EXHIBIT 10.14.1
AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
THIS AGREEMENT is entered into by and between ▇▇▇ ▇▇▇▇▇▇, INC. dba "▇▇▇
▇▇▇▇▇▇ HONDA, CADILLAC, OLDSMOBILE" (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 Honda, Cadillac and Oldsmobile motor vehicles and related
parts and accessories from premises located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, under franchises issued by American Honda Motor Co., Inc. and
General Motors Corporation.
Buyer wishes to purchase from Seller, and Seller is willing to sell to
Buyer, all assets relating to Seller's Honda, Cadillac and Oldsmobile franchises
upon the terms and conditions set forth herein.
Buyer (or a related entity) also wishes to lease and purchase the real
property commonly referred to as ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, and
the purchase of Seller's business assets shall be conditioned upon the
simultaneous closing of the leasing of that real property.
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 December 2, 1996. "Final Closing Date" shall refer to
the earlier of: (i) January 2, 1997, or (ii) the 11th business day after the
condition precedent set forth in subparagraph 17(a) (the issuance of
Franchisor approvals) has been satisfied or waived.
(b) "SELLER'S BUSINESS" shall refer to any and all activities
conducted by Seller in Monterey County, California, relating to the marketing
and sale of new Honda, Cadillac and Oldsmobile vehicles and associated parts
and accessories, and the repair and servicing of new or used Honda, Cadillac
and Oldsmobile 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 further including all similar assets listed on Seller's financial
statements as of June 30, 1996. Attached to this Agreement as Exhibit "A" is
a listing prepared by Seller of certain items of Equipment being retained by
Seller and not being purchased by Buyer.
(e) The term "EQUIPMENT" shall include the Hercules Car Wash and new
exterior awnings which have been ordered by Seller but not installed by
Seller as of the date of this Agreement.
(f) Seller's "INTANGIBLE ASSETS" shall refer to Seller's name ("▇▇▇
▇▇▇▇▇▇ Honda, Cadillac, Oldsmobile"), telephone and fax numbers, service
customer lists, sales customer lists, vehicle sales records, 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 interests of any value relating
to Seller's Business.
(g) "BUSINESS REAL PROPERTY" shall refer to the real property located
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ which has been used in
connection with Seller' business.
(h) "FRANCHISORS" shall refer to American Honda Motor Co., Inc. and
General Motors Corporation.
(i) "NEW VEHICLE" shall refer to a Honda, Cadillac and Oldsmobile
motor vehicle which: (i) is unregistered and unused, (ii) is from the 1996 or
1997 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.
(j) "PROGRAM VEHICLE" shall mean any vehicle which has been purchased
by Buyer at a factory auction or from a seller (or an affiliate of such
seller) which is engaged in the business of renting or leasing vehicles.
(k) "DEMONSTRATOR VEHICLE" shall mean any Honda, Cadillac and
Oldsmobile vehicle which: (i) is from the 1996 or 1997 model year, and
(ii) either is registered in the name of Seller (and is being used by a third
party which has received use of the vehicle in exchange for the advertising
credit) or is registered in the name of a third party which has received use
of the vehicle in exchange for advertising credit or (iii) is utilized by
Seller or its employees and has not been sold at retail. "Used Vehicle" shall
mean any vehicle which is not a new vehicle, a program vehicle or a
demonstrator vehicle.
(l) "DATE OF THIS AGREEMENT" shall refer to the first date upon which
this Agreement has been signed by all of the parties.
(m) 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. Subject to paragraph 17, 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 such paragraphs or excluded pursuant to the terms
hereof.
3. INVENTORY OF NEW AND DEMONSTRATOR VEHICLES. Buyer shall purchase
Seller's entire inventory of new Honda, Cadillac and Oldsmobile vehicles, as
that inventory exists on the Closing Date. Buyer also shall purchase
Seller's entire inventory of demonstrator vehicles, as that inventory exists
on the Closing Date.
(a) PRICE OF NEW VEHICLES. The purchase price for each of the 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, unexpired floor plan allowances, finance cost allowances, unpaid
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's actual net cost for the
new vehicle shall include Seller's actual installed net cost for any and all
parts and accessories reasonably installed by Seller on new vehicles in the
ordinary course of business, including $80 per unit in connection with the
installation of a silencer security system on Honda Civic, Prelude, and
Passport models, and $74 per unit in connection with such installation on all
other vehicles, and shall not include any other vehicle preparation charges
or other dealer charges.
