Document:

spni_ex101.htm

EXHIBIT 10.1
 
SHARE EXCHANGE AGREEMENT
 
THIS AGREEMENT is made on February 5, 2016 between FV Corporation, at 5 Washington Street, Due West, South Carolina, 29639 (hereinafter "FV" or "Seller") and Sputnik Enterprises, Inc. at 3956 Town Center Blvd, Suite 562, Orlando, Florida 32837 (hereinafter "SPNI," or "Buyer,"). 
 
RECITALS
 
SPNI desires to acquire all issued and outstanding shares of common stock of FV, and FV and FV Shareholders wish to have all issued and outstanding shares of common stock of FV acquired by SPNI on the terms and conditions set forth in this Agreement by way of an exchange of shares (the "Exchange").
 
The boards of directors of both SPNI and FV have determined that it is in the best interest of the parties for SPNI to acquire all issued and outstanding shares of common stock of FV pursuant to a share exchange transaction.
 
NOW, THEREFORE, in consideration of the terms, conditions, agreements and covenants contained herein (the receipt and sufficiency of which are acknowledged by each party), and in reliance upon the representations and warranties contained in this Agreement, the parties hereto agree as follows:
 
I. RECITALS; TRUE AND CORRECT; PURPOSE OF TRANSACTION
 
The above stated recitals are true and correct and are incorporated into this Agreement.
 
II. PURCHASE AND SALE
 
2.1 Share Exchange. Subject to all the terms and conditions of this Agreement, at the Closing, FV agrees to receive from SPNI, and SPNI agrees to issue to the shareholders of the Seller (each, a "Shareholder") an aggregate of 45,170,085 shares of Common Stock ("SPNI Common Stock") and such number of shares of Series A Convertible Preferred Stock that convert into an additional 45,170,085 shares of Common Stock of SPNI ("SPNI Preferred Stock") (the SPNI Common Stock and the SPNI Preferred Stock collectively, the "Share Consideration") in exchange for the transfer of all of the issued and outstanding shares of the Common Stock of FV ("FV Shareholder's Shares") to SPNI. Each FV Shareholder's Share that is issued and outstanding immediately before the Closing shall entitle the holder thereof to receive one share of SPNI Common Stock and 0.0001 shares of SPNI Preferred Stock which equates to one share of common stock (together, the "Exchange Ratio"), such that when all shares of Common Stock and SPNI Preferred Stock have been issued under this Agreement and all shares Preferred Stock issued under this Agreement have been converted to common stock, an aggregate of 90,340,170 shares of SPNI Common Stock shall have been issued to FV's Shareholders under this Agreement. Notwithstanding the foregoing, prior to Closing, the parties shall adjust the number of FV Shareholder's Shares to be transferred to SPNI to such number of shares of FV Common Stock as is actually issued and outstanding as of the Closing Date and the aggregate number shares of SPNI Common Stock and SPNI Preferred Stock to be issued to the FV Shareholders shall be adjusted accordingly pursuant to the Exchange Ratio.
 
	 
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2.2 Closing. The parties shall hold the Closing as soon as reasonably practical following receipt of the approval described in Section 3.5 below (the "Closing" or "Closing Date"), at 11:00 A.M., local time, at the offices, or at such other time and place as the parties may agree upon. 
 
2.3 Delivery of Certificates in Escrow. Each FV Shareholder shall deliver to FV a duly and validly executed Stock Power in blank for its certificates evidencing all of such Shareholder's FV Shareholder Shares ("Certificates"). The Stock Powers will be held in escrow by FV until the Closing at which time FV shall deliver the Certificates and Stock Powers to SPNI against delivery to FV Shareholders of the Share Consideration that is due at Closing. FV shall use commercially reasonable efforts to cause its Shareholders to deliver their Stock Powers within thirty (30) days of the date of the approval set forth in Section 3.5 below, however, SPNI acknowledges and agrees that FV shall deliver the Stock Powers and Certificates to SPNI promptly after they are received. For the avoidance of doubt, an FV Shareholder must surrender a duly executed Stock Power pursuant to this Section 2.3 before such Shareholder shall be entitled to receive stock certificates from SPNI evidencing the applicable Share Consideration.
 
2.4 Schedules. If a Schedule referred to in Article IV or V is not attached to this Agreement, FV or SPNI, respectively, is representing that there is no information required to be disclosed on such Schedule.
 
III. CONDUCT OF BUSINESS PENDING CLOSING
 
FV and SPNI covenant that between the date hereof and the date of the Closing:
 
3.1 Access to FV. FV shall (a) give to SPNI and to SPNI's counsel, accountants and other representatives reasonable access, during normal business hours, throughout the period prior to the Closing Date, to all of the books, contracts, commitments and other records of FV and shall furnish SPNI during such period with all information concerning Seller that SPNI may reasonably request; and (b) afford to SPNI and to SPNI's representatives, agents, employees and independent contractors reasonable access, during normal business hours, to the properties of FV, in order to conduct inspections at SPNI's expense to determine that FVFV is operating in compliance with all applicable federal, state, local and foreign statutes, rules and regulations, and all material building, fire and zoning laws or regulations and that the assets of FV are substantially in the condition and of the capacities represented and warranted in this Agreement; provided, however, that in every instance described in (a) and (b), SPNI shall make arrangements with FV reasonably in advance and shall use its best efforts to avoid interruption and to minimize interference with the normal business and operations of FV. Any such investigation or inspection by SPNI shall not be deemed a waiver of, or otherwise limit, the representations, warranties or covenants of FV contained herein.
 
3.2 Conduct of Business. During the period from the date hereof to the Closing Date, FV shall use reasonable efforts, to the extent such efforts are within FV Shareholder's control, to cause its business to be operated in the usual and ordinary course of business and in material compliance with the terms of this Agreement. 
 
	 
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3.3 Exclusivity to SPNI. Until either this exchange agreement is terminated or Closing, FV agrees not to solicit or accept any other inquiries, proposals or offers to purchase or otherwise acquire, in a exchange transaction or another type of transaction, the business of FV or the shares of capital stock of FV. Any person inquiring as to the availability of the business or shares of capital stock of FV or making an offer therefor shall be told that FVFV is bound by the provisions of this Agreement. Seller as well as its officers, directors, representatives or agents further agree to advise SPNI promptly of any such inquiry or offer. 
 
3.4 Access to SPNI. SPNI shall (a) give to FV and to FV's counsel, accountants and other representatives reasonable access, during normal business hours, throughout the period prior to the Closing Date, to all of the books, contracts, commitments and other records and shall furnish Seller during such period with all information concerning SPNI that FV may reasonably request; and (b) afford to FV and to FV's representatives, agents, employees and independent contractors reasonable access, during normal business hours, to the properties in order to conduct inspections at FV Shareholder's expense to determine that SPNI is operating in compliance with all applicable federal, state, local and foreign statutes, rules and regulations, and all material building, fire and zoning laws or regulations and that the assets are substantially in the condition and of the capacities represented and warranted in this Agreement; provided, however, that in every instance described in (a) and (b), FV shall make arrangements with SPNI reasonably in advance and shall use its best efforts to avoid interruption and to minimize interference with the normal business and operations . Any such investigation or inspection by FV shall not be deemed a waiver of, or otherwise limit, the representations, warranties or covenants contained herein.
 
3.5 Approval. As promptly as reasonably practicable following the date of this Agreement, FV shall take all action reasonably necessary in accordance with South Carolina law and its Organizational Documents to secure the required approval and adoption of this Agreement, including all requisite shareholder approval. 
 
3.6 Mutual Cooperation. The initial press release relating to this Agreement shall be a joint press release. Thereafter, until the date of Closing, each of FV and SPNI agree to provide 24-hour pre-notification to the other party of any news releases or regulatory filings which the party proposes to issue or file and shall agree to consider any reasonable recommendation or suggestion of the other party with respect thereto. SPNI shall be permitted to make announcements of FV's newsworthy activities provided the consent of FV is obtained, which consent shall not be reasonably withheld. Each party shall also provide the other party with notice a reasonable time in advance of, and shall permit a representative of the other party to review or participate in, any communications, meetings, or correspondence relating to investor relations matters, including matters relating to public offering activities which are expected to take place following Closing. 
 
	 
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IV. REPRESENTATIONS AND WARRANTIES OF FV
 
FV represents and warrants to SPNI as follows, with the knowledge and understanding that SPNI is relying materially upon such representations and warranties:
 
4.1 Organization and Standing. FV is a company duly organized, validly existing and in good standing under South Carolina law. FV has all requisite corporate power to carry on its business as it is now being conducted and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary under applicable law, except where the failure to qualify (individually or in the aggregate) does not have any material adverse effect on the assets, business or financial condition of FV. The copies of the Organizational Documents of FV, as amended to date, delivered to SPNI, are true and complete copies of these documents as now in effect. Seller does not own any interest in any other corporation, business trust or similar entity. The minute book of FV contains accurate records of all meetings of its respective Board of Directors and shareholders since its incorporation.
 
4.2 Capitalization. The issued and outstanding capital stock of FV as of the date hereof is 45,170,085. All of such shares of capital stock are duly authorized, validly issued and outstanding, fully paid and non-assessable, and were not issued in violation of the preemptive rights of any person. To the Seller's knowledge, there are no subscriptions, options, warrants, rights or calls or other commitments or agreements to which FV is a party or by which it is bound, calling for any issuance, transfer, sale or other disposition of any class of securities of FV, except as known to SPNI. There are no outstanding securities convertible or exchangeable, actually or contingently, into shares of common stock or any other securities of FV. FV has no subsidiaries except as known to SPNI. 
 
