
approvals, licenses, permits and other consents contemplated by Articles VIII
and IX.
10.3 During the period from the date of this Agreement through the
Closing Date, the Sellers will conduct the operation of their respective
Businesses in the ordinary course and in accordance with past practices.
10.4 From the date hereof until the Closing, each of the Sellers shall
afford to the Buyer, its attorneys, accountants and such other representatives
of the Buyer as the Buyer shall designate to such Seller, free and full access
at all reasonable times, and upon reasonable prior notice, to the Assets and the
properties, books and records of such Seller, and to interview personnel,
suppliers and customers of such Seller, in order that the Buyer may have full
opportunity to make such due diligence investigation as it shall reasonably
desire of the Assets, the Liabilities and the Businesses.
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10.5 In connection with the Buyer's due diligence investigation, the
Sellers shall allow an environmental consulting firm selected by the Buyer (the
"Environmental Auditor") to have prompt access to the Real Property in order to
conduct an environmental investigation, satisfactory to the Buyer in scope (such
scope being sufficient to result in a Phase I environmental audit report and a
Phase II environmental audit report, if desired by the Buyer), of, and to
prepare a report with respect to, the Real Property (the "Environmental Audit").
Each of the Sellers shall provide to the Environmental Auditor: (i) reasonable
access to all of its existing records concerning the matters which are the
subject of the Environmental Audit; and (ii) reasonable access to the employees
of such Seller and the last known addresses of former employees of such Seller
who are most familiar with the matters which are the subject of the
Environmental Audit (such Seller agreeing to use reasonable efforts to have such
former employees respond to any reasonable requests or inquiries by the
Environmental Auditor). The Sellers shall otherwise cooperate with the
Environmental Auditor in connection with the Environmental Audit. The Buyer, on
the one hand, and the Sellers, on the other hand, shall each bear 50% of the
costs, fees and expenses in connection with the Environmental Audit.
10.6 All representations and warranties of the Sellers (which shall
include all statements contained in any schedule or certificate furnished or
delivered by the Sellers) shall survive the Closing for a period of three (3)
years, except for the representations and warranties in Sections 7.4, 7.6,
7.8(b) and 7.10 which shall survive the Closing until the expiration of the
applicable statutes of limitation. The Sellers and the Stockholder, jointly and
severally, agree to indemnify and hold harmless the Buyer and its officers,
directors, employees and agents, and their respective successors and assignees,
from and against any and all losses, liabilities, obligations, assessments,
suits, actions, proceedings, claims or demands, including costs, expenses and
fees (including reasonable attorneys' fees and expert witness fees) incurred in
connection therewith, suffered by any of them or asserted against any of them or
the Assets (collectively, "Buyer's Damages"), arising out of or based upon: (a)
the failure of any representation or warranty of the Sellers contained herein,
or in any agreement, certificate, schedule or document executed by the Sellers
or the Stockholder in connection herewith, to be true and correct in all
material respects as of the Closing Date; provided, however, the Sellers and the
Stockholder shall have no obligation to pay Buyer's Damages pursuant to this
subsection 10.6(a) unless and until (and only to the extent that) all claims in
respect of Buyer's Damages exceed a cumulative aggregate total of Fifty Thousand
Dollars ($50,000); (b) the breach of any covenant or agreement of the Sellers or
the Stockholder contained in this Agreement; (c) any liability or obligation of
the Sellers or the Stockholder not expressly assumed by the Buyer pursuant to
this Agreement; or (d) any arrangements or agreements made or alleged to have
been made by the Sellers or the Stockholder with any broker, finder or other
agent in connection with the transactions contemplated hereby; provided,
further, that the aggregate amount of Buyer's Damages required to be paid by the
Seller and the Stockholder shall not exceed Twenty-Five Million Dollars
($25,000,000).
10.7 All representations and warranties of the Buyer (which shall
include all statements contained in any schedule or certificate furnished or
delivered by the Buyer) shall survive the Closing for a period of three (3)
years. The Buyer agrees to indemnify and hold harmless each of the Sellers and
its Stockholder, officers, directors, employees and agents, and their respective
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successors and assignees, from and against any and all losses, liabilities,
obligations, assessments, suits, actions, proceedings, claims or demands,
including costs, expenses and fees (including reasonable attorneys' fees and
expert witness fees) incurred in connection therewith, suffered by any of them,
or asserted against any of them, arising out of or based upon (a) the failure of
any representation or warranty of the Buyer contained herein, or in any
agreement, certificate or document executed by the Buyer in connection herewith,
to be true and correct in all material respects as of the Closing Date, (b) the
breach of any covenant or agreement of the Buyer contained in this Agreement,
(c) the Liabilities, or (d) any arrangements or agreements made or alleged to
have been made by the Buyer with any broker, finder or other agent in connection
with the transactions contemplated hereby.