(b) PRICE FOR DEMONSTRATOR VEHICLES. The purchase price for each of
Seller's demonstrator vehicles shall be determined under subparagraph (a) in
the same manner as for new vehicles, except that the purchase price for a
demonstrator vehicle shall be reduced by ten cents ($0.10) for each odometer
mile in excess of 1,000 miles.
(c) DEDUCTION FOR DAMAGE TO NEW OR DEMONSTRATOR VEHICLES. Immediately
prior to Closing, Buyer and Seller shall jointly inspect Seller's inventory
of new and demonstrator vehicles. If any new or demonstrator 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 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.
(d) PAYMENT FOR NEW AND DEMONSTRATOR VEHICLES. The aggregate purchase
price for all new and demonstrator vehicles purchased by Buyer from Seller
shall be paid in full at Closing.
(e) 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 by Seller with respect to ordered but
undelivered new vehicles.
4. INVENTORY OF USED VEHICLES. Except as hereinafter provided, Buyer
shall purchase Seller's entire inventory of used vehicles as that inventory
exists at Closing.
(a) DISCLOSURES. Seller shall be obligated to: (i) disclose to Buyer
any and all facts known to Seller 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 AND PROGRAM VEHICLES. The purchase price
for each of Seller's used vehicles except used Honda vehicles shall be equal
to the "wholesale" value for that vehicle as published in the ▇▇▇▇▇▇ Blue
Book (Western Edition) for the period which includes the Closing Date plus
$74 for each installed silencer security system, reduced by the amount, if
any, reasonably necessary to repair or recondition such vehicle to a standard
which is customary for such used vehicle to be sold at retail. Buyer shall
perform all such repairs and reconditioning at the dealership location if
possible, and any reduction of the used vehicle price shall not exceed 50% of
the normal retail charge for such repairs or reconditioning. If it is not
possible to perform such repairs or reconditioning at the dealership
location, the reduction of the used vehicle price shall be Buyer's cost to
complete such repairs or reconditioning. If the parties cannot agree upon
the necessity for or the extent of such repairs or reconditioning, they shall
select an independent third party to make such a determination, which
determination shall be final and binding upon both Buyer and Seller.
The purchase price for used Honda vehicles and Program Vehicles shall be
that certain price determined by mutual agreement of Buyer and Seller. If Buyer
and Seller are unable to agree upon the price for any used Honda vehicle or
Program Vehicle, the Buyer shall have no right or obligation to purchase that
vehicle, and Seller shall have no right or obligation to sell that vehicle.
Buyer and Seller agree to use their best efforts to establish the proposed
purchase prices of all used vehicles and program 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 and Program Vehicles sold hereunder shall
be paid in full at Closing.
5. INVENTORY OF NEW PARTS AND ACCESSORIES. Buyer shall purchase Seller's
entire inventory of new, current (non-obsolete), undamaged Honda, Cadillac
and Oldsmobile vehicle parts and accessories furnished by Franchisors and/or
third party suppliers, as that inventory exists on the Closing Date. Buyer
shall purchase Seller's entire inventory of parts relating to silencer
security systems at Seller's cost. 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
Honda, Cadillac and Oldsmobile vehicles (whether manufactured by a Franchisor
or third party suppliers) shall be the net cost of that item as set forth in
the then most recent price book published by the supplier of that item,
reduced by any 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 Honda, Cadillac and Oldsmobile 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. Buyer shall purchase Seller's Equipment. Buyer
acknowledges that Seller is retaining, and is not selling to Buyer, those
items of Seller's Equipment which are listed on Exhibit "A" attached hereto.
(a) PRICE FOR EQUIPMENT. The aggregate purchase price for Seller's
Equipment shall be equal to the sum of: (i) Two Hundred Thirty-Three Thousand
Five Hundred Fifty and 00/100 Dollars ($233,550), plus (ii) cost of new tools
and displays required by either of the Franchisors and purchased by Buyer
subsequent to August 1, 1996. In addition, Buyer will negotiate in good
faith and pay to Seller a reasonable price for the office trailer located on
the used car lot and the storage trailer located at the new car sales
location. Buyer shall have the right to reasonably allocate the purchase
price among the items of Equipment in whatever manner Buyer believes will
best reflect the relative fair market values of those items. Seller hereby
assigns to Buyer, subject to the Closing of this Agreement, Seller's
agreement for the purchase and installation of new exterior awnings at the
dealer premises. Buyer shall assume and pay the balance of the purchase
price in connection with such contract and shall reimburse Seller at Closing
its deposit in the amount of $9,411.00 previously paid under said contract.
