EXHIBIT 2.2
AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
THIS AGREEMENT is entered into by and between, RODWAY CHEVROLET CO., A
California corporation (hereinafter referred to as "Seller"), and LITHIA MOTORS,
INC., an Oregon corporation, or its nominee (hereinafter referred to as
"Buyer").
RECITALS:
Seller is a California business corporation engaged in the business of
selling and servicing Chevrolet, Mazda and Isuzu motor vehicles and related
parts and accessories from premises located at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Business Real PROPERTY"), and holds franchises issued by
Chevrolet Motor Division of General Motors Corporation, Mazda Motor Sales of
America, Inc. and American Isuzu Motors, Inc.
Buyer wishes to purchase from Seller, and Seller is willing to sell to
Buyer, all assets relating to Seller's Chevrolet, Mazda and Isuzu franchises at
the Business Real Property conditioned upon the above referenced Franchisors
granting to Buyer a franchise for the sale of new Chevrolet, Mazda and Isuzu
motor vehicles, respectively, in the same location as Seller's franchises.
Buyer (or a related entity) also wishes to purchase the real property and
improvements which constitute the Business Real Property, and the purchase of
Seller's business assets shall be conditioned upon the simultaneous closing of
the purchase of that real property by Buyer.
NOW, THEREFORE, IN CONSIDERATION OF the mutual promises set forth herein,
the parties agree as follows:
1. DEFINITIONS. In this Agreement, the following words shall have the
indicated meanings:
(a) "CLOSING" shall refer to the consummation of the transaction
contemplated under this Agreement in accordance with the terms hereof, and
"CLOSING DATE" shall refer to June 18,1998.
(b) "SELLERS BUSINESS" shall refer to any and all activities
conducted by Seller in Redding, California, relating to the marketing and sale
of new Chevrolet, Mazda and Isuzu vehicles and associated parts and accessories,
and the repair and servicing of new or used Chevrolet, Mazda and Isuzu vehicles.
(c) "PURCHASED ASSETS" shall refer to those assets which are
identified in Paragraph 2 as being purchased and sold by the parties hereunder.
(d) Sellers "EQUIPMENT" shall refer to tangible personal property
owned or used by Seller in connection with Seller's business, including, but not
limited to, all of Seller's machinery, tools, signs, office equipment, computer
equipment, computer programs, microfiches, parts lists, repair manuals, sales or
service brochures, furniture and fixtures, and all of Seller's leasehold
improvements to the Business Real Property. Prior to the Closing Date, a list of
the "Equipment" shall be attached hereto as Exhibit "A". Buyer and Seller have
acknowledged that certain equipment used by Seller and included in this
definition is presently certain equipment used by Seller and included in this
definition is presently owned by All-Way Leasing, Inc., ("All-Way"), a
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California corporation. Prior to the Closing Date, a listing prepared by Seller
of certain personal items being retained by Seller and NOT being purchased by
Buyer shall be attached hereto as Exhibit "B".
(e) Seller's "Intangible Assets" shall refer to Seller's telephone
and fax numbers, service customer lists, sales customer lists, all rights of
Seller under contracts assigned to and assumed by Buyer pursuant to this
Agreement, all goodwill associated with Seller's Business, and all other
intangible rights and interests of any value relating to Seller's Business;
provided, however, that Seller's business name ("Rodway Chevrolet, Mazda,
Isuzu") is not included within the Intangible Assets being sold by Seller
hereunder.
(f) "Business Real Property" shall refer to that certain real
property owned by Shasta Enterprises in Redding, California, which is a
portion of Assessor's Parcel Number ▇▇▇-▇▇▇-▇▇▇ and more commonly known as
the Rodway Chevrolet-Mazda-Isuzu automobile dealership premises, the address
of which is ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, as depicted on
Exhibit "D", which is attached hereto and incorporated herein by reference.
(g) "Franchisor(s)" shall refer to Chevrolet Motor Division of
General Motors Corporation, Mazda Motor Sales of America, Inc., and American
Isuzu Motors, Inc.
(h) "New Vehicle" shall refer to a Chevrolet, Mazda or Isuzu motor
vehicle which: (i) is unregistered and unused, (ii) is from the 1996, 1997 or
1998 model year, (iii) has been driven for less than 500 odometer miles, and
(iv) may be represented or warranted to consumers as "new" under California law.
"Rollback Vehicle" shall mean an unregistered vehicle from the 1996, 1997 or
1998 model year which has been sold to a customer by Seller but returned because
of the customer's inability for whatever reason, to complete the purchase.
"DEMONSTRATOR Vehicle" shall mean an unregistered vehicle from the 1996, 1997 or
1998 model year, which has been used and operated by Seller on dealer plates for
sales demonstration purposes. "Used Vehicle" shall mean any vehicle which is not
a "new vehicle", a "demonstrator vehicle" or a "rollback vehicle" as defined in
the three preceding sentences.
(i) "Date of this Agreement" shall refer to the first date upon which
this Agreement has been signed by all of the parties.
