EXHIBIT 10.2
AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
THIS AGREEMENT is entered into by and between NISSAN - BMW, INC., a
California corporation, dba "BAKERSFIELD NISSAN, ACURA, BMW" (hereinafter
referred to as "Seller"), ELOY RENFROW (hereinafter "Renfrow"), and LITHIA
MOTORS, INC. OR ITS NOMINEE (hereinafter referred to as the "Buyer' or as
"Lithia").
RECITALS:
Seller is a California business corporation engaged in the business of
selling and servicing Nissan, Acura and BMW motor vehicles and related parts and
accessories from premises located at 31 01 Cattle Drive, Bakersfield, California
93313 (the "Business Real Property"), under franchises issued by Nissan Motor
Corporation in USA, BMW of North America, Inc., and American Honda Motor Co.
Renfrow owns all of the outstanding shares of Seller.
Buyer wishes to purchase from Seller, and Seller is willing to sell to
Buyer, all assets relating to Seller's Nissan, Acura and BMW franchises at 3101
Cattle Drive, Bakersfield, California, conditioned upon the granting to Buyer of
exclusive franchises for the sale of new Nissan, Acura and BMW motor vehicles in
the same geographical area as Seller's franchises.
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. Renfrow is the owner of the Business 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 September 1, 1997. "FINAL CLOSING DATE" shall refer to OCTOBER
1, 1997.
(b) "SELLER'S BUSINESS" shall refer to any and all activities
conducted by Seller in Bakersfield, California, relating to the marketing and
sale of new Nissan, Acura and BMW vehicles and associated parts and accessories,
and the repair and servicing of new or used Nissan, Acura and BMW vehicles.
(c) "PURCHASED ASSETS" shall refer to those assets which are
identified in Paragraph 2 as being purchased and sold by the parties hereunder.
(d) Seller's "EQUIPMENT" shall refer to all non-inventory items of
tangible personal property presently owned or used by Seller in connection with
Seller's Business, including all of Seller's machinery, tools, signs, office
equipment, computer equipment, computer programs, microfiches, parts lists,
repair manuals, sales or service brochures, furniture and fixtures, and all of
Seller's leasehold improvements to the Business Real Property, and further
including all fixed assets listed on Sellers financial statements as of December
31, 1996.
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(e) Sellers "INTANGIBLE ASSETS" shall refer to Seller's business name
("Bakersfield Nissan, Acura and BMW), 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, and all other intangible rights and interests of any
value relating to Seller's Business; provided, however, that Seller's
"Intangible Assets" shall not include the goodwill arising out of the franchise
agreements issued by the Franchisors to Renfrow, which goodwill is being
separately sold by Renfrow to Buyer under this Agreement.
(f) "BUSINESS REAL PROPERTY" shall refer to all of the real property
located in Bakersfield, California which has been used in connection with
Sellers business, including but not limited to the premises at 3101 Cattle
Drive, Bakersfield, California, and also including the vacant parcel of
approximately 2.7 acres to the rear of the dealership on the opposite side of
the railroad tracks.
(g) "FRANCHISORS" shall refer to Nissan Motor Corporation in USA, BMW
of North America, Inc. and American Honda Motor Co.
(h) "NEW VEHICLE" shall refer to a Nissan, Acura or BMW motor vehicle
which: (i) is unregistered and unused, (ii) is from the 1997 or 1998 model year,
(iii) has been driven for less than 200 odometer miles, and (iv) may be
represented or warranted to consumers as "new" under California law. "ROLLBACK
VEHICLE" shall mean an unregistered vehicle from the 1997 or 1998 model year
which has been sold to a customer by Seller but returned because of the
customers inability to obtain financing for the purchase. "DEMONSTRATOR
VEHICLE" shall mean an unregistered vehicle from the 1997 or 1998 model year
which has been used and operated by Seller on dealer plates for sales
demonstration purposes. "USED VEHICLE" shall mean any vehicle which is not a
"new vehicle", a "demonstrator vehicle" or a "rollback vehicle" as defined in
the three preceding sentences.
(i) "DATE OF THIS AGREEMENT" shall refer to the first date upon which
this Agreement has been signed by all of the parties.
(j) All amounts payable by Buyer to Seller at Closing shall be paid
by certified check drawn against a bank of Buyers choice having offices located
in Jackson County, Oregon, or by whatever other means shall be acceptable to
Seller.
2. PURCHASED ASSETS. Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, the assets identified in Paragraphs 3, 4, 5, 6, 7, 8, 9,
and 10 of this Agreement (the "Purchased Assets"). Excluded from this
transaction are Seller's cash, accounts receivable, notes receivable, banking
accounts and deposits, and all other assets not identified in Paragraphs 3, 4,
5, 6, 7, 8, 9, and 1 0 of this Agreement.
3. INVENTORY OF NEW VEHICLES, DEMONSTRATOR VEHICLES AND ROLLBACK
VEHICLES. Buyer shall purchase Seller's entire inventory of new Nissan, Acura
and BMW vehicles, as that inventory exists on the Closing Date. Buyer also
shall purchase Seller's entire inventory of demonstrator vehicles and rollback
vehicles (up to a maximum of five rollback vehicles), as that inventory exists
on the Closing Date.
(a) PRICE OF NEW VEHICLES. The purchase price for each of Seller's
new vehicles shall be equal to Seller's factory invoice cost, reduced by any
factory hold-backs, factory rebates, factory incentives, carry-over model
allowances, Franchisor floor plan allowances, finance cost allowances,
advertising allowances, and any other items which should reasonably be deducted
in order to establish Sellers actual net cost for each vehicle, and further
reduced by the actual net cost for any and all
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accessories, equipment and parts which are missing from a vehicle. Seller
shall be entitled to receive directly from the Franchisors all holdbacks,
rebates, incentives, allowances and other items referred to in the preceding
sentence which shall have accrued prior to Closing and which reduce Buyer's
purchase price for Seller's new vehicles. Seller's actual net cost for new
vehicles shall include Seller's actual net 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 vehicle in Seller's inventory of new vehicles is damaged,
and if the cost of repairing that damage would be more than $1,000.00, then
that vehicle shall be treated as a used vehicle for purposes of Paragraph 4
and this Paragraph 3, rather than as a new vehicle. If any vehicle in
Seller's inventory of new vehicles is damaged, and if the cost of repairing
that damage is less than $1,000.00, then Buyer shall be obligated to purchase
that vehicle as a new vehicle, and the price for that vehicle, as determined
under subparagraph 3(a), shall be reduced by the actual net cost to Buyer of
repairing that damage. If Buyer and Seller are unable to agree upon the
actual net cost to Buyer of repairing the damage to a vehicle, then Buyer and
Seller shall select an independent third party to determine that repair cost,
which determination shall be binding upon both Buyer and Seller.
