EXHIBIT 2.1
RESTATED STOCK PURCHASE AGREEMENT
THIS RESTATED STOCK PURCHASE AGREEMENT (the "Agreement") is entered into
by and between LITHIA MOTORS, INC., an Oregon corporation ("Lithia"), PHIL S.
CAMP, JERRY W. CAMP, JR., JULIE A. CAMP MCKAY, CHRIS E. CAMP, TRAVIS W. CAMP
and CARTER B. CAMP (the "Shareholders"), and CAMP AUTOMOTIVE, INC., a
Delaware corporation (the "Company"), dated as of August 1, 1998.
RECITALS
A. The Shareholders are the owners of all of the issued and
outstanding shares of capital stock of the Company.
B. The Company is engaged in the business of selling and servicing
Chevrolet, BMW, Subaru and Volvo motor vehicles and related parts and
accessories from premises located at 101 E. Montgomery, Spokane, Washington
(the "Business Real Property").
C. Lithia desires to acquire 100% of the issued and outstanding
capital stock of the Company, and the Shareholders desire to sell their stock
to Lithia, for the consideration and upon the terms and conditions set forth
in this Agreement.
D. The parties entered into a Stock Purchase Agreement dated June 25,
1998 and an undated Addendum to Stock Purchase Agreement, which commitments
are incorporated into and superseded by this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF the premises, the parties wish to
restate their agreement and agree as follows:
1. DEFINITIONS
In this Agreement, the following words shall have the indicated meanings:
1.1 "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, which shall be no
later than October 31, 1998.
1.2 "SHARES" shall mean the aggregate of all shares of capital stock
of the Company, regardless of class or series.
1.3 "AUDITED ACQUISITION BALANCE SHEET" shall mean the acquisition
balance sheet prepared by Moss Adams LLP pursuant to Section 3.2.
1.4 "NEW VEHICLES" shall mean vehicles from the 1998 or 1999 model
year, unregistered, not reported as sold to the factory, driven less than 200
miles, and meeting Washington state requirements to be sold as a new vehicle.
1.5 "ROLLBACK VEHICLE" shall mean an unregistered vehicle from the
1998 or 1999 model year which has been sold to a customer by the Company but
returned because of the customer's inability to obtain financing for the
purchase.
1.6 "DEMONSTRATOR VEHICLE" shall mean an unregistered vehicle from the
1998 or 1999 model year which has been used and operated by the Company on
dealer plates for sales demonstration purposes.
1.7 "USED VEHICLE" shall mean any vehicle which is not a "New
Vehicle," a "Demonstrator Vehicle" or a "Rollback Vehicle."
1.8 "LEASED VEHICLE(S)" shall mean any vehicle(s) owned by the Company
and leased to a third party prior to August 1, 1998.
1.9 "LEASED CONTRACT RECEIVABLE(S)" shall mean an account
receivable(s) related to a Leased Vehicle.
1.10 "PURCHASE PRICE" shall refer to the total price to be paid by
Lithia to the Shareholders for the Shares as determined by Section 4.
1.11 "REAL PROPERTY ENCUMBRANCES" shall mean the debt secured by the
Business Real Property.
1.12 "IN-HOUSE CONTRACTS" shall mean those "in-house" installment sales
contracts which are to be transferred to shareholders prior to closing and
excluded from the assets being purchased and the computation of the purchase
price.
1.13 "IN-HOUSE CONTRACT LIABILITIES" shall mean all Company Liability
to Washington Trust Bank, the repayment of which is secured by the In-House
Contracts.
1.14 "RECOURSE CONTRACTS" shall mean those installment sales contracts
which have been transferred to various third party lenders, subject to the
limited recourse guaranty of the Company.
1.15 "RECOURSE CONTRACT LIABILITIES" shall mean the limited guaranty of
the Company with respect to the Recourse Contracts.
1.16 "VOLVO LOANER VEHICLES" shall mean those 1998 or 1999 Volvo
vehicles loaned to the Company's Volvo service customers as defined in, and
pursuant to, the Company's franchise agreement with Volvo Cars of North
America, Inc.
1.17 "ASSUMED LIABILITY" shall mean any Liabilities of the Company,
including but not limited to any real property lease, the payment or
performance of which has been guarantied by the Shareholders, or any of them,
or for which the Shareholders, or any of them, are otherwise liable, which is
not paid on the Final Closing Date or assumed by Shareholders pursuant to
this Agreement.
2. SALE AND PURCHASE OF SHARES
2.1 SHARES AND SHAREHOLDERS. Exhibit 2.1 sets forth the name, as it
appears in the Company's corporate records, of each record owner of shares of
the Company's capital stock, the number and class or series of the shares of
capital stock held by each Shareholder, and the percentage of the Purchase
Price (in cash and notes) each Shareholder is to receive.
2.2 SALE OF SHARES. Subject to the terms and conditions set forth in
this Agreement, on the Closing Date the Shareholders shall sell, transfer,
convey, assign, and deliver to Lithia and Lithia shall purchase, acquire and
accept from the Shareholders, all of the right, title and interest in and to
the Shares, free and clear of all encumbrances, claims, liens or restrictions
on transfer, except such restrictions as may be imposed by state or federal
law upon the sale or other transfer of unregistered securities. The
obligation of Lithia to purchase the Shares is subject to the Shareholders
selling to Lithia, in the aggregate, all of the Shares.
3. PHYSICAL INVENTORY AND AUDIT
3.1 PHYSICAL INVENTORY. On or prior to the Audit Date, Lithia or
Lithia's representatives shall conduct physical inventories of all parts,
accessories, vehicles, equipment and supplies owned by the Company. The
Company shall have the right to have an agent present during each physical
inventory. The physical inventories shall be collectively referred to in this
Agreement as the "Physical Inventories." If a third party is used to conduct
the inventory, then such third party shall be jointly selected by Lithia and
the Company, and the costs will be shared equally between Lithia and the
Company.
3.2 AUDIT. Using the books and records of the Company, Moss Adams LLP
will prepare, an Audited Acquisition Balance Sheet (the "Balance Sheet"). The
Balance Sheet will be prepared as of the close of business on July 31, 1998 (the
"Audit Date"), using generally accepted accounting principles except and with
the understanding that: (i) all vehicles and parts inventories will be valued as
set forth in Sections 3.2.1, 3.2.2, 3.2.3 and 3.2.4 below but without a
deduction for any tax effect of the adjustment from the Company's current
utilization of the last-in first-out ("LIFO") method; (ii) the Business Real
Property and the Real Property Encumbrances will be excluded; (iii) the In-House
Contracts and the In-House Contract Liabilities will be excluded; (iv) the
Balance Sheet will value Machinery and Shop Equipment, Parts and Accessories
Equipment, and Furniture and Fixtures at fifty percent of original cost and
Company Vehicles and Leasehold Improvements shall remain at their depreciated
net book value; (v) the Balance Sheet will reflect previously taxed income of
the Company, as of July 31, 1998, which has not been distributed to
Shareholders, as an account payable of the Company; (vi) the Balance Sheet will
value the Company shares of Sterling Savings Association at their fair market
value, at July 31, 1998; (vii) the Balance Sheet shall exclude any value
attributable to intangible assets (viii) reserves for account receivables and
Lease Contracts
Receivables will be established as set forth in Section 3.2.5 and 3.2.6
below; and (ix) any deduction required by Section 14 will be reserved for.
Lithia shall provide BDO Seidman a preliminary copy of the Balance
Sheet. If BDO Seidman should disagree with the findings of Moss Adams
regarding the valuation of assets and the parties cannot resolve that
disagreement, then a mutually agreed upon, independent accounting firm shall
be retained to value those assets in question. The parties agree that the
independent valuation shall be final and binding on the parties and that the
cost will be shared equally between Lithia and the Shareholders. Except for
the expenses of BDO Seidman, which shall be borne by the Shareholders, the
cost of the audit shall be the sole responsibility of Lithia.
3.2.1 NEW VEHICLES. The value of the new, rollback, Volvo Loaner
Vehicles, and demonstrator vehicles shall be equal to the factory invoice
price less the factory hold-backs, rebates, incentives and allowances, the
net cost of any accessory, equipment or parts missing, and the net cost to
repair any damage. The value will be increased for the actual net cost of
parts and accessories reasonably installed but will not include vehicle
preparation or other dealer charges. All rollback and demonstrator
vehicles will be further reduced by $750.00 each plus 30 cents for any
miles in excess of 200 (for rollbacks) or 500 (for demonstrators). All
Volvo Loaner Vehicles shall be valued as set forth above, less $2,400,
with no deduction for mileage.
3.2.2 USED VEHICLES. The Company and Lithia generally agree,
subject to specific agreement with respect to individual vehicles, to value
the Company's used vehicle inventory as the net inventory value of such
vehicle inventory as of July 31, 1998. If the parties fail to agree on the
value of any used vehicles unsold as of the Closing, the value shall be
determined as set forth in Section 16.5, or if sold prior to Closing for
less than net inventory value, then such lower sales price.
3.2.3 LEASED VEHICLES/ LEASE CONTRACTS RECEIVABLES. The Company
currently accounts for all of its vehicles under lease on an operating
lease method. For purposes of the Balance Sheet, all vehicles subject to
leases, whether or not any such lease would qualify under FASB 13 for
treatment as a sales type lease, will be characterized and reflected as a
sales type lease and Lease Contracts Receivables. To the extent that
previously unrealized sale income is recognized, such income (net of a tax
reserve at 34.00%) will be included in the stockholders' equity
calculation. The schedule for the restatement of the Leased Vehicles will
be prepared by BDO Seidman subject to confirmation and acceptance by Moss
Adams LLP.
