EXHIBIT 2.1
AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
THIS AGREEMENT is entered into by and between DANIEL A. HAUS GROUP, INC., a
Nevada corporation, dba "QUALITY NISSAN" and "QUALITY JEEP - EAGLE - HYUNDAI"
(hereinafter referred to as "Seller"), DAN NIEDRINGHAUS (hereinafter
"Niedringhaus"), and LITHIA MOTORS, INC. OR ITS NOMINEE (hereinafter referred to
as the "Buyer" or as "Lithia").
RECITALS:
Seller is a Nevada business corporation engaged in the business of selling
and servicing Nissan, Jeep, Eagle and Hyundai motor vehicles and related parts
and accessories from premises located at 5570, 5580, 5586 and 5590 North
Blackstone Avenue, Fresno, California (the "Business Real Property").
Niedringhaus 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, Jeep, Eagle and Hyundai
franchises in Fresno, California, conditioned upon the granting to Buyer of
franchises for the sale of new Nissan, Jeep, Eagle and Hyundai motor vehicles in
the same geographical area as Seller's franchises.
Buyer (or a related entity) also wishes to purchase 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 of that real property by Buyer.
N0W, 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 January 2, 1998. "FINAL CLOSING DATE" shall refer to January 15,
1998.
(b) "SELLER'S BUSINESS" shall refer to any and all activities
conducted by Seller in Fresno, California, relating to the marketing and sale of
new Nissan, Jeep, Eagle and Hyundai vehicles and associated parts and
accessories, and the repair and servicing of new or used Nissan, Jeep, Eagle and
Hyundai vehicles.
(c) "PURCHASED ASSETS" shall refer to those assets which are
identified in Paragraph 2 as being purchased and sold by the parties hereunder.
(d) Seller's "Equipment" shall refer to all non-inventory items of
tangible personal property presently owned or used by Seller in connection with
Seller's Business, including all of Seller's machinery, tools, signs, office
equipment, computer equipment, computer programs, microfiches, parts lists,
repair manuals, sales or service brochures, furniture and fixtures, and further
including all assets listed on Seller's financial statements as of December 31,
1996.
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(e) Seller's "INTANGIBLE ASSETS" shall refer to Seller's business
names ("Quality Nissan" and "Quality Jeep Eagle - Hyundai"), telephone and fax
numbers, service customer lists, sales customer lists, vehicle sales records,
vehicle service records, all rights of Seller under contracts assigned to and
assumed by Buyer pursuant to this Agreement, all goodwill associated with
Seller's Business, and all other intangible rights and interests of any value
relating to Seller's Business.
(f) "BUSINESS REAL PROPERTY" shall refer to all of the real property
located in Fresno, California which has been used in connection with Seller's
business, including but not limited to the premises at 5570, 5580, 5586 and 5590
North Blackstone Avenue, Fresno, California.
(g) "FRANCHISOR" shall refer to Nissan Motor Corporation in USA
Chrysler Corporation and Hyundai Motor Company.
(h) "NEW VEHICLE" shall refer to a Nissan, Jeep, Eagle or Hyundai
motor vehicle which: (i) is unregistered and unused, (ii) is from the 1997 or
1998 model year, (iii) has been driven for less than 500 odometer miles, and
(iv) may be represented or warranted to consumers as "new" under California law.
"ROLLBACK VEHICLE" shall mean an unregistered vehicle from the 1997 or 1998
model year which has been sold to a customer by Seller but returned because of
the customer's inability to obtain financing for the 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 10 of this Agreement.
3. INVENTORY OF NEW VEHICLES, DEMONSTRATOR VEHICLES AND ROLLBACK
VEHICLES. Buyer shall purchase Seller's entire inventory of new Nissan, Jeep,
Eagle 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 vehicles), as that inventory
exists on the Closing Date.