(b) PAYMENT FOR EQUIPMENT. Prior to or simultaneously with the
execution of this Agreement, Buyer has deposited with The Escrow Forum, in
Lake Forest, California, a $150,000.00 ▇▇▇▇▇▇▇ money deposit to be applied
against the purchase of the Equipment. The Escrow Forum shall deposit that
$150,000.00 ▇▇▇▇▇▇▇ money deposit in an interest bearing account. At
Closing, that entire $150,000.00 ▇▇▇▇▇▇▇ money deposit, together with all
interest earned on that ▇▇▇▇▇▇▇ money deposit, shall be credited against the
purchase price for the Equipment. The 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,
paper products, office supplies, and other supplies which are held for use in
Seller's Business. 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 "B" attached hereto. Seller warrants
that all of Seller's obligations under the contracts listed on Exhibit "B"
shall be current at the time of Closing. Seller agrees to indemnify Buyer
against all obligations under the contracts identified on Exhibit "B" which
relate to periods prior to Closing. Buyer agrees to indemnify Seller against
all obligations under the contracts identified on Exhibit "B" which relate to
periods after Closing.
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 Eight Hundred Thousand One and 00/100 Dollars ($800,001.00). The
$800,001.00 purchase price for Seller's Intangible Assets shall be paid in
full at Closing. The $800,001.00 purchase price shall, subject to paragraph
17(a)(1)(iv), be allocated among the items which constitute the Intangible
Assets as follows:
(1)Four Hundred Thousand Dollars
($400,000.00) shall be allocated to the purchase of the goodwill, service
customer lists, sales customer lists, vehicle sales records, vehicle service
records, and other intangible rights and interests of any value relating to
Seller's Honda franchise.
(2)Four Hundred Thousand Dollars
($400,000.00) shall be allocated to the purchase of the goodwill, service
customer lists, sales customer lists, vehicle sales records, vehicle service
records, and other intangible rights and interests of any value relating to
Seller's Cadillac and Oldsmobile franchises.
(3)One Dollar ($1.00) shall be
allocated to all of the Intangible Assets not identified in subparagraphs
10(a)(1) and 10(a)(2).
(4)The parties agree that there is
no separate value to the nontransferable Honda, Cadillac and Oldsmobile
franchises issued by the Franchisors.
(b) In order for Buyer to receive the full benefit of the intangible
good will being purchased by Buyer, it will be necessary for Buyer 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
$800,001.00 amount being paid by Buyer for the Intangible Assets, Seller
agrees to reimburse Buyer for fifty percent (50%) of the net cost to Buyer of
repair and warranty services on Used Vehicles which are not covered by
factory or other warranty and which are reported to Buyer within 30 days and
performed by Buyer within 90 days 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 Used Vehicles
purchased from Seller prior to Closing. Seller agrees to reimburse Buyer
pursuant to the preceding sentence on a monthly basis, with payment to be
made within ten (10) days after Buyer submits a billing for the cost of repair
and warranty services performed during the preceding calendar month. During
the same period of time, Seller shall pay to Buyer the cost of additional
equipment or services furnished by Buyer after Closing pursuant to Customer
purchase orders on New Vehicles sold prior to Closing and for which Seller had
been paid prior to Closing.
(c) Seller agrees that Seller shall not, during the 5 year period
beginning on the Closing Date, directly or indirectly: (i) engage in the sale
or servicing of new or used motor vehicles or the sale of motor vehicle parts
or accessories within the geographical limits of Monterey County, California,
or (ii) suggest, request, advise, encourage or cause any person or entity to
avoid, reduce or terminate any business relationship with Buyer (including
any relationship as a customer, supplier or partner of Buyer). In the event
of any actual or threatened breach of Seller's covenant against competition
or interference, Buyer shall be entitled to an injunction preventing further
breach.