4.3 Authority. This Agreement constitutes, and all other agreements contemplated hereby will constitute, when executed and delivered by Seller in accordance therewith (and assuming due execution and delivery by the other parties hereto), the valid and binding obligation of FV, enforceable in accordance with their respective terms, subject to the approval set forth in Section 3.5 above and general principles of equity and bankruptcy or other laws relating to or affecting the rights of creditors generally.
 
4.4 Properties. FV has good title to all of the Assets which it purports to own as reflected on the balance sheet included in the Financial Statements (as hereinafter defined), or thereafter acquired. FV has a valid leasehold interest in all material property of which it is the lessee and each such lease is valid, binding and enforceable against Seller, as the case may be, and, to the knowledge of FV, the other parties thereto in accordance with its terms. Neither Seller nor the other parties thereto are in material default in the performance of any material provisions thereunder. Neither the whole nor any material portion of the Assets of FV is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of FV, any such condemnation, expropriation or taking been proposed. None of the assets of FV is subject to any restriction which would prevent continuation of the use currently made thereof or materially adversely affect the value thereof. 
 
4.5 Contracts Listed; No Default. To the knowledge of FV, Seller Contracts consisting of contracts, agreements, licenses, leases, easements, permits, rights of way, commitments, and understandings, written or oral, connected with or relating in any respect to present or proposed future operations of FV that involve a commitment of over one year or over $[___], except employment or other agreements terminable at will and other agreements which, in the aggregate, are not material to the business, properties or prospects of FV) are valid, binding and enforceable by the signatory thereto against the other parties thereto in accordance with their terms. Neither Seller nor any signatory thereto is in default or breach of any material provision of FV Contracts. FV Shareholder's operation of its business has been, is, and will, between the date hereof and the Closing Date, continue to be, consistent with the material terms and conditions of FV Contracts. 
 
	 
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4.6 Litigation. Except as made known to SPNI, there is no claim, action, proceeding or investigation pending or, to the knowledge of FV, threatened against or affecting Seller before or by any court, arbitrator or governmental agency or authority which, in the reasonable judgment of FV, could have any materially adverse effect on Seller. There are no decrees, injunctions or orders of any court, governmental department, agency or arbitration outstanding against Seller. 
 
4.7 Taxes. For purposes of this Agreement, (A) "Tax" (and, with correlative meaning, "Taxes") shall mean any federal, state, local or foreign income, alternative or add-on minimum, business, employment, franchise, occupancy, payroll, property, sales, transfer, use, value added, withholding or other tax, levy, impost, fee, imposition, assessment or similar charge, together with any related addition to tax, interest, penalty or fine thereon; and (B) "Returns" shall mean all returns (including, without limitation, information returns and other material information), reports and forms relating to Taxes or to any benefit plans. FV has duly filed all Returns required by any law or regulation to be filed by it, except for extensions duly obtained. All such Returns were, when filed, and to the knowledge of FV are, accurate and complete in all material respects and were prepared in conformity with applicable laws and regulations in all material respects. FV has paid or will pay in full or has adequately reserved against all Taxes otherwise assessed against it through the Closing Date, and the assessment of any material amount of additional Taxes in excess of those paid and reported is not reasonably expected.
 
4.8 Tax Assessment. FV is not a party to any pending action or proceeding by any governmental authority for the assessment of any Tax, and no claim for assessment or collection of any Tax has been asserted against Seller that has not been paid. There are no Tax liens upon the assets (other than the lien of property taxes not yet due and payable) of FV. There is no valid basis, to the knowledge of FV, except as known to SPNI, for any assessment, deficiency, notice, 30-day letter or similar intention to assess any Tax to be issued to FV by any governmental authority.
 
4.9 Compliance with Laws and Regulations. To its knowledge, FV is in compliance, in all material respects, with all laws, rules, regulations, orders and requirements (federal, state and local) applicable to it in all jurisdictions where the business of FV is currently conducted or to which FV is currently subject which has a material impact on Seller.
 
4.10 Information. FV has furnished and will continue to furnish SPNI all information and financial statements as SPNI may reasonably request.
 
4.11 Condition of Assets. The equipment, fixtures and other personal property of FV, taken as a whole, is in good operating condition and repair (ordinary wear and tear excepted) for the conduct of the business of FV as is contemplated to be conducted.
 
4.12 No Breaches. To its knowledge, the making and performance of this Agreement and the other agreements contemplated hereby by Seller will not (i) conflict with or violate the Articles of Incorporation or the Bylaws of FV; (ii) violate any material laws, ordinances, rules or regulations, or any order, writ, injunction or decree to which FV is a party or by which Seller or any of its respective assets, businesses, or operations may be bound or affected; or (iii) result in any breach or termination of, or constitute a default under, or constitute an event which, with notice or lapse of time, or both, would become a default under, or result in the creation of any encumbrance upon any asset of FV under, or create any rights of termination, cancellation or acceleration in any person under, any Seller Contract.
 
	 
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4.13 Employees. None of the employees of FV is represented by any labor union or collective bargaining unit and, to the knowledge of FV, no discussions are taking place with respect to such representation.
 
4.14 Financial Statements. FV has furnished or will prior to SEC filing deadlines furnish to SPNI Sellers' financial statements (the "Financial Statements") for the period from inception through any necessary SEC filing date. The Financial Statements, when submitted to SPNI for inclusion in the SEC filings, will have been prepared in accordance with Regulation S-X of the SEC and, in particular, Rules 1-02 and 3-05 promulgated thereunder. The Financial Statements present fairly, in all respects, the consolidated financial position and results of operations of FV as of the dates and periods indicated, prepared in accordance with generally accepted accounting principles consistently applied ("GAAP"). Without limiting the generality of the foregoing, (i) there is no basis for any assertion against Seller as of the date of the Financial Statements of any debt, liability or obligation of any nature not fully reflected or reserved against in the Financial Statements; and (ii) there are no assets of FV as of the date of the Financial Statements, the value of which is overstated in the Financial Statements. Except as disclosed in the Financial Statements, FV has no known contingent liabilities (including liabilities for Taxes), forward or long-term commitments or unrealized or anticipated losses from unfavorable commitments other than in the ordinary course of business. FV is not a party to any contract or agreement for the forward purchase or sale of any foreign currency that is material to FV taken as a whole.
 
4.15 Absence of Certain Changes or Events. Since the date of the last financial statement furnished to SPNI, there has not been:
 
(a) Any material adverse change in the financial condition, properties, assets, liabilities or business of FV;
 
(b) Any material damage, destruction or loss of any material properties of FV, whether or not covered by insurance;
 
(c) Any material change in the manner in which the business of FV has been conducted;
 
(d) Any material change in the treatment and protection of trade secrets or other confidential information of FV;
 
(e) Any material change in the business or contractual relationship of FV with any customer or supplier which might reasonably be expected to materially and adversely affect the business or prospects of FV;
 
(f) Any agreement by Seller, whether written or oral, to do any of the foregoing; and
 
(g) Any occurrence not included in paragraphs (a) through (f) of this Section 4.16 which has resulted, or which FV has reason to believe, in its reasonable judgment, might be expected to result, in a material adverse change in the business or prospects of FV.
 
	 
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4.16 Governmental Licenses, Permits, Etc. To its knowledge, FV has all governmental licenses, permits, authorizations and approvals necessary for the conduct of its business as currently conducted ("Licenses and Permits"). All Licenses and Permits are in full force and effect, and no proceedings for the suspension or cancellation of any thereof is pending or threatened.
 
4.17 Employment Matters. FV is in material compliance with all relevant laws, rules and regulations governing employment matters such as ERISA and federal tax laws.
 
4.18 Brokers. FV has not made any agreement or taken any action with any person or taken any action which would cause any person to be entitled to any agent's, broker's or finder's fee or commission, except as disclosed to the other party, connection with the transactions contemplated by this Agreement.
 
4.19 Business Locations. The primary business location of FV is the address set forth in this Agreement.
 
4.20 Intellectual Property. "Intellectual Property" means all of FV's right, title and interest in and to all patents, trade names, assumed names, trademarks, service marks, and proprietary names, copyrights (including any registration and pending applications for any such registration for any of them), together with all the goodwill relating thereto and all other intellectual property of FV. All of the licenses, patents, trademark registrations and copyrights that are owned by Seller are valid and in full force and effect. To the knowledge of FV, it is not infringing upon, or otherwise violating, the rights of any third party with respect to any Intellectual Property. No proceedings have been instituted against or claims received by Seller, nor to its knowledge are any proceedings threatened alleging any such violation, nor does Seller know of any valid basis for any such proceeding or claim. To the knowledge of FV, there is no infringement or other adverse claims against any of the Intellectual Property owned or used by Seller. To the knowledge of FV, its use of software does not violate or otherwise infringe the rights of any third party. 
 
4.21 Warranties. All express warranties and guaranties made by Seller to third parties with respect to any services rendered by Seller have been made known to SPNI.
 
4.22 Suppliers. Seller knows and has no reason to believe that, either as a result of the transactions contemplated hereby or for any other reason (exclusive of expiration of a contract upon the passage of time), any present material supplier of FV will not continue to conduct business with FV after the Closing Date in substantially the same manner as it has conducted business prior thereto. 
 
4.23 Accounts Receivable. The accounts receivable reflected on the balance sheets included in the Financial Statements, or thereafter acquired by Seller, consists, in the aggregate in all material respects, of items which are collectible in the ordinary and usual course of business.
 
4.24 Governmental Approvals. To its knowledge, other than as set forth herein, no authorization, license, permit, franchise, approval, order or consent of, and no registration, declaration or filing by Seller with, any governmental authority, federal, state or local, is required in connection with FV and FV Shareholder's execution, delivery and performance of this Agreement. 
 