(a) PRICE OF NEW VEHICLES. The purchase price for each of Seller's
new vehicles shall be equal to Seller's factory invoice cost, REDUCED BY any
factory hold-backs, factory rebates, factory incentives, carry-over model
allowances, (floor plan allowances and advertising allowances (100% for vehicles
in inventory for less than 30 days, and 0% for vehicles in inventory)
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for 30 days for more), and any other items which should reasonably be deducted
in order to establish Seller's actual net cost for each vehicle, and FURTHER
REDUCED BY the actual net cost for any and all accessories, equipment and parts
which are missing from a vehicle. Seller's actual net cost for 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 Seller's 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 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 500 miles.
The price for each rollback vehicle shall be determined as provided in
subparagraphs 3(a) and 3(b) and then REDUCED BY 30 CENTS per mile for each
odometer mile on that vehicle in excess of 500 miles. The purchase price for
demonstrator vehicles and rollback vehicles shall be paid at Closing.
4. INVENTORY OF USED VEHICLES. Buyer intends to purchase Seller's entire
inventory of used vehicles, as that inventory exists at Closing. However, Buyer
shall not be obligated to purchase any used vehicle for which Buyer and Seller
are unable to agree upon a purchase price.
(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
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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 then on hand at least fifteen (15) business days
prior to the anticipated Closing Date. The purchase price for used vehicles
acquired by Seller within 15 days prior to Closing shall be determined by
agreement of the parties (and Buyer shall not be obligated to purchase any
vehicle for which the parties are unable to agree upon a purchase price). If
Buyer notifies Seller within 30 days after Closing that there is a material
defect in a particular used vehicle (which defect is not apparent from a visual
inspection or from title documents), then Seller will repurchase that vehicle
from Buyer (at the same price as the price paid by Buyer to Seller for that
vehicle). The aggregate purchase price for Seller's inventory of used vehicles
shall be paid in full at Closing.
(c) STORAGE OF USED VEHICLES WHICH ARE NOT PURCHASED BY
BUYER. Seller shall have ten (10) days after Closing within which to remove
from the Business Real Property any of Seller's used vehicles which are not
purchased by Buyer. Buyer shall store those vehicles in accordance with
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, Jeep, Eagle or Hyundai 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, Jeep, Eagle or Hyundai vehicles (whether manufactured
by Franchisor or third party suppliers) shall be the net cost for that item
as set forth in the then most recent price book published by the supplier of
that item, REDUCED BY any discounts (including quantity purchase or stock
order discounts (with stock order discounts to be prorated based on Seller's
stock order utilization percentage)), 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
inventory of parts and accessories shall be paid in full at Closing.
(b) DETERMINATION OF INVENTORY OF PARTS AND ACCESSORIES.
Seller's inventory of new, current and undamaged Nissan, Jeep, Eagle and
Hyundai 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.
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6. EQUIPMENT. Seller agrees to sell all of the Equipment to
Buyer, and Buyer agrees to purchase the Equipment from Seller. Within ten
(10) 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.
(a) PRICE FOR EQUIPMENT. The aggregate purchase price
for all items of Seller's Equipment which are being purchased hereunder shall
be equal to the sum of: (i) $185,000.00, plus (ii) that certain amount (up to
a maximum of $50,000.00) expended by Seller subsequent to the date of this
Agreement and prior to Closing to acquire and install smog testing equipment
required by the California Department of Motor Vehicles. 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 in full at Closing.
7. SUPPLIES. Buyer shall purchase all of the gas, oil,
nuts, bolts, and other automotive supplies which are held for use in Seller's
Business; provided, however, that Buyer shall not be obligated to purchase
used, damaged or obsolete items or supplies. 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 supplier's then-current price books. Prior to Closing, Seller
shall maintain Seller's inventory of supplies at a level consistent with good
business practices and Seller's 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. Seller warrants that all of Seller's obligations under the contracts
listed on Exhibit "C" shall be current at the time of Closing. Seller agrees
to indemnify Buyer against all obligations under the contracts identified on
Exhibit "C" which relate to periods prior to Closing. Buyer agrees to
indemnify Seller against all obligations under the contracts identified on
Exhibit "C" which relate to periods after Closing.