3.2.4 NEW PARTS AND ACCESSORIES INVENTORY. The value of new parts
and accessories shall be the net cost for that item as set forth in the
then most recent price book, then reduced by rebates, incentives,
allowances, stock order discounts, quantity discounts, and any other
reductions that should be reasonably taken to determine the true net cost,
less the sum of $250,000, with respect to General Motors parts, and
$30,000, with respect to import vehicle parts, as a credit to compensate
Lithia for any used, damaged or obsolete parts and accessories, including
items not currently listed in price and parts books or not returnable to
supplier. The inventory of new parts and accessories shall be jointly
conducted by Lithia and the Company.
4. PURCHASE PRICE
The Purchase Price shall be the lesser of (i) $15,000,000 or (ii) the
stockholders' equity reflected on the Balance Sheet, less distributions to
shareholders which are not reflected as liabilities of the Company as of July
31, 1998, plus $775,000, adjusted as follows:
4.1 ACCOUNTS RECEIVABLE. The Company has established an allowance for
doubtful accounts in the amount of $95,452 as a reserve against any
uncollected accounts receivable. The amount of this reserve as of the Audit
Date shall be maintained without any further analysis of whether the reserve
is deemed adequate. Any losses with respect to the accounts receivables
shall be charged to the accounts receivable allowance reserve. Any account
receivable not collected within 12 calendar months of the closing may be
charged off as a bad debt; provided, however, any subsequent collection of a
charged off account receivable shall be credited to the accounts receivable
reserve. If after the earlier of 12 calendar months or final liquidation of
all accounts receivables, the allowance reserve has a positive balance, the
Shareholders shall be entitled to that balance as an additional Purchase
Price. If the charge offs exceed the allowance reserve, then the
Shareholders shall reimburse Lithia for any deficit. At the Shareholders
option, the amount of any reimbursement may be deducted from the next payment
due under Section 5.2 if any such amounts are then owing. At the request of
Shareholders, Lithia shall assign to Shareholders, without recourse, any
receivable which has been charged off.
4.2 LEASE VEHICLES/LEASE CONTRACTS RECEIVABLES. The Company has
established a reserve for potential losses of its lease vehicle portfolio in
the amount of $400,000. For purposes of the Balance Sheet, an amount equal
to fifty-five percent (55%) of the deferred interest income margin of the
Company's Lease Contracts Receivable (net of a tax reserve of 34.00%) shall
be added, after completion of the Acquisition Audit, to the reserve that
otherwise existed at the Audit Date (herein the "Lease Contracts Receivables
Reserve"). As used herein, deferred interest income margins shall mean the
difference between the lessee interest rate on each Lease Contract Receivable
and the weighted average interest rate on the Company's borrowings secured by
such Lease Contract Receivables, as set forth in Schedule 4.2 attached. The
revised amount of this reserve shall be maintained as a reserve with respect
to the ultimate collection and recoverability of the Lease Contracts
Receivables. The Lease Contracts Receivables Reserve shall be payable to
Shareholders at the earlier of five (5) calendar years from the date hereof,
or final liquidation of the last Lease Contract Receivable. Shareholders
guarantee to Lithia that the Company will incur no losses of any kind on the
Lease Contracts Receivables or Recourse Liabilities. Any Lease Contract
Receivable not collected within five (5) calendar years may be charged off as
a bad debt; provided, however, that any subsequent recovery of a charged-off
receivable shall be credited to the Lease Contract Receivable Reserve. Any
losses and costs incurred
during the liquidation of these Lease Contracts Receivables or Recourse
Liabilities will be charged against the Lease Contracts Receivables Reserve
account. Any recovery of amounts attributable to Lease Contracts Receivable
charged off prior to the Audit Date, or charged off thereafter but
subsequently recovered, will be credited to the Lease Contracts Receivables
Reserve account. Shareholders will reimburse Lithia for any reserve
deficiency resulting from liquidation of the Lease Contracts Receivables,
including returned vehicles, and Lithia shall assign, without recourse, any
such Lease Contract Receivable to Shareholders. Lithia will pay the
Shareholders any amount remaining in the reserve account upon liquidation of
the Lease Contracts Receivables, including returned vehicles. Because the
Shareholders are guarantying Lithia against losses, the Shareholders will
have the right to purchase any vehicle at its then net payoff within five (5)
days of written notice should there be a dispute over the appraised value by
the Company. Provided, however, nothing herein shall require shareholders to
reimburse or otherwise compensate Lithia for losses caused by Lithia's
failure to service any Lease Contract Receivable according to commercially
reasonable standards in the automobile and light truck lease finance industry.
4.3 FURTHER ADJUSTMENTS TO THE PURCHASE PRICE. The Purchase Price
shall be adjusted, as follows:
4.3.1 Shareholder Adjustments to the Purchase Price. As
additional consideration for the shares, Lithia shall pay Shareholders an
amount equal to $50,000.00 per calendar month beginning August 1, 1998, less
any payments after the Audit Date made by the Company with respect to the
Real Estate Encumbrances plus 6.00% of the Purchase Price, as determined
herein, divided by 365 and multiplied by the number of days between and
including August 1, 1998 and continuing until and including the Closing Date,
or until the date of termination of the Agreement. The accrued consideration
shall be due and payable at the earlier of the Closing Date or the date of
termination of this Agreement, and shall be non-refundable in the event the
Agreement is terminated for any reason, other than breach of the Agreement by
the Shareholders. In addition, if the Shareholders are entitled to be
reimbursed for LIFO Tax Payments, as provided in Section 7.14, then such
reimbursements shall be an addition to the purchase price.
4.3.2 Lithia Adjustments to the Purchase Price. The Company
and the Shareholders shall operate the business of the Company as they have
in the past, in all material respects, and in compliance with Sections 7.15
and 9.2 of this Agreement. For providing management oversight and assistance
to the Company, Lithia shall be entitled to all net profits of the Company
after July 31, 1998 and through the Closing Date, and shall be responsible
for all net operating losses of the Company for such period, all as
determined by the Company and its accountants using the same methods of
accounting as have been historically utilized by the Company, which amount
shall be a credit against or debit toward Lithia's obligation to pay the
Purchase Price at the Closing Date. Provided, however, notwithstanding the
foregoing, in determining net profits or net losses: (i) the Company will
show a rent expense of $50,000 per calendar month attributable to the Camp
Family real estate, as though the Lease Agreement were in effect as of August
1, 1998; (ii) no income or expense will be attributable to the In-House
Contracts or In-House Contract Liabilities; (iii) no building or improvement
depreciation, or finance costs, will be includable with respect to the
Business Property or Business Property Encumbrances; (iv)
distributions to the Shareholders shall be excluded, including distributions
of previously taxed income, the In-House Contracts, and the Business Real
Estate.
5. PAYMENT OF PURCHASE PRICE.
The Purchase Price shall be paid to the Shareholders as set forth in
Exhibit 2.1, as follows:
5.1 CASH AT CLOSING. $8,000,000 (unless adjusted as permitted by
paragraph 5.2 herein) by wire transfer or cashier's check delivered at
Closing.
5.2 PROMISSORY NOTE. At Closing, Lithia shall deliver to
Shareholders, at the sole discretion of Lithia, either (i) promissory note or
notes, bearing interest at the fixed rate of 7.00% per annum, having an
amortization term of ten calendar years, and a maturity of six calendar years
(provided, however, that if the Note is not then in default, and has not
previously been in default, Lithia shall have the right to extend the
maturity date of the Note for an additional four (4) calendar years, with the
repayment of principal to be fully amortized during such four (4) year
extended term). The Note shall be substantially in the form of Exhibit
5.2(a), or in lieu of the Note, (ii) cash, which will total an amount equal
to the Purchase Price, after taking into account all adjustments provided for
in Section 4; provided, however, if Lithia elects to deliver the Note, it may
reduce the cash payment by the amount, if any, which will result in the Note
having a minimum principal balance of $2,000,000.
6. CLOSING
6.1 DATE, TIME, AND PLACE OF CLOSING. Subject to the terms and
conditions set forth in this Agreement, the closing ("Closing") of the
purchase and sale of the Shares shall take place at the offices of
Witherspoon, Kelley, Davenport & Toole, P.S., W. 422 Riverside Avenue, Suite
1100 Spokane, Washington, or at such other place as may be mutually agreed
upon by Lithia, the Shareholders and the Company, on the Targeted Closing
Date or on the last business day of the month which all conditions to the
obligations of the parties (other than those requiring the taking of action
at the Closing) have been satisfied or waived, but no later than October 31,
1998. Any other provision of this Agreement to the contrary notwithstanding,
if the Company, the Shareholder and Lithia have not obtained the consents
required by this Agreement prior to the Closing Date, either the Company, the
Shareholders or Lithia shall have the right to terminate this Agreement by
giving written notice to the other parties.
6.2 DOCUMENTS TO BE DELIVERED AT CLOSING BY THE SHAREHOLDERS.
Conveyance, transfer, assignment and delivery of the Shares will be by
execution and delivery of stock powers and stock certificates in such form as
Lithia may request. At Closing, the Shareholders will deliver or cause the
Company to deliver to Lithia the following instruments and other documents,
in each case, in such form as Lithia may reasonably request:
6.2.1 The lease relating to the Business Real Property,
substantially as set forth in Exhibit 6.2 attached hereto, including the
consent of any unrelated third party Lessor to the transfer of the
Company's Stock to Lithia, as contemplated herein, if such consent in
required pursuant to the terms of such third party lease;
6.2.2 Consents from all parties from whom consent is required to
be obtained (including all manufacturers) in order for the Company or the
Shareholders to enter into the transactions contemplated by this Agreement
and Lithia to acquire ownership of the Company;
6.2.3 Evidence that the Company has been released from any
indebtedness with respect to the Business Real Property and the In-House
Contract Liabilities;
6.2.4 Delivery to Lithia of a Phase I report of an
environmental engineer, showing that the Business Real Property,
which report shall be reasonably satisfactory to Lithia in all
respects.