	 
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4.25 Information concerning Seller Complete. FV shall promptly provide to SPNI notice concerning any of the information concerning Seller furnished hereunder if events occur prior to the Closing Date that would have been required to be disclosed had they existed at the time of executing this Agreement. The information provided to SPNI concerning Seller, as supplemented prior to the Closing Date, will contain a true, correct and complete list and description of all items required to be set forth therein. The information provided to SPNI concerning Seller, as supplemented prior to the Closing Date, is expressly incorporated herein by reference. Notwithstanding the foregoing, any such supplement to the information in furnished by Seller following the date hereof shall not in any way affect SPNI's right not to consummate the transactions contemplated hereby as set forth herein. 
 
V. REPRESENTATIONS AND WARRANTIES OF SPNI
 
SPNI represents and warrants to FV as follows, with the knowledge and understanding that FVFV is relying materially on such representations and warranties:
 
5.1 Organization and Standing. SPNI is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada, and has the corporate power to carry on its business as now conducted and to own its assets and it not required to qualify to transact business as a foreign corporation in any state or other jurisdiction. The copies of the Articles of Incorporation and Bylaws, delivered to FV, are true and complete copies of those documents as now in effect. SPNI does not own any capital stock in any other corporation, business trust or similar entity, and is not engaged in a partnership, joint venture or similar arrangement with any person or entity. The minute books contain accurate records of all meetings of its incorporator, shareholders and Board of Directors since its date of incorporation.
 
5.2 SPNI's Authority. SPNI's Board of Directors has approved and adopted this Agreement and the Exchange. 
 
5.3 Due Execution. This Agreement constitutes, and all other agreements contemplated hereby will constitute, when executed and delivered by SPNI in accordance herewith (and assuming due execution and delivery by the other parties hereto), the valid and binding obligations, enforceable in accordance with their respective terms, subject to general principles of equity and bankruptcy or other laws relating to or affecting the rights of creditors generally.
 
5.4 No Breaches. To its knowledge, the making and performance of this Agreement (including, without limitation, the issuance of SPNI Common Shares and SPNI Preferred Shares) by SPNI will not (i) conflict with the Articles of Incorporation or the Bylaws ; (ii) violate any order, writ, injunction, or decree applicable to SPNI; or (iii) result in any breach or termination of, or constitute a default under, or constitute an event which, with notice or lapse of time, or both, would become a default under, or result in the creation of any encumbrance upon any asset under, or create any rights of termination, cancellation or acceleration in any person under, any agreement, arrangement or commitment, or violate any provisions of any laws, ordinances, rules or regulations or any order, writ, injunction or decree to which SPNI is a party or by which SPNI or any of its assets may be bound.
 
	 
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5.5 Capitalization. The authorized capital stock is as set forth in Schedule 5.5. Except for the foregoing and for the shares to be issued under the terms of this Agreement or otherwise referred to in this Agreement, there are no agreements, commitments, obligations, options, warrants or similar rights, oral or written, known to SPNI or its affiliates under which additional shares are required to be issued after the Closing. All of the outstanding SPNI Common Stock is duly authorized, validly issued, fully paid and non-assessable, and was not issued in violation of the preemptive rights of any person. The Share Consideration to be issued upon effectiveness of the Exchange, when issued in accordance with the terms of this Agreement shall be duly authorized, validly issued, fully paid and non-assessable.
 
5.6 Business. SPNI, since its formation, has engaged in no business other than as set forth in a schedule attached by SPNI to this Agreement.
 
5.7 Governmental Approval; Consents. To its knowledge, no authorization, license, permit, franchise, approval, order or consent of, and no registration, declaration or filing by SPNI with, any governmental authority, federal, state or local, is required in connection with SPNI's execution, delivery and performance of this Agreement. No consents of any other parties are required to be received by or on the part to enable SPNI to enter into and carry out this Agreement.
 
5.8 Financial Statements. To its knowledge, the financial statements of SPNI as filed with the SEC (SPNI Financial Statements") present fairly, in all material respects, the financial position as of the respective dates and the results of its operations for the periods covered in accordance with GAAP applicable to the United States. Without limiting the generality of the foregoing, (i) except as set forth in Schedule 6.13 and as follows, there is no basis for any assertion against SPNI as of the date of said balance sheets of any material debt, liability or obligation of any nature not fully reflected or reserved against in such balance sheets or in the notes thereto; and (ii) there are no assets , the value of which (in the reasonable judgment ) is materially overstated in said balance sheets. Except as disclosed therein, SPNI has no known material contingent liabilities (including liabilities for taxes), unusual forward or long-term commitments or unrealized or anticipated losses from unfavorable commitments. SPNI is not a party to any contract or agreement for the forward purchase or sale of any foreign currency.
 
5.9 Underlying Common Stock. At Closing SPNI shall not have available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series A Convertible Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Convertible Preferred Stock; and accordingly SPNI shall as soon as practical after Closing such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Articles of Incorporation and filings with the SEC. 
 
5.10 Payment of Obligations of FV. The outstanding financial obligations of FV, not to exceed $175,000, set forth on Schedule 5.10 shall, no more than 30 days following the Closing, be paid by SPNI. 
 
	 
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VI. Conditions to SPNI's Obligation to Close.
 
6.1 Conditions to Obligation. The obligation to consummate the transactions to be performed by SPNI in connection with the Closing are subject to satisfaction of the following conditions: 
 
		a. 	the representations and warranties set forth in Section 4 shall be true and correct in all material respects at and as of the Closing Date;

		 	
		b. 	FV shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;

		 	
		c. 	FV shall have procured all of the consents required in order to effect the Closing including as set forth in Section 3.5 above; no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect adversely the right to own FV Shares and to control FV, or (D) affect adversely the right of FV to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

		 	
		d. 	FV shall have delivered to SPNI a certificate to the effect that each of the conditions specified above is satisfied in all respects;

		 	
		e. 	all actions to be taken by FV in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby shall be satisfactory in form and substance to SPNI;

		 	
		f. 	FV shall have in its possession all stock certificates of the FV Shareholders to be transferred hereunder and

		 	
		g. 	SPNI may waive any condition specified in this Section 6.1 at or prior to the Closing in writing executed by SPNI.

 
6.2 Conditions to Obligation of FV. The obligations of FV to consummate the transactions to be performed by it in connection with the Closing are subject to satisfaction of the following conditions:
 
		a. 	the representations and warranties set forth in Section 5 shall be true and correct in all material respects at and as of the Closing Date;

		 	
		b. 	SPNI shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;

		 	
		c. 	no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

 
	 
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		d. 	SPNI shall have delivered to FV a certificate to the effect that each of the conditions specified above is satisfied in all respects;

		 	
		e. 	FV may waive any condition specified in this Section 6.2 at or prior to the Closing in writing executed by FV.

    
VII. MISCELLANEOUS
 
7.1 Expenses. The parties will pay for all their own expenses and costs. 
 
7.2 Survival of Representations, Warranties and Covenants. All statements contained in this Agreement or in any certificate delivered by or on behalf of FV or SPNI pursuant hereto or in connection with the transactions contemplated hereby shall be deemed representations, warranties and covenants by Seller or SPNI, as the case may be, hereunder. All representations, warranties and covenants made by FV and by SPNI in this Agreement, or pursuant hereto, shall survive through the Closing Date.
 
7.3 Nondisclosure. SPNI will not at any time after the date of this Agreement, without Seller' consent, divulge, furnish to or make accessible to anyone (other than to its representatives as part of its due diligence or corporate investigation) any knowledge or information with respect to confidential or secret processes, inventions, discoveries, improvements, formulae, plans, material, devices or ideas or know-how, whether patentable or not, with respect to any confidential or secret aspects (including, without limitation, customers or suppliers) ("Confidential Information") of FV.
 
Seller will not at any time after the date of this Agreement, without SPNI's consent (except as may be required by law), use, divulge, furnish to or make accessible to anyone any Confidential Information (other than to its representatives as part of its due diligence or corporate investigation) with respect to SPNI. The undertakings set forth in the preceding two paragraphs of this Section 8.3 shall lapse if the Closing takes place as to SPNI and Seller.
 
Any information, which (i) at or prior to the time of disclosure by either of FV or SPNI was generally available to the public through no breach of this covenant, (ii) was available to the public on a non-confidential basis prior to its disclosure by either of FV or SPNI or (iii) was made available to the public from a third party, provided that such third party did not obtain or disseminate such information in breach of any legal obligation to FV or SPNI, shall not be deemed Confidential Information for purposes hereof, and the undertakings in this covenant with respect to Confidential Information shall not apply thereto.
 
7.4 Succession and Assignments; Third Party Beneficiaries. This Agreement may not be assigned (either voluntarily or involuntarily) by any party hereto without the express written consent of the other party. Any attempted assignment in violation of this Section shall be void and ineffective for all purposes. In the event of an assignment permitted by this Section, this Agreement shall be binding upon the heirs, successors and assigns of the parties hereto. Except as expressly set forth in this Section, there shall be no third party beneficiaries of this Agreement.
 
	 
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7.5 Notices. All notices, requests, demands or other communications with respect to this Agreement shall be in writing and shall be (i) sent by facsimile transmission, (ii) sent by the federal postal service, registered or certified mail, return receipt requested, or (iii) personally delivered by a nationally recognized express overnight courier service, charges prepaid, to the addresses specified in writing by each party.
 
Any such notice shall, when sent in accordance with the preceding sentence, be deemed to have been given and received on the earliest of (i) the day delivered to such address or sent by facsimile transmission, (ii) the fifth (5th) business day following the date deposited with the United States Postal Service, or (iii) twenty-four (24) hours after shipment by such courier service. 
 
