EX-10
Exhibit 10.33.1 Purch/Sale Agmt of ▇▇▇▇▇▇
EXHIBIT 10.33.1
AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
THIS AGREEMENT is entered into by and between E.W.H. GROUP, INC., a
California corporation, dba "▇▇▇▇▇▇ JEEP/EAGLE AND ▇▇▇▇▇ ▇▇▇▇▇▇ MITSUBISHI"
(hereinafter referred to as "Seller"), and LITHIA MOTORS, INC. or its nominee
(hereinafter referred to as the "Buyer").
RECITALS:
Seller is a California business corporation engaged in the business of
selling and servicing Jeep/Eagle and Mitsubishi motor vehicles and related
parts and accessories from premises located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Business Real Property"),
under franchise issued by Chrysler Corporation and Mitsubishi Motor Sales of
America, Inc.
Buyer wishes to purchase from Seller, and Seller is willing to sell to
Buyer, all assets relating to Seller's Jeep/Eagle and Mitsubishi franchise at
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
conditioned upon the granting to Buyer of an exclusive franchise for the sale
of new Jeep/Eagle and Mitsubishi motor vehicles in the same geographical area
as Seller's franchise.
Buyer (or a related entity) also wishes to purchase, lease or sublease
all of 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, lease or sublease 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 the actual date of Closing.
"Target Closing Date" shall refer to September 1, 1997. "Final Closing Date"
shall refer to September 30, 1997.
(b) "Seller's Business" shall refer to any and all activities
conducted by Seller in Bakersfield, California, relating to the marketing and
sale of new Jeep/Eagle and Mitsubishi vehicles and associates parts and
accessories, and the repair and servicing of new or used Jeep/Eagle and
Mitsubishi 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) Seller's "Equipment" shall refer to all non-inventory items
of tangible personal property presently owned or used by Seller in connection
with Seller's Business, including 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.
Within 20 days after the date of this Agreement, Seller shall provide to
Buyer a list of the "Equipment", which list shall be attached hereto as
Exhibit "A". Attached to this Agreement as Exhibit "B" is a listing prepared
by Seller of certain personal items being retained by Seller and not being
purchased by Buyer.
(e) Seller's "Intangible Assets" shall refer to Seller's
telephone and fax numbers, service customer lists, sales customer lists,
vehicle service records, 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 interest of any value
relating to Seller's Business; provided, however, that Seller's business name
("▇▇▇▇▇▇ Jeep/Eagle and ▇▇▇▇▇ ▇▇▇▇▇▇ Mitsubishi") is not included within the
Intangible Assets being sold by Seller hereunder.
(f) "Business Real Property" shall refer to all of the real
property located in Bakersfield, California which has been used in connection
with Seller's business, including but not limited to the premises at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
(g) "Franchisor" shall refer to Chrysler Corporation and
Mitsubishi Motor Sales of America, Inc.
(h) "New Vehicle" shall refer to a Jeep/Eagle and Mitsubishi
motor vehicle which: (i) is unregistered and unused, (ii) is from the 1997
or 1998 model year, (iii) has been driven for less than 200 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 1997 or 1998 model year which has been sold to a customer by Seller but
returned because of the customer's inability to obtain financing for the
1
purchase "Demonstrator Vehicle" shall mean an unregistered vehicle form the
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) "Data of this Agreement" shall refer to the first date upon
which this Agreement has been signed by all of the parties.
(j) 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, 8, 9, and 10 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, 8, 9, and 10 of this Agreement.
3. Inventory Of New Vehicles, Demonstrator Vehicles and Rollback
Vehicles. Buyer shall purchase Seller's entire inventory of new Jeep/Eagle
and Mitsubishi vehicles, as that inventory exists on the Closing Date. Buyer
also shall purchase Seller's entire inventory of demonstrator vehicles and
rollback vehicles (up to a maximum of five rollback vehicles), as that
inventory exists on the Closing Date.