6.2.5 Copies of any note or guaranty referenced in
Section 7.13.
6.2.6 Such other documents and instruments as Lithia may
reasonably require to effectuate or evidence the transfer of all of the
Shares.
6.3 DOCUMENTS TO BE DELIVERED AT CLOSING BY LITHIA. At Closing,
Lithia will execute and deliver to the Shareholders the following instruments:
6.3.1 A cashier's check or wire transfer deposit confirmation in
the amounts as provided by Section 5.1, together with delivery of the
promissory note or notes required under Section 5.2; and
6.3.2 If not earlier transferred, a bargain and sale deed to the
Shareholders for the Business Real Property, subject to the Real Property
Encumbrances, and the assignment of the In-House Contracts; and
6.3.3 Employment contracts for Phil S. Camp and Thomas Leyda, the
terms of which shall be agreed to by the parties thereto within ten (10)
calendar days of the date hereof , duly signed by such employees.
6.4 TRANSFER TAXES. The Company will pay any B & O, transfer and
excise taxes incurred by any party in connection with the transactions
contemplated by this Agreement, including the transfer of the Business Real
Property and In-House Contracts, which amounts shall be deducted from the
Purchase Price or accrued as liabilities of the Company as of July 31, 1998.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EACH OF THE SHAREHOLDERS
The Company and each of the Shareholders jointly and severally represent
and warrant to Lithia as follows:
7.1 AUTHORIZATION. The Company has the authority to execute and
deliver this Agreement and to perform the Company's obligations hereunder.
This Agreement is a valid and legally binding obligation of the Company and
the Shareholders, enforceable against the Company and the Shareholders in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to the enforcement of creditors, rights generally and
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The Shareholders will have
at Closing (i) good, absolute, and marketable title to the Shares, free and
clear of any liens, claims, encumbrances, or restrictions of any kind, except
for restrictions imposed by state or federal law on the transfer or sale of
unregistered securities, and (ii) the complete and unrestricted right, power,
and authority to sell, transfer, and assign the Shares in accordance with
this Agreement.
7.2 INCORPORATION AND GOOD STANDING. The Company is duly organized,
validly existing and in good standing under the applicable laws of the state
of its incorporation and has all necessary power and authority to own, lease,
and operate its properties and assets and to conduct its business as its
business is now being conducted. The Company has delivered to Lithia as
Exhibit 7.2 complete and accurate copies of the Company's articles of
incorporation and bylaws, including all amendments thereto. The Company is
qualified to do business and is in good standing in each state in which it
transacts business. The Company does not have any subsidiaries nor any direct
or indirect equity interest in any corporation, partnership, or other entity.
7.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 5000 shares of Class A Voting Common Stock, par value $1.00 per
share, 1,899 shares of which are outstanding and 50,000 shares of Class B
Non-Voting Common Stock, par value $1.00 per share, 29,169 shares of which
are outstanding (collectively, the "Shares"). The Shares constitute all of
the issued and outstanding shares of capital stock of the Company, have been
validly authorized and issued, are fully paid and non-assessable, and have
not been issued in violation of any preemptive rights. or of any federal or
state securities law. On the date hereof, the Shares are owned beneficially
and of record by the Shareholders as set forth on Exhibit 2.1. There are and
will be on the Closing Date no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating the Company or the Shareholders to issue any additional shares of
its capital stock of any class or any other securities of any kind. There
are no agreements that relate to the voting or control of the Shares.
7.4 NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the fulfillment of or compliance with the terms and provisions
hereof will violate, conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default or an event which, with
notice or lapse of time or both, would constitute a default under, the
articles of incorporation or bylaws of the Company, any contract, agreement,
mortgage, deed of trust, or other instrument or obligation to which either
the Shareholders or the Company are parties or by which any of them is bound,
or violate any provision of any applicable law or regulation or of any order,
decree, writ or
injunction of any court or governmental body, or result in the creation or
imposition of any lien, charge, restriction, security interest or encumbrance
of any nature whatsoever on any property or asset of the Company or on the
Shares.
7.5 CONSENTS. Except as may otherwise be set forth in the Agreement,
no consent from, or other approval of, any governmental entity or agency or
any other person or entity is necessary in connection with the execution,
delivery or performance of this Agreement by the Company, other than consent
from (i) General Motors Corporation--Chevrolet Division, (ii) BMW of North
America, Inc., (iii) Subaru of America, Inc., and (iv) Volvo Cars of North
America, Inc, all of which the Shareholders and the Company shall use
commercially reasonable efforts to obtain.
7.6 REAL PROPERTY. Set forth in Exhibit 7.6 is a complete and
accurate legal description of the Business Real Property. The zoning of the
Business Real Property permits the presently existing improvements and the
continuation of the business presently being conducted on such real property.
To the best of the Company's knowledge, and to the best of the actual
knowledge of Shareholders, there are no pending or proposed changes to such
zoning.
7.7 TANGIBLE PERSONAL PROPERTY. Exhibit 7.7 sets forth a complete and
accurate description of all equipment, furniture, fixtures, and other
tangible personal property (except parts and supplies) owned by, in
possession of, or used by the Company in connection with its business and a
complete and accurate description of all tangible personal property in which
the Company has a leasehold interest, together with a complete and accurate
description of each lease under which the Company holds such leasehold
interests. Each of the leases is in full force and effect and constitutes a
legal, valid, and binding obligation of the parties thereto. The Company has
performed the covenants required to be performed by it under each of the
leases to which it is a party and is not in default under any of the leases
to which it is a party.
7.8 PARTS INVENTORIES. The parts and assessories inventories of the
Company consist of goods of a quality and in quantities that are salable in
the ordinary course of its business with normal mark-up at prevailing market
prices, less the adjustments provided for in Section 3.2.4. Except as
provided in the allocation for damaged or obsolete parts and assessories
provided in Section 3.2.4, all parts and accessories in the inventory of the
Company, for which the Company has return agreements, are returnable,
according the return rules set by the manufacturer, are undamaged parts and
were listed for sale in the then-current dealer parts and accessories price
schedule for the represented manufacturers.
7.9 LICENSES AND PERMITS. Exhibit 7.9 sets forth a complete and
accurate description of all permits, licenses, franchises, certificates, and
similar items and rights, owned or held by the Company (hereinafter
collectively referred to as the "Licenses and Permits"). The Licenses and
Permits are adequate for the operation of the Company's business; are valid
and in full force and effect, and no basis exists for a grantor of any such
Licenses or Permits to terminate the same. No additional permit, license,
franchise, certificate, or similar item or right is required by the Company
for the operation of its business. Neither the Company or Shareholders make
any representation or warranty as to the assignability of any license or
permit to Lithia.
7.10 INTELLECTUAL PROPERTY. Exhibit 7.10 sets forth a complete and
accurate description of all proprietary intellectual property presently
in-use by the Company, which intellectual property includes (without
limitation) patents, trademarks, trade names, service marks, copyrights,
trade secrets, customer lists, inventions, formulas, methods, processes,
advertising materials, Internet sites, and any other proprietary information
or property. There are no outstanding licenses or consents to third parties
granting the right to use any intellectual property owned by the Company. To
the best of the Company's and each of the Shareholders' knowledge, the
Company owns and has the exclusive right to use its intellectual property
free and clear of any claims and without any conflict with the rights of
others. No royalties or fees are payable by the Company to any third party
by reason of the use of any intellectual property by the Company. No
additional intellectual property is required by the Company for the operation
of its business. The Shareholders each agree that they will not, either for
their own benefit or through any corporation, partnership, or other business
entity in which they have an interest, utilize the "Camp" name in association
with the sale, lease or service of automobiles or light trucks for a period
of 10 years within 100 miles of Spokane, Washington; provided, however,
nothing herein shall prohibit any shareholder, other than Phil S. Camp (whose
rights, with respect to noncompetition, shall be set forth in his employment
agreement with Lithia, of even date), from working, as an employee, of any
automobile or light truck dealership; provided, further, nothing herein shall
prevent the Shareholders from operating an automobile leasing or finance
company under the trade or corporate name of "Camp Finance, L.L.C..", with
respect to leases or conditional sales contracts purchased from Lithia.
7.11 TITLE TO PROPERTIES; ENCUMBRANCES. The Company has good,
absolute, and marketable title to (or, in the case of leased property, valid
and subsisting leasehold interests in) all of its properties and assets,
including (without limitation) the properties and assets that will be listed
on Schedules 7.7, 7.8, 7.9, and 7.10 except for properties and assets sold,
consumed, or otherwise disposed of by the Corporation in the ordinary course
of its business, and will have good, absolute and marketable title to all
assets included in the Balance Sheet. Except as otherwise disclosed in its
Financial Statements, the assets of the Company are subject to no liens,
mortgages, encumbrances, conditional sales agreements, security interests,
claims, or restrictions of any kind or character, except for (i) the
encumbrances that will be listed on Exhibit 7.11 and (ii) liens for current
taxes not yet due and payable.
