EXHIBIT 10.1
AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
THIS AGREEMENT is entered into by and between SUN VALLEY FORD, INC., a
California corporation, dba "SUN VALLEY FORD VOLKSWAGEN HYUNDAI" (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 Ford, Volkswagen, and Hyundal motor vehicles and related
parts and accessories from premises located at 2285 Diamond Blvd, & 1051 Burnett
Ave., Concord, Califamia 94520 (the "Business Real Properr/), under franchises
issued by Ford Motor Company, Volkswagen of America, Inc., and Hyundai Motor
Company.
Buyer wishes to purchase from Seller, and Seller is willing to sell to
Buyer, all assets relating to Seller's Ford, Volkswagen, and Hyundal franchises,
conditioned upon the granting to Buyer of exclusive franchises for the sale of
new Ford, Volkswagen, and Hyundai motor vehicles in the same geographical area
as Seller's current franchises in Concord, California.
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 consummaton of the transacton
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 refor to July 1, 1997.
(c) "Seller's Business" shall refer to any and all actvities
conducted by Seller in Contra Costa County, California, relating to the
marketing and sale of new Ford, Volkswagen and Hyundai vehicles and associated
parts and accessories, and the repair and servicing of new or used Ford,
VolkSwagen and Hyundai vehicles.
(d) "Purchased Assets" shall refer to those assets which are
identfied in Paragraph 2 as being purchased and sold by ft parties hereunder.
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(e) Seller's "Equipment" shall refor to all non-inventory items of
tangible personal property presently owned or used by Saller im connecton Wth
Sellers Business, including all of Sellees machinery, tools, signs, offical
equipment, computer equipment, computer programs, microfiches, parts lists,
repair manuals, sales or service brochures, fumiture and fixtures, and all of
Seller's leasehold improvements to the Business Real Property, and further
including all assets listed on Seller's financial statements as of December 31,
1996, and further including all assets listed in the "Personal Property
Appraisal of Sun Valley Ford as of March 4, 1997" which was prepared by Marshall
& Stevens Incorporated (File Reference 14-5170). Attached to this Agreement as
Exhibit "A" is a listng prepared by Seller of certain personal items being
retained by Seller and NOT being purchased by Buyer.
(f) Seller's "Intangible Assets" shall refer to Seller's business
name ("Sun Valley Ford Volkswagen Hyundai"), telephone and fax numbers, service
customer lists, sales customer lists, vehicle sales records, vehicle service
records, all of Seller under contracts assigned to and assumed by Buyer pursuant
to this Agreement, all goodwil 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 all of the real property
located in Concord, California which has been used in connection with Seller's
business, including but not limited to the premises at 2285 Diamond Blvd,
Concord, California.
(h) "Franchisors" shall refer to Ford Motor Company, Volkswagen of
America, Inc., and Hyundai Motor Company.
(i) "New Vehicle" shall refer to a Ford, Volkswagen or Hyundai motor
vehicle which: (i) is unregistered and unused, (ii) is from the 1996, 1997 and
1998 model years, (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 model year
which has been sold to a customer by Seller but returned because of the
customers inability to obtain financing for the purchase. "Demonstrator
Vehicle" shall mean an unregistered vehicle from the 1997 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.
(j) "Date of this Agreement" shall refer to the first date upon
which this Agreement has been signed by all of the parties.
(k) All amounts payable by Buyer to Selli@r at Closing shall. be
paid by certfied check drawn against a bank of Buyer's choice having offices
located in Jackson County, Oregon, or by whatever other means acceptable to
Seller.
2. PURCHASED ASSET. Seller agrees to sell to Buyer, and Buyer agrees to
purchase from
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Seller, the assets identfied 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 Ford,
Volkswagen and Hyundai 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 vehiciies), 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 not 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, Sellers actual net cost for new vehicles shall
include Sellees actual net cost 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 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 determinaton 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 Sellers rights (including customer deposits) and
obligations (including sales commissions) under such purchase orders;
provided, however, that Buyer shall not be obligated to assume Sellers rights
or obligations with respect to any new vehicle purchase order which is at a
price less then net 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.
(e) PRICE FOR DEMONSTRATOR VEHICLES AND ROLLBACK VEHICLE. The price
for each
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demonstrator vehicle shall be determined as provided in subparagraphs 3(a)
and 3(b) and then reduced by $750 per vehicle and further reduced by 30CENTS per
mile for each odometer mile on that vehicle in excess of 1,000 miles. The price
for each rollback vehicle shall be determined as provided in subparagraphs 3(a)
and 3(b) and then reduced by 3CENTS per mile for each odometer mile on that
vehicle in excess of 200 miles. The purchase price for demonstrator vehicles
and rollback vehicles shall be paid at Closing.