(a) Price of New Vehicles. The purchase price for each of
Seller's new vehicles shall be equal to Seller's factory invoice cost,
reduced by any factory hold-backs, factory rebates, factory incentives,
carry-over model allowances, floor plan allowances, finance cost allowances,
advertising allowances, and any other items which should reasonably be
deducted in order to establish Seller's actual net cost for each vehicle, and
further reduced by the actual net cost for any and all accessories, equipment
and parts which are missing from a vehicle. Seller shall be entitled to
receive directly from Chrysler Corporation all holdbacks, rebates,
incentives, allowances and other items referred to in the preceding sentence
which reduce Buyer's purchase price for Seller's new vehicles. Seller's
actual net cost for new vehicles shall include Seller's actual net costs for
any and all parts and accessories reasonably installed by Seller to new
vehicles in the ordinary course of business, but shall not include any other
vehicle preparation charges, labor charges or other dealer charges of any
kind.
(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, 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 new 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) Payment for New Vehicles. The aggregate purchase price for
all new vehicles purchased by Buyer from Seller shall be paid in full at
Closing.
(d) 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. At Closing, Buyer shall
reimburse Seller for all deposits made to Seller with respect to ordered but
undelivered new vehicles.
(e) Price for Demonstrator Vehicles and Rollback Vehicles. The
price for each demonstrator and rollback vehicle shall be determined as
provided in subparagraphs 3(a) and 3(b) and then reduced by $.30 per mile for
each odometer mile on that vehicle. The purchase price for demonstrator
vehicles and rollback vehicles shall be paid at Closing.
4. Inventory Of Used Vehicles. Buyer intends to purchase Seller's
entire inventory of used vehicles, as that inventory exists at Closing.
However, Buyer shall not be obligated to purchase any used vehicle for which
Buyer and Seller are unable to agree upon a purchase price.
2
(a) Disclosures. Seller shall be obligated, prior to Closing,
to: (i) disclose to Buyer any and all facts concerning each used vehicle
which Seller would be legally obligated to disclose to a consumer (including
but not limited to known damage and usage history), and (ii) provide to Buyer
legal odometer statements and free and clear title for each of the used
vehicles.
(b) Price for Used Vehicles. Used vehicles shall be purchased
on an individual basis. It is Buyer's intention to purchase all of Seller's
used vehicles. However, if Buyer and Seller cannot agree on the value of one
or more used vehicles, then those vehicles whose value is not agreed upon
shall remain the property of the Seller, and Buyer shall not be obligated to
purchase those vehicles. Buyer and Seller agree to establish the proposed
purchase price for all of Seller's used vehicles at least three business days
prior to the anticipated Closing Date.
(c) Payment for Used Vehicles. The aggregate purchase price
for Seller's inventory of used vehicles shall be paid in full at Closing.
(d) Storage of Used Vehicles Which are not Purchased by Buyer.
Seller shall have ten (10) days after Closing within which to remove from the
Business Real Property any of Seller's used vehicles which are not purchased
by Buyer. Buyer shall store those vehicles in accordance with Buyer's normal
business practices. Seller shall have sole and exclusive risk and liability
for any damage or loss to Seller's used vehicles while so stored on the
Business Real Property after Closing, and Buyer shall have no liability or
obligation of any kind by reason of any such damage or loss.
5. Inventory Of New parts and Accessories. Buyer shall purchase
Seller's entire inventory of new, current (non-obsolete), undamaged
Jeep/Eagle and Mitsubishi vehicle parts and accessories manufactured by
Franchisor and/or third party suppliers, as that inventory exists on the
Closing Date. Buyer shall have no obligation to purchase from Seller any
parts or accessories which are used, damaged or obsolete. For purposes of
this Paragraph 5, a part or accessory shall be "obsolete" on the Closing date
if not then returnable to the supplier from which that part was originally
purchased, or if not then listed in the supplier's then-current price and
parts books. 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, current and undamaged parts and
accessories for Jeep/Eagle and Mitsubishi vehicles (whether manufactured by
Franchisor 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, reduced by any discounts (including quantity purchase or stock
order discounts), rebates, incentives or allowances which should reasonably
be taken into account in order to establish what Buyer's net cost for that
item would be if that item was purchased by Buyer directly from that supplier
at the time of Closing.