(c) 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 Sellers outstanding purchase orders for
new vehicles ordered from Seller by customers but not delivered prior to
Closing. At Closing, Seller shall assign and transfer 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.
(e) PRICE FOR DEMONSTRATOR VEHICLES AND ROLLBACK VEHICLES. The price
for each demonstrator and rollback vehicle shall be determined as provided in
subparagraphs 3(a) and 3(b) and then reduced by $750 per vehicle and further
reduced by 30 cents per mile for each odometer mile on that vehicle in excess of
1,000 miles]. The purchase price for demonstrator vehicles and rollback
vehicles shall be paid at Closing.
(f) ALLOCATION TO SELLER OF PORTION OF POTENTIAL NISSAN INCENTIVE.
If for the 1997 calendar year the combined Bakersfield Nissan franchises which
are operated by Seller prior to Closing and by Buyer subsequent to Closing
qualify for the $150.00 per vehicle incentive which is being offered under the
Nissan Wholesale Delivery Incentive Plan, then that incentive shall be allocated
between Buyer and Seller as follows:
(i) Seller shall be entitled to receive that portion of the
total incentive which is determined by multiplying the total incentive by a
fraction, the denominator of which is the total number of wholesale vehicles
purchased by the combined franchises from Nissan during the entire 1997 calendar
year, and the numerator of which is the number of wholesale vehicles purchased
by Seller's franchise from Nissan in 1997 prior to Closing minus the number of
those wholesale vehicles purchased by Seller's franchise from Nissan in 1997
which are purchased by
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(ii) Buyer shall be entitled to receive that portion of the total
incentive which is determined by multiplying the total incentive by a fraction,
the denominator of which is the total number of wholesale vehicles purchased by
the combined franchises from Nissan during the entire 1997 calendar year, and
the numerator of which is the number of wholesale vehicles purchased by Buyer's
franchise from Nissan in 1997 subsequent to Closing PLUS the number of wholesale
vehicles purchased by Seller's franchise from Nissan in 1997 which are purchased
by Buyer from Seller under this Agreement.
4. INVENTORY OF USED VEHICLES. Buyer intends to purchase Sellers entire
inventory of used vehicles, as that inventory exists at Closing. However, Buyer
shall not be obligated to purchase any used vehicle for which Buyer and Seller
are unable to agree upon a purchase price.
(a) DISCLOSURES. Seller shall be obligated, prior to Closing, to:
(i) disclose to Buyer any and all facts concerning each used vehicle which
Seller would be legally obligated to disclose to a consumer (including but not
limited to known damage and usage history), and (ii) provide to Buyer legal
odometer statements and free and clear title for each of the used vehicles.
(b) PRICE FOR USED VEHICLES. Used vehicles shall be purchased on an
individual basis. It is Buyer's intention to purchase all of Seller's used
vehicles. However, if Buyer and Seller cannot agree on the value of one or more
used vehicles, then those vehicles whose value is not agreed upon shall remain
the property of the Seller, and Buyer shall not be obligated to purchase those
vehicles. Buyer and Seller agree to establish the proposed purchase price for
all of Seller's used vehicles at least three business days prior to the
anticipated Closing Date.
(c) PAYMENT FOR USED VEHICLES. The aggregate purchase price for
Seller's inventory of used vehicles shall be paid in full at Closing.
(d) STORAGE AND DISPOSITION OF USED VEHICLES WHICH ARE NOT PURCHASED
BY BUYER. Buyer agrees to cooperate with Seller (at no cost to Buyer) in the
disposition of any of Sellers used vehicles which are not purchased by Buyer.
Seller shall have twenty (20) days after Closing within which to remove from the
Business Real Property any of Seller's used vehicles which are not purchased by
Buyer. Buyer shall store those vehicles in accordance with Buyers normal
business practices. Seller shall have sole and exclusive risk and liability for
any damage or loss to Seller's used vehicles while so stored on the Business
Real Property after Closing, and Buyer shall have no liability or obligation of
any kind by reason of any such damage or loss.
5. INVENTORY OF NEW PARTS AND ACCESSORIES. Buyer shall purchase Seller's
entire inventory of new, current (non-obsolete), undamaged Nissan, Acura and BMW
vehicle parts and accessories manufactured by Franchisor and/or third party
suppliers, as that inventory exists on the Closing Date. Buyer shall have no
obligation to purchase from Seller any parts or accessories which are used,
damaged or obsolete. For purposes of this Paragraph 5, a part or accessory
shall be "obsolete" on the Closing Date if not then returnable to the supplier
from which that part was originally purchased, or if not then listed in the
supplier's then-current price and parts books. Prior to Closing, Seller shall
maintain Seller's inventory of parts and accessories at a level consistent with
good business practices and Seller's normal and regular course of business.
(a) PRICE FOR PARTS AND ACCESSORIES. The purchase price for each
item in Seller's inventory of new, current and undamaged parts and
accessories for Nissan, Acura and BMW vehicles (whether manufactured by
Franchisor or third party suppliers) shall be the net cost for that item as
set forth in the then most recent price book published by the supplier of
that Rem, reduced
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by any discounts (including quantity purchase or stock order discounts),
rebates, incentives or allowances which should reasonably be taken into
account in order to establish what Buyer's net cost for that item would be if
that item was purchased by Buyer directly from that supplier at the time of
Closing.