10.8 Personal property, use and intangible taxes and assessments with
respect to the Assets shall be prorated on a per diem basis and apportioned
between the Sellers and the Buyer as of the date of the Closing. The Sellers
shall be liable for that portion of such taxes and assessments relating to, or
arising in respect of, periods on or prior to the Closing Date, and the Buyer
shall be liable for that portion of such taxes and assessments relating to, or
arising in respect of, any period after the Inventory Date. Any sale or transfer
taxes attributable to the sale or transfer of the Assets to the Buyer hereunder
shall be paid by the Sellers.
10.9 Except as may be required by law or the rules of the New York
Stock Exchange or as necessary in connection with the transactions contemplated
hereby, no party hereto shall (i) make any press release or other public
announcement relating to this Agreement or the transactions contemplated hereby,
without the prior approval of the other parties hereto or (ii) otherwise
disclose the existence and nature of negotiations regarding the transactions
contemplated hereby to any person or entity other than such party's accountants,
attorneys, agents and representatives, all of whom shall be subject to this
nondisclosure obligation as agents of such party. The parties shall cooperate
with each other in the preparation and dissemination of any public announcements
of the transactions contemplated by this Agreement.
10.10 None of the Sellers or the Stockholder shall pursue, initiate,
encourage or engage in, any negotiations or discussions with, or provide any
information to, any person or entity (other than the Buyer and its
representatives and affiliates) regarding the sale or possible sale to any such
person or entity of any of the Assets or capital stock of any of the Sellers or
any merger or consolidation or similar transaction involving any of the Sellers.
10.11 The Sellers shall promptly notify the Manufacturers regarding the
transactions contemplated by this Agreement. The Buyer shall promptly apply to
the Manufacturers for, or cause an affiliate of the Buyer to apply to the
Manufacturers for, the issuance of franchises to operate the respective
automobile dealerships upon the Real Property. Effective as of the Closing, each
of the Sellers shall terminate its Dealer Sales and Service Agreements with the
Manufacturers. The Sellers shall fully cooperate with the Buyer, and take all
reasonable steps to assist the Buyer, in the Buyer's efforts to obtain its own
similar Dealer Sales and Service Agreements with the Manufacturers. The parties
acknowledge that the Buyer's Dealer Agreements are subject to the approval of
the Manufacturers and that the Buyer would be unable to obtain its own, similar
Dealer Sales and
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Service Agreements absent the Sellers' termination of their respective
agreements with the Manufacturers.
10.12 The Buyer shall have the right, but not the obligation, to employ
any or all of the Sellers' employees. If permitted by law and applicable
regulations, each Seller shall, in consideration for the sale of substantially
all of such Sellers' assets in bulk, assign and transfer to the Buyer, without
additional charge therefor, the amount of reserve in such Seller's State
Unemployment Compensation Fund with respect to the Businesses and the
corresponding experience rate.
10.13 Subject to the determination by the Buyer that any of the
following actions is not required, the Sellers and the Buyer shall promptly
prepare and file Notification and Report Forms under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation.
10.14 The Sellers shall allow, cooperate with and assist the Buyer's
accountants, and shall instruct the Sellers' accountants to cooperate, in the
preparation of audited financial statements of the Sellers as necessary for any
required filings by the Buyer with the Securities and Exchange Commission or
with the Buyer's lenders; provided, however, that the expense of such audit
shall be borne by the Buyer.
10.15 Termination.
(a) Notwithstanding any other provision herein contained to
the contrary, this Agreement may be terminated at any time prior to the Closing
Date:
(i) By written consent of the Buyer and the Sellers'
Agent;
(ii) At any time after the Closing Date Deadline (as
the same may have been extended pursuant to Article I hereof), by written notice
by the Buyer or the Sellers to the other party(ies) hereto if the Closing shall
not have been completed on or before the Closing Date Deadline (as the same may
have been extended pursuant to Article I hereof); provided, however, no party
may terminate this Agreement pursuant to this Section 10.15(a)(ii) if such party
is in breach of any material representation, warranty or covenant of such party
contained in this Agreement;
(iii) By the Buyer if, after any initial HSR Act
filing, the FTC makes a "second request" for information, or the FTC or the
Antitrust Division challenges the transactions contemplated hereby; provided
that the Buyer delivers a written notice to the Sellers of its termination
hereunder within 30 days of the Buyer's receipt of such second request or of
notice of such challenge;
(iv) [intentionally left blank]
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(v) Subject to the last paragraph of this Section
10.15(a), by the Buyer, by written notice to the Sellers' Agent, in the event
that approval by any applicable automobile manufacturer or distributor of the
transactions contemplated by this Agreement is not received prior to the Closing
Date Deadline; or
(vi) Subject to the last paragraph of this Section
10.15(a), by the Buyer, by written notice to the Sellers' Agent, in the event
that any Manufacturer shall exercise any right of first refusal, preemptive
right or other similar right, with respect to any of the Assets.