(b) Determination of Inventory of Parts and Accessories.
Seller's inventory of new, current and undamaged Jeep/Eagle and Mitsubishi
parts and accessories shall be determined immediately prior to Closing (or on
whatever earlier date shall be selected by mutual agreement of the parties)
by a third party inventory service selected by mutual agreement of the
parties. Buyer and Seller each shall be responsible for 50% of the fees
charged by the inventory service for conducting the inventory.
(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.
6. Equipment. Within twenty (20) days after the date of this
Agreement, Seller shall provide to Buyer a list of the Equipment being
purchased and sold hereunder, which list shall be attached hereto as Exhibit
"A". Prior to closing Buyer will have the right to inspect the equipment.
Seller is retaining, and is not selling to Buyer, those personal items of
Seller's Equipment which are listed on Exhibit "B" attached hereto.
(a) Price for Equipment. The aggregate purchase price for all
items of Seller's Equipment (including leasehold improvements) which are
being purchased hereunder shall be Four Hundred Thousand and 00/100 Dollars
($400,000.00). 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 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 Capital City Escrow,
Inc., in Sacramento, California, in the amount of $100,000.00, which ▇▇▇▇▇▇▇
3
money deposit, together with all interest earned thereon, shall be credited
at Closing against the purchase price for the Equipment.
(2) The $300,000.00 balance of the purchase price for the
Equipment shall be paid in full at Closing.
7. Supplies. Buyer shall purchase all of the gas, oil, nuts, bolts,
and other automotive supplies which are held for use in Seller's Business;
provided, however, that buyer shall not be obligated to purchase used,
damaged or obsolete 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.
8. Contractual Rights and Obligations. At Closing, Buyer shall
assume all rights and obligations of Seller under those certain equipment
leases and other contracts identified on Exhibit "C" attached hereto, which
Exhibit "C" shall be prepared and attached hereto within 20 days after the
date of this Agreement. Buyer shall have the right to refuse to permit any
one or more of Seller's leases or other contracts to be included in
Exhibit "C" (and assumed by Buyer under this Agreement). Seller warrants
that all of Seller's obligations under the contracts listed on Exhibit "C"
shall be current at the time of Closing. Seller agrees to indemnify buyer
against all obligations under the contracts identified on Exhibit "C" which
relate to periods prior to Closing. Buyer agrees to indemnify Seller against
all obligations under the contracts identified on Exhibit "C" which relate to
periods after Closing. The amount of any obligation assumed by Buyer
pursuant to this Paragraph 8 shall be credited at Closing against the
$400,000.00 purchase price for the Equipment.
9. 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
completed prior to Closing. The purchase price for work in progress shall be
paid at Closing.
10. Intangible Assets. Buyer shall purchase all of Seller's
Intangible Assets.
(a) The aggregate purchase price for Seller's Intangible Assets
shall be One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00). This $1,500,000.00 purchase price shall be allocated among
the items which constitute the Intangible Assets as determined by Buyer in
the reasonable exercise of Buyer's discretion; provided, however, that no
value shall be allocated to the non-transferable Jeep/Eagle and Mitsubishi
franchise issued by the Franchisor. This $1,500,000.00 purchase price shall
be paid at Closing.
(b) In order for Buyer to receive the full benefit of the
intangible good will 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 $1,500,000.00 amount being paid by Buyer for the
Intangible Assets, Seller agrees to perform the no-charge repair in his own
shop (▇▇▇▇▇▇ Dodge) for a period of six (6) months after Closing in order to
satisfy: (i) customers who are dissatisfied with repair services provided by
Seller prior to Closing, and (ii) warranty claims with respect to new or used
vehicles purchased from Seller prior to Closing.