7.6 Construction. This Agreement shall be construed and enforced in accordance with the internal laws of Nevada without giving effect to the principles of conflicts of law thereof.
 
7.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same Agreement.
 
7.8 No Implied Waiver; Remedies. No failure or delay on the part of the parties hereto to exercise any right, power or privilege hereunder or under any instrument executed pursuant hereto shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All rights, powers and privileges granted herein shall be in addition to other rights and remedies to which the parties may be entitled at law or in equity.
 
7.9 Entire Agreement. This Agreement, including the Exhibits and Schedules attached hereto, sets forth the entire understandings of the parties with respect to the subject matter hereof, and it incorporates and merges any and all previous communications, understandings, oral or written, as to the subject matter hereof, and cannot be amended or changed except in writing, signed by the parties.
 
7.10 Headings. The headings of the Sections of this Agreement, where employed, are for the convenience of reference only and do not form a part hereof and in no way modify, interpret or construe the meanings of the parties.
 
7.11 Severability. To the extent that any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted here from and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect.
 
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT. 
 
Signature Page Follows.
 
	 
	12

	

	 

 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.
 
 
	  Sputnik Enterprises, Inc., a Nevada corporation
		
	 
			
	By:
	/s/ Anthony Gebbia
		
	 
	Anthony Gebbia, President
		
	 
			
	FV Corporation, a South Carolina corporation
		
	 
			
	By:
	/s/ Ron Konersmann
		
	 
	Ron Konersmann, President
		

 
	 
	13

	

	 

 
Schedule 5.5
 
SPNI is authorized to issue 100,000,000 shares of common stock with $.001 par value per share and 10,000,000 shares of Series A Convertible Preferred Stock, $.001 par value. SPNI has issued and outstanding 1,015,278 shares of common stock with $.001 par value per share and 5,200 shares of Series A Convertible Preferred Stock, $.001 par value. 
 
	 
	14

	

	 

 
Schedule 5.10
 
	Shareholder Notes
	 
	$	128,000	 

	Accounting & Tax Filings
	 
	$	5,500	 

	PCAOB Audit
	 
	$	15,000	 

	Legal
	 
	$	15,000	 

	 	 
	 
	 
	 

	Total
	 
	$	163,500	 

 
 
16ex10-1.htm

Exhibit 10.1

 

EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT

 

This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT (“Agreement”), between Lithia Motors, Inc., an Oregon corporation (“Employer”), and [________] (“Executive”), is dated as of February 4, 2016.

 

Employer and Executive agree as follows:

 

1.     Terms of Employment. The employment of Executive by Employer, or by Employer’s wholly owned subsidiary, is “at will” and Executive’s employment may be terminated at any time for any lawful reason or for no reason at all.

 

2.     Termination Related to Change in Control.

 

(a)     Definitions. 

 

i.     “Cause” for termination of employment means any one or more of the following: (A) willful misfeasance, gross negligence, or conduct involving dishonesty in the performance of Executive’s duties, as determined by the board of directors of Employer (the “Board”); (B) conviction of a crime in connection with Executive’s duties, or of any felony; (C) conduct significantly harmful to Employer, as reasonably determined by the Board, including but not limited to intentional violation of law or of any significant policy or procedure of Employer; (D) refusal or failure to act in accordance with a stipulation, requirement, or directive of the Board (provided such directive is lawful); or (E) failure to faithfully or diligently perform any of the duties of Executive’s employment which are specified in this Agreement, articulated by the Board, or are usual and customary duties of Executive’s employment, if Executive has not corrected the problem or formulated a plan for its correction with the Board (if such failure is not susceptible to immediate correction) within 30 days after notice to Executive.

 

ii.     A “Change in Control” occurs on the date: (A) Employer merges or consolidates with another entity and as a result less than 50% of the combined voting power of the resulting entity immediately after the merger or consolidation is held by persons who were the holders of Employer’s voting securities immediately before the merger or consolidation; (B) any person, entity, or group of persons or entities, other than through merger or consolidation, acquires 50% or more of the total fair market value or total voting power of Employer’s outstanding stock (excluding such a change through the transfer of Employer’s outstanding stock or interests in Lithia Holding Company, LLC to the Sidney B. DeBoer Trust or the election of Bryan DeBoer or the Sidney B. DeBoer Family Trust as the manager of Lithia Holding Company, L.L.C.) or acquires substantially all of Employer’s assets; (C) any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Employer possessing 50% or more of the total voting power of the stock of Employer (excluding such a change through the transfer of Employer’s outstanding stock or interests in Lithia Holding Company, LLC to the Sidney B. DeBoer Trust or the election of the Sidney B. DeBoer Family Trust as the manager of Lithia Holding Company, L.L.C.); or (D) a majority of the members of the Board are removed from office by a vote of Employer’s shareholders over the recommendation of the Board or replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election.

 

iii.     “Change in Control Benefits” means the Accelerated Change in Control Benefits, the Cash Change in Control Benefits and the Continuing Change in Control benefits, defined as follows:

 

A.     “Accelerated Change in Control Benefits” means (1) the portion of any outstanding Executive equity award (excluding any portion of the equity award forfeited previously in accordance with its terms) that is not vested as of the date Executive’s employment with Employer terminates (the “Separation Date”), which, for awards subject to performance criteria and for which the relevant performance period has not ended as of the Separation Date, will be (a) for awards based on performance over a single one-year period, the average percentage of similar awards earned (based on performance) in the three immediately preceding annual performance periods and (b) for all other awards, at the “target level,” if specified in the award, or at the highest possible award level if no target level is specified, and (2) the portion of all discretionary contributions made by Employer for Executive’s account under any retirement plan, including Employer’s Non-Qualified Deferred Compensation and Long-Term Incentive Plan (the “LTIP”), that is not vested as of the Separation Date;

 

 

 

 

 

 

B.     “Cash Change in Control Benefits” means (1) 24 months of base salary, based on Executive’s base salary immediately before the Change in Control (the “Base Salary Portion”) and (2) Executive’s estimated annual cash bonus amount multiplied by two (the “Cash Bonus Portion”), which estimated annual cash bonus amount shall be calculated as specified on Schedule A; and

 

C.     “Continuing Change in Control Benefits” means (1) continuing long-term care insurance premiums for 24 months after the Separation Date, and (2) continuing health insurance benefits until the earlier of (a) 24 months after the Separation Date, (b) the full COBRA period required by law, or (c) when Executive becomes eligible for employer-sponsored health insurance from a subsequent employer.

 

iv.     “Good Reason” for Executive’s resignation means (A) any one or more of the following occurs without Executive’s consent: (1) a material diminution of Executive’s base compensation (unless consistent with an across the board pay reduction for all senior management and not in excess of 20%); (2) a material change in the geographic location at which Executive must perform services for Employer; (3) a material diminution in Executive’s authority, duties or responsibilities, or (4) any action or inaction by Employer that constitutes a material breach of this Agreement; (B) Executive provides notice to Employer of the existence of the condition within 90 days of the initial existence of the condition; (C) Employer has 30 days following receipt of such notice to remedy the condition and fails to do so; and (D) Executive resigns within twelve months of such event occurring. For purposes of clause (A)(3) of the previous sentence, whether a material diminution in Executive’s authority has occurred shall be determined in part by comparing the authority and positions of the persons to whom Executive directly reports immediately prior to the Change in Control or announcement of the Change in Control with the authority and positions of the persons to whom Executive directly reports immediately after the claimed diminution in Executive’s authority. For example, if Executive was the CEO of Employer before Employer was acquired by a competing business, a material diminution in Executive’s authority would include, but not be limited to, Executive not serving as the CEO of the consolidated competing business after its acquisition of Employer.

 

(b)     Payment of Change in Control Benefits.

 

(i)     Payment. If, during the one-year period following a Change in Control, Employer terminates Executive’s employment without Cause or Executive terminates his employment for Good Reason, Employer shall, except as otherwise provided in this Agreement, pay Executive the Cash Change in Control Benefits and the Continuing Change in Control Benefits, and the Accelerated Change in Control Benefits shall vest and be settled, on the schedule specified in Section 2(b)(iv). A sample calculation of Change in Control Benefits is attached for illustrative purposes as Schedule B.

 

(ii)     Release Effective Date. Employer shall not be obligated to pay Executive the Cash Change in Control Benefits, and the Accelerated Change in Control Benefits shall not vest or be settled, unless and until (A) Executive has executed and delivered to Employer the Separation Agreement in substantially the form attached hereto as Exhibit A (the “Separation Agreement”), (B) the Separation Agreement is effective and enforceable and (C) the revocation period specified in the Separation Agreement has expired without Executive having revoked the Separation Agreement (the first date that all of the conditions set forth in (A), (B) and (C) are satisfied, the “Release Effective Date”). If the conditions specified in the previous sentence are not satisfied on or prior to the date that is 60 days after the Separation Date, Executive shall forfeit all of the Change in Control Benefits, including, for the avoidance of doubt, the Continuing Change in Control Benefits, not paid or settled such date. Cash Change in Control Benefits that otherwise would be paid before the Release Effective Date pursuant to the schedule specified in Section 2(b)(iv) shall be held and accumulated without interest and shall be paid on the next applicable payment date specified in Section 2(b)(iv) that occurs after the Release Effective Date.

 

 

 

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(iii)     Violation of Terms.

 

A.     If Executive violates any material term of this Agreement other than Section 5(a)(ii) or any material term of the Separation Agreement other than Section 9(b) of the Separation Agreement, then (1) Executive shall forfeit all Cash Change in Control Benefits and Continuing Change in Control Benefits that were not paid before the date the violation occurred and (2) Executive shall forfeit all Accelerated Change in Control Benefits that were either not vested or not settled before the date the violation occurred.