4. LNVENTORY OF USED VEHICLES. Buyer intends to purchase Seller's entire
inventory of used vehicles (including 1996 demonstrator vehicles and 1996
rollback 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.
(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 intenton 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 obiligated 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 this
anticipated Closing Date.
(c) PAYMENT FOR USED VEHICLES. The aggregate purchase price for
Seller's inventory of used vehicies 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 Sellers used vehicles which are not purchased
by Buyer. Buyer shall store those vehicles in accordance with Buyers normal
business practces. 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 Ford, Volkswagen and
Hyundai vehicle parts and accessories manufactured by Franchisors 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
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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 Ford, Wolkswagen and Hyundai vehicles (whether manufactured by a 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, rebates, incentves 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 Ford, Volkswagen and Hyundal parts and
accessories shall be deterrmined immediately prior to Closing (or on whatever
ealier 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; provided,
however, that Seller is retaining, and is not selling to Buyer, those personal
items of Seller's Equipment which are listed on Exhibit "A" 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 One Million Nine Hundred Thirty Three Thousand
Fifty and 00/100 Dollars ($l,933,050.00), of which $795,800.00 shall be
allocated to the Purchase of Seller's leasehold improvements to the Business
Real Property, and $1,137,250.00 shall be allocated to the purchase of all items
of Equipment other than leasehold improvements to the Business Real Property.
Notwithstanding the preceding sentence, if one or more items of Equipment listed
on the "Personal Property Appraisal of Sun Valley Ford as of March 4, 1997"
which was prepared by Marshall & Stevens incorporated (File Reference 14-5170)
are not delivered to Buyer at Closing or any equipment is added, then the
aggregate purchase price for the Equipment shall be reduced or increased by the
value for those missing or added items as shown an the Marshall & Stevens
appraisal.
(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 earnest money deposit to Capital City Escrow,
Inc., in Sacramento, California, in the amount of $100,000.00, which earnest
money deposit, together with all interest earned thereon, shall be credited at
Closing against the purchase price for the items of Equipment other than
leasehold improvements to the Business Real Property.
(2) The balance of the purchase price for the terms of Equipment
other than leasehold improvements to the Business Real Property ($1,037,250.00)
shall be paid in full at Closing.
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(3) $200,000.00 of the purchase price for Seller's leasehold
improvements to the Business Real Property shall be paid at Closing.
(4) The $595,800.00 balance of the purchase price for Seller's
leasehold improvements to the Business Real Property shall be amortized,
together with interest accruing thereon at the rate of nine percent (9%) per
annum beginning on the date of Closing, in equal monthly installments over a 120
month period, with the first monthly installment being due and payable one month
after the date of Closing, and with subsequent being due and payable at regular
monthly intervals thereafter on the monthly installments same day of each month
until payment in full, provided, however, that the entire deferred balance then
outstanding (together with any Interest accrued thereon) shall be due and
payable in full on the fifth anniversary after the date of Closing.
(A) Buyer shall have the right at any time to prepay all or
any portion of the unpaid balance of the purchase price for Sellers leasehold
improvements to the Business Real Property without penalty or premium. Any
prepayment shall be applied against the last maturing installments of principal
then due (with the principal balance being reduced accordingly), and shall not
excuse Buyer from making the regular installment payments subsequently due until
the principal balance has been paid in full.
(B) If Buyer fails to pay any amount of p6ncipal or
interest due pursuant to this subparagraph 5(b)(4) within ten (10) days after tm
date when due, and ff Seller notiflas Buyer in wdbng of that defauft and Buyer
fails to cure that defauft within ten (1 0) days after receipt of that written
notce from Seller, then Seller will have the right at any time prior to the
moment when Buyer cures that default, to declare (and thereby cause) the entire
unpaid balance of the purchase price to be immediately due and payable.
(C) Buyer's deferred payment obligation as set forth in
this subparagraph 6(b)(4) shall be evidenced by a negotiable promissory note to
be executed by Buyer and delivered to Seller at Closing. If Lithia Motors, Inc.
is not the Buyer, then Lithia Motors Inc. shall co-sign the promissory note.
The promissory note shall be secured by the leaseholds.
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. The
price for all such supplies shall be Sellers 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 contract 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 indemnity Buyer against all
obligations under the contracts idenfified on Exhibit "B" which relate to
periods prior to Closing. Buyer agrees to indemnify Seller against all
obligatons 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
pprior to Closing. The purchase price for work in progress shall be paid at
Closing.