11. 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.
12. Limitation On Liabilities Assumed. Except as provided in
subparagraph 3(d), Paragraph 8 and Paragraph 9, 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).
13. Warranties Of Seller. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Seller make 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 qualified to do business in the State of California,
and has full power and authority to own, use, and sell its assets.
(b) Corporate Authority. Seller's board of directors and
shareholders have authorized the execution and delivery of this Agreement to
Buyer and the carrying out of its provisions. This Agreement will not
violate any judicial, governmental or administrative decree, order, writ,
4
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. No employees of Seller are members of any
union. Within 10 days after the date of this Agreement, Seller shall provide
to Buyer the following: (i) a census 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. 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. At Buyer's sole discretion, Buyer may
(but shall not be obligated to) hire any of Seller's employees. Buyer also
represents and warrants to Seller that it has conducted its own independent
investigation and due diligence of all of Seller's employees, Buyer does so
based upon its own investigation without any representations, disclosures or
warranties of any description by Seller. Further, both Buyer and Seller
agree that they shall not, for a period of two (2) years following Closing,
employ or offer employment to any of each others employees except (1) if such
employee was terminated by his/her respective employer or (2) if such
employee voluntarily terminates his/her employment, then the former employer
must consent to such employment.
(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 might
have a material impact on Buyer's use of the Purchased Assets, (ii) Seller is
not a party to any contracts or commitments which might have a material
impact on 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 might adversely 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
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. Buyer is to verify at the time of
Closing that each item of Equipment shall be in good operating condition and
following Closing the Buyer has agreed that the purchase of Equipment is "as
is" without any warranty of any description by Seller.
(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. Upon the execution of this
Agreement, Seller at its cost shall engage an appropriate environmental firm
which is acceptable to Buyer to conduct an investigation or produce a Phase
One Environmental Report regarding the Business Real Property. In addition,
Seller shall make available to Buyer copies of all other environmental
reports and certificates (of which Seller has knowledge) with respect to the
Business Real Property. If the Phase One Environmental Report discloses any
likelihood of contamination, Seller shall have until the Closing Date to
remedy that contamination (unless Buyer waives the requirement for
remediation). In the event it is apparent that a remedy can not be completed
by the Closing Date, then Seller can either elect to rescind the transaction
in its entirety or place sufficient funds into the escrow at the Closing Date
to cover the expense of the required remedy.
Except as disclosed by Seller on Exhibit "D" 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, local or other
governmental law, regulation or order or would require reporting to any
governmental authority and (ii) 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.
5
(h) Franchisor's Consent. Seller shall take all actions which
are reasonably necessary on Seller's part to obtain the consent of the
Franchisor to the issuance to Buyer of an exclusive franchise for the sale of
new Jeep/Eagle and Mitsubishi vehicles in the same geographical area as
Seller's current franchise in Bakersfield, California.
(i) Indemnification for Breach of Warranties. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and Seller shall indemnify Buyer against all losses, damages and costs
(including attorney fees and court costs) relating to any warranty made by
Seller in this Agreement which is false, misleading, incomplete or inaccurate
(either on the date of this Agreement or at the time of Closing). If at any
time prior to Closing Seller determines that any warranty made by Seller is
this Agreement is incorrect, incomplete or misleading, then Seller shall
advise Buyer of that fact and shall provide to Buyer in writing whatever
other information shall be necessary to cause that warranty to be correct,
complete and not misleading.
(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 it own due
diligence and has approached Seller on its own and requested Seller to sell
its franchises, 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.
14. 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 may
cause a material adverse change in the operations of Seller's Business; (iv)
Seller shall not conduct any sale which shall use the words or phrases "Going
Out of Business Sale" or other words or phrases having similar meanings; (v)
Seller shall use its best efforts to preserve the value of the Jeep/Eagle and
Mitsubishi franchise in Bakersfield, California.
15. 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 (10) days after the date of this
agreement. This Agreement will 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.