Notwithstanding the provisions of Subsections 10.15(a)(v) and (vi)
above, the Buyer and the Sellers' Agent may elect to terminate this Agreement
only as to the Assets and Liabilities with respect to the dealership franchise
from the Manufacturer referred to in such Subsection; in such event, the
Business and Intangible Assets Purchase Price shall be reduced by the applicable
amount opposite the name of the applicable Seller on Schedule 2.2 hereto and the
other components of the Purchase Price shall be appropriately reduced.
(b) In the event of termination of this Agreement pursuant to
Section 10.15(a), this Agreement shall be of no further force or effect;
provided, however, that any termination pursuant to Section 10.15(a) shall not
relieve (a) the Buyer of any liability under Section 10.15(c) below, (b) the
Sellers of any liability under Section 10.15(d) below, or (c) any party hereto
of any liability for breach of any representation and warranty, covenant or
agreement hereunder occurring prior to such termination. In addition, in the
event of any such termination, all filings, applications and other submissions
made pursuant to this Agreement or prior to the execution of this Agreement in
contemplation thereof shall, to the extent practicable, be withdrawn from the
agency or other entity to which made.
(c) If this Agreement is terminated by the Sellers pursuant to
Section 10.15(a)(ii) above and the failure to complete the Closing on or before
the Closing Date Deadline shall have been due to the Buyer's breach of its
material representations and warranties or its material covenants or obligations
under this Agreement, then the Buyer shall, upon demand of the Sellers, promptly
pay to the Sellers in immediately available funds, as liquidated damages for the
loss of the transaction, a termination fee of $500,000 (the "Buyer's Termination
Fee").
(d) If this Agreement is terminated by the Buyer pursuant to
Section 10.15(a)(ii) above and the failure to complete the Closing on or before
the Closing Date Deadline shall have been due to the Sellers' breach of any of
their material representations and warranties or any of their material covenants
or obligations under this Agreement, then the Sellers, jointly and severally,
shall, upon demand of the Buyer, promptly pay to the Buyer in immediately
available funds, as liquidated damages for the loss of the transaction, a
termination fee of $500,000 (the "Sellers' Termination Fee").
(e) The respective rights of the parties to terminate this
Agreement under Section 10.15(a)(ii) and to be paid the Sellers' Termination Fee
or the Buyer's Termination Fee, as the case may be, shall be the respective
parties' sole and exclusive remedies for damages; in the event of
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such termination by either party, such party shall have no right to equitable
relief for any breach or alleged breach of this Agreement, other than for
specific performance for the payment of the Sellers' Termination Fee or the
Buyer's Termination Fee, as the case may be. Nothing contained in this Agreement
shall prevent any party from electing not to exercise any right it may have to
terminate this Agreement and, instead, seeking any equitable relief (including
specific performance) to which it would otherwise be entitled in the event of
breach by any other party hereto.
10.16 The Buyer agrees to provide to Dennis D. Higginbotham and members
of his immediate family (for personal use and not for commercial resale) the
right to purchase, during each year of the seven years after the termination of
his employment with the Buyer, an aggregate total of four vehicles (including
trucks), as selected by Dennis D. Higginbotham (or, in the event of his death or
disability, by a single person representing his family), from the Buyer or one
or more of the Buyer's wholly-owned subsidiaries at the Buyer's or such
subsidiaries' actual cost (equal to factory invoice less (i) factory holdback,
(ii) dealer rebates, and (iii) any other factory incentive).
ARTICLE XI
MISCELLANEOUS
11.1 Except as provided in this Section, this Agreement shall not be
assignable by any party hereto without the prior written consent of the other
parties. The Buyer may assign this Agreement, without the consent of the other
parties hereto, to a corporation, partnership or limited liability company
controlled by the Buyer, including a corporation, partnership or limited
liability company to be formed at any time prior to the Closing Date, and to any
person or entity who shall acquire all or substantially all of the assets of the
Buyer or of such corporation, partnership or limited liabilities company
controlled by the Buyer (including any such acquisition by merger or
consolidation); provided said assignment shall be in writing and the assignee
shall assume all obligations of the Buyer hereunder, whereupon the assignee
shall be substituted in lieu of the Buyer named herein for all purposes,
provided, however, that the Buyer originally named herein shall continue to be
liable with respect to its obligations hereunder. The Buyer may assign this
Agreement, without the consent of the other parties hereto, as collateral
security, and the other parties hereto agree to execute and deliver any
acknowledgment of such assignment by the Buyer as may be required by any lender
to the Buyer.