7.12 FINANCIAL STATEMENTS. The Company has delivered to Lithia copies
of a balance sheet for the Company dated December 31, 1997, and the related
statement of income for the period ending December 31, 1997 (hereinafter
collectively referred to as the "Financial Statements"). The Financial
Statements fairly present the financial condition of the Company at the dates
mentioned and the results of its operations for the periods specified, were
prepared in accordance with generally accepted accounting principles, except
as noted on Exhibit 7.12, and reflect adequate reserves for all reasonably
anticipated losses, claims, and costs. The Financial Statements disclose all
of the debts, liabilities, and obligations of any nature (whether absolute,
accrued, contingent but known,
or otherwise, and whether due or to become due) of the Company as of the date
thereof and includes appropriate reserves for all taxes and other liabilities
accrued or due at such dates but not yet paid.
7.13 INDEBTEDNESS FOR BORROWED MONEY; GUARANTIES. The Company has
delivered to Lithia complete and accurate copies of all instruments
evidencing or relating to the Company's indebtedness for borrowed money. The
Company is not in default or violation of any provision of any agreement
evidencing or relating to its indebtedness for borrowed money. Exhibit 7.13
sets forth a complete and accurate description of all guaranties by the
Company of any obligation or liability of any person or entity, including
(without limitation) any guaranties of installment sales contracts or leases.
At or prior to Closing, Company shall have reduced its notes to shareholders
and other insiders (the "Insider Note") to no more than $1,100,000, including
the Company's notes to Phil S. Camp and Georgia R. Camp, with interest
thereon to accrue at the rate of 7.0% per annum, compounded and payable
monthly, with the final payment to be due within thirteen (13) months after
the Closing Date.
7.14 TAX MATTERS. The Company has duly filed all federal, state, and
local tax returns required to be filed by it. All federal, state, local, and
foreign income, ad valorem, excise, b&o, sales, use, payroll, unemployment,
and other taxes and assessments that are due and payable by the Company, or
by the Shareholders on behalf of the Company have been properly computed,
duly reported, fully paid, and discharged. The Company has been in full
compliance with the IRS LIFO Regulations and has committed no conformity
violations which would disqualify the Company from continuing to utilize the
LIFO method for federal tax purposes. (It is understood by the parties that
Lithia intends to terminate use of the LIFO method during tax year 1999. If
it is subsequently determined by the Internal Revenue Service that the
Company, prior to Closing, improperly utilized the LIFO method, the payment
of any resulting tax shall be the obligation of Shareholders; provided,
however, that Lithia shall reimburse shareholders for any such tax paid over
four calendar years, beginning June 1 of the year following payment of the
tax by Shareholders and continuing on the same day of each year thereafter;
provided, further, notwithstanding any thing to the contrary herein, Lithia
shall not be obligated to reimburse Shareholders for any tax penalties or
interest). The only unpaid taxes that require payment by the Company or on
behalf of the Company, are current taxes not yet due and payable. All current
taxes not yet due and payable by the Company have been properly accrued and
are accurately reflected in the Company's balance sheet in the Financial
Statements and will be properly accrued and accurately reflected on the
Audited Acquisition Balance Sheet. The Company has not been delinquent in
the payment of any tax, assessment or governmental charge, nor has any tax
deficiency been proposed or assessed against it, nor has it executed any
waiver of the statute of limitations on the assessment or collection of any
tax. The Shareholders agree to indemnify and hold harmless Lithia with
respect to any income or other tax liabilities, penalties and interest which
arise from the operation of the Company prior to Closing, or arise as a
result of the transfer of the Business Real Estate or In-House Contracts by
the Company to the Shareholders.
7.15 TRANSACTIONS SINCE BALANCE SHEET DATE. Since December 31, 1997,
or as disclosed in the Acquisition Balance Sheet or as anticipated by this
Agreement, (i) the Company has not incurred any debts, liabilities, or
obligations except current liabilities in the ordinary course of
business; discharged or satisfied any liens or encumbrances, or paid any
debts, liabilities, or obligations, except in the ordinary course of
business; mortgaged, pledged, or otherwise subjected to any lien or other
encumbrance any of its properties or assets; canceled any debt or claim; sold
or transferred any properties or assets except sales from inventory in the
ordinary course of business; nor entered into any transaction other than in
the ordinary course of business; (ii) there has not been any change in the
financial condition, net income, assets, liabilities, operations, or business
of the Company other than changes in the ordinary course of business, none of
which, individually or in the aggregate, has been material; (iii) except for
the distribution to Shareholders of previously taxed income, and for tax
distributions necessary to pay the federal income tax obligations
attributable to the Shareholders as of July 31, 1998, there has not been any
declaration, setting aside or payment of any dividend or other distribution
in respect of, or any repurchase or acquisition of, the capital stock of the
Company; (iv) the Company has not issued any securities or options to
purchase any securities of any nature whatsoever; (v) the Company has not
increased the compensation, commissions, bonuses, or other remuneration
payable to any officer, director, employee, or to any other person or entity,
whether now or hereafter payable; (vi) there has not been any damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting the assets, properties or business of the Company; (vii)
the Company has not made any capital expenditure or commitment in excess of
$50,000.00 for additions to property, plant, or equipment; (viii) the Company
has not made any loan or advance to any person or entity; guaranteed any
obligation or liability of any person or entity, except to Dollar Rent-a-Car
and guaranties of any installment sales contracts or leases in the ordinary
course of business, other than as will be set forth on Exhibit 7.15, or given
any indemnification to any person or entity; (ix) the Company has not made
any sale, assignment or transfer of, additions to or transactions involving
any of its tangible assets other than in the ordinary course of business; (x)
the Company has not made any change in its method of accounting or accounting
practices, including (without limitation) any change in depreciation or
amortization policies or rates; (xi) the Company has not granted any waiver
or release of any claim or right, or canceled any debt or claim held by it;
(xii) the Company has not amended or terminated any material contract,
agreement, or license to which it is a party; or (xiii) the Company has not
agreed, in writing or otherwise, to do or permit any of the foregoing.
7.16 LITIGATION. Exhibit 7.16 sets forth a complete and accurate
description of all legal actions, suits, arbitrations, condemnation actions,
or other proceedings pending or threatened against the Shareholders with
respect to their shares or the Company, or any of its properties, assets, or
business, and all orders, decrees, writs or injunctions of any court or
governmental body applicable to the Company. The Company is not aware of any
facts that might result in any other action, suit, arbitration, or proceeding.
7.17 COMPLIANCE WITH LAWS. To the best of the Company's and each of
the Shareholders' knowledge, there are no existing violations of federal,
state, or local laws, ordinances, rules, codes, regulations, or orders by the
Company which might materially affect the properties,
assets, or business of the Company. To the best of the Company's and each of
the Shareholders' knowledge, the Company is not subject to any restriction,
judgment, order, writ, injunction, decree, or award, which materially or
adversely affects or is likely to materially or adversely affect the
business, operations, properties, assets, or condition (financial or
otherwise) of the Company.
7.18 CONTRACTS AND AGREEMENTS. Exhibit 7.18 sets forth a complete and
accurate description of all material contracts and agreements to which the
Company is a party or by which it or any of its property is bound. All such
contracts and agreements are in full force and affect and neither the Company
nor the other party are in breach of any of the provisions thereof. Except
as set forth on Exhibit 7.18, the Company is not a party to any contract or
agreement which materially or adversely affects or is likely to materially or
adversely affect the business, operations, properties, assets, or condition
(financial or otherwise) of the Company.
7.19 EMPLOYEE BENEFIT PLANS. Exhibit 7.19 sets forth a complete and
accurate description of all pension, profit sharing, bonus, deferred
compensation, percentage compensation, severance pay, retirement, health,
stock option, insurance and other employee benefit plans and arrangements
binding upon the Company. The Company has complied with the provisions of
and has performed the obligations required of it under such plans and
arrangements, and the Company is not in default under any provision thereof
in any manner. There have been no material defaults, breaches, or omissions
by the Company or any fiduciary under any of these plans or arrangements.
The Company has not incurred any liability of any nature whatsoever not
reflected in the Financial Statements under any employee benefit plan or
arrangement.
7.20 INSURANCE. Exhibit 7.20 sets forth a complete and accurate
description of all insurance, including (without limitation) worker's
compensation, maintained by the Company and summarizes the substantive terms
of each of the insurance policies, including (without limitation) whether the
insurance policies are "claims made" or "occurrence" policies. The Company
is carrying insurance that is reasonable in light of the risks attendant to
the business and activities in which the Company is engaged. All of the
insurance is in full force and effect, and the Company will keep such
insurance in full force and effect until the Closing Date.
7.21 PERSONNEL. Exhibit 7.21 sets forth a complete and accurate list
of all current employees of the Company and all independent contractors
regularly performing services on behalf of the Company and their respective
rates of compensation, including any salary, bonus or other payment
arrangement made with any of them. The Company does not have any employment
agreements or contracts between the Company and any person or entity. The
Company is not a party to or bound by any collective bargaining agreement,
nor has the Company experienced any strikes, grievances, claims of unfair
labor practices, or other collective bargaining dispute. The Company has not
committed any unfair labor practice. There are no unions representing any
employees of the Company. The Company has no knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company. The Company has paid or has made
provision for the payment of all compensation due any person or entity and
has complied in all material respects with all applicable laws, rules, and
regulations relating to the employment of labor, including those related to
wages, hours, collective bargaining and the payment and withholding of taxes,
and has withheld and paid to the appropriate
governmental authority, or is holding for payment not yet due to such
authority, all amounts required by law or agreement to be withheld from the
compensation of its employees.