16. 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.
(a) Buyer shall have obtained from Franchisor, prior to the
Final Closing Date, an exclusive franchise to sell new Jeep/Eagle and
Mitsubishi vehicles in the same geographical area as Seller's current
franchise in Bakersfield, 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
that franchise.
(b) Buyer shall be reasonably satisfied with any facility
improvement requirements which are imposed by Franchisor.
(c) Buyer shall have been permitted to inspect the business
real property. All leases and subleases 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 which are
acceptable to Buyer. Buyer shall have been reasonably satisfied with the
physical condition of the business real property, and with all aspects of the
business real property.
6
(d) All of Seller's agreement and warranties set forth in this
Agreement shall be true, correct, complete and not misleading at Closing;
provided that Buyer's decision to close this transaction shall not release
Seller from liability to Buyer for any warranty which is subsequently
determined to be incorrect, incomplete or misleading.
(e) Buyer is satisfied with the kind, quality and/or value of
the items listed on Exhibit "A" and does not notify Seller to the contrary
pursuant to Paragraph 6.
(f) This agreement shall have been authorized by the board of
directors of Lithia Motors, Inc. within 10 days after the date of this
agreement.
17. 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 the Final Closing Date, at the offices of Capital
City Escrow, Inc. in Sacramento, California, or at such other location as
shall be selected by mutual agreement of the parties.
(a) The parties agree to establish a closing escrow account at
Capital City Escrow, Inc. in Sacramento, 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 $100,000.00 (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 6, 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 the Final Closing
Date.
(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 11:59
p.m., Pacific Standard Time, on the Closing Date.
(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, 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 the Final
Closing Date because there has been a failure of any condition precedent set
forth in Paragraph 16 or because Seller has elected to rescind the Agreement
pursuant to subparagraph 13(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 $100,000.00 ▇▇▇▇▇▇▇ money deposit (and interest earned
thereon) referred to in subparagraph 6(b), and (iii) this Agreement and all
predecessor agreements shall thereafter be void and of no effect.
(g) If Closing does not take place on or before the Final
Closing Date because of Buyer's material breach of this Agreement, then the
$100,000.00 ▇▇▇▇▇▇▇ 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. THIS SUM REPRESENTS A REASONABLE
ESTIMATE BY BUYER AND SELLER OF SELLER'S DAMAGES IN THE EVENT OF SUCH A
DEFAULT, IT BEING EXTREMELY DIFFICULT TO ASCERTAIN SELLER'S PRECISE DAMAGES.
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 $100,000.00 ▇▇▇▇▇▇▇ 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 provide by law or in equity.
7
(h) Both parties agree to make a good faith effort to execute
and deliver all documents, with exception of Seller's financial or tax
records and complete all actions necessary to consummate this transaction.
18. Seller's Accounts Receivable. For a period of 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, 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 an pay only
Seller's receivables with are actually received by Buyer.
19. 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.
20. Assignment By Buyer. Lithia Motors, Inc. shall have the right to
assign all rights and obligations of Lithia Motors, Inc. as "Buyer" under
this Agreement. In the vent of any such assignment, the assignee shall
assume all rights and obligations of Buyer under this Agreement, and Lithia
Motors, Inc. shall remain jointly liable for all obligations of the Buyer.
21. Lease of Real Property. As a condition to the Closing of the
transaction contemplated under this Agreement, Buyer (or a related entity)
agrees to sublease the Business Real Property under the following general
terms and conditions, and Buyer's obligation to close the transaction
contemplated under this Agreement shall be subject to the condition that
Buyer is simultaneously able to enter into an agreement with the owner of the
Business Real Property which allows Buyer to sublease the Business Real
Property under the following general terms and under such additional terms as
are reasonably satisfactory to Buyer:
(a) Buyer has reviewed the Westwind Properties lease for the
Mitsubishi Store and the ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ lease for the Jeep/Eagle
Store and accepts the terms and conditions of the leases.