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10. INTANGIBLE ASSETS. Buyer shall purchase all of Seller's Intangible
Assets.
(a) The aggregate purchase price for Seller's Intangible Assets shall
be Five Million and 00/100 Dollars ($5,000,000.00). This $5,000,000.00 purchase
price shall be allocated among the items which constitute the Intangible Assets
as determined by Buyer in the reasonable exercise of Buyer's discreton. This
$5,000,000.00 purchase price shall be paid as follows:
(1) A down payment of One Million Five Hundred Thousand and 00/1
OC Dollars ($1,500, 000.00) shall be paid at the Closing.
(2) A second lump sum payment of principal in the amount of One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) shall be due
and payable on the first anniversary after the date of Closing.
(3) The sum of Two Million Three Hundred Fifteen Thousand
Dollars ($2,315,000.00) (i.e. the $2,000,000.00 balance of the purchase price
for the Intangible Assets, plus interest in the amount of $315,000.00 which
shall have acrrued at the rate of 9% per annum on the $3,500,000.00 outstanding
balance during the period beginning on the date of Closing and anding on the
first anniversary after the date of Closing), shall be amortized over a 48 month
period with interest at the rate of nine percent (9%) per annum in equal monthly
installments of $448,856.00 each, with the first monthly installment being due
and payable thirteen months after the date of Closing, and with subsequent
monthly installments being due and payable at regular monthly intervals
thereafter on the same day of each month until payment in full; provided,
however, that the entire deferred balance then outstanding (together with any
interest accrued thereon) shall be due and payable in full on the fifth
anniversary after the date of Closing.
(4) Buyer shall have the right at any time to prepay all or any
portion of the unpaid balance of the purchase price for the Intangible Assets,
without penalty or premium. Any prepayment shall be applied against the last
maturing installments of principal then due (with the principal balance being
reduced accordingiy), and shall not excuse Buyer from makng the regular
installment payments subsequenty due until the principal balance has been paid
in full.
(5) If Buyer fails to pay any amount of principal or interest
due pursuant to this subparagraph 10(a)(3) within ten (10) days after the date
when due, and if Seller notifies Buyer in writing of that default and Buyer
fails to cure that defauft within ten (10) days after receipt of that written
notice from Seller, then Saller shall have the right, at any time prior to the
moment when Buyer cures that default to declare (and thereby cause) the entire
unpaid balance of the purchase price to be immediately due and payable.
(6) Buyer's deferred payment obligation as set forth in this
subparagraph 10(a)(3) shall be evidenced by a negotiable promissory note to be
executed by Buyer and delivered to Seller at Closing. If Lithia Motors, Inc. is
not the Buyer, then Lithia Motors Inc. shall co-sign the promissory note. The
promissory note shall be unsecured and guaranteed by the public company.
The parties agree that there is no separate value to the non-transferable Ford,
Volkswagen, and Hyundai franchises issued by the Franchisors.
(b) In order for Buyer to receive the full benefit of the intangible
good will being
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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
$5,000,000.00 amount being paid by Buyer for the Intangible Assets, Seller
agrees to reimburse Buyer for the net cost to Buyer of repair and warranty
services which are not covered by factory warranty and which are performed by
Buyer within 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, 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 billinf for the cost of
repair and warranty service performed during the preceding calendar month.
11. BULK TRANSFERS. It is the intenton of the panes 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 htis Agreemet
or Buyer's purchase of the Pruchased Assets, take responsibility for any
liabilities, debts or obligations of Seller (including Seller's trade payables,
account payables, oboigations to employees, or tax liabilities).
13. WARRANTIES OF SELLER. J. Larry Wagner, Edmund Bartlett 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 standign under the laws of the State of
California. Seller is qualified to do business in teh State of California, and
has full pwoer 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 ir
judgment, and will not conflict with or constitutte 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. Seller has a union agreement with the
Machinists Automotive Trades District Lodge No. 190, Local Lodge 1173,
International Association of Machinists and Aerospace and Teamsters General
Truck Drivers and Helpers No. 315, which expries on January 1, 2000. Within 10
days after the date of this Agreement, Seller shall provide Buyer the following:
(i) a consus 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 Clsoing Date. Buyer will
consider any of Seller's employees who apply for employment on an equal basis
with all othe applications. Employement will be offered to Buyer's selected
applicants on terms and conditions to be established by Buyer. Seller will not,
for a peirod of two years following Closing, employ or offer emplyoment to any
of Seller's terminated employees unless Buyer shall fail to employ such
employees or shall subsequently terminate such employees.