(1) All amounts payable by Buyer to Seller at Closing shall be paid
by certified check drawn against a bank of Buyer's choice having offices located
in ▇▇▇▇▇▇▇ County, Oregon, or by whatever other means shall be acceptable to
Seller.
2. PURCHASED ASSETS. Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, the assets identified in Paragraphs 3, 4, 5, 6, 7 and 8 of
this Agreement (the "Purchased Assets"). Excluded from this transaction are
Seller's cash, accounts receivable, notes receivable, banking accounts and
deposits, and all other assets not identified in Paragraphs 3, 4, 5, 6, 7 and 8
of this Agreement.
3. INVENTORY OF NEW VEHICLES, DEMONSTRATOR VEHICLES, ROLLBACK VEHICLES
AND USED VEHICLES. Buyer shall purchase Seller's entire inventory of new
Chevrolet, Mazda and Isuzu vehicles, as that inventory exists on the Closing
Date. Buyer also shall purchase Seller's entire
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inventory of demonstrator vehicles, rollback vehicles and used vehicles as that
inventory exists on the Closing Date.
(a) PRICE OF NEW VEHICLES. The purchase price for each of Sellers new
1996, 1997 and 1998 vehicles shall be equal to Seller's factory invoice cost
adjusted to reflect any holdback, carryover allowance, incentives, or price
adjustments which are received by or credited to Seller at the completion of the
new vehicle inventory (i.e., on the final day of the inventory at such time as
the inventory is reported to representatives of Lithia and Rodway), and further
adjusted for the addition (or removal) of accessories and/or equipment at
Seller's internal cost for parts and labor., With respect to vehicles "in
transit" (i.e., those vehicles which are not "on the ground" at the Business
Property at the completion of the new vehicle inventory), any holdback,
carryover allowance, incentives, price adjustments, advertising and flooring
allowance will be paid to Buyer at such time as Seller has received the same
from the manufacturer.
(b) DEDUCTION FOR DAMAGE TO NEW VEHICLES. Immediately prior to
Closing, Buyer and Seller shall jointly inspect Seller's inventory of new
vehicles. If any new vehicle purchased by Buyer from Seller is damaged, and the
cost of repairing that damage would be more than $1,000.00, then that vehicle
shall be treated as a used vehicle for purposes of Paragraph 4 and this
Paragraph 3, rather than as a new vehicle. If any vehicle in Seller's inventory
of new vehicles is damaged, and the cost of repairing that damage is less than
$1,000.00, then Buyer shall be obligated to purchase that vehicle as a new
vehicle, and the price for that vehicle, as determined under subparagraph 3(a),
shall be reduced by the actual net cost to Buyer of repairing that damage. If
Buyer and Seller are unable to agree upon the actual net cost to Buyer of
repairing the damage to a vehicle, then Buyer and Seller shall select an
independent third party to determine that repair cost, which determination shall
be binding upon both Buyer and Seller.
(c) PURCHASE ORDERS FOR NEW VEHICLES. Immediately prior to Closing,
Buyer and Seller shall jointly review Seller's outstanding purchase orders for
new vehicles ordered from Seller by customers but not delivered prior to
Closing. At Closing, Seller shall assign to Buyer, and Buyer shall assume from
Seller, all of Seller's rights (including customer deposits) and obligations
(including sales commissions) under such purchase orders, provided, however,
that Buyer shall not be obligated to assume Seller's rights or obligations with
respect to any new vehicle purchase order which is at a price less than factory
invoice, or which provides for a trade-in at a price or under terms unacceptable
to Buyer.
(d) PRICE FOR DEMONSTRATOR AND ROLLBACK VEHICLES. The price for each
demonstrator vehicle shall be determined as provided in subparagraphs 3(a) and
3(b) and then reduced by 25 cents per mile for each odometer mile in excess of
4,000 miles on that vehicle. The price for each rollback vehicle shall be
determined as provided in subparagraph 3(a), less ten percent (10%), and further
adjusted as set forth in paragraph 3(b).
(e) PRICE FOR USED VEHICLES. The purchase price for each of Seller's
used vehicles shall be the wholesale value of the vehicle as determined by the
then current edition of ▇▇▇▇▇▇ Blue Book (including adjustments for mileage,
equipment, reconditioning, etc...). If Buyer and Seller are unable to agree upon
the appropriate adjustments for reconditioning, Buyer and Seller shall select an
independent third party to determine that adjustment, which determination shall
be binding upon both Buyer and Seller.
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(f) USED VEHICLE DISCLOSURES. Prior to closing, Seller shall provide
Buyer with access to Seller's purchase and repair documentation for the used
vehicles, and at the closing provide to Buyer legal odometer statements and free
and clear title for each of the used vehicles. All vehicles are sold "As-Is"
without warranty, either express or implied.
(g) PAYMENT FOR NEW, DEMONSTRATOR, ROLLBACK AND USED VEHICLES. The
aggregate purchase price for all new, demonstrator, rollback and used vehicles
purchased by Buyer from Seller shall be paid in full outside of escrow.