22. First Right of Refusal. Seller agrees to grant Buyer "First
Right of Refusal" to any purchase offer for Bakersfield Dodge dba "▇▇▇▇▇▇
Dodge" located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇. Any purchase
offer must be a signed written agreement, Buyer must respond to offer within
10 days from date Buyer is notified. Further should Seller desire to sell
but has no offer then Seller agrees to contact Buyer first.
23. Miscellaneous.
(a) There are no oral agreements or representations between the
parties which affect this transaction, and this Agreement supersedes 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 id
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 ▇▇▇▇ County,
California, and agrees that any legal proceedings with respect to this
Agreement shall be filed and heard in the appropriate court in ▇▇▇▇ 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.
(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.
8
(f) Time 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 agrees 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 operation 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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates indicated below.
SELLER: E.W.H. GROUP, INC., a California corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 7-14-97
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 7-14-97
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
BUYER: LITHIA MOTORS, INC. (OR NOMINEE)
By: /s/ ▇▇▇▇ ▇▇▇▇ 7-14-97
▇▇▇▇ ▇▇▇▇, Executive Vice President
9
EXHIBIT "A" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between E.W.H. GROUP, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
LIST OF EQUIPMENT, FURNITURE AND FIXTURES BEING SOLD BY SELLER
[See pages attached hereto.]
10
EXHIBIT "B" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between E.W.H. GROUP, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
LIST OF EQUIPMENT, FURNITURE AND FIXTURES BEING RETAINED BY SELLER
[See pages attached hereto.]
11
EXHIBIT "C" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between E.W.H. GROUP, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
LISTING OF LEASES AND AGREEMENTS BEING ASSUMED
[See pages attached hereto.]
12
EXHIBIT "D" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between E.W.H. GROUP, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
DISCLOSURE OF TOXIC MATERIALS
[See pages attached hereto.]
13
ADDENDUM TO
AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
This Addendum is entered into by and between E.W.H. Group, Inc., a
California corporation, dba "▇▇▇▇▇▇ Jeep/Eagle" (hereinafter referred to as
the "Seller"), and Lithia Motors, Inc. or its nominee (hereinafter referred
to as the "Buyer").
RECITALS:
Buyer and Seller have entered into an Agreement for Purchase and Sale
of Business Assets dated July 14, 1997, relating to assets owned by Seller
used in connection with the operation of Jeep/Eagle and Mitsubishi motor
vehicle franchises (the "Original Agreement"). (The Original Agreement and
this Addendum are referred to collectively herein as the "Agreement".)
The asset purchase contemplated by the Original Agreement did not close
by the "Final Closing Date" of September 30, 1997. Nevertheless, Buyer and
Seller desire to proceed with purchase and sale of certain of the assets
covered by the Original Agreement under the terms of the Original Agreement,
as modified as by this Addendum. The parties desire to modify the Original
Agreement to establish a new Closing Date; to specify that only the Seller's
assets relating to the marketing and sale of Jeep/Eagle vehicles and related
business activities are included in the purchase, and the assets relating
solely to Seller's business of sales of Mitsubishi vehicles will be excluded;
to modify the purchase price to reflect the change in assets being acquired;
to increase the amount placed in escrow to $200,000.00; and to modify certain
of the terms of the escrow.
AGREEMENT
In consideration of the mutual promises set forth herein and in the
Original Agreement, the parties hereby agree that the Original Agreement is
reinstated and is amended as provided as follows:
1. The definition of "Target Closing Date" in Subparagraph 1(a) is
modified to refer to March 16, 1998. The definition of "Final Closing Date"
in Subparagraph 1(a) is modified to refer to March 30, 1998.
2. The Original Agreement is amended throughout to eliminate
references to Mitsubishi vehicles and to Seller's franchise issued by
Mitsubishi Motor Sales of America, Inc., including, but not limited to the
specific changes set forth in this Addendum. The following definitions are
so amended:
2.1 The definition of "Seller's Business" in Subparagraph 1(b)
is modified to delete "and Mitsubishi".