11.2 The interpretation and construction of this Agreement, and all
matters relating hereto, shall be governed by the laws of the State of Florida.
11.3 All accounting matters required or contemplated by this Agreement
shall be in accordance with generally accepted accounting principles.
11.4 Except as otherwise specifically provided in this Agreement, each
of the parties hereto shall be responsible for the payment of such party's fees,
costs and expenses incurred in connection with the negotiation and consummation
of the transactions contemplated hereby.
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11.5 This Agreement, including the schedules and other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement may not be amended except by a writing executed by all
of the parties hereto. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.6 Any party to this Agreement may, by written notice to the other
parties hereto, waive any provision of this Agreement from which such party is
entitled to receive a benefit. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision of this Agreement.
11.7 All notices, claims, certificates, requests, demands and other
communications hereunder shall be given in writing and shall be delivered
personally or sent by facsimile or by a nationally recognized overnight courier,
postage prepaid, and shall be deemed to have been duly given when so delivered
personally or by confirmed facsimile or one (1) business day after the date of
deposit with such nationally recognized overnight courier. All such notices,
claims, certificates, requests, demands and other communications shall be
addressed to the respective parties at the addresses set forth below or to such
other address as the person to whom notice is to be given may have furnished to
the others in writing in accordance herewith.
If to the Buyer, to:
Sonic Automotive, Inc.
5401 E. Independence Boulevard
Charlotte, North Carolina 28212
Telecopy No.: (704) 563-5116
Attention: Chief Financial Officer
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Telecopy No.: (704) 334-4706
Attention: Edward W. Wellman, Jr.
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If to the Sellers or the Stockholder, to:
Dennis D. Higginbotham
Higginbotham Management, Inc.
P.O. Box 770
104 Riverside Drive
New Smyrna Beach, Florida 32170
Telecopy No.: (904) 426-8111
With a copy to:
Cobb, Cole & Bell
P.O. Box 2491
150 Magnolia Avenue
Daytona Beach, Florida 32114
Telecopy No.: (904) 238-7003
Attention: Larry D. Marsh
11.8 This Agreement may be executed in any number of counterparts. Each
such counterpart hereof shall be deemed to be an original instrument, and all
such counterparts together shall constitute but one agreement.
11.9 Whenever any representation or warranty of the Sellers contained
herein or in any other document executed and delivered in connection herewith is
based upon the knowledge of the Sellers, (a) such knowledge shall be deemed to
include (i) the best actual knowledge, information and belief of any of the
Sellers or the Stockholder, and (ii) any information which any Stockholder would
reasonably be expected to be aware of in the prudent discharge of his or her
duties in the ordinary course of business (including consultation with legal
counsel) on behalf of any Seller, and (ii) the knowledge of any Seller or
Stockholder shall be deemed to be the knowledge of all of the Sellers.
11.10 (a) Any dispute, claim or controversy arising out of or relating
to this Agreement or the interpretation or breach hereof shall be resolved by
binding arbitration under the commercial arbitration rules of the American
Arbitration Association (the "AAA Rules") to the extent such AAA Rules are not
inconsistent with this Agreement. Judgment upon the award of the arbitrators may
be entered in any court having jurisdiction thereof or such court may be asked
to judicially confirm the award and order its enforcement, as the case may be.
The demand for arbitration shall be made by any party hereto within a reasonable
time after the claim, dispute or other matter in question has arisen, and in any
event shall not be made after the date when institution of legal proceedings,
based on such claim, dispute or other matter in question, would be barred by the
applicable statute of limitations. The arbitration panel shall consist of three
(3) arbitrators, one of whom shall be appointed by each of the Buyer and the
Sellers within thirty (30) days after any request for arbitration hereunder. The
two arbitrators thus appointed shall choose the third arbitrator
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within thirty (30) days after their appointment; provided, however, that if the
two arbitrators are unable to agree on the appointment of the third arbitrator
within 30 days after their appointment, either arbitrator may petition the
American Arbitration Association to make the appointment. The place of
arbitration shall be Charlotte, North Carolina. The arbitrators shall be
instructed to render their decision within sixty (60) days after their selection
and to allocate all costs and expenses of such arbitration (including legal and
accounting fees and expenses of the respective parties) to the parties in the
proportions that reflect their relative success on the merits (including the
successful assertion of any defenses).