7.22 ACCOUNTS RECEIVABLE. Exhibit 7.22 sets forth a complete and
accurate list of all accounts receivable, notes receivable and vehicle leases
of the Company and an aging analysis of such accounts. All receivables of
the Company are valid and enforceable claims, arose in the ordinary course of
business, require no further performance by the Company, and are not subject
to claims or offset.
7.23 BROKERS AND FINDERS. The Company has not employed, directly or
indirectly, any broker or finder, or incurred any liability for any brokerage
fees or commissions or finders, fees, and no broker or finder has acted
directly or indirectly for the Company in connection with this Agreement or
the transactions contemplated by this Agreement. The Shareholders have
retained a consultant, at the Shareholders' sole expense, to advise them
regarding the sale of their stock.
7.24 DELIVERY OF DOCUMENTS. Complete and accurate copies of all
written instruments listed or described on the exhibits attached hereto have
been or will be furnished to Lithia. The Company will make available to
Lithia, to the extent requested by Lithia, all books, records, and facilities
of the Company.
7.25 POWERS OF ATTORNEY; AUTHORIZED SIGNATORIES. The Company has
provided to Lithia (i) the names and addresses of all persons holding a power
of attorney on behalf of the Company, and (ii) the account numbers and names
of all banks or other financial institutions in which the Company currently
has an account, deposit, or safe deposit box, with the names of all persons
authorized to draw on the accounts or deposits or to have access to the boxes.
7.26 FULL DISCLOSURE. No representation or warranty by the Company or
the Shareholders in this Agreement or in any of the exhibits attached hereto,
or other statement in writing or certificate furnished or to be furnished to
Lithia by or on behalf of the Company or the Shareholders in connection with
the transactions contemplated by this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will fail to state a
material fact necessary to make the statements contained herein not
misleading.
7.27 ENVIRONMENTAL.
7.27.1 Except as may be disclosed in any environmental site audit
obtained or to be obtained by the Company and delivered to Lithia, there
are no past or present events, conditions, circumstances, activities,
practices, incidents, plans or actions, based on or resulting from the
conduct of the business of the Company, including the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release, or threatened release into
the environment, of any pollutant, contaminant, chemical, or industrial
toxic or hazardous material, substance or waste, which will violate any
laws currently in effect relating to pollution or protection of the
environment
(the "Environmental Laws") or any plan, order, decree, judgment,
injunction, notice or demand letter from a governmental entity
applicable to the Company, or which will give rise to any common law or
other legal liability, including, without limitation, liability under
the Comprehensive Environmental Response, Compensation, and Liability
Act ("CERCLA") or similar state or local laws in effect as of the date
hereof. To the best of the Company's and each of the Shareholders'
knowledge, the Business Real Property contains no spill, deposit, or
discharge of any hazardous substance (as that term is currently defined
under CERCLA or any applicable state law), as a result of which there
would be a materially adverse effect on the Company.
7.27.2 Exhibit 7.27 sets forth a complete and accurate description
of each underground storage tank of any kind or nature located on the
Business Real Property.
7.27.3 The Company has delivered or will deliver to Lithia, prior
to the Closing Date, copies of all existing environmental site audits on
the Business Real Property and any other real property currently owned,
leased, or otherwise utilized by the Company.
7.28 CONTINUATION OF BUSINESS. Neither the Company nor the
Shareholders know of any reason why the Company cannot continue its business
in the same manner following the execution of this Agreement and the Closing
as it has been operated prior thereto, except to the extent that Lithia
causes the business of the Company to change following the Closing. Neither
the Company nor the Shareholders has any reason to believe that at any time
in the foreseeable future the business of the Company shall be materially or
adversely affected by any event, except to the extent that Lithia causes the
business of the Company to change following the Closing.
7.29 CONTRACTS IN TRANSIT. At the time of Closing, the Company will
provide a complete and accurate description of all contracts in transit for
the Company.
8. REPRESENTATIONS AND WARRANTIES OF LITHIA
Lithia represents and warrants to the Shareholders as follows:
8.1 INCORPORATION. Lithia has been duly incorporated, is validly
existing under the laws of the State of Oregon. At Closing Lithia will be
qualified to do business and will be in good standing in the State of
Washington.
8.2 AUTHORIZATION. Lithia has the authority to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement is a
valid and legally binding obligation of Lithia, enforceable against Lithia in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to the enforcement of creditors' rights generally and
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
8.3 NO CONFLICTS. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement will not
result in any breach or violation of or default under any agreement or other
instrument to which Lithia is a party or by which it is bound.
8.4 BROKERS AND FINDERS. Lithia has not employed, directly or
indirectly, a broker or finder to act on behalf of or negotiate for Lithia in
connection with this Agreement or the transactions contemplated by the
Agreement which could give rise to any claim against the Company or the
Shareholders, and, should any such claim be made against the Company or
Shareholders, Lithia shall indemnify and hold the Company and Shareholders
harmless from and against any and all losses, damages, fees and costs,
including a reasonable attorneys fee, directly or indirectly related to or
caused by any such claim..
8.5 FULL DISCLOSURE. The financial statements of Lithia as filed with
the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934 are a complete and accurate reflection of the financial condition
of Lithia as of the date and for the periods presented in those statements
(the "Lithia Financial Statements"). The financial condition of Lithia, as
of the Final Closing Date, shall not be different, in any material adverse
respect, from that set forth in the Lithia Financial Statements. No
representation or warranty of Lithia to the Shareholders in connection with
the transactions or as contemplated by this Agreement contain or will contain
any untrue statement of a material fact or omits or will fail to state a
material fact necessary to make such statements contained herein not
misleading.
8.6 COLLECTION OF RECOURSE CONTRACTS. Concurrently with the execution
of this Agreement, Lithia will cause the Company, after Closing, to execute a
servicing agreement with Shareholders or, at the option of Shareholders, with
Camp Finance, Inc., setting forth the terms and conditions under which Lithia
will service and collect the In-House Contracts for the benefit of
Shareholders and the compensation payable for such servicing. The Servicing
Agreement shall be substantially in the form as attached hereto as Exhibit
8.6. Except as may be expressly set forth in the Servicing Agreement,
neither Lithia nor the Company guarantees the collection of the Recourse
Contracts nor shall either be liable to Shareholders for any loss or claim
except for its or their failure to fully and properly account for the funds
received.
8.7 COMPANY TAX RETURNS AND FINANCIAL RECORDS. Lithia, through Moss
Adams, and subject to the approval of BDO Seidman, which approval shall not
be unreasonably withheld, will cause the Company to prepare a short year
federal tax return through the Closing Date and file the same with the IRS on
a timely basis and Lithia will make available to Shareholders, or their
professional advisors, records of the Company prior to the Closing Date at
reasonable times and purposes.
8.8 CONSENTS. Except as may otherwise be set forth herein, Lithia
will use commercially reasonable efforts to obtain the consent or approval of
any governmental entity or agency or any other person or entity that is
necessary in connection with its execution, delivery or performance of its
obligations under this Agreement.
8.9 INSIDER NOTES. Lithia will cause the Company to pay the accrued
interest and principal of the Insider Notes, according to the terms thereof,
with final payment to be made on or before thirteen (13) calendar months
after the Closing Date.
8.10 KNOWLEDGE OF LITHIA. Neither Lithia, or its agents, know or knows
of any fact or alleged fact which, if true, would make any of the
representations and warranties of the Company or the Shareholders contained
in this Agreement, including but not limited to those representations and
warranties set forth in Article 7 of this Agreement, untrue or misleading in
any respect.
8.11 UNREGISTERED SECURITIES. Lithia recognizes that the Stock to be
purchased hereunder has not been registered and that, as such, certain
restrictions on the sale or other transfer of unregistered securities will or
may be imposed under state or federal law.
9. COVENANTS
The Shareholders and the Company agree that:
9.1 NOTICES AND CONSENTS. The Company and the Shareholders shall use
their best efforts to obtain any required approvals or consents to this
Agreement and the transactions contemplated by this Agreement from all (i)
lenders, (ii) lessors, (iii) manufacturers represented by the Company, and
(iv) will assist Lithia in obtaining the approval or consent of the Federal
Trade Commission ("FTC") and the Justice Department under the
Hart-Scott-Rodino Act ("HSR Act") and all regulations promulgated thereunder.
9.2 CONDUCT OF BUSINESS BY THE COMPANY PRIOR TO THE CLOSING DATE. The
Company and the Shareholders shall cause the Company to conduct its
operations according to the ordinary and usual course of business reasonably
consistent with past and current practices, to maintain and preserve its
assets, properties, insurance policies, business organization, and
advantageous business relationships, and to retain the services of its
officers, employees, agents, and independent contractors, and shall not allow
the Company to engage in any practice, take any action, or enter into any
transaction outside of the ordinary course of business. Except for
borrowings in the ordinary course of business, from the date of the execution
of this Agreement to the date of Closing of the transaction contemplated
hereby, neither the Shareholders nor the Company will commit to or make any
obligation which binds the Company to an expense in excess of $50,000 without
Lithia's prior consent. Lithia acknowledges and consents to a distributions
for quarterly tax payments that may, in the aggregate, exceed $50,000.
9.3 LITHIA'S EXAMINATION. The Company and the Shareholders shall
cause the Company to permit representatives of Lithia to have full access to
and to examine, at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company, the books,
records, properties, and assets of the Company and the Business Real Property.