2.2 The definition of "Franchisor" in Subparagraph 1(g) of the
Original Agreement shall refer to Chrysler Corporation. References to
"Mitsubishi Motor Sales of America, Inc." are deleted.
2.3 The definition of "New Vehicle" in Subparagraph 1(h) is
modified to eliminate "and Mitsubishi."
3. The definition of "Business Real Property" in Subparagraph 1(f)
is amended to delete "and 5200 Gasoline Alley", and other references in the
Agreement to the ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ property are also deleted.
4. Reference to purchases of inventory in Paragraph 3 of the
Original Agreement are modified to delete "and Mitsubishi."
5. Paragraph 5 of the Original Agreement relating to purchase of new
parts and accessories is modified to eliminate "and Mitsubishi."
6. Paragraph 6 of the Original Agreement dealing with purchase and
sale of Equipment is modified as follows:
6.1 Prior to the Closing date, Buyer and Seller shall review
the list of Equipment being purchased and sold designated as Exhibit A and
shall delete from Exhibit A any Equipment related solely to operation of
Seller's Mitsubishi franchise.
6.2 The purchase price for the Equipment stated in Subparagraph
6(a) is reduced to Two Hundred Thousand and No/100 Dollars ($200,000.00).
14
6.3 The ▇▇▇▇▇▇▇ money deposit referred to in Subparagraph
6(b)(1) shall be increased by Buyer from $100,000.00 to $200,000.00, which
amount shall be credited at Closing against the purchase price for the
equipment and all interest earned shall be credited to the purchase price for
Intangible Assets.
6.4 Subparagraph 6(b)(2) of the Original Agreement is deleted.
7. The gas, oil, nuts, bolts and other automotive supplies purchased
by Buyer pursuant to Paragraph 7, shall not be separately priced. The price
of such items is part of the purchase price for the Equipment.
8. Between the date of this Addendum and the Closing Date, Buyer and
Seller shall review equipment leases and other contracts identified in
Exhibit C. Buyer may eliminate any contracts which relate to the Mitsubishi
franchise. The amount of any obligation assumed by Buyer pursuant to
Paragraph 8 shall be credited at Closing against the purchase price for
Intangible Assets.
9. The vehicle repair work in progress (in-house and subcontracted)
purchased by Buyer pursuant to Section 9 shall not be separately priced, but
shall be included in the purchase price for the Equipment.
10. In Subparagraph 10(a), the purchase price for Seller's Intangible
Assets is modified to be One Million Three Hundred Thousand and No/100
Dollars ($1,300,000.00). References to "and Mitsubishi" are deleted from
Paragraph 10.
11. In Subparagraph 13(h) reference to "and Mitsubishi" is deleted.
12. In Paragraph 14 "and Mitsubishi" is deleted.
13. The conditions to Buyer's obligations to close in Paragraph 16
are modified as follows:
13.1 In Subparagraph 16(a) the reference to "and Mitsubishi" is
deleted.
13.2 In the absence of new requirements imposed by Franchisor
prior to the Closing Date, the condition in Subparagraph 16(b) is deemed
satisfied and shall not an additional condition to Closing.
13.3 Subparagraph 16(c) is amended to read "All leases and
subleases 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 which are acceptable to Buyer." The other provisions of that
Subparagraph have been satisfied and are no longer conditions to Closing.
13.4 The condition in Subparagraph 16(d) remains unmodified.
13.5 The conditions in Subparagraph 16(e) and 16(f) are
satisfied and are no longer conditions to Closing.
14. Paragraph 17, dealing with the Closing, is amended as follows:
14.1 Upon execution of this Addendum, Buyer shall deliver to
escrow agent an additional sum of $100,000.00 increasing the escrow deposit
to $200,000.00. The deposit plus interest shall be credited to Buyer and
shall be applied against the purchase price, first, for the Equipment at
Closing as provided in Paragraph 6, with any additional amount shall be
applied to the purchase price for intangible assets, or if the Closing fails
to occur then the deposit shall be disbursed as set forth in Paragraph 17, as
amended by this section.