 

B.     If Executive violates Section 5(a)(ii) or Section 9(b) of the Separation Agreement, then (1) Executive shall forfeit all of the Cash Bonus Portion of the Cash Change in Control Benefits that was not been paid before the date the violation occurs and (2) Executive shall forfeit any portion of any equity award awarded to Executive on or after January 1, 2016 that, when granted, was subject to performance criteria and that was not vested (including due to time-vesting restrictions) on the Separation Date (a “Specified Accelerated Equity Award”) that was not settled before the date the violation occurred. For the avoidance of doubt, this Agreement is intended to be a “bonus restriction agreement” as defined in Section 653.295(7)(a) of the Oregon Revised Statutes, and this Agreement shall be interpreted in a manner so that the penalty imposed on Executive for competition against Employer is limited to forfeiture of profit sharing or other bonus compensation that has not yet been paid to Executive. An example of the bonus forfeiture for violating Section 5(a)(ii) or Section 9(b) of the Separation Agreement is attached for illustrative purposes as Schedule C. 

 

(iv)     Schedule for Payments, Vesting and Settlement of Change in Control Benefits. Except as otherwise provided in this Agreement:

 

A.     Beginning on Employer’s first payroll date in the calendar month following the calendar month in which Executive’s employment with Employer is terminated: (1) Employer shall pay Executive the Continuing Change in Control Benefits in accordance with Employer’s standard procedures for making such payments; and (2) Employer shall pay Executive the Base Salary Portion of the Cash Change in Control Benefits in installments over 24 months (and without interest) in accordance with Employer’s standard payroll procedures.

 

B.     Employer shall pay Executive one quarter of the Cash Bonus Portion of the Cash Change in Control Benefits on each of the dates that are six, twelve, eighteen and twenty-four months after the Separation Date.

 

C.     The Accelerated Change in Control Benefits shall vest immediately on the Release Effective Date, and the Accelerated Change in Control Benefits that are Restricted Stock Units shall be settled promptly after vesting, provided that, notwithstanding the foregoing and anything to the contrary in any other agreement between Employer and Executive, each Specified Accelerated Equity Award shall be settled in equal quarterly installments over 24 months beginning on the Release Effective Date.

 

 

 

3

 

 

3.     “Excess Parachute Payment” Restrictions; Limitation on Change in Control Benefits. If any benefit payable by Employer to Executive, including without limitation the Change in Control Benefits payable under this Agreement, either alone or together with other payments or compensation benefits to which Executive is entitled to receive from Employer, would constitute an “excess parachute payment” as defined in Section 280G of the Internal Revenue Code of 1986 (the “Code”), those benefits shall be reduced to the largest amount that will result in no portion of the benefits being subject to the excise tax imposed by Section 4999 of the Code. Any reductions to the Change in Control Benefits under this Section 3 shall be made in a manner consistent with the requirements of Section 409A of the Code, including any Internal Revenue Service guidance describing the application of Section 409A to Section 280G reductions issued after the date of this Agreement. Unless otherwise provided or allowed by such guidance, (1) any reductions shall be determined in the sole discretion of Employer, (2) the parties hereto contemplate that in exercising such discretion Employer will attempt to maximize Executive’s after-tax economic position, but in no event shall Employer be liable for failure to do so and (3) where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis.

 

4.     409A. Notwithstanding any provision of this Agreement to the contrary:

 

(a)     Specified employee. If, at the time of Executive’s “separation of service” with Employer, he or she is a “specified employee” as such terms are defined in Section 409A of the Internal Revenue Code and regulations promulgated thereunder, and one or more of the payments or benefits received or to be received by Executive pursuant to this Agreement would constitute “deferred compensation” subject to Section 409A, no such payment or benefit will be provided under this Agreement until the earlier of: (i) the date that is six months following the Separation Date, or (ii) the date of Executive’s death (such earlier date, the “Delayed Payment Date”), unless the payment or distribution is exempt from the application of Section 409A. Amounts that otherwise would be paid before the Delayed Payment Date shall be held and accumulated without interest and shall be paid on the Employer’s first regular payroll date following the Delayed Payment Date.

 

(b)     Separation from Service. To the extent that any payment or benefit provided for in this Agreement constitutes a “deferral of compensation” within the meaning of Section 409A of the Code, if such payment or benefit is payable upon Executive’s termination of employment, that payment or benefit shall be payable only upon Executive’s “separation from service” within the meaning of Section 409A(a)(2)(A)(i) of the Code.

 

(c)     Release Effective Date. To the extent that any payment or benefit provided for in this Agreement constitutes a “deferral of compensation” within the meaning of Section 409A of the Code, if the period from (y) the date of Executive’s Separation of Service to (z) the date on which Executive’s revocation rights would expire if Executive were to deliver the Separation Agreement to Employer on the 60th day following the Separation Date, begins in one calendar year and ends in the following calendar year:

 

(i)     Employer shall not pay Executive any Cash Change in Control Benefits, and the Accelerated Change in Control Benefits shall not vest or be settled, prior to Employer’s first payroll date of the calendar year following the year of the Separation Date, but in no event more than 90 days after the Separation Date, and

 

(ii)     Employer shall hold and accumulate the Cash Change in Control Benefits to which Section 4(c)(i) applies, without interest, and shall pay the Cash Change in Control Benefits, and the Accelerated Change in Control Benefits shall vest, on Employer’s first payroll date on the calendar year following the year of the Separation Date.

 

(d)     Separate Payment. Each payment of any of the Change in Control Benefits is hereby designated as a separate payment, rather than a part of a larger single payment or one of a series of payments.

 

 

 

4

 

 

(e)     Administration. The parties intend that this Agreement, to the extent possible, will be administered in accordance with Section 409A of the Code and will interpreted in a manner so that all payments hereunder do not constitute a deferral of compensation or, if so, will constitute a deferral for which the payment and other terms are compliant with Section 409A of the Code. Employer may, without Executive’s prior consent, amend this Agreement, adopt policies and procedures, or take other actions (including amendments, policies, procedures and actions with retroactive effect) that Employer determines are necessary or appropriate to (i) exempt any payment or benefit under this Agreement from the application of Section 409A, or (ii) cause any payment or benefit to comply with the requirements of Section 409A.

 

5.     Restrictive Covenants

 

(a)     The restrictive covenants set forth in this Section 5(a) shall apply to Executive only if Executive receives any Change in Control Benefits under this Agreement.

 

(i)     Non-Solicitation of Lithia Employees. Except as may be consented to in writing by Employer, during the 24-month period following the Separation Date, Executive will not, directly or indirectly, employ or offer employment to, or assist or be affiliated with any other person in employing, any persons employed by Employer or any of its subsidiaries in a Director or higher position on or after the date hereof (“Managers”), and will not, either directly or indirectly, solicit, induce, recruit or encourage any Managers to leave their employment, attempt to solicit, induce, recruit or encourage any Managers to leave their employment, or cause or encourage any person to directly or indirectly solicit, induce, recruit or encourage Managers to leave their employment, either for him or herself or for any other person or entity, unless such person has not been employed by Employer or any of its subsidiaries for at least six months.

 

For purposes of this paragraph, the terms “solicit, induce, recruit and encourage” means, direct and indirect communications of any kind and nature, directed specifically to an individual for the purpose of causing the person to leave their employment with Employer, but does not include general advertisement or notice of job opportunities within an industry. For purposes of this Agreement, the term “affiliated with” includes Executive’s ownership of 3% or more of the equity of any person, lending money to any person, or serving as an executive officer, director, manager or consultant to any person.

 

(ii)     Noncompetition. Executive will not be “affiliated with” (as that term is defined in Section 5(a)(i) above) any Competitor (as defined below) for 24 months following the Separation Date. A “Competitor” means any dealership group listed as one of the top 100 dealership groups based in the U.S., ranked according to unit sales of new vehicles, determined according to the “Top 150 Dealership Groups” report (or any successor report, the “Automotive News Report”) most recently published by Automotive News at the time of Executive’s separation of service; provided, that if the most recently published Automotive News Report is unavailable, indeterminable or was published more than eighteen months before Executive’s separation from service, a “Competitor” means (A) any automotive dealership or group of affiliated automotive dealerships with $250,000,000 or more in annual revenues for each of its prior two fiscal years and that has operations in the U.S. (each a “Competing Automotive Group”) and (B) any person or business whose focus is buying, conglomerating or otherwise acquiring any Competing Automotive Group.

 

(iii)     No Disparagement. Executive shall not take any action or make any statement that disparages Employer, its operation, business, or reputation, or any of its officers or directors, or their reputation, and shall not encourage or induce any third parties to disparage such persons (“Disparaging Acts”) for three years following the Separation Date. “Disparaging Acts” means any statement, communication or publication, oral or written, regardless of whether such statement, communication or publication is true, made about such persons or their reputation, that is vilifying and/or derogatory in nature and that reasonably would be expected to result in a negative perception of such person, or that otherwise may have a material adverse effect on such person or their reputation.

 

 

 

5

 

 

(b)     The restrictive covenants set forth in this Section 5(b) shall apply to Executive regardless of whether Executive receives any Change in Control Benefits.

 

(i)     Disclosure of Confidential Information. During Executive’s employment with Employer, Executive will have access to and become familiar with certain proprietary and confidential information of Employer and its subsidiaries not known to the public generally, or by its actual or potential competitors (“Confidential Information”). Executive acknowledges that such information constitutes valuable, special, and unique assets of Employer’s business, even though such information may not be of a technical nature and may not be protected under trade secret or related laws. 