4. INVENTORY OF NEW PARTS AND ACCESSORIES. Buyer shall purchase Seller's
entire inventory of new, undamaged and remanufactured Chevrolet, Mazda and Isuzu
vehicle parts and accessories manufactured by Franchisors and/or third party
suppliers listed on the current supplier's price list (including parts with
superceded numbers), as that inventory exists on the inventory date. Buyer shall
have no obligation to purchase from Seller any parts or accessories which are
used or damaged. Prior to Closing, Seller shall maintain Seller's inventory of
parts and accessories at a level consistent with good business practices and
Seller's normal and regular course of business.
(a) PRICE FOR PARTS AND ACCESSORIES. The purchase price for each item
in Seller's inventory of new, remanufactured and undamaged parts and accessories
for Chevrolet, Mazda and Isuzu vehicles (whether manufactured by Franchisors or
third party suppliers) shall be the net cost for that item as set forth in the
then most recent price book published by the supplier of that item.
(b) DETERMINATION OF INVENTORY OF PARTS AND ACCESSORIES. Seller's
inventory of new, remanufactured and undamaged Chevrolet, Mazda and Isuzu parts
and accessories (whether manufactured by Franchisor or third party suppliers)
shall be determined immediately prior to Closing (or on whatever earlier date
shall be selected by mutual agreement of the parties) by an inventory to be
conducted by appointees of Buyer and Seller. Buyer and Seller shall each be
responsible for the cost of their respective representatives. The inventory
shall be priced and extended as soon thereafter as possible.
(c) PAYMENT FOR INVENTORY OF NEW PARTS AND ACCESSORIES. The purchase
price for Seller's inventory of parts and accessories shall be paid in full at
Closing.
5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS. Seller agrees to sell all of the
Equipment to Buyer, and Buyer agrees to purchase the Equipment from Seller.
Seller warrants to Buyer that the items listed on Exhibit "A" constitute
tangible personal property (other than inventory, consumable supplies or those
items listed on Exhibit "B") which, during the six (6) months preceding Closing,
has owned or used by Seller in connection with Seller's Business. Buyer shall
have the right to fully inspect the Equipment. Any Parts delivery or shop
vehicles which may be included in this section will be purchased by Buyer as
part of Seller's Used Vehicle inventory
(a) PRICE FOR EGUIPMENT. The purchase price for Equipment purchased
by Seller or All-Way on or after January 1,1996, shall be the invoice amount
thereof. The purchase price for Equipment purchased by Seller or All-Way prior
to January 1, 1996, shall be the current fair market value. Notwithstanding the
foregoing, (i) the UCS computer system (and related hardware) owned by All-Way
and present at the Business Property and All-Way Leasing's corporate office
shall be purchased by Buyer for its fair market value or One Hundred Fifty
Thousand and 00/100 Dollars ($150,000.00), whichever is greater, and (ii) the
purchase price for the electronic message center owned by All-Way and located at
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, shall be Fifty Thousand and 00/100
Dollars ($50,000.00). The current fair market shall be determined by an
appraisal; the decision of the appraiser
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shall be binding upon Buyer and Seller. The appraisal shall be determined prior
to the Closing on a date mutually agreeable to the parties. Buyer and Seller
shall each be responsible for 50% of the fees charged by the appraiser. Seller
agrees that Buyer shall have the right to allocate the aggregate purchase price
for the Equipment among the various items of Equipment in whatever manner Buyer,
in the exercise of its reasonable discretion, believes will best reflect the
relative fair market values of those items.
(b) PAYMENT FOR EQUIPMENT. The purchase price for the Equipment shall
be paid as follows:
(1) Prior to or simultaneously with the execution of this
Agreement, Buyer is making an ▇▇▇▇▇▇▇ money deposit to Chicago Title Company, in
Redding, California, in the amount of $500,000.00, which ▇▇▇▇▇▇▇ money deposit,
together with all interest earned thereon, shall be credited at Closing against
the purchase price for the Equipment.
(2) The balance of the purchase price for the Equipment shall be
paid in full at Closing.
(c) Buyer shall purchase Seller's leasehold improvements for the
sum of $166,371, which amount shall be paid in full at the closing. The
leasehold improvements are transferred to Buyer in as-is condition, without
warranty, either express or implied.
6. SUPPLIES. Buyer shall purchase all of the gas, oil, nuts, bolts,
and other supplies which are held for use in Seller's Business; provided,
however, that Buyer shall not be obligated to purchase used or damaged items
or supplies. The price for all such supplies shall be Seller's actual net
cost, as determined by mutual agreement of the parties, and shall be paid to
Seller at Closing. Buyer shall purchase prepaid expenses of Seller which are
assignable from Seller to Buyer.
7. REPAIR WORK IN PROGRESS. Buyer shall purchase all of Seller's
vehicle repair work in progress (in-house and subcontracted), at a price
equal to Seller's actual net cost (before profit and overhead) for all work
performed prior to Closing. The purchase price for work in progress shall be
paid at Closing.