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 for labor and
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materials (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. The aggregate purchase price for Seller's Intangible
Assets shall be Two Million Six Hundred Thousand and 00/100 Dollars
($2,600,000.00). This $2,600,000.00 purchase price shall be allocated among
the items which constitute the Intangible Assets as determined by Buyer in
the reasonable exercise of Buyer's discretion; provided, however, that no
value shall be allocated to the non-transferable Nissan, Jeep, Eagle and
Hyundai franchises issued by the Franchisors. The purchase price for the
Intangible Assets 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 $200,000.00, which earnest
money deposit, together with all interest earned thereon, shall be credited
at Closing against the purchase price for the Intangible Assets.
(2) The balance of the purchase price for the Intangible
Assets shall be paid in full at Closing.
11. BULK TRANSFERS. It is the intention of the parties that this
transaction comply with Division Six of the California Uniform Commercial Code,
more commonly known as Uniform Commercial Code - Bulk Transfers, and Seller
shall take all actions necessary to comply therewith.
12. LIMITATION ON LIABILITIES ASSUMED. Except as provided in subparagraph
3(d), Paragraph 8 and Paragraph 9, Buyer shall not, by reason of this Agreement
or Buyer's purchase of the Purchased Assets, take responsibility for any
liabilities, debts or obligations of Seller (including Seller's trade payables,
account payables, obligations to employees, or tax liabilities).
13. WARRANTIES OF SELLER. Niedringhaus and Seller make the following
warranties to Buyer, with the intent that Buyer rely thereon:
(a) CORPORATE ORGANIZATION. Seller is a corporation organized,
validly existing, and in good standing under the laws of the State of Nevada.
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 represented by any
union in connection with their employment by Seller. 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
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Closing. Seller shall pay all wages, commissions, accrued vacation pay and
other accrued compensation earned by Seller's employees prior to Closing
(together with all accrued FICA and withholding taxes). Seller shall terminate
the employment of all of Seller's employees effective as of the close of
business on the Closing Date. At Buyer's sole discretion, Buyer may (but shall
not be obligated to) hire any of Seller's employees. Seller will not, for a
period of two years following Closing, employ or offer employment to any person
who was an employee of Seller's Business at any time within the 180 day period
immediately preceding Closing unless either: (1) Buyer consents in writing to
Seller's employment of that employee, or (2) a period of at least 6 months shall
have elapsed since the LATER of: (i) the date of Closing, or (ii) the last date
when that employee is employed by Buyer. For purposes of the preceding
sentence, Buyer hereby consents to Seller's employment of that one person who
has been serving as comptroller (business manager) of Seller's Business prior to
Closing.
(d) FINANCIAL DISCLOSURES. Seller shall promptly furnish to Buyer
such financial and operating data and other information relating to Seller's
Business and the Business Real Property as Buyer shall reasonably request. The
review of such materials will be at Buyer's expense. Seller warrants that all
such financial statements and related materials provided to Seller fairly
present the financial position of Seller's Business and the results of operation
of Seller's Business for the periods covered thereby. Buyer (at Buyer's
expense) shall have the right, at any time prior to Closing, to conduct a
certified audit (by one or more certified public accounting firms selected by
Buyer) of Seller's balance sheets and income and cash flow statements for
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), 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
adverse 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 adverse 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 have a material adverse effect on the value of the
Purchased Assets, and (iv) to Seller's knowledge, Seller has all licenses,
permits and authorizations required by any federal, state or local governmental
or regulatory agency in order to operate Seller's Business, and knows of no
reason why any such license or permit might be subject to revocation. If any
claim is asserted against Buyer after Closing with respect to any obligation of
Seller which Seller has failed to disclose to Buyer in writing, or which Seller
has disclosed but failed to pay, then Buyer shall give prompt written notice of
that claim to Seller. Seller shall indemnify Buyer with respect to all such
obligations.