(b) DETERMINATION OF INVENTORY OF PARTS AND ACCESSORIES. Seller's
inventory of new, current and undamaged Nissan, Acura and BMW 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. If Closing does not take place
immediately after the inventory is completed, then the aggregate purchase price
for Seller's inventory of parts and accessories shall be increased by the actual
purchase price of any new items acquired after the inventory and prior to
Closing, and decreased by the cost of any items sold after the inventory and
prior to Closing
(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. Seller agrees to sell all of the Equipment to Buyer, and
Buyer agrees to purchase the Equipment from Seller. Within twenty (20) days
after the date of this Agreement, Seller shall provide to Buyer a list of the
Equipment, which list shall be attached hereto as Exhibit "A". Seller is
retaining, and is not selling to Buyer, those personal items of Seller's
Equipment which are listed on Exhibit "B" attached hereto. Seller warrants to
Buyer that the items listed on Exhibit "A" constitute all of the items of
tangible personal property (other than inventory, consumable supplies or those
items listed on Exhibit "B") which, during the six months preceding Closing,
shall have been owned or used by Seller in connection with Seller's Business.
Buyer shall have the right to fully inspect the Equipment. If Buyer is
dissatisfied with the kind, quality and/or value of the items listed on Exhibit
"A", Buyer shall have ten (10) days after receipt of Exhibit "A" from Seller
within which to notify Seller, in writing, of Buyer's determination to rescind
the transaction contemplated hereunder based on that dissatisfaction.
(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 Two Hundred Thousand and 00/100 Dollars
($200,000.00). Notwithstanding the preceding sentence, if one or more items of
Equipment listed on Sellers financial statements as of April 30, 1997 are not
delivered to Buyer at Closing, then the aggregate purchase price for the
Equipment shall be reduced by the fair market value of those missing items.
Seller agrees that Buyer shall have the right to allocate the aggregate purchase
price for the Equipment among the various items of Equipment in whatever manner
Buyer, in the exercise of its discretion, believes will best reflect the
relative fair market values of those items.
(b) PAYMENT FOR EQUIPMENT. The purchase price for the Equipment
shall be paid as follows:
(1) Prior to or simultaneously with the execution of this
Agreement, Buyer is making an 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 Equipment.
(2) The balance of the purchase price for the Equipment shall be
paid in full at Closing.
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(c) Attached to this Agreement as Exhibit "A-Nonfunctional" is a
listing of certain items of the Equipment which are nonfunctional and have been
retained by Seller as a source of parts. Seller shall have no obligation to
restore any of the items listed on Exhibit "A-Nonfunctional" to good operating
condition prior to Closing, and Buyer agrees to accept those items in an "as
is", nonfunctional state of repair.
7. SUPPLIES. Buyer shall purchase all of the gas, oil, nuts, bolts, and
other automotive supplies which are held for use in Seller's Business; provided,
however, that Buyer shall not be obligated to purchase used, damaged or obsolete
items or supplies. For purposes of this Paragraph 7, an item shall be
"obsolete" on the Closing Date if not then returnable to the supplier from which
that item was originally purchased, or if not then listed in the suppliers then
current price books. Prior to Closing, Seller shall maintain Seller's inventory
of supplies at a level consistent with good business practices and Sellers
normal and regular course of business. The price for each item of the purchased
supplies shall be Seller's actual net cost, as determined by mutual agreement of
the parties, reduced by any discounts (including quantity purchase or stock
order discounts), rebates, incentives or allowances which should reasonably be
taken into account in order to establish what Buyer's net cost for that item
would be if that item was purchased by Buyer directly from that supplier at the
time of Closing. The purchase price for Seller's supplies shall be paid to
Seller at Closing.
8. CONTRACTUAL RIGHTS AND OBLIGATIONS. At Closing, Buyer shall assume
all rights and obligations of Seller under those certain equipment leases and
other contracts identified on Exhibit 'C" attached hereto, which Exhibit "C"
shall be prepared and attached hereto within 10 days after the date of this
Agreement. Buyer shall have the right to refuse to permit any one or more of
Seller's leases or other contracts to be included in Exhibit "C" (and assumed by
Buyer under this Agreement), and Seller shall remain solely responsible for any
such obligations refused by Buyer. Notwithstanding the preceding sentence,
Seller shall have the right to include on Exhibit "C" all of Seller's factory
communications computer leases and all of those additional leases identified on
Exhibit "C-l". Seller warrants that all of Seller's obligations under the
contracts listed on Exhibit "C" shall be current at the time of Closing. Seller
agrees to indemnity Buyer against all obligations under the contracts identified
on Exhibit "C" which relate to periods prior to Closing. Buyer agrees to
indemnity Seller against all obligations under the contracts identified on
Exhibit "C" 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 Two Hundred Thousand and 00/100 Dollars ($200,000.00). This $200,000.00
purchase price shall be allocated among the items which constitute the
Intangible Assets as determined by Buyer in the reasonable exercise of Buyer's
discretion, and shall be paid by Buyer to Seller at Closing.
(b) In order for Buyer to receive the full benefit of the intangible
assets being purchased by Buyer from Seller, 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
$200,000.00 amount being paid by Buyer for the Intangible Assets, Seller agrees
(subject to subparagraph (b)(1)) 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)
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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.
(1) Buyer shall be obligated to provide written notification to
Seller before performing any services which would give rise to Seller's
reimbursement obligation under this subparagraph 10(b). In each individual
case, Seller shall have no obligation to reimburse Buyer under the second
sentence of this subparagraph 10(b) for the cost of repair and warranty services
unless: (i) Buyer either consents in writing to those services (which consent
shall not be withheld unreasonably) or fails to reasonably object in writing to
those services within three (3) business days after receiving the written
notification referred to in the first sentence of this subparagraph 10(b)(1).
(2) In each individual case, Buyer agrees to exhaust reasonable
efforts to obtain reimbursement from the manufacturer for warranty services
before submitting a notice to Seller pursuant to subparagraph 10(b)(1).
(3) 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.
11. PURCHASE AND SALE OF GOODWILL. Renfrow is the owner of the Nissan,
Acura and BMW franchises issued by Franchisors with respect to Seller's
Business. All goodwill relating to the existing franchises is the property of
Renfrow. Buyer agrees to purchase from Renfrow all goodwill associated with the
Nissan, Acura and BMW franchises issued by Franchisors with respect to Seller's
Business for the aggregate purchase price of Three Million Two Hundred Thousand
and 00/100 Dollars ($3,200,000.00).
(a) Two Million and 00/100 Dollars ($2,000,000.00) of the purchase
price for the franchise goodwill shall be paid to Renfrow at Closing.