9.4 AUDIT. In order to assist Lithia in complying with its disclosure
obligations to the Securities and Exchange Commission, the Shareholders and
the Company shall cause the Company to permit Lithia, at Lithia's expense, to
conduct an audit under generally accepted auditing
standards, of the books, records, and financial statements of the Corporation
for 1996, 1997, and any additional years if required by applicable law, and
shall cause Audited Financial Statements to be prepared in accordance with
generally accepted accounting principles, which shall include reserves for
any deferred warranties, charge-backs, inventory write downs, repossessions,
contracts in transit, and any other appropriate reserves. The audits shall
hereinafter be referred to individually as an "Audit" and collectively as the
"Audits." As used in this Agreement, "Audited Financial Statements" shall
mean an audited consolidated balance sheet dated December 31, 1997, for the
Company. The Audit will be conducted by Lithia's accountants, Moss Adams,
LLP. The Company and the Shareholders agree to cause the full cooperation of
the officers, directors and employees of the Company in the Audit as
requested by Lithia. The Company's accounting staff will assist in gathering
information and providing schedules and analyses in order to have the Audit
completed on or before the Closing Date. Provided, however, it is expressly
understood and agreed to by Lithia that neither the Audit or Audits shall in
any manner effect the amount of the Purchase Price, nor shall they give
Lithia any right of offset under the Lease Agreement or under Note or Notes
representing the deferred payment of any part of the Purchase Price.
9.5 NOTICE OF CHANGES. The Company shall give prompt written notice
to Lithia of any material adverse change in the financial condition, net
income, assets, liabilities, operations, or business of the Company.
9.6 FURTHER ASSURANCES. The Shareholders and the Company shall from
time to time, upon the request of Lithia, execute and deliver to Lithia such
further instruments and take such other action as Lithia may reasonably
request, in order to more effectively transfer, convey, assign, and deliver,
or place Lithia in possession and control of the Shares, or to enable Lithia
to exercise and enjoy all rights and benefits with respect thereto.
10. CONDITIONS PRECEDENT TO OBLIGATION OF LITHIA
The obligation of Lithia to effect the transactions contemplated by this
Agreement is subject to the satisfaction on or prior to the Closing Date of
the following conditions, each of which may be waived by Lithia:
10.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND EACH
OF THE SHAREHOLDERS. All representations and warranties of the Company and
each of the Shareholders contained in this Agreement shall be true and
correct in all material respects as of the Closing Date with the same effect
as though such representations and warranties were made on the Closing Date,
except to the extent that such representations and warranties expressly
relate to any earlier date, and the Company and the Shareholders shall have
performed and complied with all the covenants and agreements and satisfied
all the conditions required by this Agreement to be performed, complied with
or satisfied by the Company and each of the Shareholders on or prior to the
Closing Date. The
Company and each of the Shareholders must have delivered to Lithia a
certificate dated as of the Closing Date certifying that this condition has
been fulfilled.
10.2 NO ADVERSE CHANGE. Lithia shall have determined, to its
satisfaction, that as of the Closing Date, there has been no material adverse
change in the financial condition, net income, assets, liabilities,
operations, or business of the Company.
10.3 TRANSFER OF SHARES. The certificates representing the Shares
shall have been transferred and conveyed by the Shareholders to Lithia in a
manner and by instruments acceptable to Lithia and its counsel, free and
clear of all liens, claims, encumbrances, or restrictions of any kind.
Contemporaneously with the consummation of the transfer, the Shareholders
shall put Lithia in full possession and enjoyment of all properties and
assets of the Company.
10.4 EMPLOYMENT CONTRACTS. Phil S. Camp and Tom Leyda shall have
executed and delivered their respective employment contract set forth in
Exhibit 6.3.3.
10.5 THIRD PARTY APPROVALS. This Agreement and the transactions
contemplated by this Agreement shall have received all required approvals and
consents from all (i) the Company's lenders (if Lithia has previously
notified the Company that it intends to assume or otherwise draw upon the
credit of the Company with any such lender after the Closing Date), (ii)
lessors, (iii) manufacturers represented by the Company, (iv) the FTC and the
Justice Department under the HSR Act and the regulations promulgated
hereunder, and (v) any other federal, state or local regulatory agencies.
10.6 PHYSICAL INVENTORIES. Lithia shall have conducted the Physical
Inventories.
10.7 LITHIA'S REVIEW. Based on such examinations and inquiries as
Lithia shall have made or shall have caused to be made, the financial
condition, net income, assets, liabilities, operations, and business of the
Company, and the condition of the Business Real Property, shall be
satisfactory to Lithia, in Lithia's sole judgment and discretion, reasonably
exercised.
10.8 APPROVAL OF DOCUMENTATION. The form and substance of all
opinions, certificates, instruments and other documents delivered to Lithia
in connection with this Agreement shall be satisfactory in all reasonable
respects to Lithia and Lithia's counsel.
10.9 RESIGNATION OF DIRECTORS AND OFFICERS. The Company shall have
delivered to Lithia the signed resignation of all directors and officers of
the Company.
10.10 HART-SCOTT-RODINO WAITING PERIOD. The applicable waiting period
under the HSR Act, and the regulations promulgated thereunder, shall have
expired.
10.11 ADDITIONAL INFORMATION. The Company and the Shareholders shall
have furnished to Lithia and Lithia's counsel such additional information,
certificates, and other documents as Lithia shall have reasonably requested.
10.12 AUDIT. Moss Adams shall have advised they are prepared, promptly
after the Audit Date, and prior to Closing, to deliver to Lithia, the Company
and the Shareholders the Audited Acquisition Balance Sheet.
10.13 LEASE AGREEMENT. Lithia shall have received the executed Lease
Agreement set forth in Exhibit 6.2.1, including the consent of any unrelated
third party lessor to the extent such consent may be required under the terms
of any of the Company's real property leases.
10.14 APPROVAL OF LITHIA AS THE DEALER. Lithia shall have been approved
as the dealer by the manufacturers represented by the Company without
restrictions or requirements deemed unacceptable by Lithia at its sole
discretion.
10.15 RELEASE OF INDEBTEDNESS. The Company shall have been released
from the In-House Contract Liabilities, the Business Real Property
Encumbrances, the guaranties executed by the Company, guarantying the
indebtedness of Cougar Investments, Inc., in favor of Bank of America and
Washington Trust Bank, any other guaranty for which the Company may be
obligated, and the Dollar Rent-a-Car guaranty or, in lieu of such release,
Dollar Rent-a-Car, and its shareholders, and the Shareholders shall provide
Lithia with a hold harmless agreement, reasonably acceptable to it, and shall
thereafter diligently pursue release of such guaranty as a post closing
matter.
10.16 ENVIRONMENTAL REPORT. Lithia shall have received from the Company
a Phase I environmental report, showing that the Business Real Property
complies with state and federal environmental regulations, rules and statutes.
10.17 CONSENTS. Lithia shall have received the waiver or consent of its
Lenders under its Credit Facility to its assumption of the Company's
obligations with respect to the financing of the Lease Contract Receivable
and the obligations of the Company with respect to the Recourse Contracts,
and the Company's lender's shall have consented to such assumption by Lithia.
11. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY AND THE SHAREHOLDERS
The obligation of the Shareholders and the Company to effect the
transactions contemplated by this Agreement is subject to the satisfaction
on or prior to the Closing Date of the following conditions, each of which
may be waived by the Company or the Shareholders:
11.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LITHIA. All
representations and warranties of Lithia contained in this Agreement shall be
true and correct in all material respects as of the Closing Date with the
same effect as though such representations and warranties were made on the
Closing Date, except to the extent that such representations and warranties
expressly relate to an earlier date, and Lithia shall have performed and
complied with all of the covenants and agreements and satisfied all the
conditions required by this Agreement to be performed, complied with or
satisfied by Lithia on or prior to the Closing Date. Lithia must have
delivered to the Company a certificate dated as of the Closing Date
certifying that this condition has been fulfilled.
11.2 DELIVERY OF PURCHASE PRICE. Lithia shall have delivered the
Purchase Price provided for in Section 5.
11.3 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates and other documents required to be delivered to the Company and
the Shareholders in connection with this Agreement shall be satisfactory in
all reasonable respects to the Company, the Shareholders and their respective
counsel.
11.4 ADDITIONAL INFORMATION. Lithia shall have furnished to the Company
and the Company's counsel such additional information, certificates, and
other documents as the Company shall have reasonably requested.
11.5 LEASE AGREEMENT. Lithia shall have executed the Lease set forth
in Exhibit 6.2.
11.6 BOARD APPROVAL. The Board of Directors of Lithia shall have
approved the consummation of the transactions contemplated by this Agreement.
11.7 EMPLOYMENT CONTRACTS. Lithia shall have executed and delivered
employment contracts with Phil S. Camp and Thomas Leyda in the form set forth
in Exhibit 6.3.3.
11.8 INSURANCE POLICIES. Lithia shall have named Shareholder's as
additional insured under its general liability policy of insurance with
respect to the Company, and any successor thereto.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made in this Agreement or in any
certificate, exhibit, document, or instrument furnished in connection with
this Agreement shall survive the Closing. Notwithstanding any investigation
or examination conducted before or after the Closing or the decision of any
party to complete the Closing, each party shall be entitled to rely upon the
representations and warranties set forth in this Agreement; provided,
however, no party shall be entitled to rely upon any representation or
warranty that such party actually knows, as of the Final Closing Date, to be
untrue in any material respect. Under no circumstances, however, shall the
representations and warranties contained in this Agreement be legally
enforceable for more than six (6) years from the date of Closing.