(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). If, prior to Closing, Buyer determines that any
item of Equipment is not in good operating condition, then Buyer shall promptly
notify Seller of that fact.
(g) GOOD TITLE. Seller has, and shall transfer to Buyer at
Closing, good and
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marketable title to all of the Purchased Assets, free and clear of all security
interests, liens, equitable interests, leases, assessments, restrictions,
reservations, or other burdens of any kind. All current and accrued taxes which
may become a lien against any of the Purchased Assets shall have been paid by
Seller prior to Closing (including sales taxes and excise taxes). Personal
property taxes will be prorated between Buyer and Seller at Closing.
(h) NO TOXIC MATERIALS DISCHARGED. To the best of Seller's
knowledge, and except as disclosed by Seller on Exhibit "D" attached hereto, (i)
no activity in connection with Seller's Business prior to Closing shall have
produced any toxic materials, the presence or use of which upon the Business
Real Property would violate any federal, state, local or other governmental law,
regulation or order or would require reporting to any governmental authority,
and (ii) 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 Real Property is otherwise free and clear of any toxic
materials. For purposes of this subparagraph (h), the phrase "toxic materials"
shall refer to and include: (i) any and all substances defined as "hazardous
substances", "hazardous materials", or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
USC Section 9601, et. seq.), the Hazardous Materials Transportation Act (49 USC
Section 1801, et. seq.), and the Resource Conservation and Recovery Act (42 USC
Section 6901, et. seq.); and (ii) any and all substances which now are deemed to
be pollutants, toxic materials or hazardous materials under any other state or
federal law. Seller has furnished to Buyer, prior to the date of this
Agreement, copies of all environmental reports and certificates of compliance
relating to Seller's Business and the Business Real Property. Upon the
execution of this Agreement, Seller shall, at Buyer's expense, engage an
appropriate environmental firm which is acceptable to Buyer to conduct an
investigation and produce an updated Phase One Environmental Report regarding
the Business Real Property (for periods since December, 1995). If the Phase One
environmental assessment discloses that the Business Real Property is, or is
likely to be, materially contaminated by the presence of toxic materials, and if
Buyer provides Seller with a written demand to remediate, cleanup, detoxify and
decontaminate any and all such contamination as a condition of Closing, then:
(A) if the cost of remediation would be less than $100,000.00, then Seller shall
be obligated either to: (i) complete (at Seller's sole expense) 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; and (B) if the cost of remediation
would be greater than $100,000.00, then Seller shall be obligated either to: (i)
complete (at Seller's sole expense) 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, or (iii) rescind this Agreement, in which event neither party shall
thereafter have any further obligations under 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 a franchise for the sale of new Nissan, Jeep, Eagle
and Hyundai vehicles in the same geographical area as Seller's current franchise
in Fresno, California.
(j) INDEMNIFICATION FOR BREACH OF WARRANTIES. Niedringhaus and
Seller shall indemnify Buyer against all losses, damages and costs (including
attorney fees and court costs) relating to any warranty made by Seller in this
Agreement which is materially false, misleading, incomplete or inaccurate
(either on the date of this Agreement or at the time of Closing) so as to have a
material adverse effect on the value of Seller's Business. If at any
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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. If any claim, action or proceeding is filed or
brought against Buyer which is or may be subject to Seller's obligation to
indemnify Buyer as set forth in this subparagraph, then Buyer shall promptly
give Seller written notice of that claim, and Seller thereafter shall have
the option to defend that claim at Seller's expense using attorneys selected
by Seller. If Seller subsequently fails to pay that claim or dispute that
obligation or liability, and if Buyer subsequently is required to pay that
claim, then Niedringhaus and Seller shall have joint and several liability to
reimburse, indemnify and hold harmless Buyer with respect to that claim,
obligation or liability.