8. INTANGIBLE ASSETS. Buyer shall purchase all of Seller's Intangible
Assets.
(a) The aggregate purchase price for Seller's Intangible Assets shall
be Two Million One Hundred Fifty Thousand and 00/100 Dollars ($2,150,000.00).
This $2,150,000.00 purchase price shall be allocated entirely to goodwill and
all other intangible assets shall be at no charge; provided, however, that no
value shall be allocated to the non-transferable Chevrolet, Mazda and Isuzu
franchises issued by the Franchisors. This $2,150,000.00 purchase price shall be
paid at the Closing.
(b) In order for Buyer to receive the full benefit of the intangible
goodwill being purchased by Buyer, it will be necessary for Seller to perform
no-charge repair work and vehicle warranty work with respect to vehicles
repaired or sold by Seller prior to Closing. In partial consideration of the
$2,150,000.00 amount being paid by Buyer for the Intangible Assets, Seller
agrees to reimburse Buyer for the full list price, less 25% of repair and
warranty services which were not covered by factory warranty and which are
performed by Buyer within ninety (90) days or three thousand (3,000) miles from
the date of completion of Seller's repairs as provided in Seller's warranty for
labor performed (as set forth on the reverse of Seller's repair orders). Buyer
agrees to obtain Seller's prior approval before performing any such repairs.
Seller agrees to reimburse Buyer pursuant to the preceding sentence on a monthly
basis, with
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payment to be made within ten (10) days after Buyer submits a billing for the
net cost of repair and warranty services performed during the preceding calendar
month.
9. BULK TRANSFERS. It is the intention of the parties that this
transaction comply with Division Six of the California Uniform Commercial Code,
more commonly known as Uniform Commercial Code - Bulk Transfers, and Seller
shall take all actions necessary to comply therewith. Seller will not commence
with the publishing of such notice until such time as Buyer has obtained
approval from Franchisors as an authorized Chevrolet, Mazda and Isuzu dealer.
10. LIMITATION ON LIABILITIES ASSUMED. Except as provided in subparagraph
3(d), Paragraph 7 and Paragraph 8, Buyer shall not, by reason of this Agreement
or Buyer's purchase of the Purchased Assets, take responsibility for any
liabilities, debts or obligations of Seller (including Seller's trade payables,
account payables, obligations to employees, or tax liabilities).
11. WARRANTIES OF SELLER. Seller makes the following warranties to Buyer,
with the intent that Buyer rely thereon:
(a) CORPORATE ORGANIZATION. Seller is a corporation organized,
validly existing, and in good standing under the laws of the State of
California. Seller is authorized to do business in the State of California, and
has full power and authority to own, use, and sell its assets.
(b) CORPORATE AUTHORITY. This agreement is subject to approval by
Seller's attorney and certified public accountant within five (5) days after the
date of this Agreement. This Agreement will not violate any judicial,
governmental or administrative decree, order, writ, injunction, or judgment, and
will not conflict with or constitute a default under Seller's bylaws, or any
contract, agreement, or other instrument to which Seller is a party or by which
it may be bound.
(c) EMPLOYEE ISSUES. To Seller's knowledge, no employees of Seller
are members of any union. Within ten (10) days after Franchisors' approval of
Buyer as a Chevrolet, Mazda and Isuzu dealer, Seller shall provide to Buyer the
following: (i) a list of Seller's employees, (ii) a written disclosure of all
benefits made available to Seller's employees (including qualified and
non-qualified retirement plans), and (iii) access to all personnel files for
seller's employees, unless the providing of such information would, in Seller's
reasonable discretion, be prohibited by State or Federal law. All employee
benefit plans maintained by Seller for its employees shall be fully funded prior
to Closing. Seller shall pay all wages, commissions, accrued vacation pay and
other accrued compensation earned by Seller's employees prior to Closing
(together with all accrued FICA and withholding taxes). Seller shall terminate
the employment of all of Seller's employees effective as of the close of
business on the Closing Date. Except as otherwise agreed between the parties,
Buyer may, in Buyer's sole discretion (but shall not be obligated to) hire any
of Seller's employees.
(d) UNDISCLOSED LIABILITIES AND CONTRACTUAL COMMITMENTS. Except as
otherwise disclosed in this Agreement (or in an attached Exhibit), the following
statements are true as of the date of this Agreement and shall be true at
Closing: (i) Seller does not have any liabilities which would materially impair
Buyer's use of the Purchased Assets, (ii) Seller is not a party to any contracts
or commitments which would materially impair Buyer's use of the Purchased
Assets, (iii) no law suit or action, administrative proceeding, arbitration
proceeding, governmental investigation, or other legal or equitable proceeding
of any kind is pending or threatened against Seller which would materially
affect the value of the Purchased Assets, and (iv) Seller has all licenses,
permits and authorizations required by any federal, state or local governmental
or regulatory agency in order to operate Seller's Business, and knows of no
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reason why any such license or permit might be subject to revocation. If any
claim is asserted against Buyer after Closing with respect to any obligation of
Seller which Seller has failed to disclose to Buyer in writing, or which Seller
has disclosed but failed to pay, then Buyer shall give prompt written notice of
that claim to Seller. Seller shall indemnify Buyer with respect to all such
obligations.