13. INDEMNIFICATION
13.1 INDEMNITY BY SHAREHOLDERS. The Shareholders agree, jointly and
severally, to indemnify, to defend and hold harmless the Company and Lithia
and its respective successors and assigns (the "Lithia Indemnified Parties")
from and against any Claims. The Shareholders agree that all valid Claims
may be set off against the outstanding balance of any note in accordance with
the terms of the promissory note set forth in Exhibit 5.2.
Claims, as used in this Section 13.1, include any claims, damages,
liabilities, penalties, actions, suits, proceedings, demands, assessments,
costs and expenses, including reasonable attorneys fees and expenses of
investigation, incurred by Lithia Indemnified Parties arising from or related
to (i) any breach of any representation, warranty, covenant or agreement made
by the Company or the Shareholders in this Agreement, (ii) any debts,
liabilities, or obligations of any nature (whether absolute, accrued,
contingent, or otherwise and whether due or to become due) of the Company
occurring or existing before Closing that are not reflected in the Balance
Sheet, except as may be set forth on Schedule 13.1 attached hereto, if any,
to the extent payment of the same is not paid by a policy of insurance held
by the Lithia Indemnified Parties (iii) any condition, activity or event,
caused in whole or in part, or engaged in, by the Company and that existed or
occurred prior to the Audit Date, except to the extent the same is set forth
on Schedule 13.1 attached hereto, if any, to the extent payment of the same
is not paid by a policy of insurance held by the Lithia Indemnified Parties,
(iv) the infringement or claimed infringement by the Company on the rights or
claimed rights of any person or entity under or in respect to any
intellectual property, (v) any payment required of the Company after the
Audit Date under the Recourse Contract Liabilities, and (vi) any tax audit
of the Company by any federal, state, or local taxing authority for any time
period prior to the Closing Date.
13.2 Indemnity by Lithia. Lithia agrees to indemnify, defend and hold
harmless the Shareholders, and their respective successors and assigned (the
"Camp Indemnified Parties"), from and against any Claims. In the event the
Camp Indemnified Parties have a valid Claim against Lithia, payment of such
Claim shall constitute additional rent under the Lease Agreement
(notwithstanding the fact that the Landlord under the Lease Agreement is an
entity owned by Shareholders, and not Shareholders in their individual
capacities).
Claims, as used in this Section 13.2, include any claims, damages,
liabilities, penalties, actions, suits, proceedings, demands, assessments,
costs and expenses, including reasonable attorneys fees and expenses of
investigation, incurred by the Camp Indemnified Parties arising from or
related to (i) any breach of any representation, warranty, covenant or
agreement made by Lithia in this Agreement (unless the Camp Indemnified
Parties knew or had reason to know of such breach prior to the Closing
Date), except to the extent payment of the same is not paid by a policy of
insurance held by the Camp Indemnified Parties; (ii) any condition, activity
or event, caused in whole or in part, or engaged in by Lithia, its employees,
invitees or agents, on or after the Closing Date, except to the extent
payment of the same is paid by a policy of insurance held by the Camp
Indemnified Parties; (iii) any failure to pay, after the Closing Date, any
Assumed Liability.
13.3 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
13.3.2. Promptly upon receipt by either a Lithia Indemnified
Party or a Cam Indemnified Party (an "Indemnified Person") of notice of any
Claim, against it, such Indemnified Person will, if a Claim is to be made
against it or them, give notice to Lithia or Shareholders,
respectively, (the Indemnifying Party will not relieve the Indemnifying Party
of any liability that it may have to any Indemnified Person, except to the
extent that the Indemnifying Party demonstrates that the defense of such
action is prejudiced by the Indemnifying Party's failure to give such notice.
13.3.2 If any Claim referred to in Section 13.3.4 is brought
against an Indemnified Person and the Indemnified Person gives written notice
to the Indemnifying Party of such claim, the Indemnifying Party may, at its
option, assume the defense of such claim with counsel satisfactory to the
Indemnified Person and, after written notice from the Indemnifying Party to
the Indemnified Person of its election to assume the defense of such claim,
the Indemnifying will not, as long as it diligently conducts such defense, be
liable to the Indemnified Person under this Section 13 for any fees of other
counsel or any other expenses with respect to the defense of such claim,
subsequently incurred by the Indemnified Person in connection with the
defense of such claim, other than reasonable costs of investigation. The
Indemnified Party shall at all times have the right to fully participate in
the defense of a third party claim or liability at its own expense directly
through counsel; PROVIDED, HOWEVER, that if the names parties to the action
or proceeding include both the Indemnifying Party and the Indemnified Party,
and the Indemnified Party is advised that representation of both parties by
the same counsel would be inappropriate under the applicable standards of
professional conduct, the Indemnified Party may engage in separate counsel at
the expense of the Indemnifying Party. If the Indemnifying Party assumes the
defense of a claim; (i) no compromise or settlement of such claims may be
effected by the Indemnifying Party without the Indemnified Person's consent
unless (a) there is no finding or admission of any violation of any legal
requirements or any violation of the rights of any person, (b) the sole
relief of provided is monetary damages that are paid in full by the
Indemnifying Party and (i) the Indemnified Party is fully released from any
and all damages relating to the claim in question; and (ii) the Indemnified
Person will have not liability with respect to any compromise or settlement
of such claims effected without its consent. If notice is given to an
Indemnifying Party of any claim and the Indemnifying Party does not, within
twenty (20) days after the Indemnified Person's notice is given, give notice
to the Indemnified Person of its election to assume the defense of such
claim, the Indemnifying Party will be bound by any determination made in such
proceeding or any compromise or settlement effected by the Indemnified Person.
13.3.3 Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a claim
may adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Person may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise, or settle such claim, but
the Indemnifying Party will not be bound by any determination of a claim so
defended or any compromise or settlement effected without its consent (which
may not unreasonably withheld).
13.4 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A Claim for
Indemnification for any matter not involving a third-party claim shall be
asserted by written notice to the Indemnifying Party from whom
indemnification is sought.
13.5 ENVIRONMENTAL INDEMNIFICATION. With respect to any existing or
potential liability arising out of any condition, activity, or event existing
or occurring prior to the Closing Date with
respect to any property comprising part of the properties or assets of the
Company for which there is any material risk of liability to any governmental
entity or agency or any other person or entity for the violation of any
Environmental Laws or for which there may be liability in tort, or otherwise,
and which is related to or arises out of an environmental condition, the
Shareholders agree to indemnity, defend, and hold harmless Lithia Indemnified
Parties from and against all claims, damages, liabilities, penalties,
actions, suits, proceedings, demands, assessments, costs and expenses,
including reasonable attorneys fees and expenses of investigation, incurred
by Lithia Indemnified Parties as a result of such environmental condition and
further including, if necessary, the costs and expenses of any remediation,
transportation, incineration, treatment, or other necessary and appropriate
disposition or mitigation of such environmental condition. In the event that
any claim relating to a violation of Environmental Laws shall arise, the
Shareholders, upon notice from Lithia, shall have the first right to address
and implement remediation of the environmental condition. Provided, however,
nothing herein shall in any manner diminish or otherwise affect the
environmental indemnity obligations of Lithia as set forth in the Lease
Agreement.
13.6 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any other
indemnification provisions in this Agreement, or any contractual, statutory,
equitable or common law remedy any party may have for the breach of any
representation, warranty or covenant. In the event that an indemnity Claim
is made by or against either party hereto, both parties agree that venue for
any such Claim shall lie in King County, Washington.
14. HART-SCOTT-RODINO NOTIFICATION
Prior to the Closing Date, the parties shall, if and to the extent
required by law, file all reports or other documents required or requested by
the FTC or the Department of Justice under the HSR Act, and all regulations
promulgated thereunder, concerning the transactions contemplated by this
Agreement, and comply promptly with any request by the FTC or the Justice
Department for additional information concerning such transactions, so that
the waiting period specified in the HSR Act will expire an soon as reasonably
possible after the execution and delivery of this Agreement. The parties
agree to furnish to one another such information concerning Lithia, the
Company, and the Shareholders as the parties need to perform their
obligations hereunder. Lithia and the Company agree to share the filing fees
and costs due governmental agencies with regard to the HSR Act notification
and compliance. The Company's share of such costs, if not otherwise paid or
reserved for, shall be reflected in the Balance Sheet. Notwithstanding the
foregoing, each party shall pay the attorneys fees of its counsel incurred in
connection with HSR Act notification and compliance.
15. TERMINATION.
15.1 MUTUAL CONSENT. This Agreement may be terminated by the written
consent of the parties.
15.2 BY LITHIA. This Agreement may be terminated by written notice of
termination given by Lithia to the Company and the Shareholders if a material
default should be made by the Company or the Shareholders in the observance
of or in the due and timely performance by the Shareholders or the Company of
any of the agreements and covenants herein contained, or if there shall have
been a material breach by the Shareholders or the Company of any of the
warranties and representations herein contained, or if the conditions of this
Agreement to be complied with or performed by the Shareholders or the Company
at or before Closing shall not have been complied with or performed at the
time required for such compliance or performance and such noncompliance or
nonperformance shall not have been waived by Lithia.
15.3 BY THE SHAREHOLDERS OR THE COMPANY. This Agreement may be
terminated by written notice of termination given by the Shareholders or the
Company to Lithia if a material default should be made by Lithia in the
observance of or in the due and timely performance by Lithia of any
agreements and covenants of Lithia herein contained, or if there shall have
been a material breach by Lithia of any of the warranties and representations
of Lithia, or if the conditions of this Agreement to be complied with or
performed by Lithia at or before Closing shall not have been complied with or
performed at the time required for such compliance or performance and such
noncompliance or nonperformance shall not have been waived by the Company or
the Shareholders.