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, Jeep, Eagle and
Hyundai franchises in Fresno, California.
15. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby makes the
following representations and warranties to Seller, with the intent that Seller
rely thereon:
(a) ORGANIZATION. Lithia Motors, Inc. is a corporation organized,
validly existing and in good standing under the laws of the State of Oregon, and
is entitled to own property and to carry on its business.
(b) AUTHORITY. This Agreement shall be binding upon Lithia Motors,
Inc. only if authorized by the board of directors of Lithia Motors, Inc. This
Agreement will not violate the provision of any judicial, governmental or
administrative decree, order, writ, injunction, or judgment, or conflict with or
constitute a default under, the Article or bylaws of Lithia Motors, Inc., or any
contract, agreement, or other instrument to which Lithia Motors, Inc. is a
party.
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, a commitment to issue to Buyer franchises to sell new Nissan,
Jeep, Eagle and Hyundai vehicles in the same geographical area as Seller's
current franchises in Fresno, California (as evidenced by the issuance to Buyer
by Franchisor of an appropriate Dealership Sales and Service Agreement, and the
approval of Buyer as the publicly owned Dealer-Operator of the franchise), and
Buyer agrees to use its best reasonable efforts to obtain that franchise.
(b) Buyer shall be reasonably satisfied with any facility
improvement
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requirements which are imposed by Franchisor.
(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.
(d) All of Seller's agreements and warranties set forth in this
Agreement shall be true, correct, complete and not misleading at Closing;
provided that Buyer's decision to close this transaction shall not release
Seller from liability to Buyer for any warranty which is subsequently determined
to be incorrect, incomplete or misleading.
(e) Buyer 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.
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 $200,000.00
(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 at Closing, 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 Closing.
(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.
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(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, 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 $200,000.00 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 $200,000.00 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 $200,000.00 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) payment
by Seller to Buyer of the additional sum of $200,000.00 as liquidated damages
for all losses suffered by Buyer as a result of Seller's breach. THIS SUM
REPRESENTS A REASONABLE ESTIMATE BY BUYER AND SELLER OF BUYER'S DAMAGES IN
THE EVENT OF SUCH A DEFAULT, IT BEING EXTREMELY DIFFICULT TO ASCERTAIN
BUYER'S PRECISE DAMAGES.
(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 12 months
after Closing, Buyer shall, on Seller's behalf, and at no charge to Seller,
accept any payment with respect to Seller's customer receivables and other
receivables arising out of the operation of Seller's Business prior to
Closing. All collected receivables from vehicle sales shall be delivered to
Seller within ten (10) days after collection, and all other collected
receivables shall be delivered to Seller on a monthly basis. Buyer shall have
no obligation to undertake collection efforts with respect to Seller's
receivables, and Buyer's only obligation shall be to account for and pay over
Seller's receivables which are actually received by Buyer. For a period of 90
days after Closing, Buyer agrees to make its staff available to Seller to
enable Seller to close out its books.
19. SURVIVAL OF REPRESENTATIONS. All representations,
warranties, indemnification obligations and covenants made in this Agreement
shall survive the Closing, and shall remain in effect until the expiration of
the latest period allowable in any applicable statute of limitations.
20. ASSIGNMENT BY BUYER. Lithia Motors, Inc. shall have the
right to assign all rights and obligations of Lithia Motors, Inc. as "Buyer"
under this Agreement. In the 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.