11. LIMITATION ON LIABILITIES ASSUMED. Except as provided in subparagraph
3(e), 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
except such obligations as Buyer expressly assumes under this Agreement or
obligations which are mandated by state or federal law). Buyer and Seller
hereby waive the requirements, if any, relating to compliance with any bulk
sales transfer act. Seller shall indemnify Buyer against any claims not
otherwise assumed by Buyer as a result of any such noncompliance.
12. LIMITED CONFIDENTIALITY. Buyer and Seller each agree to take all
reasonable actions to prevent unnecessary disclosure to any third parties of
any information relating to this transaction and the terms of this Agreement;
provided, however, that in connection with Buyer's intended offering of its
securities, Buyer shall have the right to make a full public disclosure of
such information as Buyer shall determine to be necessary or appropriate
relating to this Agreement and the results of Buyer's due diligence;
provided further, that Seller takes no responsibility for the accuracy or
completeness of any such disclosure and this Agreement does not create any
rights in third parties.
13. 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 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, 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) UNDISCLOSED LIABILITIES AND CONTRACTUAL COMMITMENTS. Except as
otherwise disclosed in this Agreement (or in an attached Exhibit), no lawsuit
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.
(d) CONDITION OF EQUIPMENT. The condition of the Equipment is
sufficient to permit Seller to operate its business in the ordinary course.
Seller will continue to perform routine maintenance and repair with respect
to the Equipment prior to Closing.
(e) 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 or liens. 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).
(f) TOXIC MATERIALS. Seller has provided to Buyer a report of an
environmental audit dated January 12, 1990 performed by Dames & ▇▇▇▇▇
relating to the real property referred to as ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇. To the best of Seller's knowledge, no material unlawful release,
storage or use of toxic materials has occurred on such real property since
the date of such report. For the purposes hereof the phrase "toxic
materials" shall include all substances deemed to be pollutants, toxic
materials or hazardous materials under any California or federal law.
(g) There are no claims by or on behalf of any of Seller's employees
pending in any court or before any governmental agency or other similar
entity charging Seller with any unfair labor practice, unpaid wages or
overtime, discrimination or other claims or grievances relating to terms or
conditions of employment at Seller's business.
(h) INDEMNIFICATION FOR BREACH OF WARRANTIES. 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 in 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.
14. OTHER AGREEMENTS.
(a) EMPLOYEE ISSUES. Within 10 days after the date of this Agreement,
Seller shall provide to Buyer the following: (i) a census of Seller's
employees and (ii) a written disclosure of all benefits made available to
Seller's employees (including qualified and non-qualified retirement plans).
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 (if any) 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 except ▇▇▇ ▇▇▇▇▇▇ 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; provided, however, Buyer shall
offer employment to ▇▇▇▇▇ ▇▇▇▇▇▇ as provided in paragraph 25(g) and provided
further, that Buyer shall offer employment to all of Seller's employees who
are covered by the Collective Bargaining Agreement between Seller and
District Lodge 93 I.A.M. & A.W. as amended May 23, 1996 on the terms and
conditions provided in said Collective Bargaining Agreement. Seller hereby
assigns, subject to the Closing of this Agreement, said Collective Bargaining
Agreement to Buyer, and Buyer agrees to assume and perform the duties and
obligations thereunder. Seller agrees that for a period of six months
following Closing it will not offer employment to any of Seller's terminated
employees unless Buyer shall fail to employ any such employees or shall
subsequently terminate any such employee.
(b) FINANCIAL DISCLOSURES. Buyer (at Buyer's expense) shall have the
right, at any time prior to Closing, to conduct a certified audit (by one or
more certified public accounting firms selected by Buyer) of: (i) Seller's
balance sheet for 1994 and 1995, (ii) Seller's income and cash flow
statements for 1993, 1994 and 1995, and (iii) Seller's balance sheet and
income and cash flow statements for all subsequent interim periods prior to
Closing. Seller agrees to cooperate and assist in the prompt and efficient
completion of all such audit activities, recognizing that the audit process may
result in inconveniences or inefficiencies to Seller's Business.
(c) FRANCHISORS' CONSENT. The parties shall take all actions which are
reasonably necessary on the part of either of them to obtain the consent of
the Franchisors to the issuance to Buyer of exclusive franchises for the sale
of new Honda, Cadillac and Oldsmobile vehicles in the same geographical area
as Seller's current franchises in Monterey County, California.