 

“Confidential Information” means any Employer proprietary information, technical data, trade secrets or know-how, including, but not limited to research, strategic and marketing plans, product plans, products, services, markets, processes, policies, financial or other business information disclosed to, or discovered by, Executive either directly or indirectly, during Executive’s employment with Employer. Executive further understand that Confidential Information does not include any of the foregoing items which has become publicly known and made generally available through no wrongful act or omission of his/her or of others who were under confidentiality obligations as to the item or items involved or improvements or new versions thereof.

 

Executive will not, without the prior written approval from an authorized officer of Employer, directly or indirectly (i) reveal, report, publish, disclose or transfer any Confidential Information, other than information that constitutes “trade secrets” under applicable state law (“Company Trade Secrets”), to any person, firm, corporation or entity, or (ii) use any Confidential Information for any purpose or for the benefit of any person, firm, corporation or entity. Further, for so long as such information remains Company Trade Secrets under applicable state laws, Executive shall not, without the prior written approval from an authorized officer of Employer, directly or indirectly (i) reveal, report, publish, disclose or transfer any information that constitutes Company Trade Secrets to any person, firm, corporation or entity, or (ii) use any of the Company Trade Secrets for any purpose or for the benefit of any person, firm, corporation or entity.

 

(ii)     Creative Work. Executive agrees that all creative work and work product, including but not limited to all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by Executive during employment with Employer, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by Employer. Executive hereby assigns to Employer all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.

 

(iii)     Return of Property. If and when Executive ceases for any reason to be employed by Employer, Executive must return to Employer all keys, pass cards, identification cards and any other property of Employer. At the same time, Executive also must return to Employer all originals and copies (whether in hard copy, electronic or other form) of any documents, drawings, notes, memoranda, designs, devices, diskettes, tapes, manuals, and specifications which constitute proprietary information or material of Employer. The obligations in this paragraph include the return of documents and other materials that may be in Executive’s desk at work, Executive’s car or place of residence, or in any other location under Executive’s control.

 

(c)     Injunctive Relief. Executive acknowledges that it may be impossible to measure in money the damages that will accrue to Employer if Executive fails to observe the covenants in this Section 5 (the “Restrictive Covenants”); therefore, in addition to any action at law for damages, the Restrictive Covenants may be enforced by an injunction to prohibit the restricted activity or as allowed by law. Executive hereby waives the claim or defense that an adequate remedy at law is available to Employer. Nothing set forth herein shall prohibit Employer from pursuing all remedies available to it.

 

 

 

6

 

 

(d)     Reasonableness. The parties agree that this Agreement in its entirety, and in particular the Restrictive Covenants, is reasonable both as to time and as to area. The parties additionally agree (i) that the Restrictive Covenants are necessary for the protection of Employer’s business and goodwill; (ii) that the Restrictive Covenants are not any greater than are reasonably necessary to secure Employer’s business and goodwill; and (iii) that the degree of injury to the public due to the loss of the service and skill of Executive or the restrictions placed upon Executive’s opportunity to make a living with Executive’s skills upon enforcement of said restraints, does not and will not warrant non-enforcement of said restraints. The parties agree that if any portion of the Restrictive Covenants is adjudged unreasonably broad, then the parties authorize said court or arbitrator to narrow same so as to make it reasonable, given all relevant circumstances, and to enforce the same.

 

(e)     Survival. This Section 5 shall survive the termination of this Agreement.

 

6.     Dispute Resolution. If a dispute arises pursuant to this Agreement, the parties agree to resolve the disputes through binding arbitration as set forth below. The parties confirm that by agreeing to this alternate dispute resolution process, they intend to give up their right to have any dispute decided in court by a judge or jury.

 

Any and all disputes, claims, or controversies between the parties (“parties” specifically including, but not being limited to, any assignee of a party) arising out of or relating to this Agreement that are not otherwise resolved by their mutual agreement shall be submitted to final and binding arbitration before JAMS, or its successor, at JAMS’ office in Medford, Oregon (or, if none, at JAMS’ office in the United States which is closest to Medford, Oregon), pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1, et seq. The dispute shall be submitted to one Arbitrator, who shall have sole authority to determine procedural questions, such as arbitrability, standing, and real party in interest, as well as the merits of the claim.

 

Any party may commence the arbitration process by filing a written demand for arbitration with JAMS at the designated office and concurrently sending a copy to the other party or parties. The arbitration will be conducted in accordance with the provisions of JAMS’ Comprehensive Arbitration Rules and Procedures in effect when the demand is filed. The parties to the dispute, claim, or controversy will cooperate with JAMS and each other in selecting an arbitrator from JAMS’ panel of neutrals and in scheduling the arbitration proceedings. The costs and fees of JAMS and of the arbitrator shall be borne equally by the parties to the dispute, claim, or controversy. The provisions of this paragraph are specifically enforceable by any court with subject matter jurisdiction sitting in Jackson County, Oregon. The prevailing party or parties shall be entitled to an award of its reasonable attorney fees and costs through every stage of the proceeding and in obtaining and enforcing any judgment. The arbitrator shall have sole discretion to determine which is the prevailing party or parties and the amount of reasonable attorney fees and costs.

 

7.     Notices. Any notice to be delivered under this Agreement shall be given in writing and delivered, personally or by certified mail, postage prepaid, addressed to Employer or to Executive at their last known addresses.

 

8.     Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oregon.

 

 

 

7

 

 

9.     Waiver/Amendment. Except as provided in Section 4(e), this Agreement may not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

 

10.     Severability. If any provision of this Agreement shall be held by a court or arbitrator to be invalid or unenforceable, the remaining provisions shall continue to be fully effective. If any part of this Agreement is held to be unenforceable as written, it shall be enforced to the maximum extent allowed by applicable law.

 

11.     Entire Agreement. This Agreement represents the entire employment agreement between the parties regarding the subject matter hereof and together with Employer’s employee handbook and Code of Business Conduct, governs the terms of Executive’s employment. Where there is a conflict between this Agreement and the employee handbook or code, the terms of this Agreement shall govern. This Agreement supersedes any other prior oral or written employment agreement between the parties on the subject matter hereof.

 

12.     Assignment. Executive shall not assign or transfer any of Executive’s rights pursuant to this Agreement, wholly or partially, to any other person or to delegate the performance of their duties under the terms of this Agreement. Upon Executive’s death, Executive’s rights under this agreement shall inure to Executive’s heirs, executors, administrators or assigns. The rights and obligations of Employer under this Agreement shall inure to the benefit of and be binding in each and every respect upon the direct and indirect successors and assigns of Employer, regardless of the manner in which the successors or assigns succeed to the interests or assets of Employer. This Agreement shall not be terminated by the voluntary or involuntary dissolution of Employer, by any merger, consolidation or acquisition where Employer is not the surviving corporation, by any transfer of all or substantially all of Employer’s assets or by any other change in Employer’s structure or the manner in which Employer’s business or assets are held. Executive’s employment shall not be deemed terminated upon the occurrence of one of the foregoing events. In the event of any merger, consolidation or transfer of assets, this Agreement shall be binding upon and shall inure to the benefit of the surviving corporation or the corporation to which the assets are transferred.

 

13.     Survival. If any benefits provided to Executive under this Agreement are still owed or claims under the Agreement are still pending, at the time of termination of this Agreement, this Agreement shall continue in force with respect to those obligations or claims, until such benefits are paid in full or claims are resolved in full. The Restrictive Covenants and dispute resolution provisions of this Agreement shall survive after termination of this Agreement, and shall be enforceable regardless of any claim Executive may have against Employer.

 

14.     Advice of Counsel. Executive acknowledges that, in executing this Agreement, Executive has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party be reason of the drafting or preparation hereof.

 

[Remainder of this page left blank intentionally.]

 

 

 

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IN WITNESS WHEREOF, the parties have signed this Agreement effective on the day and year first above written.

 

EXECUTIVE:

 

______________________________________

 

 

LITHIA MOTORS, INC.

 

 

By: ___________________________________

 

Name:                                                                              

 

Title:                                                                                

 

 

 

 

 

 

Schedule A

 

Executive’s estimated annual cash bonus amount shall be calculated as (i) the attainment level that Executive has been deemed to have achieved in the current performance period, determined according to the following paragraph, multiplied by (ii) Executive’s target cash bonus compensation for the year in which the Change in Control occurred.

 

Executive will be deemed to have achieved in the current performance period an attainment level equal to the average of the attainment levels that Executive achieved in the prior four six-month performance periods. For example, if in the last four six-month performance periods Executive’s attainment levels were 95%, 96%, 97% and 94%, Executive will be deemed to have achieved the 95.5% attainment level in the current period. 

 

EXAMPLE 1:

 

Assumptions:

	 	
●
	
Base salary of $300,000.

	 	
●
	
Annual bonus target level is 100% of base salary.

	 	
●
	
Variable compensation criteria are set for the first half and second half of each year. 

	 	
●
	
Change in control is triggered in the first half of a year.

	 	
●
	
Attainment levels in the four prior six-month performance periods were 95%, 96%, 97% and 94% (average is 95.5%).

	 	
●
	
Payment is triggered in the first half of a year. 

 

Result: Executive’s estimated annual cash bonus amount is $300,000 x 0.955 = $286,500. The full amount payable in respect of the Cash Bonus Portion of the Cash Change in Control Benefits is $300,000 x 0.955 x 2 = $573,000.

 

EXAMPLE 2:

 

Assumptions: 

Same as above, except that the payment is triggered in the second half of a year, after first half variable compensation was earned at the 94% level and variable compensation of $141,000 has already been paid to Executive. Accordingly, attainment levels in the four prior six-month performance periods were 96%, 97%, 94% and 94% (average is 95.25%).