(b) Renfrow shall have the option (which option shall be exercised by
Renfrow in writing not less than ten (10) business days prior to Closing) to
receive the $1,200,000.00 balance of the purchase price for the Intangible
Assets in accordance with either of the following two alternatives:
Option #1: Delivery to Renfrow at Closing of a promissory note
issued by Buyer in the amount of One Million Two Hundred Thousand Dollars
($1,200,000.00), which promissory note (the "Promissory Note") shall incorporate
the following terms:
(A) Interest shall accrue on the outstanding balance of the
Promissory Note at the rate of eight and one-half percent (8.5%) per annum
beginning on the date of Closing. The interest which accrues on the unpaid
principal balance during the first year following the date of Closing
($102,000.00 if there are no prepayments) shall be added to the principal
balance outstanding as of the first anniversary after Closing, and that adjusted
principal balance ($1,302,000.00 if there are no prepayments) shall thereafter
be amortized (with interest at the rate of 8.5% per annum) in equal monthly
installments over a 60 month period, 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.
(B) Print to prepay all or any portion of the unpaid
balance of the
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Promissory Note, 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.
(C) If Buyer fails to pay any amount of principal or
interest due under the Promissory Note within ten (1 0) days after the date when
due, and if Renfrow notifies Buyer in writing of that default and Buyer fails to
cure that default within ten (10) days after receipt of that written notice from
Renfrow, then Renfrow 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 Promissory Note to be immediately due and payable.
(D) The Promissory Note shall be unsecured.
Option #2: Delivery to Renfrow at Closing of shares of
Class A Common Stock issued by Lithia. The number of shares ("Lithia
Shares") to be issued to Renfrow pursuant to the preceding sentence will be
determined by dividing One Million Two Hundred Thousand Dollars
($1,200,000.00) by the average closing price of Lithia's Class A Common Stock
as quoted in the Wall Street Journal for the ten (10) business days prior to
Closing. No fractional shares will be issued and should Renfrow be entitled
to a fractional share, the value of that fractional share shall be paid in
cash. The Lithia shares so issued to Renfrow shall be issued without
registration under the Securities Act of 1933 or any state securities laws,
under applicable exemptions from registration.
12. LIMITATION ON LIABILITIES ASSUMED. Except as provided in subparagraph
3(d), Paragraph 8 and Paragraph 9, Buyer shall not, by reason of this Agreement
or Buyer's purchase of the Purchased Assets, take responsibility for any
liabilities, debts or obligations of Seller (including Seller's trade payables,
account payables, obligations to employees, or tax liabilities).
13. WARRANTIES OF SELLER. 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) EMPLOYEE ISSUES. No employees of Seller are members of any
union. Within 10 days after the date of this Agreement, Seller shall provide to
Buyer the following: (i) a census of Seller's employees, (ii) a written
disclosure of all benefits made available to Seller's employees (including
qualified and non-qualified retirement plans), and (iii) access to all personnel
files for seller's employees. All employee benefit plans maintained by Seller
for its employees shall be fully funded prior to Closing. Seller shall pay all
wages, commissions, accrued vacation pay and other accrued compensation earned
by Seller's employees prior to Closing (together with all accrued FICP and
withholding taxes). Seller shall terminate the employment of all of the
employees of Sellers Business, with the termination to be effective as of the
close of business on the Closing Date. At Buyer's sole discretion, Buyer may
(but
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shall not be obligated to) hire any of the terminated employees of Seller's
Business (the 'Terminated Employees"). Seller will not, for a period of two
years following Closing, employ or offer employment to any Terminated
Employee unless: (1) Buyer shall fail to offer employment to that Terminated
Employee, or (2) that Terminated Employee is initially employed by Buyer, but
that employment is subsequently terminated and either: (i) Buyer consents in
writing to Seller's employment of that Terminated Employee, or (ii) a period
of 6 months elapses between the date of termination of Buyer's employment of
that Terminated Employee and the first date of Seller's reemployment of that
Terminated Employee.
(e) UNDISCLOSED LIABILITIES AND CONTRACTUAL COMMITMENTS. Except as
otherwise disclosed in this Agreement (or in an attached Exhibit), the following
statements are true as of the date of this Agreement and shall be true at
Closing: (i) Seller does not have any liabilities which might have a material
impact on Buyer's use of the Purchased Assets, (ii) Seller is not a party to any
contracts or commitments which might have a material impact on Buyer's use of
the Purchased Assets, (iii) no law suit or action, administrative proceeding,
arbitration proceeding, governmental investigation, or other legal or equitable
proceeding of any kind is pending or threatened against Seller which might
adversely affect the value of the Purchased Assets and (iv) Seller has all
licenses, permits and authorizations required by any federal, state or local
governmental or regulatory agency in order to operate Seller's Business, and
knows of no reason why any such license or permit might be subject to
revocation. if any claim is asserted against Buyer after Closing with respect to
any obligation of Seller which Seller has failed to disclose to Buyer in
writing, or which Seller has disclosed but failed to pay, then Buyer shall give
prompt written notice of that claim to Seller. Seller shall indemnity 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 two business days after Closing 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). Any items of Equipment which are in good
operating condition at Closing shall be accepted by Buyer "as is" and without
any additional warranty.
(g) GOOD TITLE. Seller has, and shall transfer to Buyer at Closing,
good and marketable title to all of the Purchased Assets, free and clear of all
security interests, liens, equitable interests, leases, assessments,
restrictions, reservations, or other burdens of any kind. All current and
accrued taxes which may become a lien against any of the Purchased Assets prior
to Closing shall have been paid by Seller prior to Closing (including property
taxes, sales taxes accrued with respect to any transaction other than the
transaction contemplated under this Agreement, and excise taxes).