15. 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,
but Seller may conduct a "Change of Ownership Sale" or similar type sale prior
to Closing; (v) Seller shall use its best efforts to preserve the value of the
Honda, Cadillac and Oldsmobile franchises in Monterey County, California; and
(vi) Buyer shall have the right, at Buyer's expense, to maintain an employee
on Seller's business premises, and Seller agrees to provide that employee
with access to and the right to participate in all aspects of Seller's
Business.
16. 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 has been authorized by the board of
directors of Lithia Motors, Inc. 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.
(c) PERFORMANCE BY BUYER. Buyer is aware of no facts relating to its
business operations which could cause either of the Franchisors to prevent or
frustrate the consummation of the terms of this Agreement other than the fact
that it intends to offer its securities for sale to the public, and is aware
of no facts which could prevent the Buyer from performing all of the terms
and conditions to be performed by Buyer hereunder.
(d) INDEMNIFICATION FOR BREACH OF WARRANTIES. Buyer shall indemnify
Seller against all losses, damages and costs (including attorney fees and
court costs) relating to any warranty made by Buyer in this Agreement which
is false, misleading, incomplete or inaccurate (either on the date of this
Agreement or at the time of Closing).
17. CONDITIONS TO CLOSING. The obligation of the parties to close this
transaction is subject to each of the following conditions (each of which is
for the benefit of the parties and may be waived by either or both of them),
and either party 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 Franchisors, prior to the Final
Closing Date, exclusive franchises to sell new Honda, Cadillac and Oldsmobile
vehicles in the same geographical area as Seller's current franchises in
Monterey County, California (as evidenced by the issuance to Buyer by
Franchisors of appropriate Dealership Sales and Service Agreement, and the
approval of Buyer as the publicly owned Dealer-Operator of the franchises),
and Buyer agrees to use its best reasonable efforts to obtain those
franchises.
(1)If General Motors Corporation
exercises its right of first refusal to purchase all of the assets relating to
Seller's Cadillac and Oldsmobile franchises or declines to permit the transfer
to or purchase by Buyer, then:
(i)Buyer agrees to waive the
requirement set forth in the first sentence of this subparagraph 17(a) with
respect to Seller's Cadillac and Oldsmobile franchises; and
(ii)Buyer shall not be obligated or
entitled to purchase any of Seller's inventory of new or demonstrator Cadillac
or Oldsmobile vehicles;
(iii)Buyer shall not be obligated
or entitled to purchase any of Seller's inventory of Cadillac or Oldsmobile
parts and accessories, or new tools or displays acquired by Seller since
August 1, 1996 relating to the sale, repair or servicing of Cadillac or
Oldsmobile vehicles;
(iv)Buyer shall not be obligated or
entitled to purchase any of the goodwill, service customer lists, sales customer
lists, vehicle sales records, vehicle service records, and other intangible
rights and interests of any value relating to Seller's Cadillac and Oldsmobile
franchises, and the purchase price for Seller's intangible assets shall be
reduced by an amount which is the lesser of (x) the fair market value
of the intangible assets described in subparagraph 10(a)(2) or (y) $800,000 less
the fair market value of the intangible assets described in subparagraph
10(a)(1).
(v)All other terms of this
Agreement shall remain in effect.
(b) Buyer shall be reasonably satisfied with any facility improvement
requirements which are imposed by American Honda Motor Co., Inc. which have
an aggregate cost of more than $50,000.00.
(c) The leasing of the Business Real Property by Buyer (or a related
entity) shall be closed concurrently with this transaction (in accordance
with the terms of the lease agreement which is attached hereto as Exhibit
"D"), and the ▇▇▇▇▇▇▇ Money Agreement attached hereto as Exhibit "E" shall be
executed by the necessary parties at or prior to Closing.
(d) All of Seller's and Buyer's agreements and warranties set forth in
this Agreement shall be 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 unless Buyer had
knowledge of such incorrect or incomplete matter prior to Closing.
18. 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 The
Escrow Forum, in Lake Forest, 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 The
Escrow Forum, in Lake Forest, 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.
(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 payments and 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: (1) payment for the Purchased Assets; and (ii) all other payments
and documents required under this Agreement.