(e) CONDITION OF EQUIPMENT. Each item of the Equipment shall be in
good operating condition at Closing. Seller will continue to perform routine
maintenance and repairs with respect to the Equipment prior to Closing, Buyer
shall have thirty days prior to the Closing within which to advise Seller in
writing if any item of Equipment is not in good operating condition. Seller
shall thereupon have the option to repair or replace that item, or remove that
item from the items to be purchased by Buyer.
(f) GOOD TITLE. Seller has, and shall transfer to Buyer at
Closing, good and marketable title to all of the Purchased Assets, free and
clear of all security interests, liens, equitable interests, leases,
assessments, restrictions, reservations, or other burdens of any kind. All
current and accrued taxes which may become a lien against any of the
Purchased Assets shall have been paid by Seller prior to Closing (including
property taxes, sales taxes and excise taxes).
(g) NO TOXIC MATERIALS DISCHARGED. Except as disclosed by Seller
on Exhibit "C" attached hereto, (i) no activity in connection with Seller's
Business prior to Closing shall have produced any toxic materials, the
presence or use of which upon the Business Real Property would violate any
federal, state or other governmental law, regulation or order or would
require reporting to any governmental authority, and (ii) there are no
underground fuel tanks, or underground waste oil tanks located on the
Business Real Property, except the oil receptacles related to the underground
hoists and (iii) the Business Real Property is otherwise free and clear of
any toxic materials. For purposes of this subparagraph (h), the phrase "toxic
materials" shall include but not be limited to any and all substances deemed
to be pollutants, toxic materials or hazardous materials under any state or
federal law. Seller has furnished to Buyer, prior to the date of this
Agreement, copies of all environmental reports and certificates of compliance
relating to Seller's Business and the Business Real Property. Upon the
execution of this Agreement, Buyer MAY, at Buyer's sole expense, engage an
appropriate environmental firm which is acceptable to Buyer to conduct an
investigation and produce a Phase One and/or Two Environmental Report
regarding the Business Real Property. If a Phase Two environmental assessment
discloses that the Business Real Property is, or is likely to be, materially
contaminated by the presence of toxic materials, and if Buyer provides Seller
with a written demand to remediate, cleanup, detoxify and decontaminate any
and all such contamination as a condition of Closing, then Seller shall be
obligated (at Seller's sole expense) to either: (i) complete such
remediation, cleanup, detoxification and/or decontamination prior to, and as
a condition of, Closing, at Seller's sole expense, (ii) place sufficient
funds into escrow at Closing to cover the expense of the required remedy, or
(iii) cancel this transaction.
(h) FRANCHISOR'S CONSENT. Seller shall take all actions which are
reasonably necessary on Seller's part to obtain the consent of the
Franchisors to the issuance to Buyer of a franchise for the sale of new
Chevrolet, Mazda and Isuzu vehicles in the same geographical area as Seller's
current franchises in Redding, California.
(i) INDEMNIFICATION FOR BREACH OF WARRANTIES. The parties shall
indemnify and hold the other harmless from and against all losses, damages
and costs (including attorney fees and court costs) relating to any breach of
warranty made by that party in this Agreement (either on the date of this
Agreement or at the time of Closing).
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(j) SHAREHOLDER WARRANTIES. Neither the shareholders or officers of
the Seller will be required to make any individual warranties. Further, Buyer
acknowledges that the Seller has made no representations or promises of any
description regarding the past, present or future profitability of the
franchises, that Buyer has conducted its own due diligence and has approached
Seller on its own and requested Seller to sell its assets, and that Seller shall
not be required to furnish any financial records nor allow any audit of
financial records or tax returns of the business and that the Buyer has not
relied upon any financial records or tax returns in making its decision to
purchase the business.
(k) ALL-WAY'S CONSENT. Seller warrants that it has obtained the
approval and consent of All-Way to offer for sale the equipment included in
subparagraph 1(d) and that All-Way shall transfer title to said equipment direct
to Buyer pursuant to this Agreement.
12. ADDITIONAL CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. THIS
AGREEMENT SHALL have been authorized by the board of directors of Seller within
five (5) days after the date of this Agreement.
13. CONDUCT OF BUSINESS PENDING CLOSING. Seller warrants that during the
period beginning on the date of this Agreement and ending at Closing: (i) Seller
shall continue to operate Seller's Business in the usual and ordinary course,
and in substantial conformity with all applicable laws, ordinances, regulations,
rules or orders; (ii) Seller shall not allow any liens to be placed against any
of the Purchased Assets unless those liens are discharged prior to Closing;
(iii) Seller shall not take any action which causes a material adverse change in
the operations of Seller's Business; (iv) Seller shall not conduct any sale
which shall use the words or phrase "Going Out of Business Sale"; (v) Seller
shall use its best efforts to preserve the value of the Chevrolet, Mazda and
Isuzu franchises in Redding, California.