(h) NO TOXIC MATERIALS DISCHARGED. Except as disclosed by Seller on
Exhibit, D" attached hereto, Seller and Renfrow warrant that (i) no activity in
connection with Seller's Business prior to Closing shall have produced any toxic
materials, the presence or use of which upon the Business Real Property would
violate any federal, state, local or other governmental law, regulation or order
or would require reporting to any governmental authority and (ii) there are no
in-ground hoists, underground gas tanks, underground fuel tanks, or underground
waste oil tanks located on the Business Real Property, and (iii) the Business
Property is otherwise free and clear of any toxic materials. For purposes of
this subparagraph (h), the phrase "toxic materials" shall include but not be
limited to any and all substances deemed to be pollutants, toxic materials or
hazardous materials under any state or federal law. Seller has furnished to
Buyer, prior to the date of this Agreement, copies of all environmental reports
and
9
certificates of compliance relating to Seller's Business and the Business
Real Property. Upon the execution of this Agreement, Seller shall, at
Seller's sole expense, engage an appropriate environmental firm which is
acceptable to Buyer to conduct an investigation and produce a Phase One
Environmental Report regarding the Business Real Property. If the Level 1
environmental assessment discloses that the Business Real Property is, or is
likely to be, materially contaminated by the presence of toxic materials, and
if Buyer provides Seller with a written demand to remediate, cleanup,
detoxify and decontaminate any and all such contamination as a condition of
Closing, and if the cost of remediation would not exceed $100,000.00, then
Seller shall be obligated (at Seller's sole expense) either to: (i) complete
such remediation, cleanup, detoxification and/or decontamination prior to,
and as a condition of, Closing, or (ii) place sufficient funds into escrow at
Closing to cover the expense of the required remedy. If the Level 1
environmental assessment discloses that the Business Real Property is, or is
likely to be, materially contaminated by the presence of toxic materials, and
if Buyer provides Seller with a written demand to remediate, cleanup,
detoxify and decontaminate any and all such contamination as a condition of
Closing, and if the cost of remediation would exceed $100,000.00, then Seller
shall have the option either to take one of the two actions identified in
claues (i) and (ii) of the preceding sentence or promptly notify Buyer in
writing of Seller's intention not to take either of those actions; if Seller
notifies Buyer in writing of Seller's intention not to take either of the
actions identified in clauses (i) and (ii) of the preceding sentence, then
Buyer shall be entitled to treat that event as a failure of a condition
precedent for purposes of Paragraph 16 of this Agreement.
(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 Nissan,
Acura and BMW vehicles in the same geographical area as Seller's current
franchises in Bakersfield, California.
(j) EVALUATION OF RISKS IN RECEIVING LITHIA SHARES. Seller and
Renfrow each are capable of evaluating the merits and risks of an investment in
the Lithia Shares. By reason of their respective business or financial
experience, and/or the business or financial experience of their respective
professional advisors who are not affiliated (either directly or indirectly)
with Lithia or any affiliate or selling agent of Lithia, Seller and Renfrow have
the capacity to protect their interests in connection with an investment in the
Lithia Shares. Seller and Renfrow each have met (either directly or through
their respective professional advisors) with a representative of Lithia and have
had the opportunity to ask questions of, and receive answers from, Lithia
concerning Lithia and the Lithia Shares and the terms and conditions of this
transaction, and also have had the opportunity to obtain any information
requested by them (or their respective professional advisors). Any questions
raised concerning the transaction have been answered to their satisfaction.
(k) LIMITATIONS ON TRANSFER OF LITHIA SHARES. The Lithia Shares to
be transferred to Seller and/or Renfrow pursuant to this Agreement will be held
as an investment and not with a view to distribution. Further, any public
offering of the Lithia Shares by Seller or its transferee pursuant to an S-3
Registration Statement or Rule 144 of the Securities Act of 1933 shall be
limited to 20,000 shares per calendar quarter during 1998.
(l) LACK OF REGISTRATION OF LITHIA SHARES. Seller and Renfrow each
understand that: (i) the Lithia Shares have not been registered under the
Securities Act of 1933 in reliance upon an exemption from registration, (ii) the
Lithia Shares must be held indefinitely, unless the Lithia Shares subsequently
are registered under the Securities Act of 1933, or unless an exemption from
registration is otherwise available, (iii) the Lithia Shares may not be offered,
sold, transferred, pledged, or otherwise disposed of in the absence of either an
effective registration statement under the Securities Act of 1933 and applicable
state securities laws or an opinion of counsel acceptable to the Lithia that
such registration
10
is not required, and (iv) the certificate representing the Lithia shares will
be imprinted with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. NO OFFER,
SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THE SHARES
MAY BE EFFECTED IN THE ABSENCE OF EITHER AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
(m) INFORMATION HAS BEEN PROVIDED CONCERNING LITHIA SHARES. Seller
and Renfrow each have received a copy of Lithia's Prospectus dated December 18,
1996, its Form 10-K for the year-end December 31, 1996, the Form 10-Q for the
quarter ended March 31, 1997, and the Information Statement for the Buyer's
Annual Meeting of Shareholders held May 15, 1997, and has had the opportunity to
review and discuss those filings with their respective professional advisors.
(n) INDEMNIFICATION FOR BREACH OF WARRANTIES. Seller (and Renfrow,
in the case of the warranty made in subparagraph 13(h)) shall indemnity Buyer
against all losses, damages and costs (including attorney fees and court costs)
relating to any warranty made by Seller (and Renfrow, in the case of the
warranty made in subparagraph 13(h)) 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. 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 "Change of Ownership Sale" or other words or phrases having similar
meanings; (v) Seller shall use its best efforts to preserve the value of the
Nissan, Acura and BMW franchises in Bakersfield, California.
15. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby makes the
following representations and warranties to Seller and Renfrow, with the intent
that Seller and Renfrow rely thereon:
(a) ORGANIZATION. Lithia Motors, Inc. is a corporation organized,
validly existing and in good standing under the laws of the State of Oregon, and
is entitled to own property and to carry on its business.
(b) AUTHORITY. This Agreement must be authorized by the board of
directors of Lithia Motors, Inc. within 10 days after the date of this
Agreement. This Agreement will not violate the provision of any judicial,
governmental or administrative decree, order, writ, injunction, or judgment, or
conflict with or constitute a default under, the Article or bylaws of Lithia
Motors, Inc., or any
11
contract, agreement, or other instrument to which Lithia Motors, Inc. is a
party.
(c) S-3 REGISTRATION. As soon as practicable after Lithia is
eligible to effect an S-3 Registration, and in no event later than January 30,
1998, Lithia shall file an S-3 Registration with the Securities and Exchange
Commission ("SEC"). The obligation of Lithia to include in the S-3 Registration
the Lithia Shares held by Seller or Renfrow (hereinafter collectively referred
to as the "Selling Shareholders") shall be conditioned upon the Selling
Shareholders providing such information regarding the Selling Shareholders, the
Lithia Shares held by the Selling Shareholders, and the intended method of
distribution as shall be requested by Lithia and required for the Registration.