(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 17, 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 $150,000.00 ▇▇▇▇▇▇▇ 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 $150,000.00
▇▇▇▇▇▇▇ money deposit delivered by Buyer to The Escrow Forum (together with
all interest earned thereon while held by The Escrow Forum) 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. 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 $150,000.00 ▇▇▇▇▇▇▇ money deposit
previously delivered to Buyer to The Escrow Forum (together with all interest
earned thereon while held by The Escrow Forum), (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 and complete all actions necessary to consummate this
transaction.
19. BOOKS AND RECORDS. Until July 1, 1997, Seller shall maintain Seller's
financial records, and Buyer and its agents shall have full reasonable access
to Seller's financial statements and general ledger and may make copies
thereof.
20. SELLER'S ACCOUNTS RECEIVABLE. Until July 1, 1997, 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 and pay over Seller's receivables which
are actually received by Buyer.
21. SURVIVAL OF REPRESENTATIONS. All representations, warranties,
indemnification obligations and covenants made in this Agreement shall
survive the Closing, and shall remain in effect for two years following
Closing, except Seller's warranty set forth in paragraph 13(f) which shall
survive for a period of three years and Seller's warranty contained in
paragraph 13(e) which shall survive until the expiration of the latest period
allowable in any applicable statute of limitation. No claim for indemnity or
for breach of warranty or any covenant herein shall be brought by either
party unless such claim or aggregate claims total at least $25,000.
22. BROKERAGE COMMISSIONS. Buyer and Seller each agree to pay to National
Business Brokers, Inc., at Closing, the commission required under their
respective commission agreements relating to this transaction.
23. 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 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 liable for all obligations of the
Buyer.
24. LEASE OF USED CAR LOT. At Closing, Buyer agrees to sublease from
Seller the used car lot located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at a
rental of $2,400.00 per month (on a "triple net" basis) for the period
remaining on Seller's existing lease for that property (which period shall be
less than 18 months at Closing). At Closing, Buyer agrees to purchase from
Seller the office trailer located on the used car lot, at a mutually agreed
upon price to be paid in cash.
25. 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 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 heading 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 Oregon. If suit or action is instituted in
connection with any controversy arising out of this Agreement, the prevailing
party in that suit or action or any appeal therefrom shall be entitled to
recover, in addition to any other relief, the sum which the court may judge
to be reasonable attorney fees.
(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.
(f) Time is of the essence to this Agreement.
(g) Buyer shall offer employment to ▇▇▇▇▇ ▇▇▇▇▇▇ in a management
position in connection with the operation of the business purchased at least
until July 1, 1997, on terms and conditions which include the normal rate of
pay and employment rules of equivalent position at Buyer's other dealerships
(adjusted, if appropriate, for the geographic area and competitive
marketplace). Buyer will use its best efforts to reach agreement with ▇▇▇▇▇
▇▇▇▇▇▇ prior to Closing concerning the terms and conditions of the offered
employment. In addition, Buyer shall provide office space at the business
until July 1, 1997 for a person to be designated by Seller who shall have
responsibilities in connection with the collection of accounts receivable of
Seller, repossessions and other matters relating to the transition of
ownership and operations from Seller to Buyer.
(h) References to "the best of Seller's knowledge" or similar language
shall mean the actual knowledge of ▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇. Any
agreement, consent or other action of Buyer's parent company (Lithia Holding
Company, LLC) shall constitute the agreement, consent or action of Buyer if
the same is in writing and communicated to Seller.
(i) After Closing, Buyer shall cooperate with Seller in connection
with repossessions of vehicles sold by Seller prior to Closing, including the
temporary storage of any such vehicles. If requested by Seller, following
Closing, Buyer will assist Seller in processing financial statements and
related financial information for the period ending on the Closing Date.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
SELLER: ▇▇▇ ▇▇▇▇▇▇, INC.
By:__________________________
▇▇▇ ▇▇▇▇▇▇, President Dated
BUYER: LITHIA MOTORS, INC. (OR NOMINEE)
By:___________________________ _______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President Dated
EXHIBIT "A" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between ▇▇▇ ▇▇▇▇▇▇, 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.]
EXHIBIT "B" TO AGREEMENT FOR PURCHASE AND SALE
OF BUSINESS ASSETS
Between ▇▇▇ ▇▇▇▇▇▇, INC., as "Seller", and
LITHIA HOLDING COMPANY, L.L.C. (OR NOMINEE), as Buyer
LISTING OF LEASES AND AGREEMENTS BEING ASSUMED
[See pages attached hereto.]