13. REPRESENTATIONS AND WARRANTIES OF BUYER. BUYER HEREBY MAKES THE
FOLLOWING REPRESENTATIONS and warranties to Seller, with the intent that Seller
rely thereon:
(a) ORGANIZATION. Lithia Motors, Inc. is a corporation organized,
validly existing and in good standing under the laws of the State of Oregon, and
is entitled to own property and to carry on its business.
(b) AUTHORITY. This Agreement must be authorized by the board of
directors of Lithia Motors, Inc. within five (5) days after the date of this
Agreement. This Agreement does not violate the provision of any judicial,
governmental or administrative decree, order, writ, injunction, or judgment, or
conflict with or constitute a default under, the Article or bylaws of Lithia
Motors, Inc., or any contract, agreement, or other instrument to which Lithia
Motors, Inc. is a party. Seller has the right to rescind this Agreement until
accepted by Buyer's board of directors as herein set forth.
(c) Buyer will make all efforts to submit a completed dealer
application to Chevrolet Division, General Motors Corporation, within twenty
one (21) days from Buyer's execution of this Agreement, and Buyer will
diligently make all efforts to obtain a Dealer Sales and Service Agreement
from the Franchisors on or before June 1, 1998. /or as soon thereafter as is
reasonably practicable.
15. ADDITIONAL CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation
of Buyer to close this transaction is subject to each of the following
conditions (each of which is for the benefit of Buyer and may be waived by
Buyer), and Buyer shall have the right to rescind this Agreement if any of the
following conditions is not satisfied in accordance with its terms:
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(a) Buyer shall have obtained from Franchisors, prior to the Final
Closing Date, a franchise to sell new Chevrolet, Mazda and Isuzu vehicles in the
same location as Seller's current franchises in Redding, California (as
evidenced by the issuance to Buyer by Franchisor of an appropriate Dealership
Sales and Service Agreement, and the approval of Buyer as the publicly owned
Dealer-Operator of the franchise), and Buyer agrees to use its best reasonable
efforts to obtain those franchises.
(b) Buyer shall have approved any facility improvement requirements
which may be imposed by Franchisors; provided, Buyer's approval shall not be
unreasonably withheld.
(c) Buyer shall have been permitted to inspect the Business Real
Property. All leases which are necessary for the beneficial use by Buyer of the
Business Real Property shall be closed concurrently with this transaction under
terms and conditions set forth in this Agreement.
(d) All of Seller's agreements and warranties set forth in this
Agreement shall be true and correct at Closing; provided that Buyers decision
to close this transaction shall not release Seller from liability to Buyer
for any warranty which is subsequently determined to be untrue or incorrect.
(e) This agreement shall have been authorized by the board of
directors of Lithia Motors Inc. within five (5) days after the date of this
Agreement.
16. CLOSING. The parties shall make all reasonable effort to close the
purchase and sale under this Agreement at or before 5:00 p.m., Pacific Standard
Time, on or before June 18, 1998, at the offices of Chicago Title Company, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other location as shall be
selected by mutual agreement of the parties.
(a) Immediately upon execution of this Agreement by the parties, the
parties shall establish a closing escrow account at Chicago Title Company in
Redding, California, (the "Closing Escrow Agent"). Buyer and Seller each shall
pay one-half (1/2) of the closing escrow fees. Buyer and Seller agree to execute
whatever reasonable escrow instructions may be required by Closing Escrow Agent
in connection with this transaction. In the event of any conflict between those
escrow instructions and this Agreement, the terms of this Agreement shall
prevail. Upon the execution of this Agreement, Buyer shall deliver to Closing
Escrow Agent the sum of $500,000.00 (the deposit), which amount shall
immediately be placed into an interest bearing account. The deposit plus
interest shall be credited to Buyer and shall be applied against the purchase
price for the Equipment at Closing as provided in Paragraph 5, or if the Closing
fails to occur, then the deposit shall be disbursed as set forth hereinafter.
(b) In all events, the Closing of the transaction contemplated under
this Agreement shall occur (if at all) on or before June 18, 1998.
(c) If this transaction closes as provided herein, then actual
possession and all risk of loss, damage or destruction with respect to the
Purchased Assets, shall be deemed to have been delivered to Buyer at the close
of escrow.
(d) At Closing, and coincidentally with the performance of the
obligations to be performed by Buyer at Closing, Seller shall deliver to Buyer
the following: (i) all bills of sale, assignments and other instruments of
transfer, in form and substance reasonably satisfactory to Buyer,
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which shall be necessary to convey the Purchased Assets to Buyer; and (ii) all
other documents required under this Agreement.
(e) At Closing, and coincidentally with the performance of all
obligations required of Seller at Closing, Buyer shall deliver to Seller the
following: (i) payment for the Purchased Assets; and (ii) all other payments and
documents required under this Agreement. Buyer shall be responsible for all
sales taxes payable in connection with the transaction.