Further, Shareholders shall have the right to terminate this Agreement
if the Balance Sheet should result in adjustments not otherwise anticipated
by or provided for in this Agreement, in a net amount of more than $400,000,
unless Lithia shall advise the Shareholders that it is prepared to proceed
with Closing at a Purchase Price which limits the net adjustments to
$400,000.
16. DISPUTE RESOLUTION.
16.1 MEDIATION. The parties hope there will be no disputes arising out
of this transaction. To that end, each commits to cooperate in good faith
and to deal fairly in performing its duties under this Agreement in order to
accomplish their mutual objectives and avoid disputes. But if a dispute
arises, the parties agree to resolve all disputes pursuant to binding
arbitration as provided herein. The parties confirm that by agreeing to
binding arbitration, they intend to give up their right to have any dispute
decided in court by a judge or jury.
16.2 BINDING ARBITRATION. Any claim between the parties arising out of
or relating to this Agreement shall be determined by arbitration in Seattle,
Washington (or some other place as the parties may agree). If either party
demands a total award greater than $250,000, including interest, attorneys'
fees and costs, then either party may require that there be three (3) neutral
arbitrators. If the parties cannot agree on the identity of the
arbitrator(s) within ten (10) days of the arbitration demand, the
arbitrator(s) shall be selected by the administrator of the American
Arbitration Association (AAA) office having jurisdiction over Seattle,
Washington, from its Large, Complex
Case Panel (or have similar professional credentials). Whether a claim is
covered by this Agreement shall be determined by the arbitrator(s). All
statutes of limitations which would otherwise be applicable shall apply to
any arbitration proceeding hereunder.
16.3 PROCEDURES. The arbitration shall be conducted in accordance with
the AAA Commercial Arbitration Rules with Expedited Procedures (the
"Arbitration Rules"). To the extent permitted by the Arbitration Rules,
and as may be shown to be necessary to ensure a fair hearing, the
arbitrator(s) may authorize limited discovery, and may enter pre-hearing
orders regarding (without limitation) scheduling, document exchange, witness
disclosure and issues to be heard.
16.4 HEARING AND AWARD. The arbitrator(s) shall schedule any required
hearing within the time frames required by the Arbitration Rules. The
arbitrator(s)'s written decision shall be made not later than fourteen (14)
calendar days after the hearing. The parties have included these time limits
in order to expedite the proceeding, but they are not jurisdictional, and the
arbitrator(s) may for good cause afford or permit reasonable extensions or
delays, which shall not affect the validity of the award.
16.5 VALUATION OF USED CARS AND OTHER PURCHASE PRICE ADJUSTMENTS. If a
dispute arises with respect to the value of the used vehicles set forth in
Section 3.2.2, the parties agree to sell the vehicles whose value is in
dispute at wholesale auction, with the sale priced received at auction
becoming the value of any such vehicle.
17. GENERAL PROVISIONS
17.1 ENTIRE AGREEMENT. This Agreement, together with those agreements
referred to herein, contains and constitutes the entire agreement between the
parties regarding the subject matter hereof and supersedes all prior
agreements and understandings between the parties relating to the subject
matter of this Agreement. There are no agreements, understandings,
restrictions, warranties or representations between the parties relating to
the subject matter hereof other than those set forth in this Agreement except
for the Lease Agreement, the Employment Agreements of Tom Leyda and Phil S.
Camp, and the Servicing Agreement.
17.2 EXHIBITS. The exhibits attached are made a part of this Agreement
by this reference.
17.3 THIRD PARTY CONSENTS. The Shareholders, the Company and Lithia
mutually agree to cooperate and use reasonable, good faith efforts to prepare
all documentation, to effect all filings and to obtain all permits, consents,
approvals, and authorizations of all third parties and governmental bodies as
may be necessary to consummate the transactions contemplated by this
Agreement.
17.4 FURTHER ACTIONS. From time to time, as and when requested by any
party hereto, the other party shall execute and deliver, or cause to be
executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
17.5 PUBLICITY. The parties hereto agree that no public release or
announcement concerning the terms of the transactions contemplated by this
Agreement shall be issued by any party without the prior written consent of
the other party (which consent shall not be unreasonably withheld), except as
such release or announcement may be required by law.
17.6 AMENDMENT. This Agreement may not be amended, modified, or
terminated except by an instrument in writing signed by all parties to this
Agreement.
17.7 CONSTRUCTION. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter gender thereof or to the
plurals of each, as the identity of the person or persons or the context may
require. The descriptive headings contained in this Agreement are for
reference purposes only and are not intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision
contained in this Agreement.
17.8 INVALIDITY. If any provision contained in this Agreement shall
for any reason be held to be invalid, illegal, void or unenforceable in any
respect, such provision shall be deemed modified so as to constitute a
provision conforming as nearly as possible to such invalid, illegal, void or
unenforceable provision while still remaining valid and enforceable; and the
remaining terms or provisions contained herein shall not be affected thereby.
17.9 PAYMENT OF EXPENSES. Whether or not the transactions contemplated
by this Agreement are consummated, each of the parties to this Agreement
shall be responsible for its own costs and expenses incurred in connection
with the preparation and negotiation of this Agreement and the
transactions-contemplated hereby.
17.10 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. Lithia
may assign its rights under this Agreement to a related entity, and Lithia
and its assignee shall be fully obligated, responsible and liable for the
performance of Lithia's obligations hereunder regardless of any such
assignment. The Company and the Shareholders may not assign any of their
rights or delegate any of their obligations hereunder. Any assignment in
violation hereof shall be void.
17.11 ATTORNEYS' FEES. In the event any party instigates litigation or
any proceeding to enforce or protect its rights under this Agreement, the
party substantially prevailing in any such litigation or proceeding shall be
entitled, in addition to all other relief, to reasonable attorneys fees,
out-of-pocket costs and disbursements relating to such litigation or
proceeding.
17.12 NOTICES. All notices and other communications hereunder shall be
(I) in writing, dated with the current date of such notice, and signed by the
party giving such notice, and (ii) mailed, postpaid, registered or certified,
return receipt requested, addressed to the party to be notified, or delivered
by personal delivery or by overnight courier. Notice shall be deemed given
when received
by the party to be notified or when the party to be notified refuses to
accept delivery of the notice. The initial addresses of the parties shall be
as follows:
If to Lithia:
Lithia Motors, Inc.360 E. JacksonMedford, Oregon 97501Attn:
Sidney B. DeBoer
With a copy to:
Foster Pepper & Shefelman LLP101 SW Main Street, 15th
FloorPortland, Oregon 97204Attn: Kenneth E. Roberts
If to the Company:
Camp Automotive, Inc.101 East MontgomerySpokane, Washington
99207Attn: Phil S. Camp
With a copy to:
Witherspoon, Kelley, Davenport & Toole, P.S.W. 428 Riverside
Avenue, Suite 1100Spokane, WA 99201Attn: Michael D. Currin, Esq.
If to a Shareholder, to such Shareholder at:
Julie A. McKayBox 1701Park City, Utah 84060
Phil S. Camp
4123 South Regal
Spokane, Wa 99223
Jerry W. Camp, Jr.
1107 E. 54th Ave.
Spokane, WA 99223
Chris E. Camp
4512 South Nappa
Spokane, WA 99223
Travis W. Camp
c/o Phil S. Camp
4123 South Regal
Spokane, WA 99223
Carter B. Camp
c/o Gretchen Rosoff
5407 W. Mercer Way
Mercer Island, WA 98040
The parties hereto shall have the right from time to time to change
their respective addresses by written notice to the other parties.
17.13 DEFINITION OF KNOWLEDGE. As used in this Agreement, Lithia's, the
Company's and the Shareholders' "knowledge" shall mean the actual knowledge
of Lithia, the Shareholders, the Company, (through its Board of Directors,
and Tom Leyda, only), respectively.
17.14 TIME IS OF THE ESSENCE. Time shall be of the essence with respect
to this Agreement and the consummation of the transactions contemplated
hereby.
17.15 REMEDIES. Except for binding arbitration, as provided in Section
16 of this Agreement, which is intended to the exclusive remedy for
resolution of disputes between the parties under this Agreement, and except
for the indemnity procedures set forth in Section 13, which are intended to
be the exclusive method by which any party may seek indemnity for a Claim,
none of the other remedies provided for in this Agreement shall be the
exclusive remedy of either party for a breach of this Agreement. Except as
otherwise limited herein, the parties hereto shall have the right to seek any
other remedy at law or in equity in lieu of or in addition to any remedies
provided for in this Agreement.
17.16 SURVIVAL OF OBLIGATIONS. To the extent necessary to carry out the
terms and provisions of this Agreement, the obligations and rights arising
from or related to this Agreement shall survive the Closing and shall not be
merged into the various documents executed and delivered at the time of the
Closing.
17.17 WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach
or default of the same or similar nature.
17.18 GOVERNING LAW. This Agreement shall be construed, enforced, and
governed in accordance with the laws of the State of Oregon.
17.19 VENUE. The obligations of the parties to this Agreement are
performable, and venue for any legal action arising out of this Agreement
shall lie in Multnomah County, Oregon.
17.20 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LITHIA MOTORS, INC.
By:
-------------------------
Title:
CAMP AUTOMOTIVE, INC.
By:
-------------------------
Title: President
SELLING SHAREHOLDERS:
-----------------------------
PHIL S. CAMP
-----------------------------
JERRY W. CAMP, JR.
-----------------------------
JULIE A. CAMP MCKAY
-----------------------------
CARTER B. CAMP
-----------------------------
CHRIS E. CAMP
-----------------------------
TRAVIS W. CAMP