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21. PURCHASE OF BUSINESS REAL PROPERTY. As a condition
concurrent to the Closing of the transaction contemplated under this
Agreement, Buyer (or a related entity) is purchasing the Business Real
Property for a price (payable at Closing) equal to the sum of: (i)
$5,560,000, plus (ii) the out-of-pocket costs (up to a maximum of $25,000.00
if construction is not commenced prior to Closing, or up to a maximum of
$110,000.00 if construction is commenced prior to Closing) incurred by Seller
subsequent to January 1, 1997 in connection with the construction of an
addition to the Jeep Eagle service department. Buyer's obligation to close
the transaction contemplated under this Agreement shall be subject to the
condition that Buyer is simultaneously able to enter into an agreement with
Niedringhaus for the purchase of the Business Real Property under terms which
are reasonably satisfactory to Buyer.
22. BOOKS AND RECORDS. For a period of five (5) 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 and may make copies thereof.
23. MISCELLANEOUS.
(a) There are no oral agreements or representations
between the parties which affect this transaction, and this Agreement
supersedes all previous negotiations, warranties, representations and
understandings between the parties. True copies of all documents referenced
in this Agreement are attached hereto. If any provision of this Agreement
shall be determined to be void by any court of competent jurisdiction, then
that determination shall not affect any other provision of this Agreement, and
all other provisions shall remain in full force and effect. If any provision
of this Agreement is capable of two constructions, only one of which would
render the provision valid, then the provision shall have the meaning which
renders it valid. The paragraph headings in this Agreement are for
convenience purposes only, and do not in any way define or construe the
contents of this Agreement.
(b) This Agreement shall be governed and performed in
accordance with the laws of the state of California. Each of the parties
hereby irrevocably submits to the jurisdiction of the courts of Fresno
County, California, and agrees that any legal proceedings with respect to
this Agreement shall be filed and heard in the appropriate court in Fresno
County, California.
(c) This Agreement may be executed in multiple
counterparts, each of which shall be an original, and all of which shall
constitute a single instrument, when signed by both of the parties. This
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the respective parties.
(d) Waiver by either party of strict performance of any
provision of this Agreement shall not be a waiver of, and shall not prejudice
the party's right to subsequently require strict performance of, the same
provision or any other provision. The consent or approval of either party to
any act by the other party of a nature requiring consent or approval shall
not render unnecessary the consent to or approval of any subsequent similar
act.
(e) All notices provided for herein shall be in writing
and shall be deemed to be duly given when mailed by United States certified
mail, postage prepaid, to the last-known address of the party entitled to
receive the notice, or when personally delivered to that party.
(f) Time is of the essence to this Agreement.
Page 12 of 14
(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.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the dates indicated below.
SELLER: DANIEL A. HAUS GROUP, INC., A Nevada Corporation
By /s/ Dan Niedringhaus 10/10/97
------------------------------------------- ----------
Dan Niedringhaus, President Dated
DAN NIEDRINGHAUS:
/s/ Dan Niedringhaus 10/10/97
- ---------------------------------------------- ----------
Dan Niedringhaus Dated
BUYER: LITHIA MOTORS, INC. (OR NOMINEE)
By /s/ Bryan DeBoer VP 1152 10/10/97
---------------------------------------------- ----------
Bryan DeBoer, Authorized Agent Vice President Dated
Page 13 of 14
EXHIBIT "A" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between DANIEL A. HAUS GROUP, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
LIST OF EQUIPMENT, FURNITURE AND FIXTURES BEING SOLD BY SELLER
[SEE ____ PAGES ATTACHED HERETO.]
EXHIBIT "B" TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between DANIEL A. HAUS GROUP, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
LIST OF EQUIPMENT, FURNITURE AND FIXTURES BEING RETAINED BY SELLER
[SEE _____ PAGES ATTACHED HERETO.]
EXHIBIT "C", TO AGREEMENT FOR PURCHASE AND SALE OF BUSINESS ASSETS
Between DANIEL A. HAUS GROUP, 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 DANIEL A. HAUS GROUP, INC., as "Seller", and
LITHIA MOTORS, INC. (OR NOMINEE), as Buyer
DISCLOSURE OF TOXIC MATERIALS
-----------------------------
[SEE ____ PAGE(S) ATTACHED HERETO.]
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