(f) If Closing does not take place on or before June 18, 1998,
because there has been a failure of any condition precedent set forth in
Paragraphs 12 or 15 or because Seller has elected to rescind the Agreement
pursuant to subparagraph 11(g), then: (i) all rights and obligations of both
parties under this Agreement shall terminate, (ii) Buyer shall be entitled to a
refund of the entire $500,000.00 ▇▇▇▇▇▇▇ money deposit (and interest earned
thereon) referred to in subparagraph 5(b) and (iii) this Agreement and all
predecessor agreements shall thereafter be void and of no effect.
(f) If Closing does not take place on or before June 18, 1998,
because of Buyer's material breach of this Agreement, the parties recognize that
Seller may be entitled to damages for such breach. HOWEVER, THE PARTIES AGREE
THAT IT IS EXTREMELY DIFFICULT AND IMPRACTICAL TO ASCERTAIN THE EXTENT OF SUCH
DAMAGES AND, TO AVOID THIS PROBLEM, BUYER AND SELLER AGREE THAT IN THE EVENT OF
SUCH BREACH BY BUYER, THEN THE $500,000.00 ▇▇▇▇▇▇▇ MONEY DEPOSIT DELIVERED BY
BUYER TO THE CLOSING ESCROW AGENT (TOGETHER WITH ALL INTEREST EARNED THEREON
WHILE HELD BY THE CLOSING ESCROW AGENT) SHALL BE FORFEITED TO SELLER AS SELLER'S
SOLE AND EXCLUSIVE REMEDY FOR BUYER'S BREACH, AND SELLER SHALL HAVE NO OTHER
RIGHTS OR REMEDIES AGAINST BUYER BY REASON OF THAT BREACH. THE ABOVE AMOUNT HAS
BEEN AGREED UPON THE PARTIES AS A REASONABLE ESTIMATE BY BUYER AND SELLER OF
SELLER'S DAMAGES IN THE EVENT OF SUCH A DEFAULT, AND THE PARTIES SPECIFICALLY
ACKNOWLEDGE THEIR AGREEMENT TO THE PROVISIONS OF THIS SECTION BY PLACING THEIR
INITIALS BELOW:
_________Buyer _______Seller.
In the event of such breach, escrow is directed to release said funds to Seller.
If Closing does not take place on or before the Final Closing Date because of
Seller's material breach of this Agreement, then Buyer shall be entitled to: (i)
a refund of the entire $500,000.00 ▇▇▇▇▇▇▇ money deposit previously delivered by
Buyer to the Closing Escrow Agent (together with all interest earned thereon
while held by the Closing Escrow Agent), (ii) any and all other rights and
remedies for that breach which are specified in this Agreement or which may be
provided by law or in equity.
(h) Both parties agree to make a good faith effort to execute and
deliver all documents, with the exception of Seller's financial or tax records,
and complete all actions reasonably necessary to consummate this transaction.
17. SELLER'S ACCOUNTS RECEIVABLE. For a period of six (6) months after
Closing, Buyer shall, on Seller's behalf, and at no charge to Seller, accept any
payment with respect to Seller's customer receivables and other receivables
arising out of the operation of Seller's Business prior to Closing. All
collected receivables from vehicle sales shall be delivered to Seller within ten
(10) days after collection,
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and all other collected receivables shall be delivered to Seller on a monthly
basis. Buyer shall have no obligation to undertake collection efforts with
respect to Seller's receivables, and Buyer's only obligation shall be to account
for and pay over Seller's receivables which are actually received by Buyer.
Seller shall be provided with reasonable access to Buyer's Chevrolet, Mazda and
Isuzu communication equipment for the above time period, at no cost to Seller,
for purposes of processing claims with the Franchisors.
18. SURVIVAL OF REPRESENTATIONS. ALL REPRESENTATIONS, WARRANTIES,
INDEMNIFICATION obligations and covenants made in this Agreement shall survive
the Closing, and shall remain in effect until the expiration of the latest
period allowable in any applicable statute of limitations.
19. ASSIGNMENT BY BUYER. Subject to Seller's prior written consent, which
shall not be unreasonably withheld, Lithia Motors, Inc. shall have the right to
assign all rights and obligations of Lithia Motors, Inc. as "Buyer" under this
Agreement. Provided, Seller's consent shall not be required if the assignee is a
corporation, the stock of which is owned entirely by Buyer. In the event of any
such assignment, the assignee shall assume all rights and obligations of the
Buyer under this Agreement, and Lithia Motors, Inc., shall remain jointly and
severally liable for all obligations of the Buyer.
20. PURCHASE OF REAL PROPERTY. AS A CONDITION TO THE CLOSING of the
transaction contemplated under this Agreement, Buyer (or a related entity)
agrees to purchase the Business Real Property pursuant to the real estate
purchase agreement which is attached hereto as Exhibit "D" and incorporated
herein by reference.