EXHIBIT "C" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS
ASSETS
Between ▇▇▇ ▇▇▇▇▇▇, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
DISCLOSURE OF TOXIC MATERIALS
[See __ page(s) attached hereto.]
EXHIBIT "D" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS
ASSETS
Between ▇▇▇ ▇▇▇▇▇▇, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
COPY OF LEASE AGREEMENT
[See __ pages attached hereto.]
EXHIBIT "E" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS
ASSETS
Between ▇▇▇ ▇▇▇▇▇▇, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
COPY OF ▇▇▇▇▇▇▇ MONEY CONTRACT
[See pages attached hereto.]
"EXHIBIT A" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
1. P/C WITH GOLDEN STATE AUTO FILES
2. CORRAL DE TIERRA MEMBERSHIP
3. ALL DEPOSITS
4. ▇▇▇ ▇▇▇▇▇▇'▇ COMPLETE OFFICE FURNISHINGS
5. BLIMP WITH ▇▇▇ ▇▇▇▇▇▇ LOGO
6. P/C IN BUSINESS OFFICE
EXHIBIT B TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
▇▇▇ ▇▇▇▇▇▇, Inc. and Lithia Motors, Inc.
1. Agreement between International
Association of Machinists & Aerospace Workers District Lodge No. 93 and ▇▇▇
▇▇▇▇▇▇ Cadillac/Honda/Oldsmobile 1994-1996 and amendment thereto dated May 23,
1996 which extends the agreement through May 31, 1999.
2. Lease Agreement with HLC Financial,
Inc. covering certain equipment described in said lease provided by Market Scan
Information Systems, Inc.
3. Master Services Agreement between
ADP, Inc. and ▇▇▇ ▇▇▇▇▇▇ Cadillac/Honda/Oldsmobile dated January 1996.
4. Maintenance Contract between New
Wave Industries, Ltd. and ▇▇▇ ▇▇▇▇▇▇ Auto Center relating to a mobile car wash
system renewable annually.
5. Security Service Agreement
effective March 3, 1996 between BRG Services, Inc. dba Monterey Peninsula Mobile
Security and ▇▇▇ ▇▇▇▇▇▇'▇ Town & Country Auto Center for security services
terminating March 2, 1997 and continuing thereafter on a month-to-month basis.
6. Computer Equipment Schedule for
Lease & Maintenance including a Computer Equipment Lease Agreement dated May 16,
1996 between American Honda Motor Co., and ▇▇▇ ▇▇▇▇▇▇ Honda, HondaNet 2,000 DCS
Software License Agreement between the same parties and Computer Equipment
Maintenance Agreement between the same parties.
7. Lease and Lease Extension and
Option Agreement relating to premises at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, for a term ending August 31, 1997 with an option to renew upon 180
days' notice for an additional three years at a negotiated rental. The lessor
is ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and the lessee is ▇▇▇ ▇▇▇▇▇▇, Inc.
8. Contract with Cintas Corporation to
supply certain uniforms, shop towels, and other items dated October 1, 1992 and
expiring September 30, 1997 and renewable thereafter unless cancelled upon 60
days' written notice in advance of expiration.
9. Agreement with Automotive
Environmental Services Corporation and ▇▇▇ ▇▇▇▇▇▇ Auto Center for the disposal
of waste anti-freeze.
10. Agreement with Evergreen
Environmental Services and ▇▇▇ ▇▇▇▇▇▇ Cadillac/Honda/Oldsmobile for the
transportation and disposal of used oil.
11. Lease between Vader, Inc. and ▇▇▇
▇▇▇▇▇▇ Cadillac/Honda/Oldsmobile for 36 months commencing April 1, 1994 of a CD
Spectrum Modular Office (it is contemplated that this asset will be purchased at
closing).
12. Monthly fees payable to the
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Company pursuant to an electric parts catalogue system.
13. Monthly payments to Monterey Bay
Office Products for copier usage.
14. Monthly fees payable to Pitney
▇▇▇▇▇, Inc. in connection with mailing machine use.
15. Various utility, garbage disposal,
and similar contracts on a month-to-month or at-will basis necessary or
convenient for the operation of the Seller's business located at ▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.