14.2 Subparagraph 17(f) is amended to change $100,000.00 to
$200,000.00.
14.3 Subparagraph 17(g) is amended to replace $100,000.00 with
$200,000.00 in each place it appears.
14.4 Subparagraph 17(h) is renumbered as 17(i) and a new
Subparagraph 17(h) is added as follows:
"(h) Buyer agrees that the Escrow Agent is authorized and
instructed to release the $200,000.00 deposit to Seller on March 31, 1998 if
Buyer fails or refuses to close the transaction on or before that date for
any reason other than (i) a material breach of the Agreement by Seller, or
(ii) a failure of any of the remaining conditions precedent in Paragraph 16
of the Agreement, as modified by this Addendum. If Buyer wishes to prevent
release of the $200,000.00 deposit to Seller on March 31, 1998 on the basis
that there has been a material breach of the Agreement by Seller, then Buyer
must both (a) on or before March 30, 1998, notify the Closing Escrow Agent
and Seller in writing (which may be by fax) that there has been a material
15
breach of the Agreement by Seller, and (b) on or before May 1, 1998, submit
to the Closing Escrow Agent and to Seller a written statement (which may be
by fax) specifying each and every alleged material breach (in sufficient
detail to provide reasonable notice to Seller as to the specific nature of
each alleged material breach). If Buyer wishes to prevent release of the
$200,000.00 deposit to Seller on March 31, 1998, on the basis that there has
been a failure of any of the remaining conditions precedent set forth in
Paragraph 16 of the Agreement, as modified by this Addendum, then Buyer must
both (a) on or before March 30, 1998, notify Closing Escrow Agent and Seller
in writing (which may be by fax) that such condition has not been satisfied,
and (b) on or before May 1, 1998, deliver to Closing Escrow Agent and Seller
a written statement (which may be by fax) specifying the condition or
conditions which were not satisfied (in sufficient detail to provide
reasonable notice to Seller of each condition). In the event of any
litigation between the parties regarding the failure to consummate the
transaction, Buyer's claims or defenses shall be limited to those matters
identified in the detailed written statement (due May 1, 1998), and the
failure to include an alleged breach or condition in the detailed written
statement shall constitute a waiver of that alleged breach or unsatisfied
condition."
15. In Paragraph 21 of the Agreement, the reference in
Subparagraph 21(a) to Buyer's review of the "Westwind Properties lease for
the Mitsubishi Store" is deleted.
16. Between the date of this Addendum and the Closing Date,
Seller will permit Buyer's representatives to have access to Seller's
business premises and employees for the purpose of installing its systems and
making preparation for Buyer to commence immediate operation of the business
following the Closing.
17. Buyer has submitted a franchise application to Franchisor.
Buyer will submit an extension request not later than five business days
following the receipt of this Addendum executed by Seller.
18. Each of the parties hereby waives and releases, any and all
claims it may have against the other party relating to the failure of the
transactions contemplated by the Agreement to close by September 30, 1997.
19. This Addendum may be executed and delivered by exchange of
facsimile copies showing signatures of the parties hereto, and those
signatures need not be affixed to the same copy. The facsimile copies
showing the signatures of the parties hereto will constitute originally
signed copies of the same agreement requiring no further execution. The
parties agree that they will promptly forward signed originals of this
Addendum. However, signed facsimile documents will remain binding even if
the originals are not sent or received.
20. Except as amended by the Addendum, the Agreement remains in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this Addendum on the
dates indicated below.
SELLER: E.W.H. GROUP, INC., a California corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Dated:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Dated:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
BUYER: LITHIA MOTORS, INC. (OR NOMINEE)
By: /s/ ▇▇▇▇ ▇▇▇▇ Dated:
▇▇▇▇ ▇▇▇▇, Executive Vice President
16