21. MISCELLANEOUS.
(a) There are no oral agreements or representations between the
parties which affect this transaction, and this Agreement supercedes all
previous negotiations, warranties, representations and understandings between
the parties. True copies of all documents referenced in this Agreement are
attached hereto. If any provision of this Agreement shall be determined to be
void by any court of competent jurisdiction, then that determination shall not
affect any other provision of this Agreement, and all other provisions shall
remain in full force and effect. If any provision of this Agreement is capable
of two constructions, only one of which would render the provision valid, then
the provision shall have the meaning which renders it valid. The paragraph
headings in this Agreement are for convenience purposes only, and do not in any
way define or construe the contents of this Agreement.
(b) This Agreement shall be governed and performed in accordance with
the laws of the state of California. Each of the parties hereby irrevocably
submits to the jurisdiction of the courts of Shasta County, California, and
agrees that any legal proceedings with respect to this Agreement shall be filed
and heard in the appropriate court in Shasta County, California.
(c) This Agreement may be executed in multiple counterparts, each of
which shall be an original, and all of which shall constitute a single
instrument, when signed by both of the parties. This Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of the
respective parties.
(d) Waiver by either party of strict performance of any provision of
this Agreement shall not be a waiver of, and shall not prejudice the party's
right to subsequently require strict performance of, the same provision or any
other provision. The consent or approval of either party to any act by the other
party of a nature requiring consent or approval shall not render unnecessary the
consent to or approval of any subsequent similar act.
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(e) All notices provided for herein shall be in writing and shall be
deemed to be duly given when mailed by United States certified mail, postage
prepaid, to the last-known address of the party entitled to receive the notice,
or when personally delivered to that party.
(f) Time is of the essence to this Agreement.
(g) Should any party hereto institute any action or proceedings to
enforce or interpret any provision hereof, or for damages by reason of any
alleged breach of any provision of this Agreement, the prevailing party shall be
entitled to recover from the losing party or parties such amount as the court
may adjudge to be reasonable attorney's fees for services rendered to the
prevailing party in such action or proceeding. The term "prevailing party" as
used in this section shall include, without limitation, any party who is made a
defendant in litigation in which damages and/or other relief may be sought
against such party and a final judgment or dismissal or decree is entered in
such litigation in favor of such party defendant.
(h) Seller and Buyer agree to hold the other party harmless from any
claims relative to their respective obligations or operation of the dealership.
Therefore, Seller would agree to hold Lithia Motors harmless from any claims
dealing with the opefation of the business up to the point of sale and Lithia
Motors would agree to hold Seller harmless from any claims which arise after the
time of sale.
(i) The parties agree that all hard copies of customer service files
shall remain in the possession of Buyer at the Business Real Property for a
period of one (1) year following the Closing and that Seller shall have
unrestricted access thereto. Buyer shall maintain the files in good condition.
Upon expiration of the one (1) year period, the records shall be returned to
Seller.
(1) Subsequent to Buyer having obtained appointment as a franchised
Chevrolet, Mazda and Isuzu dealer, Buyer may interview Seller's employees for
prospective employment with Buyer.
(k) The parties agree that this Agreement shall become null and void
in the event Buyer shall fail to be appointed as a franchised Chevrolet, Mazda
and Isuzu dealer (or receive a similar commitment from said manufacturers) by
close of business on June 1, 1998.
(l) Each of the parties to this Agreement shall pay its respective
attorney's fees, consultant's fees and any other similar costs associated with
this transaction. Buyer and Seller represent that except as otherwise herein
provided, neither party has dealt with any broker, consultant or finder in
connection with this Agreement and that no fees are due and payable. The parties
agree to indemnify and hold the other harmless with respect to any such fee,
commission, or assertion therefor, alleged to be payable because of any act,
omission, or statement of the indemnifying party, and each party agrees to be
responsible for its respective fees, commissions and/or costs.
(m) The parties to this Agreement waive the rule of construction
which provides that ambiguities are to be resolved against the drafter of the
agreement. The parties agree that ambiguities, if any, are to be resolved in the
same manner as would have been the case if this Agreement had been jointly
conceived and drafted.
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(n) The terms of this Agreement shall be held in the strictest
confidence and shall not be disclosed by either party prior to the Closing,
except insofar as such information may be required by law to be disclosed to
Buyer's shareholders pursuant to the Securities and Exchange Act of 1934.
Subsequent to the Closing, all terms related to the price paid for
vehicles, equipment, inventory, leasehold improvements, goodwill, the Business
Real Property, or other assets under the Agreement shall not be disclosed by
either party, except insofar as may be required as may be set forth above or
pursuant to litigation between the parties related to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
SELLER: RODWAY CHEVROLET CO., a California corporation
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
-----------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Attorney in Fact 3/19/98
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President Dated
BUYER: LITHIA MOTORS, INC., an Oregon corporation
By /s/ B ▇▇▇▇ 3/19/98
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▇▇▇▇ ▇▇▇▇, Executive Vice President
Dated
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