(1) The plan of distribution of the Lithia Shares by the Selling
Shareholders, which shall be stated in the S-3 Registration, shall be
substantially as follows (except as may be otherwise required by the SEC or
state securities law regulators):
"The Lithia Shares may be sold from time to time by the
Selling Shareholders, or by pledgees, donees, transferees or
other successors in interest. Such sales may be made on
stock exchanges (including the Nasdaq National Market) or
otherwise at prices and on terms then prevailing or at
prices related to the then current market price, or in
negotiated transactions. The Lithia Shares may be sold by
one or more of the following methods: (i) block trades in
which the broker or dealer so engaged will attempt to sell
the Lithia Shares as agent but may position and resell a
portion of the block as principal to facilitate the
transaction; (ii) purchases by a broker or dealer as
principal, in a market maker capacity or otherwise, and
resale by such broker or dealer for its account pursuant to
this Prospectus; and (iii) ordinary brokerage transactions
and transactions in which the broker solicits purchasers.
In effecting sales, brokers or dealers engaged by the
Selling Shareholders may arrange for other brokers or
dealers to participate. Brokers or dealers will receive
commissions or discounts from the Selling Shareholders in
amounts to be negotiated immediately prior to the sale. The
Selling Shareholders, such brokers or dealers, and any other
participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of
1933 (the "Act") in connection with such sales.
In addition, any securities covered by this Prospectus which
qualify for sale pursuant to Rule 144 under the Act may be
sold under Rule 144 rather than pursuant to this Prospectus"
(2) In connection with the filing of an S-3 Registration Statement,
Lithia will as expeditiously as possible:
(i) Use its best efforts to cause the S-3 Registration to be
declared effective by the SEC.
(ii) Subject to paragraph (v) below, prepare and file with the
SEC such amendments and post-effective amendments to any S-3 Registration , and
such supplements to the Prospectus, as may be necessary to keep the S-3
Registration continuously effective until all Lithia Shares included in the
Registration Statement shall have been sold or until twelve (1 2) months after
Closing (at
12
which time sales pursuant to Rule 144 of the Act may be effected).
(iii) Promptly notify the Selling Shareholders (and, if
requested by any Selling Shareholder, confirm such advice in writing) of: ((l))
the date when the S-3 Registration or any post-effective amendment thereto
becomes effective, ((2)) the issuance by the SEC of any stop order suspending
the effectiveness of the S-3 Registration, ((3)) the initiation of any
proceedings which might lead to the issuance by the SEC of any stop order
suspending the effectiveness of the S-3 Registration, ((4)) the receipt by
Lithia of any notification relating to the suspension of the qualification of
the Lithia Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose, and ((5)) the existence of any fact which
causes the Prospectus or any document incorporated therein by reference to
contain an untrue statement of a material fact or to omit to state a material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Each Selling Shareholder agrees that,
upon receipt of any notice from Lithia of the happening of any event of the kind
described in clause ((2)) or clause ((5)) of the preceding sentence, that
Selling Shareholder will forthwith discontinue disposition of Lithia Shares
until that Selling Shareholder's receipt of the copies of the supplemented or
amended prospectus contemplated by subparagraph (iv).
(iv) Subject to subparagraph (v) below, prepare a supplement or
post-effective amendment to the S-3 Registration or the related Prospectus or
any document incorporated therein by reference, or file any other required
document, so that the Prospectus, as thereafter delivered to the purchasers of
the Lithia Shares, will not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
(v) At any time when the S-3 Registration is effective, give
written notice to Selling Shareholders that a "Blackout Period" has commenced.
((1)) Upon receipt of notice that a "Blackout Period" has
commenced, the Selling Shareholders shall suspend sales of Lithia Shares
pursuant to the S-3 Registration until Lithia gives notice of the termination
of the Blackout Period. During a Blackout Period, Lithia's obligations under
subparagraph 2(ii) and 2(iv) shall also be suspended.
((2)) Blackout Period" shall mean a period: ((a))
commencing upon notice by Lithia to the Selling Shareholders of Lithia's good
faith determination that sales of Lithia Shares pursuant to a Registration
Statement would require the disclosure of material nonpublic information at a
time when such disclosure would be disadvantageous to Lithia or otherwise
inconsistent with Lithia's normal timing for disclosures, and ((b)) ending on
the earliest of: ((i)) the date upon which such material non-public information
is disclosed to the public or ceases to be material, ((ii)) sixty (60) days
after the date when Lithia first gives notice to Selling Shareholders of that
Blackout Period, or ((iii)) the date on which Lithia gives notice to the Selling
Shareholders that the Blackout Period is terminated. Blackout Periods shall not
exceed a total of ninety (90) days in any calendar year.
(vi) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the S-3 Registration.
(vii) Deliver to each of the Selling Shareholders, without
charge, as many copies of the Prospectus and any amendment or supplement thereto
as the Selling Shareholders may reasonably request.
(viii) Cause all Lithia Shares covered by the S-3 Registration
to be listed for
13
trading on the Nasdaq National Market System.
(ix) Pay all expenses of Lithia in connection with the
registration of the Lithia Shares.
(x) Upon being notified by a Selling Shareholder that any
material arrangement has been entered into with a broker or dealer for the sale
of Lithia Shares, which arrangement requires a supplement to the Prospectus, to
promptly file a supplemented Prospectus pursuant to Rule 424 of the Act setting
forth such additional information as is required under the Act and the rules and
regulations of the SEC.
(d) INDEMNIFICATION FOR BREACH OF WARRANTIES. Buyer shall indemnity
Seller and Renfrow 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). If at any time prior to Closing Buyer
determines that any warranty made by Buyer in this Agreement is incorrect,
incomplete or misleading, then Buyer shall advise Seller of that fact and shall
provide to Seller in writing whatever other information shall be necessary to
cause that warranty to be correct, complete and not misleading.