 

Result: Executive’s estimated annual cash bonus amount is $300,000 x 0.9525 = $285,750. The full amount payable in respect of the Cash Bonus Portion of the Cash Change in Control Benefits is $300,000 x 0.9525 x 2 =$571,500.

 

 

 

 

 

Schedule B

 

The example below does not include a calculation of potential cutbacks to, or reductions or forfeitures of, Change in Control Benefits or address the schedule for making payments of Cash Change in Control Benefits or Continuing Change in Control Benefits or accelerating the vesting or settlement of Accelerated Change in Control Benefits.

 

Assumed salary and other compensation and perquisites at the time Executive’s employment with Employer terminates:

 

	 	
1.
	
$200,000 base salary.

	 	
2.
	
Variable compensation potential for 100% of base salary, depending on first and second half performance criteria under the Employer’s Variable Compensation Plan. First half performance criteria was met at the 94% level and employee was paid $94,000; performance levels in the three previous performance periods were met at the following attainment levels: 95%, 96% and 97%.

	 	
3.
	
5,000 restricted stock units (RSUs) subject to performance and time-vesting. Performance criteria not yet met. 3,000 RSUs earned after achieving minimum performance criteria; 4,000 RSUs earned after achieving “target level” performance.

	 	
4.
	
3,000 RSUs subject to time-vesting.

	 	
5.
	
10,000 RSUs subject to long-term performance vesting criteria (performance criteria not yet met). No “target level” specified under the award.

	 	
6.
	
Unvested Employer contributions to Executive’s account under the LTIP of $100,000.

 

If, during the earlier of the one-year period following a Change in Control, Executive’s employment is terminated without Cause or Executive terminates his employment for Good Reason, the Change in Control Benefits would be comprised of: $400,000 (twice his base salary); $382,000 under the Variable Compensation Plan; 17,000 vested RSUs; $100,000 in vested Employer contributions to Executive’s account under the LTIP; and continuing health insurance benefits until the earlier of (i) 24 months after the Separation Date, (ii) the full COBRA period required by law or (iii) when Executive becomes eligible for employer-sponsored health insurance from a subsequent employer.

 

 

 

 

 

Schedule C

 

Example of Bonus Forfeiture upon Violation of Non-Competition Provisions

 

Assumed variable compensation and equity awards outstanding as of the Separation Date are as follows.

 

	 	
1.
	
Variable compensation potential for 100% of base salary ($200,000), depending on first and second half performance criteria under the Employer’s Variable Compensation Plan. First half performance criteria was met at the 94% level and employee was paid $94,000; performance levels in the three previous performance periods were met at the following attainment levels: 95%, 96% and 97%. Accordingly, Executive’s estimated annual cash bonus amount is $191,000, and the Cash Bonus Portion of the Cash Change in Control Benefits is $382,000.

	 	
2.
	
5,000 restricted stock units (RSUs) subject to performance and time-vesting; performance criteria were met and 4,000 RSUs were vested and settled prior to the Separation Date but 1,000 RSUs remain subject to time-vesting over the nine months after the Separation Date. The average percentage of similar awards earned (based on performance) in the three immediately preceding annual performance periods is 76%.

	 	
3.
	
3,000 RSUs subject to time-vesting only (no performance criteria).

	 	
4.
	
10,000 RSUs subject to long-term performance vesting criteria (performance criteria not yet met). No “target level” specified under the award.

 

Item 1 is the Cash Bonus Portion of the Cash Change in Control Benefits and (b) Item 2 and Item 4 are “Specified Accelerated Equity Awards.” The unvested portions of these awards as of the Separation Date are subject to forfeiture under the bonus restriction provisions of the Agreement until settled, in four semi-annual payments in the case of Item 1 and in eight quarterly payments in the case of Item 2 and Item 4. Item 3 is not a Specified Accelerated Equity Award because it was not subject to performance criteria when granted and therefore is not subject to forfeiture under the Agreement.

 

	 	 	
Bonus Amount Subject to Forfeiture / Months after Separation Date
	 
	 	 	
3 months
	 	 	
6 months
	 	 	
9 months
	 	 	
12 months
	 	 	
15 months
	 	 	
18 months
	 	 	
21 months
	 	 	
24 months
	 
	
Item 1
	 	$	382,000	 	 	$	382,000	 	 	$	286,500	 	 	$	286,500	 	 	$	191,000	 	 	$	191,000	 	 	$	95,500	 	 	$	95,500	 
	
Item 2 (RSUs)
	 	 	760 	 	 	 	665	 	 	 	570	 	 	 	475	 	 	 	380	 	 	 	285	 	 	 	190	 	 	 	95	 
	
Item 4 (RSUs)
	 	 	10,000	 	 	 	8,750	 	 	 	7,500	 	 	 	6,250	 	 	 	5,000	 	 	 	3,750	 	 	 	2,500	 	 	 	1,250	 

 

 

 

 

 

 

Exhibit A

 

EMPLOYMENT SEPARATION AGREEMENT AND RELEASE OF CLAIMS

 

This is a confidential agreement (the “Separation Agreement”) between you, Lithia Motors, Inc. and Lithia Support Services, Inc. (together with Lithia Motors, Inc., “Employer,” and also referred to herein as “us,” “we” or “our”). This Separation Agreement is dated for reference purposes _____________, 20___ (the “Delivery Date”), which is the date we delivered this Separation Agreement to you for your consideration. This Separation Agreement is the “Separation Agreement” described in Section 2(b)(ii)(A) of the Employment and Change in Control Agreement between you and Employer dated ____________, 2015 (the “Change in Control Agreement”). Any term capitalized but not defined in this Separation Agreement has the meaning ascribed to it in the Change in Control Agreement.

 

1.     Termination of Employment. Your employment [terminates or was terminated] on _______________, 20___ (the “Separation Date”).

 

2.     Payments. Subject to the terms and conditions in the Change in Control Agreement, we will pay, or vest and settle, the Change in Control Benefits in exchange for your agreeing to the release of claims and other terms in this Separation Agreement.

 

3.     COBRA Continuation Coverage. Your normal employee participation in Employer’s group health coverage will terminate on the Separation Date and continuation of group health coverage thereafter will be made available to you and your dependents pursuant to federal law (COBRA) and, except as provided under Section 2 of the Change in Control Agreement, at your expense as provided under COBRA.

 

4.     Termination of Benefits. Except as provided in Section 3 above, your participation in all of our employee benefit plans and programs ended on the Separation Date. Your rights under any of our pension benefit or other plans in which you may have participated will be determined in accordance with the written plan documents governing those plans.

 

5.     Full Payment. You acknowledge having received full payment of all compensation of any kind (including wages, salary, vacation, sick leave, commissions, bonuses and incentive compensation), other than the Change in Control Benefits, that you earned as a result of your employment by us.

 

6.     No Further Compensation. Any and all agreements to pay you bonuses or other incentive compensation are terminated. You understand and agree that you have no right to receive any further payments for bonuses or other incentive compensation from us. We owe you no further compensation or benefits of any kind, except as described in Sections 2, 3 and 4 above and compensation that is “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.

 

7.     Release of Claims.

 

(a)     You hereby release (i) Employer and its subsidiaries, affiliates, and benefit plans, (ii) each of Employer’s past and present shareholders, executives, directors, agents, employees, representatives, administrators, fiduciaries and attorneys, and (iii) the predecessors, successors, transferees and assigns of each of the persons and entities described in this sentence, from any and all claims of any kind, known or unknown, that arose on or before the date you signed this Separation Agreement.

 

 

 

 

 

 

(b)     The claims you are releasing include, without limitation, claims of wrongful termination, claims of constructive discharge, claims arising out of employment agreements, representations or policies related to your employment, claims arising under federal, state or local laws or ordinances prohibiting discrimination or harassment or requiring accommodation on the basis of age, race, color, national origin, religion, sex, disability, marital status, sexual orientation or any other status, claims of failure to accommodate a disability or religious practice, claims for violation of public policy, claims of retaliation, claims of failure to assist you in applying for future position openings, claims of failure to hire you for future position openings, claims for wages or compensation of any kind (including overtime claims), claims of tortious interference with contract or expectancy, claims of fraud or negligent misrepresentation, claims of breach of privacy, defamation claims, claims of intentional or negligent infliction of emotional distress, claims of unfair labor practices, claims arising out of any claimed right to stock or stock options, claims for attorneys’ fees or costs, and any other claims that are based on any legal obligations that arise out of or are related to your employment relationship with us.

 

(c)     You release and forever discharge us, our subsidiaries and affiliates, all predecessors and successors for such entities, and all officers, directors, employees, agents, shareholders, representatives and insurers of the aforementioned (herein, collectively the “Released Parties”) from any and all liability, damages or causes of action, claims, charges, judgments, or obligations of whatever kind or character you have or may have against the Released Parties, and you covenant that you shall not assist, participate or be represented in, nor institute, submit or file, or permit to be instituted, submitted or filed on the Released Parties, nor shall you voluntarily participate or cooperate in the prosecution of, any lawsuit, charge, claim, complaint or other proceeding against the Released Parties with any administrative agency, court or other forum under any federal, state or local laws or regulations, including, but not limited to, under Title VII of the Civil Rights Act of 1964, as amended; Title VII of the Civil Rights Act of 1964; claims under the Civil Rights Action of 1991; claims under the Age Discrimination in Employment Act of 1967, as amended; claims under 42 USC § 1981, 1981a, 1983, 1985, or 1988; claims under the Family and Medical Leave Act of 1993; claims under the Americans with Disabilities Act of 1990, as amended; claims under the Fair Labor Standards Act of 1938 as amended; claims under the Employee Retirement Income Security Act of 1974, as amended; the Worker Adjustment and Retraining Notification Act; the Equal Pay Act of 1963; the Consolidated Omnibus Budget Reconciliation Act of 1985; the applicable Workers’ Compensation statutes; and all amendments to each such Act as well as the regulations issued; or any other federal, state, or local laws, rules or regulations, including any insurance, human rights, civil rights, wage-hour, pension, or labor laws, rules or regulations; public policy, contract or tort laws, or any claim of retaliation under any law, or any claim arising under common law, including, but not limited to, causes of action for wrongful termination; discrimination on the basis of age, sex, race, or national origin or any other basis; intentional or negligent infliction of emotional distress; intentional or negligent misrepresentation; fraud; conspiracy to commit any act mentioned herein; breach of the employment offer letter or of any other contract (whether express or implied, oral or written); breach of the implied covenant of good faith and fair dealing; interference with business advantage; interference with prospective economic advantage; interference with contractual relationship; defamation; failure to pay compensation of any kind, or to pay equal compensation for equal work; or any other action whether cognizable in law or in equity, based upon any conduct up to and including the date of this Separation Agreement, and shall not, from any source or proceeding, seek or accept any award or settlement therefrom.