(b) Nothing contained in this Section 11.10 shall prevent any
party hereto from seeking any equitable relief to which it would otherwise be
entitled from a court of competent jurisdiction.
11.11 Subject to Section 11.1 hereof, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto. Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon or give to any
employee of the Sellers, or any other person, firm, corporation or legal entity,
other than the parties hereto and their successors and permitted assigns, any
rights, remedies or other benefits under or by reason of this Agreement.
11.12 The article, section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.13 In the event that any provision, or part thereof, of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions, or parts thereof, shall
not in any way be affected or impaired thereby.
11.14 For a period of three (3) years after the Closing Date, the Buyer
agrees to provide to the Sellers full cooperation and assistance relative to
accounting matters in connection with the Businesses including, but not limited
to, assistance in connection with any Florida Department of Revenue sales tax
audit, filing of all final payroll and sales tax returns, filing of final W-2's
for all employees for the calendar year ended December 31, 1998, assistance in
the termination or roll-over of the qualified pension plan, accounting
assistance in the paying of accounts payable, accounting assistance relative to
the finalization of all factory accounts, accounting assistance relative to the
collection of all receivables, accounting assistance relative to the year end
accounting necessary to prepare the Sellers' corporate tax returns, and
accounting assistance in the event of an Internal Revenue Service audit.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
THE BUYER: SONIC AUTOMOTIVE, INC.
By: /s/ O. Bruton Smith
------------------------------------
Name: O. Bruton Smith
Title: Chief Executive Officer
Federal Taxpayer I.D.: 51-0363307
THE SELLERS: HMC FINANCE CORPORATION, INC.
By: /s/ Dennis D. Higginbotham
------------------------------------
Name:
Title:
Federal Taxpayer I.D.: 59-3095116
HALIFAX FORD-MERCURY, INC.
By: /s/ Dennis D. Higginbotham
------------------------------------
Name:
Title:
Federal Taxpayer I.D.: 59-2806650
HIGGINBOTHAM AUTOMOBILES, INC.
By: /s/ Dennis D. Higginbotham
------------------------------------
Name:
Title:
Federal Taxpayer I.D.: 59-3278207
HIGGINBOTHAM CHEVROLET-
OLDSMOBILE, INC.
By: /s/ Dennis D. Higginbotham
------------------------------------
Name:
Title:
Federal Taxpayer I.D.: 59-1671876
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SUNRISE AUTO WORLD, INC.
By: /s/ Dennis D. Higginbotham
------------------------------------
Name:
Title:
Federal Taxpayer I.D.: 59-3297730
THE SHAREHOLDER: /s/ Dennis D. Higginbotham (SEAL)
--------------------------------------
DENNIS D. HIGGINBOTHAM
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INDEX OF SCHEDULES AND EXHIBITS
TO
ASSET PURCHASE AGREEMENT
Schedules
Schedule 2.2 Part I - Allocation of Purchase Price Among Sellers(1)
Part II - Allocation of Purchase Price and Liabilities to Assets
Part III - Payment of Purchase Price(2)
Schedule 2.4 Part I - Liabilities
Part II - Retained Liabilities
Schedule 2.5 Promissory Note from HMC to Dennis D. Higginbotham
Schedule 3.1 New Vehicles(2)
Schedule 3.2 Demonstrators(2)
Schedule 5.4 Fixtures and Equipment (Book Depreciation Schedule)(3)
Schedule 5.9 HMC Receivables(4)
Schedule 6.2 Compliance re: Buyer
Schedule 7.1 Stockholders
Schedule 7.2 Compliance re: Seller and Stockholder
Schedule 7.3 Pending or Threatened Actions, Suits or Proceedings
Schedule 7.4 Encumbrances on the Assets
Schedule 7.5 Permits and Approvals
Schedule 7.7 Employees
Schedule 7.10 Compliance with Laws
Schedule 9.12 Personal Guarantees by Dennis D. Higginbotham
Exhibits
A Form of Bills of Sale
B Statement of Rights and Preferences
C Form of Non-Competition Agreement
D Form of Employment Agreement - Dennis Higginbotham
- -----------------------
(1) As to Business and Intangible Assets Purchase Price only; revised
Schedule with all Purchase Price Components delivered 3 days prior to
Closing
(2) 3 days prior to Closing
(3) 5 days prior to Closing
(4) 1 day prior to Closing