16. ADDITIONAL CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The
obligation of Buyer to close this transaction is subject to each of the
following conditions being true as of the date of Closing (each of which is for
the benefit of Buyer and may be waived by Buyer), and Buyer shall have the right
to rescind this Agreement if any of the following conditions is not satisfied in
accordance with its terms:
(a) Buyer shall have obtained from Franchisors, prior to the Final
Closing Date, exclusive franchises to sell new Nissan and BMW vehicles in the
same geographical area as Seller's current franchises in Bakersfield, California
(as evidenced by the issuance to Buyer by Franchisors of appropriate Dealership
Sales and Service Agreements, 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. Buyer specifically agrees to prepare and
submit its applications for franchise approvals as soon as reasonably possible
after execution of this Agreement. Although Buyer, with Seller's full
cooperation, will attempt to obtain an exclusive franchise to sell new Acura
vehicles in Bakersfield, California, the issuance of that franchise to Buyer
shall not be a condition precedent to the closing of this transaction. If Buyer
is unable, prior to Closing, to obtain an exclusive franchise to sell new Acura
vehicles in Bakersfield, California, then Seller agrees to cooperate fully with
Buyer in the disposition of all assets related to Seller's Acura franchise.
(b) Buyer shall be reasonably satisfied with any facility improvement
requirements which are imposed by Franchisors.
(c) Buyer shall have been permitted to fully inspect the Business
Real Property. Buyer shall be reasonably satisfied with the physical condition
of the Business Real Property, and with all other aspects of the Business Real
Property (and Buyer agrees that if Buyer is not reasonably satisfied with any
aspect of the Business Real Property, then Buyer shall notify Seller in writing
of that dissatisfaction within 30 days after Buyer completes is inspection of
the Business Real Property). All leases and subleases which are necessary for
the beneficial use by Buyer of the Business Real Property shall be closed
concurrently with this transaction under terms and conditions which are
acceptable to Buyer.
(d) All of Sellers agreements and warranties set forth in this
Agreement shall be true,
14
correct, complete and not misleading at Closing; provided that Buyers
decision to close this transaction shall not release Seller from liability to
Buyer for any warranty which is subsequently determined to be incorrect,
incomplete or misleading.
(e) Buyer shall be reasonably satisfied with the kind, quality and/or
value of the items listed on Exhibit "A", and does not notify Seller to the
contrary pursuant to Paragraph 6.
(f) This Agreement shall have been authorized by the board of
directors of Lithia Motors, Inc. within 10 days after the date of this
Agreement.
(g) If the Business Real Property is contaminated by hazardous
materials and the cost of remediation would exceed $100,000.00, then Seller must
either remediate that contamination prior to Closing or deposit sufficient funds
in escrow to cover the cost of that remediation, in accordance with the
provisions of subparagraph 13(h).
17. CLOSING. The parties shall make all reasonable effort to close the
purchase and sale under this Agreement at or before 5:00 p.m., Pacific Standard
Time, on or before the Final Closing Date, at the offices of Capital City
Escrow, Inc. in Sacramento, California, or at such other location as shall be
selected by mutual agreement of the parties.
(a) The parties agree to establish a closing escrow account at
Capital City Escrow, Inc. in Sacramento, California, (the "Closing Escrow
Agent"). Buyer and Seller each shall pay one-half (1/2) of the closing escrow
fees. Buyer and Seller agree to execute whatever reasonable escrow instructions
may be required by Closing Escrow Agent in connection with this transaction. In
the event of any conflict between those escrow instructions and this Agreement,
the terms of this Agreement shall prevail. Upon the execution of this
Agreement, Buyer shall deliver to Closing Escrow Agent the sum of $100,000.00
(the deposit), which amount shall immediately be placed into an interest bearing
account. The deposit plus interest shall be credited to Buyer and shall be
applied against the purchase price for the Equipment at Closing as provided in
Paragraph 6, or if the Closing fails to occur, then the deposit shall be
disbursed as set forth hereinafter.
(b) In all events, the Closing of the transaction contemplated under
this Agreement shall occur (if at all) on or before the Final Closing Date.
(c) If this transaction closes as provided herein, then actual
possession and all risk of loss, damage or destruction with respect to the
Purchased Assets, shall be deemed to have been delivered to Buyer at 11:59 p.m.,
Pacific Time, on the Closing Date.
(d) At Closing, and coincidentally with the performance of the
obligations to be performed by Buyer at Closing, Seller shall deliver to Buyer
the following: (i) all bills of sale, assignments and other instruments of
transfer, in form and substance, reasonably satisfactory to Buyer, which shall
be necessary to convey the Purchased Assets to Buyer; and (ii) all other
documents required under this Agreement.
(e) At Closing, and coincidentally with the performance of all
obligations required of Seller at Closing, Buyer shall deliver to Seller the
following: (i) payment for the Purchased Assets; and (ii) all other payments
and documents required under this Agreement. Buyer shall be responsible for all
sales taxes payable in connection with the transaction.
(f) If Closing does not take place on or before the Final Closing
Date because there
15
has been a failure of any condition precedent set forth in Paragraph 16,
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 earnest 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 interest earned thereon while held by the Closing Escrow Agent) shall
be forfeited to Seller as Seller's sole and exclusive remedy for Buyer's breach,
and Seller shall have no other rights or remedies against Buyer by reason of
that breach. THIS SUM REPRESENTS A REASONABLE ESTIMATE BY BUYER AND SELLER OF
SELLER'S DAMAGES IN THE EVENT OF SUCH A DEFAULT, IT BEING EXTREMELY DIFFICULT TO
ASCERTAIN SELLER'S PRECISE DAMAGES. If Closing does not take place on or before
the Final Closing Date because of Seller's material breach of this Agreement,
then Buyer shall be entitled to: (i) a refund of the entire $100,000.00 earnest
money deposit previously delivered by Buyer to the Closing Escrow Agent
(together with all interest earned thereon while held by the Closing Escrow
Agent), (ii) any and all other rights and remedies for that breach which are
specified in this Agreement or which may be provided by law or in equity.
(h) Both parties agree to make a good faith effort to execute and
deliver all documents and complete all actions necessary to consummate this
transaction.
(i) At Closing, Seller agrees to execute an Asset Acquisition
Statement (IRS Form 8594) prepared by Buyer which reflects the allocation of the
total purchase price among the Purchased Assets in the manner determined in
accordance with this Agreement.