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(d) FINANCIAL DISCLOSURES. Seller shall furnish to Buyer such
financial and operating data and other information as to the business nad
propertie sof Seller's Business as Buyer shall request. The review of such
materials will be at Buyer's expense. Buyer (at Buyer's expense) shall have the
right, at any time prior to Closing, to coduct a certified audit (by one or more
certified public accounting firms selected by Buyer) of Seller's balance sheets
and income and cash flow statements fro recent periods, and 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.
(e) UNDISCLOSED LIABILITIES AND CONTRACTUAL COMMITMENTS. Except as
otherwise disclosed in this Agreement (or in an attached Exhibit): (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 hte Purchased
Assets, and (iii) no law suit or action, administrative proceeding, arbitration
proceeding, governmental investigation, or other legal or equitable proceedign
of any kind s pending or threatened agaisnt Seller which might adversely affect
the value of the Purchased Assets. 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.
(f) CONDITION OF EQUIPMENT. Each item of the Equipment shall be in
good operating condition at Closing. Seller will continue to perform routine
maintenance and repairs with respect to the Equipment prior to Closing. Buyer
shall have thirty days after Closign within which to advise Seller in writing if
any item of Equipment is not in good operating condition at Closing, and Seller
shall thereupon be obligated to repair or replace that item (or reimburse Buyer
for doing so).
(g) GOOD TITLE. Seller has, and shall transfer to Buyer at Clsoing,
good and marketable title to all of the Purchased Assets, free and clear of all
security interests, liens, equitable interests, leases, assetssments,
restrictions, reservations, or other burdens of any kind. All current and
accrued taxes which may become a lien agasint any of the Purchased Assets shall
have been paid by Seller prior to Closing (including property taxes, sales taxes
and excise taxes).
(h) NO TOXIC MATERIALS DISCHARGED. Upon the execution of this
Agreement, Seller at its cost shall engage an appropriate environmental firm to
conduct an investigation and 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 contamiation, Seller shall have
untilt he 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 cna 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 "C" attached hereto,
(i) no activity in connection with Seller's Business prior to Closing shall have
produced any toxic materials, the presence or use of which upon the Business
Real Property would violate any federal, state, local or other governmental law,
regulation or order or would require reporting to any govenmental 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.
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(i) FRANCHISORS' CONSENT. Seller shall take all actions which are
reasonably necessary on Seller's part to obtain the consent of the Franchisors
to the issuance to Buyer of exclusive franchises for the sale of new Ford,
Volkswagen and Hyundai vehicles in the same geographical area as Seller's
current franchises in Concord, California.
(j) INDEMNFICIATION FOR BREACH OF WARRANTIES. Larry Wagner, Edmund
Bartlett and Seller shall indemnify Buyer agaisnt 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 ont eh date of htis Agreement or at the time of Closing). If at any
time prior to Closing Buyer determiens that any warranty made by Seller in this
Agremeent is incorrect, incomplete or misleading, then Seller shall advise Buyer
of that fact and shall provide Buyer in writing whatever other information shall
be necessary to cause that warranty to be correct, complete and not misleading.
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 Sellers' Business in the usual and ordinary
course, and in substantial conformity with all applicable laws, ordinarnces,
regulatins, rules or orders; (ii) Seller shall not allow any liens to be places
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 "Change of Ownership Sale" or other words ro phrases having similar
meaings; (v) Selle shall use its best efforts to preserve teh value of the Ford,
Volkswagen and Hyundai franches in Concord, California.
15. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby makes the
following representations and warranties to Seller, with the intent tht 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 bene authorized by the board of
directors of Lithia Motors, Inc. This Agreement will not violate the provision
of any judicial, governmental or administraitve decreem, order, writ,
injunction, or judgment, or conflict with or constitute a default under, the
Articles or bylaws of Lithia Motors, INcl, or any contract, agreement, or other
instrumet to which Lithia Motors, Inc. is a party.
16. ADDITIONAL CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The
obligation of Buyer to close this transation is subject to each of the following
conditions (each of which is for the benefit of Buyer and may be waived by
Buyer), the Buyer shall have the right to rescind this Agreement if any ofh te
following conditions is not satisfied in accordance with its terms:
(a) Buyer shall have obtained from Frnachisors, prior to the Final
Closing Date, exclusive franchises to sell new Ford, Volkswagen and Hyundai
vehicles in teh same geographical area as Seller's current franchises in
Concord, California (as evidenced by the issuance to Buyer by Franchisors of
appropriate Dealership Sales and Service Agreement, and the approval of Buyer as
the publicily owned Dealer-Operator of the franchises), and Buyer agrees to use
its best reasonable efforts to obtain those franchises.
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(b) Buyer shall be reasonably satisifed with any facility improvement
requirements which are imposed by Franchisors which have an aggregate cost of
more than $25,000.00.