 

(d)     You knowingly and voluntarily agree to waive any rights or claims arising out of or relating to the federal Age Discrimination in Employment Act (29 USC) Section 621 et seq.) (“ADEA”) and you represent and acknowledge that you have been informed of the following: (i) you are waiving any and all rights or claims that you may have arising under the ADEA; (ii) you understand that you are not waiving any rights or claims that may arise after the date this Separation Agreement is executed; (iii) you understand that in exchange for the waiver and release of your rights under this Separation Agreement, you are receiving consideration in addition to any consideration to which you are already entitled; (iv) you understand that this Separation Agreement does not bar you from bringing a claim under ADEA challenging the validity of the ADEA waiver set forth herein; (v) you have been advised to seek legal counsel regarding this waiver, to the extent you deem necessary or appropriate, and you have had ample time to review and analyze this entire Separation Agreement, and understands its final and binding effect; and (vi) you have seven (7) days to revoke this Separation Agreement after signing and delivering it to us.

 

 

 

 2

 

 

(e)     You agree not to seek any personal recovery (of money damages, injunctive relief or otherwise) for the claims you are releasing in this Separation Agreement, either through any complaint to any governmental agency or otherwise. You agree never to start any lawsuit or arbitration asserting any of the claims you are releasing in this Separation Agreement. You represent and warrant that you have not initiated any complaint, charge, lawsuit or arbitration involving any of the claims you are releasing in this Separation Agreement. Should you apply for future employment with Employer, Employer has no obligation to consider you for future employment.

 

(f)     You represent and warrant that you have all necessary authority to enter into this Separation Agreement (including, if you are married, on behalf of your marital community) and that you have not transferred any interest in any claims to your spouse or to any third party.

 

(g)     Except as provided in Section 4 above, this Separation Agreement does not affect your rights, if any, to receive pension plan benefits, medical plan benefits, unemployment compensation benefits or workers’ compensation benefits. This Separation Agreement also does not affect your rights, if any, under agreements, bylaw provisions, insurance or otherwise, to be indemnified, defended or held harmless in connection with claims that may be asserted against you by third parties.

 

(h)     You understand that you are releasing potentially unknown claims, and that you have limited knowledge with respect to some of the claims being released. You acknowledge that there is a risk that, after signing this Separation Agreement, you may learn information that might have affected your decision to enter into this Separation Agreement. You assume this risk and all other risks of any mistake in entering into this Separation Agreement. You agree that this release is fairly and knowingly made.

 

(i)     You are giving up all rights and claims of any kind, known or unknown, except for the rights specifically given to you in this Separation Agreement.

 

8.     Acceptance and Revocation Period and Effective Date. You shall have twenty-one (21) days after the Delivery Date in which to review this Separation Agreement and deliver the Separation Agreement signed by you to us by such date. The signed agreement must be delivered to Lithia Motors, Inc. to the attention of the Chief Executive Officer, at 360 E. Jackson Street, Medford, Oregon 97501. You shall have a period of seven (7) days after the date upon which you deliver the signed Separation Agreement to us in which to revoke your acceptance (the “Revocation Period”). This Separation Agreement shall become effective upon expiration of the Revocation Period, provided you have not delivered a written notice of revocation to us before such expiration. In the event of any such revocation of this Separation Agreement, the obligations contained in the Separation Agreement shall be null and void and of no further force and effect, and there shall be no obligation by us to pay the sums, or provide the benefits, otherwise provided for in this Separation Agreement or the Change in Control Agreement. For purposes of this Section, “delivery” of the Separation Agreement will be deemed given as of (i) the day the Separation Agreement is delivered to us in person, or by a nationally recognized express delivery service (such as Federal Express, UPS or DHL) to the above address; (ii) the day the Separation Agreement is delivered via facsimile to us; or (iii) the day the Separation Agreement is deposited in the U.S. mail system, postage prepaid, certified or registered, return receipt requested, and addressed as set forth above.

 

 

 

3 

 

 

9.     Non-solicitation; Noncompetition.

 

(a)     You will comply with Sections 5(a)(i) of the Change in Control Agreement, and Employer will have the right to enforce that provision under the terms of Section 5(c) of the Change in Control Agreement.

 

(b)     You will comply with Sections 5(a)(ii) of the Change in Control Agreement, and Employer will have the right to enforce that provision under the terms of Section 5(c) of the Change in Control Agreement.

 

(c)     After the restrictive periods in Sections 5(a)(i) and 5(a)(ii) of the Change in Control Agreement, you will not, apart from good faith competition, interfere with our relationships with customers, employees, vendors, or others.

 

10.     No Disparagement. You may not disparage us, our officers or directors or our operation as set forth in Section 5(a)(iii) of the Change in Control Agreement.

 

11.     Nondisclosure Agreement. You will comply with the covenant regarding confidential information as set forth in Section 5(b)(i) of the Change in Control Agreement.

 

12.     Employer Materials. You represent and warrant that you have, or no later than the Separation Date will have, returned all keys, credit cards, documents and other materials that belong to us, in accordance with Section 5(b)(iii) of the Change in Control Agreement.

 

13.     Cooperation Regarding Other Claims. If any claim is asserted by or against us as to which you have relevant knowledge, you will reasonably cooperate with us in the prosecution or defense of that claim, including by providing truthful information and testimony as reasonably requested by us.

 

14.     No Admission of Liability. Neither this Separation Agreement nor the payments made under this Separation Agreement are an admission of any liability or wrongdoing by us.

 

15.     Independent Legal Counsel. You are advised and encouraged to consult with an attorney before signing this Separation Agreement. You acknowledge that you have had an adequate opportunity to do so.

 

16.     Governing Law. This Separation Agreement is governed by the laws of the State of Oregon that apply to contracts executed and to be performed entirely within the State of Oregon.

 

17.     Dispute Resolution.

 

(a)     Arbitration. In the event a dispute arises pursuant to this Separation Agreement we both agree to resolve all disputes by submitting such dispute to binding arbitration as set forth below. We confirm that by agreeing to this alternate dispute resolution process, we both intend to give up our rights to have any dispute decided in court by a judge or jury. Any and all disputes, claims, or controversies between us arising out of or relating to this Separation Agreement shall be submitted to final and binding arbitration before JAMS, or its successor, at JAMS’ office in Medford, Oregon (or, if none, at JAMS’ office in the United States which is closest to Medford, Oregon), pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1, et seq. The dispute shall be submitted to one Arbitrator, who shall have sole authority to determine procedural questions, such as arbitrability, standing, and real party in interest, as well as the merits of the claim.

 

 

 

 4

 

 

Either of us may commence the arbitration process by filing a written demand for arbitration with JAMS at the designated office and concurrently sending a copy to the other party or parties. The arbitration will be conducted in accordance with the provisions of JAMS’ Comprehensive Arbitration Rules and Procedures in effect when the demand is filed. Each of us will cooperate with JAMS and each other in selecting an arbitrator from JAMS’ panel of neutrals and in scheduling the arbitration proceedings. The costs and fees of JAMS and of the arbitrator shall be borne equally by us. The provisions of this paragraph are specifically enforceable by any court with subject matter jurisdiction sitting in Jackson County, Oregon.

 

(b)     Expenses/Attorneys’ Fees. The prevailing party shall be awarded all costs and expenses of the proceeding, including but not limited to, attorneys’ fees, filing and service fees, witness fees and arbitrator’s fees. If arbitration is commenced, the arbitrator will have full authority and complete discretion to determine the “prevailing party” and the amount of costs and expenses to be awarded.

 

18.     Saving Provision. If any part of this Separation Agreement is held to be unenforceable, it shall not affect any other part. If any part of this Separation Agreement is held to be unenforceable as written, it shall be enforced to the maximum extent allowed by applicable law.

 

19.     Final and Complete Agreement. This Separation Agreement and the Change in Control Agreement are the final and complete expression of all agreements between us on all subjects covered herein and therein, and they supersede and replace all prior discussions, representations, agreements, policies and practices. You acknowledge you are not signing this Separation Agreement relying on anything not set out herein.

 

Lithia Motors, Inc.

 

 

By: ____________________________________

 

Title:___________________________________

 

 

 

 

 

I, the undersigned, having been advised to consult with an attorney, hereby agree to be bound by this Separation Agreement and confirm that I have read and understood each part of it. I acknowledge that pursuant to Section 8, I have twenty-one (21) days after delivery of this Separation Agreement within which to review and consider this agreement, prior to signing and delivering to you.

 

 

                                                                                             

(Name)

 

                                                                                             

(Signature

 

                                                                                            

Date

 

 

 5

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