18. SELLER'S ACCOUNTS RECEIVABLE. For a period of six months after
Closing, Buyer shall, on Seller's behalf, and at no charge to Seller, accept any
payment with respect to Sellers 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 Buyers
only obligation shall be to account for and pay over Seller's receivables which
are actually received by Buyer.
19. SURVIVAL OF REPRESENTATIONS. All representations, warranties,
indemnification obligations and covenants made in this Agreement shall survive
the Closing, and shall remain in effect until the expiration of the latest
period allowable in any applicable statute of limitations.
20. ASSIGNMENT BY BUYER. Lithia Motors, Inc. shall have the right to
assign all rights and obligations of Lithia Motors, Inc. as "Buyer" under this
Agreement to any subsidiary of Lithia Motors, Inc. 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.
21. LEASE AND/OR PURCHASE OF BUSINESS REAL PROPERTY. As a condition to
the Closing of the transaction contemplated under this Agreement, Buyer (or a
related entity) is leasing the Business Real Property under the following
general terms and conditions, and Buyers obligation to close the transaction
contemplated under this Agreement shall be subject to the condition that Buyer
is, within 45 days after the date of execution of this Agreement, able to enter
into an agreement with the owner of the Business Real Property which allows
Buyer to lease the Business Real Property under the following general terms
16
and under such additional terms as are reasonably satisfactory to Buyer:
(a) Fifteen year initial lease term, with Buyer having five
subsequent 5 year options to renew (for a total potential lease term of 40
years).
(b) Lease amount for first five years of $36,500.00 on a triple net
basis. Increase in basic lease amount for second five years based on changes in
CPI for Los Angeles/Long Beach area during first five years, with the maximum
increase being 10%. Similar CPI adjustment (limited to 10% over five years) for
each successive five year option period (with the maximum increase for each five
year period being 10%).
(c) At any time during initial five (5) years of the lease term,
Buyer will have right to exercise an option to purchase the Business Real
Property for $4,800,000.00. If Buyer exercises option, parties obligated to
close transaction no earlier than six months and no later than nine months after
date of notice of exercise of option. Full purchase price for property shall be
payable at closing of purchase. Seller must convey the Business Real Property
free of all liens and encumbrances. If Buyer exercises its purchase option,
then Buyer will cooperate with Seller (at no cost to Buyer) in enabling Seller
to complete a tax-free exchange of the Business Real Property under IRC Section
1031.
(d) During the initial fifteen year lease term, Buyer agrees to
maintain either Nissan and BMW franchises, or one or more other new car
franchises, on the Business Real Property.
(e) Buyer will agree to indemnity and hold harmless Seller with
respect to environmental contamination occurring with respect to the Business
Real Property during the lease term.
22. BOOKS AND RECORDS. For a period of three (3) years after Closing,
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
relating to periods prior to Closing, and may make copies thereof.
23. BULK TRANSFERS. It is the intention of the parties that this
transaction comply with Division Six of the California Uniform Commercial Code,
more commonly known as Uniform Commercial Code - Bulk Transfers, and Seller
shall take all actions necessary to comply therewith.
24. BROKERS COMMISSIONS. Seller shall be responsible for all commissions
payable to National Business Brokers in connection with the transaction
contemplated under this Agreement.
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
headings in this Agreement are for convenience purposes only, and do not in any
way define or construe the contents of this Agreement.
(b) This Agreement shall be governed and performed in accordance with
the laws of the state of California. Each of the parties hereby irrevocably
submits to the jurisdiction of the courts
17
of Kern County, California, and agrees that any legal proceedings with
respect to this Agreement shall be filed and heard in the appropriate court
in Kern County, California.
(c) This Agreement may be executed in multiple counterparts, each of
which shall be an original, and all of which shall constitute a single
instrument, when signed by both of the parties. This Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of the
respective parties.
(d) Waiver by either party of strict performance of any provision of
this Agreement shall not be a waiver of, and shall not prejudice the party's
right to subsequently require strict performance of, the same provision or any
other provision. The consent or approval of either party to any act by the
other party of a nature requiring consent or approval shall not render
unnecessary the consent to or approval of any subsequent similar act.
(e) All notices provided for herein shall be in wilting and shall be
deemed to be duly given when mailed by United States certified mail, postage
prepaid, to the last-known address of the party entitled to receive the notice,
or when personally delivered to that party.
(f) Time is of the essence to this Agreement.
(g) Should any party hereto institute any action or proceedings to
enforce or interpret any provision hereof, or for damages by reason of any
alleged breach of any provision of this Agreement, the prevailing party shall be
entitled to recover from the losing party or parties such amount as the court
may adjudge to be reasonable attorney's fees for services rendered to the
prevailing party in such action or proceeding. The term "prevailing party" as
used in this section shall include, without limitation, any party who is made a
defendant in litigation in which damages and/or other relief may be sought
against such party and a final judgment or dismissal or decree is entered in
such litigation in favor of such party defendant.
(h) This Agreement may be executed by the parties using facsimile
copies, and facsimile signatures of the parties shall be binding.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated below.
SELLER NISSAN - BMW, INC., a California corporation
By/s/ELOY RENFROW JUNE 26, 1997
--------------------------------------- ---------------------------------
Eloy Renfrow, President Dated
ELOY RENFROW:
/s/ELOY RENFROW JUNE 26, 1997
- ----------------------------------------- ---------------------------------
Eloy Renfrow Dated
BUYER: LITHIA MOTORS, INC. (OR NOMINEE)
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By/s/BRYAN B. DEBOER JUN 26, 1997
- ----------------------------------------- ---------------------------------
Bryan B. DeBoer, Authorized Agent Dated
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EXHIBIT "A" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between NISSAN - BMW, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
LIST OF EQUIPMENT, FURNITURE AND FIXTURES BEING SOLD BY SELLER
[See ____ pages attached hereto.]
EXHIBIT "B" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between NISSAN - BMW, 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 "C" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between NISSAN - BMW, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
LISTING OF LEASES AND AGREEMENTS BEING ASSUMED
[See ____ pages attached hereto.]
EXHIBIT "D" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between NISSAN - BMW, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
DISCLOSURE OF TOXIC MATERIALS
[See ____ pages attached hereto.]
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