(c) 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.
(d) All of Seller's agreements and warranties set forth in this
Agremeent shall be true, correct complete and not misleading at Closing;
provided that Buyer's decision to close this transaction shall not release
Seller form liabilty to Buyer for any warrnaty which is subsequently determiend
to be incorrect, incomplete or misleading.
17. CLOSING. The parties shall make all reasonable effort to close the
purchase and sale under this Agremeent at or begore 5:00 p.m., Pacific Standard
Time, on or before the Final Clsoing 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 reuqired by Colsing 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 Excrow 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 pruchase price of 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 60th day after the
Target 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 for 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 by 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
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rescind the Agreement pursuant to subparagraph 13(h), 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 earnes 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
earnest money deposit delivered by Buyer to the Closing Escrow Agent (together
with all interst earned tehreon 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 agasint 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 DEFUALT, IT BEGIN EXTREMELY DIFICULT 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 htis Agreement,
then Buyer shall be entitled to: (i) a refund of the entire $100,000.00 earnest
money depost previously delivered by 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 beach which are specified in thsi 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.
18. BOOKS AND RECORDS. Seller shall have the right at any tiem and from
time to time, for a period of five (f) years after the Closing Date, to examine
and make copies of all books and reocrds required by Buyer hereunder. In
addition, Buyer agrees to store for a period of five (5) years all books and
records of Seller which Buyer is not acquiring hereunder. Buyer agrees to make
its staff available to Seller for a period of five (5) days subsequent to the
Closing Date so that Seller can close out Seller's books.
19. 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 otu
of the operation of Seller's Busienss prior to Closing. All collected
receivables from vehicle sales shall be delivered to Seller within ten (1) days
after collection, and all other collected receivables shall be delivered to
Seller on a monthly basis. Buyer shall have no obligation to undertkae
collection efforts with respect to Seller's receivables, and Buyer's only
obligatin shall be to account for and pay over Seller's receivables which are
actually received by Buyer.
20. SURVIVAL OF REPRESENTATIONS. All representations, warranties,
indemnification obligations and covenants made in this Agrement shall survive
the Closing, and shall remain in effect until the expiration of the latest
period allowable in any applicable statute of limitations.
21. 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
rihgts and obligations of the Buyer under this Agreement, and Lithia Motors,
Inc. shall remain jointly liable for all obligations of the Buyer.
22. MISCELLANEOUS.
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(a) There are no oral agreements or representations between the
parties which affect this transactions, and this Agreement supersedes all
previous negotiations, warranties, representations and understandings between
the parties. True copies of all documents references in this Agreement are
attached hereto. If any provision fo htis Agremeent shall be determined to be
viod by any court of competent jurisdiction, then that determination shall not
affect any other provision of htis Agreement, and all other provisions shall
reamain in full force and effect. If any provision of htis Agreement is capable
of two consturctions, only one of which would render the provisin valid, then
the provision shall have the meaining whihc renders it valid. The paragraph
headings in this Agremeent 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 accordnace with
the laws of the State of California. Each of hte parties hereby irrevocably
submits to the jurisdiction of the courts of Contra Costs County, California,
and agrees that any legal proceedings with represt to this Agreement shall be
filed and hear in the appropriate court in Contra Costa County, California.
(c) This Agremeent 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) Should any party hereto institute any action or proceedings to
enforce or interpret any provision hereof, or for damages by reasona of any
alleged breach of any provision of this Agrement, the prevailing party shall be
entitle dto 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 litigatin in which damages and/or other relief may be sought
agaisnt such party and a final judgment or dismissal or decree is entered in
such litigation in favor of such party defendent
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
SELLER: SUN VALLEY FORD, a California corporation
By/s/J. LARRY WAGNER APRIL 2, 1997
- ----------------------- -----------------------------------------
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J. Larry Wagner, President Dated
By/s/EDMUND BARTLETT APRIL 2, 1997
------------------ -----------------------------------------
Edmund Bartlett, Chairman & CEO Dated
BUYER: LITHIA MOTORS, INC. (OR NOMINEE)
By/s/BRAD GRAY APRIL 2, 1997
- ----------------------------- ---------------------------------------------
Brad Gray, Vice President Dated
Page 14 of 15
EXHBIIT "A" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between SUN VALLEY FORD, 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 SUN VALLEY FORD, 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 SUN VALLEY FORD, INC., as "Seller", and
LITHIA MOTORS, INC., (OR NOMINEE), as Buyer
DISCLOSURE OF TOXIC MATERIALS
[SEE PAGES ATTACHED HERETO.]
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